EXHIBIT 1
EXECUTION COPY
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AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
PROXIM CORPORATION
AND
THE PURCHASERS NAMED HEREIN
Dated as of October 21, 2003
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TABLE OF CONTENTS
Page
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1. Definitions.....................................................................................1
2. Authorization, Purchase and Sale of Notes, Preferred Stock and Warrants........................11
2.1. Authorization of Securities....................................................................11
2.2. Amendment of the July 2003 Notes; Issuance of Warrants.........................................11
2.3. Call Right.....................................................................................12
2.4. The Closings...................................................................................12
2.5. Use of Proceeds................................................................................13
3. Representations and Warranties of the Company..................................................13
3.1. Incorporation..................................................................................13
3.2. Subsidiaries...................................................................................13
3.3. Capitalization.................................................................................14
3.4. Authorization..................................................................................14
3.5. Valid Issuance.................................................................................15
3.6. Financial Statements...........................................................................15
3.7. Absence of Certain Changes.....................................................................15
3.8. Absence of Litigation..........................................................................16
3.9. Intellectual Property..........................................................................16
3.10. Disclosure Documents...........................................................................16
3.11. Books and Records..............................................................................17
3.12. Consents.......................................................................................17
3.13. No Conflict....................................................................................17
3.14. Brokers or Finders.............................................................................17
3.15. Nasdaq National Market.........................................................................17
3.16. No Manipulation of Stock.......................................................................18
3.17. Company Not an "Investment Company"............................................................18
3.18. Title to Property and Assets...................................................................18
3.19. Labor Relations................................................................................18
3.20. Employee Benefits..............................................................................18
3.21. Environmental Matters..........................................................................19
3.22. Taxes..........................................................................................20
3.23. Insurance......................................................................................21
3.24. General Solicitation; No Integration...........................................................21
3.25. Accounting Controls............................................................................21
3.26. By-Laws........................................................................................21
3.27. CSFB Documents.................................................................................21
3.28. Opinion of the Financial Advisor...............................................................21
4. Representations and Warranties of Each Purchaser...............................................22
4.1. Organization...................................................................................22
4.2. Authorization..................................................................................22
4.3. Purchase Entirely for Own Account; Etc.........................................................22
4.4. Investor Status; Etc...........................................................................22
4.5. Securities Not Registered......................................................................22
4.6. No Conflict....................................................................................22
4.7. Brokers........................................................................................23
4.8. Consents.......................................................................................23
4.9. No Manipulation of Stock.......................................................................23
5. Covenants......................................................................................23
5.1. HSR Act Filings................................................................................23
5.2. Other Governmental Approvals...................................................................23
5.3. Further Assurances.............................................................................23
5.4. Board Designees................................................................................24
5.5. Series B Preferred Certificate of Designations.................................................25
5.6. Covenant Pending Each Closing..................................................................25
5.7. Proxy Statement................................................................................26
5.8. Subscription Right.............................................................................26
5.9. Standstill.....................................................................................28
5.10. Nominating Committee; Agreement to Vote........................................................28
5.11. Affirmative Covenants in Connection with the Sale of the Notes.................................28
5.12. Negative Covenants in Connection with the Sale of the Notes....................................30
5.13. Exchange of Notes for Preferred Stock..........................................................32
6. Conditions Precedent...........................................................................33
6.1. Conditions to the Obligation of the Purchasers to Consummate the Initial Closing...............33
6.2. Conditions to the Obligation of the Company to Consummate the Initial Closing..................34
6.3. Conditions to the Obligations of the Purchasers to Consummate each Subsequent Closing..........35
7. Registration of the Securities; Compliance with the Securities Act.............................36
7.1. Securities Law Transfer Restrictions...........................................................36
7.2. Legends........................................................................................36
7.3. Registration Procedures and Other Matters......................................................37
7.4. Transfer of Securities; Suspension.............................................................38
7.5. Company Registration...........................................................................40
7.6. Indemnification................................................................................41
7.7. Termination of Conditions and Obligations......................................................44
7.8. Information Available..........................................................................44
7.9. Delay of Registration..........................................................................45
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8. [Intentionally Omitted.].......................................................................45
9. Miscellaneous Provisions.......................................................................45
9.1. Public Statements or Releases..................................................................45
9.2. Rights Cumulative..............................................................................45
9.3. Pronouns.......................................................................................45
9.4. Notices........................................................................................45
9.5. Captions.......................................................................................46
9.6. Severability...................................................................................46
9.7. Confidentiality................................................................................46
9.8. Governing Law; Injunctive Relief...............................................................46
9.9. Waiver.........................................................................................47
9.10. Expenses.......................................................................................47
9.11. Assignment.....................................................................................47
9.12. Counterparts...................................................................................47
9.13. 2002 Purchase Agreement........................................................................47
9.14. Entire Agreement...............................................................................47
Exhibits
Exhibit A -- Schedule of Purchasers
Exhibit B -- Form of Amended Notes
Exhibit C -- Form of New Notes
Exhibit D -- Certificate of Designations, Preferences and Rights of the
Series B Convertible Preferred Stock
Exhibit E -- Form of Original Warrant
Exhibit F -- Form of New Warrant
Exhibit G -- Form of Amended and Restated Pledge and Security Agreement
Exhibit H -- Form of Amended and Restated Intercreditor Agreement
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This AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (this
"Agreement") is dated as of the 21st day of October 2003 by and among Proxim
Corporation, a Delaware corporation with its principal office at 000 Xxxxxxx
Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000 (the "Company"), and each of the purchasers
named in EXHIBIT A hereto (each, a "Purchaser" and collectively, the
"Purchasers").
WHEREAS, the Company and the Purchasers entered into a
Securities Purchase Agreement, dated as of July 22, 2003, as amended on
September 4, 2003 (as amended, the "Original Agreement");
WHEREAS, pursuant to the terms of the Original Agreement, the
Purchasers purchased $30,000,000 aggregate principal amount of the Company's
twenty-five percent (25%) Secured Promissory Notes (the "July 2003 Notes");
WHEREAS, the Company seeks to ensure the availability of
additional capital for its general corporate purposes and, in connection
therewith, the Company and the Purchasers seek to amend and restate the terms of
the Original Agreement and the July 2003 Notes;
WHEREAS, the Company has authorized the issuance of (i) up to
540,000 shares of its Series B Convertible Preferred Stock, par value $.01 per
share (the "Preferred Stock"), which shares are, or will be, upon issuance,
convertible into authorized but unissued shares of class A common stock, $.01
par value per share, of the Company (the "Common Stock") and (ii) the Warrants
(as defined below);
WHEREAS, in connection with the issuance of the Amended Notes
(as defined herein), the Company desires to issue and sell to each Purchaser
pursuant to this Agreement, and each Purchaser, severally, desires to accept
from the Company, immediately upon Stockholder Approval (as defined below), the
Warrants to purchase the number of shares of Common Stock as is set forth
opposite its respective name in EXHIBIT A hereto under the headings "Original
Warrant Coverage Issuable upon Stockholder Approval" and "New Warrant Coverage
Issuable upon Stockholder Approval"; and
WHEREAS, if the Company determines that additional borrowings
are required for the operation of its business, the Company shall have the
right, subject to the conditions to set forth, to require each Purchaser to
purchase the aggregate principal amount of New Notes (as defined below) as is
set forth opposite its respective name on EXHIBIT A hereto under the heading
"Maximum Commitment Under the Call Right."
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1. "Affiliate" means, with respect to any Person, any other
Person controlling, controlled by or under direct or indirect common control
with such Person. For the purposes of this definition "control," when used with
respect to any specified Person, shall mean the power to direct the management
and policies of such Person, directly or indirectly, whether through ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
1.2. "Agreement" has the meaning set forth in the first
paragraph herein.
1.3. "Announcement Date" means October 2, 2003.
1.4. "Amended Notes" means one or more secured subordinated
promissory note(s) containing the same terms and conditions, and with the same
exchange features and definition of Incremental Interest, as is set forth in the
form of amended note attached hereto as Exhibit B.
1.5. "Bankruptcy Code" means the United States Code, 11
U.S.C.ss.ss.101 et seq., as amended.
1.6. "Beneficially Owns" or "Beneficially Owned" has the
meaning set forth in Rules 13d-3 and 13d-5 of the Exchange Act, but without
taking into account any contractual restrictions or limitations on voting or
other rights.
1.7. "Board Designee" has the meaning set forth in Section
5.4(a) herein.
1.8. "Board Observer" has the meaning set forth in Section
5.4(b) herein.
1.9. "Board of Directors" has the meaning set forth in Section
3.4 herein.
1.10. "Broadview" means Broadview Capital Partners, L.P.,
Broadview Capital Partners Qualified Purchaser Fund L.P. and Broadview Capital
Partners Affiliates Fund L.L.C.
1.11. "Business Day" means any day except a Saturday or Sunday
or day on which banking institutions are legally authorized to close in the City
of New York.
1.12. "Call Right" has the meaning set forth in Section 2.3(a)
herein.
1.13. "Call Right Expiration Date" has the meaning set forth
in Section 2.3(a) herein.
1.14. "Class B Common Stock" has the meaning set forth in
Section 3.3(a) herein.
1.15. "Closing" and "Closings" have the meanings set forth in
Section 2.4(c) herein.
1.16. "Code" means the Internal Revenue Code of 1986, as
amended.
1.17. "Collateral" has the meaning set forth in the Pledge and
Security Agreement.
1.18. "Collateral Agent" means Warburg.
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1.19. "Commitment" has the meaning set forth in Section 3.7
herein.
1.20. "Common Stock" has the meaning set forth in the Recitals
herein.
1.21. "Company" has the meaning set forth in the first
paragraph herein.
1.22. "Confidential Information" has the meaning set forth in
Section 9.7 herein.
1.23. "Control" (including the terms "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management policies of a
Person, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee or executor, or otherwise.
1.24. "Conversion Price" has the meaning set forth in the
Series B Preferred Certificate of Designations.
1.25. "CSFB" means Credit Suisse First Boston.
1.26. "CSFB Collateral" has the meaning given to the term
"Collateral" in the CSFB Documents.
1.27. "CSFB Documents" means (i) the Security Agreement, dated
November 1, 1999, by and between the Company and CSFB, (ii) the Intellectual
Property Security Agreement, dated November 1, 1999, between the Company and
CSFB and (iii) any other agreement, document or instrument pursuant to which the
Company grants, or confirms a grant of, a Lien on or security interest in any of
its assets, properties or rights, interests as security for the its CSFB Secured
Obligations.
1.28. "CSFB Liens" has the meaning given to the term "Liens"
in the CSFB Documents.
1.29. "CSFB Secured Obligations" has the meaning given to the
term "Secured Obligations" in the CSFB Documents.
1.30. "Disclosure Documents" means the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2002, filed by the Company
on March 31, 2003; the Company's Schedule 14A Proxy Statement for its Annual
Meeting of Stockholders, dated April 29, 2003; the Company's Quarterly Report on
Form 10-Q for the quarter ended March 28, 2003; the Company's Quarterly Report
on Form 10-Q for the quarter ended June 27, 2003; and any Current Reports on
Form 8-K filed by the Company on or after March 28, 2003, together in each case
with any documents incorporated by reference therein or exhibits thereto.
1.31. "Disclosure Schedule" has the meaning set forth in
Section 3 herein.
1.32. "Disclosing Party" has the meaning set forth in Section
9.7 herein.
1.33. "Employees" has the meaning set forth in Section 3.19
herein.
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1.34. "Environmental Laws" has the meaning set forth in
Section 3.21(b) herein.
1.35. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.36. "ERISA Affiliate" has the meaning set forth in Section
3.20(a) herein.
1.37. "Event of Default" has the meaning ascribed to it in
Section 7 of the Notes.
1.38. "Exchange Act" means the Securities Exchange Act of
1934, as amended, and all of the rules and regulations promulgated thereunder.
1.39. "Existing Warrants" means the warrants issued to the
Purchasers pursuant to the 2002 Purchase Agreement.
1.40. "Financial Statements" has the meaning set forth in
Section 3.6 herein.
1.41. "Foreign Plans" has the meaning set forth in Section
3.20(h) herein.
1.42. "Former Employees" means individuals other than
Employees who at any time prior to the date of this Agreement performed services
as an Employee primarily for the Company.
1.43. "GAAP" has the meaning set forth in Section 3.6 herein.
1.44. "Guaranteeing Subsidiaries" means Proxim Wireless
Networks, Inc., WirelessHome Corporation and Proxim International Holdings, Inc.
(formerly Western Multiplex International Holdings, Inc.).
1.45. "Hazardous Material" has the meaning set forth in
Section 3.21(a) herein.
1.46. "HLHZ" means Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial
Advisors, Inc.
1.47. "Holders" has the meaning set forth in Section 7.4(a)
herein.
1.48. "HSR Act" has the meaning set forth in Section 3.12
herein.
1.49. "Incremental Interest" has the meaning given to it in
the Notes.
1.50. "Independent Directors" means members of the Board of
Directors who are: (i) not officers, directors or affiliates of the Company;
(ii) independent as defined under applicable requirements of federal law, state
law and Nasdaq; and (iii) unaffiliated with any Purchaser.
1.51. "Initial Closing" has the meaning set forth in Section
2.4(a) herein.
1.52. "Initial Closing Date" has the meaning set forth in
Section 2.4(a) herein.
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1.53. "Intellectual Property" has the meaning set forth in
Section 3.9 herein.
1.54. "Intercreditor Agreement" means the Amended and Restated
Intercreditor Agreement by and among SVB, the Company, the Collateral Agent and
the Guaranteeing Subsidiaries substantially in the form attached hereto as
EXHIBIT H.
1.55. "Investment Company Act" has the meaning set forth in
Section 3.17 herein.
1.56. "Irreparable Breach" has the meaning set forth in
Section 9.7(b) herein.
1.57. "July 2003 Notes" has the meaning set forth in the
Recitals herein.
1.58. "Liability" means any liability or obligation whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether matured or unmatured, whether
liquidated or unliquidated, whether incurred or consequential and whether due or
to become due, including, without limitation, any obligation that is created,
issued, incurred or assumed by the Company for borrowed money or arising out of
any credit facility or for the deferred purchase price of property or services
(such as any obligation of the Company under any conditional sale or other title
retention agreement; any guaranty by the Company of liabilities or indebtedness
of any other party; the capitalized amount under any capital lease by the
Company as lessee or which is the substantial equivalent of a financing of the
property so leased; and any reimbursement or similar obligation in respect of
any letter of credit or other financial accommodation).
1.59. "Lien" means any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), charge
or other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as any of the
foregoing).
1.60. "Loan Documents" means this Agreement, the Notes, the
Pledge and Security Agreement, the Intercreditor Agreement and any other
agreement, document or instrument pursuant to which the Company grants, or
confirms a grant of, a Lien on or security interest in any of its assets,
properties or rights, interests as security for the Obligations.
1.61. "Material Adverse Change" means (i) any change, event or
occurrence which, individually or in the aggregate, has had a material adverse
effect on, or a material adverse change in, (a) the business, operations,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, that had the effect of reducing revenues or net
income of the Company and its subsidiaries, taken as a whole, by more than $15
million in any quarter compared to published financial statements (if publicly
announced) or consensus analysts estimates (in the case of a quarter for which
financial results have not yet been publicly announced) and that was not
disclosed in any Disclosure Document filed on or prior to the date hereof (and
excluding, in all cases, the effects of any restructuring charges already taken
or otherwise publicly announced, and the effects of terminating the Company's
000 Xxxxxx Xxx lease obligation, as publicly disclosed by the Company);
provided, however, that a reduction in net income for the third quarter of 2003
as a result of any ruling in the pending Symbol patent
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infringement litigation (x) occurring prior to the date hereof and (y) disclosed
in writing to the Purchasers prior to the date hereof shall not constitute a
Material Adverse Change under this clause (i)(a), or (b) the ability of the
Company to perform its obligations under this Agreement, in each case other than
any change, event or occurrence (w) resulting from conditions in the United
States or foreign economies or securities markets in general or any change in
the Company's stock price, (x) resulting from conditions in the industry in
which the Company operates in general, except to the extent that the Company is
disproportionately affected thereby, (y) resulting from the public announcement
of the transactions contemplated by this Agreement or (z) arising out of or
resulting from actions of the Purchasers in connection with this Agreement, (ii)
any adverse ruling or judgment in the pending Symbol patent infringement
litigation that requires the Company and/or any of its subsidiaries to render
payment or post a bond equal to or greater than $10 million (whether or not such
payment has been made or bond posted as of such date) or (iii) any other rulings
or judgments made against the Company and/or any of its subsidiaries in the
Symbol patent infringement litigation or other litigations, the effects of which
rulings or judgments are material and adverse to the Company and its
subsidiaries, taken as a whole.
1.62. "Material Adverse Effect" means, collectively, a
material adverse effect on, or a material adverse change in, or group of such
effects on or changes in, (i) the business, operations, financial condition,
results of operations, assets or liabilities of the Company and its
subsidiaries, taken as a whole or (ii) the ability of the Company to perform its
obligations under any of the Loan Documents, in each case other than any change,
event or occurrence (a) resulting from conditions in the United States or
foreign economies or securities markets in general or any change in the
Company's stock price, (b) resulting from conditions in the industry in which
the Company operates in general, except to the extent that the Company is
disproportionately affected thereby, (c) resulting from the public announcement
of the transactions contemplated by this Agreement, or (d) arising out of or
resulting from actions of the Purchasers in connection with this Agreement.
1.63. "NASD" has the meaning set forth in Section 3.15 herein.
1.64. "Nasdaq" has the meaning set forth in Section 3.15
herein.
1.65. "New Notes" means one or more secured promissory note(s)
containing the same terms and conditions, and with the same exchange features
and definition of Incremental Interest, as set forth in the form of note
attached hereto as EXHIBIT C.
1.66. "Notes" shall mean, collectively, the Amended Notes and
the New Notes.
1.67. "Obligations" has the meaning set forth in the Pledge
and Security Agreement.
1.68. "Original Agreement" shall have the meaning set forth in
the Recitals herein.
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1.69. "Permitted Lien" means any of the following Liens:
(a) Liens for Taxes or assessments and similar charges, which
are either (i) not delinquent or (ii) being contested diligently and in good
faith by appropriate proceedings and as to which the Company has set aside
adequate reserves on its books;
(b) statutory Liens, such as mechanic's, materialman's,
warehouseman's, carriers or other like Liens, incurred in the ordinary course of
business, which are to be paid in the ordinary course of business or which are
being contested diligently and in good faith by appropriate proceedings and as
to which the Company has set aside adequate reserves on its books;
(c) encumbrances consisting of zoning restrictions, easements,
licenses, reservations, covenants, conditions, waivers, restrictions on the use
of property or minor irregularities of title that do not materially impair the
use of any property which is material in the operation of the Company's
business;
(d) Liens securing purchase money equipment lease (or similar)
obligations, but only in the property which is the subject of such obligations
and only to the extent such obligations are permitted pursuant to the terms
hereof;
(e) Liens arising under or pursuant to the Loan Documents;
(f) Liens in respect of judgments or awards with respect to
which the Company, in good faith, is prosecuting an appeal or proceeding for
review and in respect of which a stay of execution upon such appeal or
proceeding for review shall have been secured, and as to which judgments or
awards the Company shall have established adequate reserves on its books;
(g) pledges or deposits made in the ordinary course of the
Company's business consistent with past practice to secure payment of workers'
compensation or to participate in any fund in connection with workers'
compensation, unemployment insurance, pensions or other social security
programs;
(h) Liens existing on the date hereof, including the Liens
granted to SVB under the SVB Agreements;
(i) Nonexclusive licenses and sublicenses granted by the
Company in the ordinary course of its business;
(j) leases or subleases granted in the ordinary course of the
Company's business, including in connection with Company's leased premises or
leased property;
(k) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), contracts for the purchase of
property, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case incurred in the
ordinary course of business and not representing an obligation for borrowed
money, provided the total amount of all such outstanding deposits under this
clause (k) does not exceed $250,000 at any time outstanding;
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(l) Liens arising by virtue of any contractual, statutory or
common law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution;
(m) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods;
(n) Liens on insurance proceeds securing the payment of
financed insurance premiums; and
(o) Liens incurred in the extension, renewal or refinancing of
the indebtedness secured by Liens described in (d), (e) and (h), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness may
not increase and maturity may not decrease.
1.70. "Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association or joint venture.
1.71. "Plans" means employee benefit plans as defined in
Section 3(3) of ERISA and all other employee benefit practices or arrangements,
including, without limitation, any such practices or arrangements providing
severance pay, sick leave, vacation pay, salary continuation for disability,
retirement benefits, deferred compensation, bonus pay, incentive pay, stock
options or other stock-based compensation, hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements, maintained by
the Company or any of its subsidiaries or to which the Company or any of its
subsidiaries is obligated to contribute for Employees or Former Employees.
1.72. "Pledge and Security Agreement" means the Amended and
Restated Pledge and Security Agreement by and among the Company, the Collateral
Agent and the Purchasers (with respect to accepting and agreeing to the
provisions of Articles X and XI thereof), in substantially the form attached
hereto as EXHIBIT G.
1.73. "Preferred Stock" has the meaning set forth in the
Recitals herein.
1.74. "Proposed Securities" has the meaning set forth in
Section 5.8(a)(i) herein.
1.75. "Proposed Transaction" means the transactions
contemplated by the Transaction Documents.
1.76. "Prospectus" has the meaning set forth in Section 7.3(c)
herein.
1.77. "Purchase Price" means the total principal amount paid
by the Purchasers for the Notes.
1.78. "Purchaser" has the meaning set forth in the first
paragraph herein.
1.79. "Recipient" has the meaning set forth in Section 9.7
herein.
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1.80. "Registration Statement" has the meaning set forth in
Section 7.3(a) herein.
1.81. "SEC" means the Securities and Exchange Commission.
1.82. "Securities" means the Notes, the Warrants, the shares
of Preferred Stock issuable upon exchange of the Notes and the shares of Common
Stock issuable upon conversion of the shares of Preferred Stock and exercise of
the Warrants; provided, that for purposes of Section 7 (other than Section 7.1
and 7.2), "Securities" shall not include the Notes, the Warrants or the
Preferred Stock; provided, further, that for purposes of Section 7.3,
"Securities" shall include the shares of Common Stock issuable upon conversion
of the Series A Preferred and exercise of the Existing Warrants.
1.83. "Securities Act" means the Securities Act of 1933, as
amended, and all of the rules and regulations promulgated thereunder.
1.84. "Series A Preferred" means the Series A Convertible
Preferred Stock of the Company, par value $0.01 per share.
1.85. "Series A Preferred Certificate of Designations" means
the Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock of the Company, which was filed with the Secretary of State of
the State of Delaware on August 2, 2002, pursuant to the 2002 Purchase
Agreement.
1.86. "Series B Preferred Certificate of Designations" means
the Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock of the Company, which will have been filed within two Business
Days of receipt of Stockholder Approval with the Secretary of State of the State
of Delaware which shall contain the same terms and conditions set forth in the
copy attached hereto as EXHIBIT D. The initial Conversion Price of the Preferred
Stock shall be $1.15.
1.87. "Soquel Letter Agreement" means the binding letter of
intent, dated July 21, 2003, between the Company and the Xxxxx Family Revocable
Living Trust relating to the settlement of a landlord-tenant dispute relating to
the premises located at 000 Xxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx 00000, pursuant to
which the Company has agreed to (i) pay rents owing through completion of the
lease in a single lump-sum payment of $6 million, plus expenses, (ii) prepay the
mortgage on the premises in full and (iii) pay certain reasonable costs related
thereto.
1.88. "Special Meeting" means the special meeting of the
stockholders of the Company called by the Company to vote on the Special Meeting
Proposals.
1.89. "Special Meeting Proposals" means the issuance of (i)
shares of Preferred Stock upon exchange of the Notes in accordance with the
terms of this Agreement, (ii) the Warrants as contemplated by this Agreement and
(iii) the Common Stock initially issuable upon conversion of the Preferred Stock
and exercise of the Warrants.
1.90. "Stockholder Approval" means stockholder approval of the
Special Meeting Proposals.
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1.91. "Subsequent Closing" has the meaning set forth in
Section 2.3(b).
1.92. "Subsequent Closing Date" has the meaning set forth in
Section 2.4(b) herein.
1.93. "Suspension" has the meaning set forth in Section 7.4
(c) herein.
1.94. "Suspension Notice" has the meaning set forth in Section
7.4 (c) herein.
1.95. "SVB" means Silicon Valley Bank.
1.96. "SVB Agreements" means collectively the SVB A/R
Financing Agreement and the SVB Overadvance Agreement.
1.97. "SVB A/R Financing Agreement" means collectively the (a)
Loan and Security Agreement, dated as of December 27, 2002 and as amended on
Xxxxx 00, 0000, xxxxxxx XXX xxx xxx Xxxxxxx, (x) the Intellectual Property
Security Agreement, dated as of December 27, 2002, between SVB and the Company,
(c) the Letter Agreement, dated June 13, 2003, between SVB and the Company and
(d) the Accounts Receivable Financing Agreement, dated as of June 13, 2003,
between SVB and the Company and all schedules, exhibits and annexes attached
thereto and all amendments or supplements thereof.
1.98. "SVB Overadvance Agreement" means the Temporary
Overadvance Agreement, dated as of June 23, 2003, between SVB and the Company
(as amended or supplemented from time to time).
1.99. "Symbol" means Symbol Technologies Inc.
1.100. "Tax Returns" means returns, reports, information
statements and other documentation (including any additional or supporting
material) filed or maintained, or required to be filed or maintained, in
connection with the calculation, determination, assessment or collection of any
Tax and shall include any amended returns required as a result of examination
adjustments made by the Internal Revenue Service or other Tax authority.
1.101. "Taxes" means any and all federal, state, local,
foreign and other taxes, levies, fees, imposts, duties and charges of whatever
kind (including any interest, penalties or additions to the tax imposed in
connection therewith or with respect thereto), whether or not imposed on the
Company, including, without limitation, taxes imposed on, or measured by,
income, franchise, profits or gross receipts, and also ad valorem, value added,
sales, use, service, real or personal property, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premium, windfall profits, transfer and gains taxes and customs duties.
1.102. "Transaction Documents" means this Agreement, the
Notes, the Warrants, the Pledge and Security Agreement, the Intercreditor
Agreement and the Series B Preferred Certificate of Designations.
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1.103. "Transaction Fees" has the meaning set forth in Section
9.9 herein.
1.104. "Transferee" has the meaning set forth in Section
7.4(a) herein.
1.105. "2002 Purchase Agreement" means that certain Securities
Purchase Agreement, dated as of June 16, 2002 and as amended, by and among the
Company and the purchasers named therein.
1.106. "UCC" means the Uniform Commercial Code (or similar
statute) of any applicable jurisdiction.
1.107. "Voting Stock" has the meaning set forth in Section 5.9
herein.
1.108. "Warburg" means Warburg Pincus Private Equity VIII,
L.P. and its Affiliates.
1.109. "Warrants" means (i) warrants to purchase 18,000,000
shares of Common Stock which shall contain the same terms and conditions and the
same exercise features, including an exercise price equal to $1.46, as set forth
in the form attached hereto as EXHIBIT E and (ii) warrants to purchase 6,000,000
shares of Common Stock which shall contain the same terms and conditions and the
same exercise features, including an exercise price equal to $1.53, as set forth
in the form attached hereto as EXHIBIT F.
2. Authorization, Purchase and Sale of Notes, Preferred Stock
and Warrants.
2.1. Authorization of Securities. The Company has, or on or
before the Initial Closing Date will have, (i) authorized the Notes, (ii)
authorized a series of its preferred stock consisting of 540,000 shares of
Preferred Stock designated as its "Series B Convertible Preferred Stock," (iii)
authorized the Warrants, (iv) authorized the issuance of the shares of Common
Stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants and (v) authorized the issuance of the shares of Preferred Stock
issuable upon exchange of the Notes in accordance with the terms of this
Agreement. The terms, limitations and relative rights and preferences of the
Preferred Stock are set forth in the Series B Preferred Certificate of
Designations.
2.2. Amendment of the July 2003 Notes; Issuance of Warrants.
(a) Subject to and upon the terms and conditions set forth in
this Agreement, at the Initial Closing, the Company shall issue to each
Purchaser upon surrender for cancellation by each Purchaser of the July 2003
Notes issued to such Purchaser pursuant to the Original Agreement, the Amended
Notes in the same aggregate principal amount as the July 2003 Notes surrendered
by such Purchaser.
(b) As part of the Company's inducement to the Purchasers to
(i) purchase the July 2003 Notes, (ii) accept the Amended Notes upon surrender
of the July 2003 Notes and (iii) enter into this Agreement, within two Business
Days of receipt of Stockholder Approval the Company shall issue to each
Purchaser Warrants entitling each Purchaser to purchase the number of shares of
Common Stock as set forth opposite its name under the headings "Original Warrant
Coverage Issuable upon Stockholder Approval" and "New Warrant Coverage Issuable
upon
11
Stockholder Approval," respectively, on EXHIBIT A hereto. Each Warrant shall be
registered in the name of such Purchaser or its Affiliates if so designated. If
Stockholder Approval is not obtained, then the Company shall have no obligation
to issue the Warrants.
2.3. Call Right.
(a) Subject to the terms and conditions set forth in this
Agreement, in the event that the Company determines that additional borrowings
are required or desirable for the operation of its business, the Company shall
have the right to require the Purchasers to purchase up to Ten Million Dollars
($10,000,000) in aggregate principal amount of the New Notes, subject to the
following restrictions: (i) at any time on or after the Initial Closing Date
until the ninetieth (90th) day following the date Stockholder Approval is
obtained (the "Call Right Expiration Date") and provided no Event of Default (as
defined in the Amended Notes) has occurred, the Company shall have the right to
require the Purchasers to purchase Five Million Dollars ($5,000,000) in
aggregate principal amount of the New Notes; and (ii) provided no Event of
Default (as defined in the Amended Notes) has occurred, at any time after the
date Stockholder Approval is obtained until the Call Right Expiration Date, the
Company shall have the right to require the Purchasers to purchase the New Notes
with an aggregate principal amount equal to the difference of (a) Ten Million
Dollars ($10,000,000) less (b) the aggregate principal amount of New Notes
purchased pursuant to clause (i) of this Section 2.3(a), each at a cash purchase
price equal to the principal amount of the New Notes purchased (collectively,
the "Call Right"); provided, however, that in no event shall the aggregate
principal amount of the New Notes issuable hereunder exceed Ten Million Dollars
($10,000,000).
(b) The Company shall exercise its Call Right by providing
written notice to the Purchasers, which notice shall set forth the aggregate
principal amount of the New Notes the Company desires to sell to the Purchasers
and the proposed date of the closing of the sale. If the proposed date of the
closing of the sale of the New Notes pursuant to the Call Right is any date
subsequent to the Initial Closing Date (each, a "Subsequent Closing") then such
date shall be no more than twenty (20) Business Days nor less than five (5)
Business Days after the date of the giving of such notice. At the Initial
Closing or each Subsequent Closing, as the case may be, the aggregate principal
amount of the New Notes to be purchased by each Purchaser shall be in the same
proportion as the total aggregate principal amount of the July 2003 Notes
purchased by such Purchaser pursuant to the Original Agreement bears to
$30,000,000.
2.4. The Closings.
(a) The initial closing (the "Initial Closing") shall take
place at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx on the date hereof or
such other date mutually agreed between the parties (the "Initial Closing
Date"). At the Initial Closing, the Company shall deliver to each Purchaser upon
delivery for cancellation by each Purchaser to the Company of the July 2003
Notes held by such Purchaser (i) one or more Amended Note(s) in the principal
amount as set forth opposite such Purchaser's name on EXHIBIT A hereto and (ii)
if the Company exercises its Call Right pursuant to Section 2.3(a)(i) above, one
or more New Notes in the principal amount being purchased by the Purchaser, and
each Purchaser shall pay to the Company the purchase price therefor by wire
transfer to the Company of immediately available funds. Upon cancellation of all
of the July
12
2003 Notes, the Company shall be forever released from all of its obligations
and liabilities to the Purchasers under the July 2003 Notes. The Company and the
Purchasers shall also deliver all Transaction Documents applicable to such
Initial Closing.
(b) Each Subsequent Closing shall take place at the offices of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx,
Xxxx Xxxx, Xxxxxxxxxx on the day set forth in the Company's notice to the
Purchasers pursuant to Section 2.3(b) herein or such other date mutually agreed
to by the Company and the Purchasers (each, a "Subsequent Closing Date"). At
each Subsequent Closing, the Company shall deliver to each Purchaser one or more
New Notes in the principal amount being purchased by such Purchasers and each
Purchaser shall pay to the Company the purchase price therefor by wire transfer
to the Company of immediately available funds. The Company and the Purchasers
shall also deliver all Transaction Documents applicable to such Subsequent
Closing(s).
(c) The Initial Closing and each Subsequent Closing are each
individually referred to as a "Closing" where the context requires and
collectively referred to as the "Closings."
2.5. Use of Proceeds. The Company will apply the net proceeds
from the issuance of the New Notes upon the Company's exercise of the Call
Right, if any, for general corporate purposes.
3. Representations and Warranties of the Company. Except as
set forth in any Disclosure Document filed prior to the date hereof or in a
corresponding numbered section of the disclosure schedule delivered to each
Purchaser prior to the execution of this Agreement (the "Disclosure Schedule"),
the Company hereby represents and warrants to each of the Purchasers as follows:
3.1. Incorporation. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect. The Company has all requisite corporate power and authority to
carry on its business as now conducted.
3.2. Subsidiaries. The Company has no material subsidiaries
and no material interests or investments in any partnership, trust or other
entity or organization. No subsidiary of the Company conducts or is engaged in
any business of any kind nor has any material assets. Each subsidiary of the
Company that is a corporation has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
formation, has the corporate power and authority to own its properties and to
conduct its business and is duly registered, qualified and authorized to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or the nature of its properties requires such
registration, qualification or authorization, except where such failure to so
qualify or register would not be reasonably likely to have a Material Adverse
Effect. All of the issued and outstanding capital stock of each subsidiary has
been duly authorized and validly issued, is fully
13
paid and non-assessable, and is owned by the Company free and clear of any Lien
other than any of the foregoing encumbered pursuant to the SVB Agreements.
3.3. Capitalization.
(a) As of the date of this Agreement, the authorized capital
stock of the Company consists of 390,000,000 shares of Common Stock, 10,000,000
shares of class B common stock, par value $.01 per share (the "Class B Common
Stock"), 3,000,000 shares of Series A Preferred, and 22,000,000 shares of
undesignated preferred stock, par value $.01 per share. As of the date of this
Agreement, there are no shares of Class B Common Stock outstanding and 3,000,000
shares of Series A Preferred are outstanding. The number of outstanding shares
of Common Stock as of October 9, 2003 was 122,217,296 and the total number of
shares of Common Stock issuable pursuant to stock options outstanding at October
9, 2003 was 29,081,694. All such shares of Common Stock and Series A Preferred
have been duly authorized, and all such issued and outstanding shares of Common
Stock and Series A Preferred have been validly issued, are fully paid and
nonassessable. No such outstanding shares of Common Stock or Series A Preferred
were issued in violation of any preemptive rights, "poison pill" provisions,
rights of first offer or refusal or similar rights.
(b) Except for the issuance of shares of Common Stock pursuant
to the exercise of outstanding options granted pursuant to the Company's option
plans or pursuant to the exercise of warrants to purchase shares of Common
Stock, including any such options granted after March 31, 2003, the Company has
not issued any capital stock since March 31, 2003, except as contemplated by
this Agreement. Except as set forth in or contemplated by the Disclosure
Documents, this Agreement or the 2002 Purchase Agreement, and except for the
issuance of options to purchase shares of the Company's Common Stock pursuant to
the Company's option plans, there are no existing options, warrants, calls,
preemptive (or similar) rights, subscriptions or other rights, agreements,
arrangements or commitments of any character obligating the Company to issue,
transfer or sell, or cause to be issued, transferred or sold, any shares of the
capital stock of the Company or other equity interests in the Company or any
securities convertible into or exchangeable for such shares of capital stock or
other equity interests, and there are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of its capital
stock or other equity interests.
3.4. Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization of the Securities and the filing of the Series B Preferred
Certificate of Designations, the authorization, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein has been taken, other than the approvals contemplated at the
Special Meeting. When executed and delivered by the Company, this Agreement,
each other Loan Document and each Transaction Document shall constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as rights to indemnity and
contribution may be limited by state or federal securities laws or the public
policy underlying such laws, and except as may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally
and by general equitable principles. The Company has all requisite corporate
power to enter into this Agreement, each other Loan Document and each
Transaction Document and to carry out and perform its obligations hereunder and
thereunder.
14
The Board of Directors of the Company (the "Board of Directors") has taken all
action necessary to render inapplicable, as it relates to Warburg and Broadview,
the provisions of Section 203 of the General Corporation Law of the State of
Delaware. At or prior to the Initial Closing, the Company will have reserved for
issuance (i) the shares of Common Stock initially issuable upon conversion of
the Preferred Stock and upon exercise of the Warrants and (ii) the shares of
Preferred Stock issuable upon exchange of the Notes in accordance with the
terms of this Agreement.
3.5. Valid Issuance.
(a) Upon their issuance in accordance with the terms of the
Preferred Stock or Warrants, as the case may be, the shares of Common Stock
issued upon conversion of the shares of the Preferred Stock or exercise of the
Warrants, as the case may be, will be duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock, free of all preemptive or
similar rights. Upon their issuance in accordance with the terms of this
Agreement and the Notes, the shares of Preferred Stock issued upon exchange of
the Notes will be duly authorized, validly issued, fully paid and non-assessable
shares of Preferred Stock, free of all preemptive or similar rights.
(b) Subject to the accuracy of the representations made by the
Purchasers in Section 4 herein, the Securities will be issued to the Purchasers
in compliance with applicable exemptions from (i) the registration and
prospectus delivery requirements of the Securities Act and (ii) the registration
and qualification requirements of all applicable securities laws of the states
of the United States. The Company is current in its filings with the SEC under
Section 13(a) of the Exchange Act.
3.6. Financial Statements. The financial statements of the
Company included in the Disclosure Documents (collectively, the "Financial
Statements") fairly present the consolidated financial position of the Company
and its subsidiaries as of the dates indicated, and the results of its
operations and cash flows for the periods therein specified. The Financial
Statements fairly present the consolidated financial position of the Company at
the dates thereof and the consolidated results of operations for the periods
then ended in accordance with generally accepted accounting principles applied
on a consistent basis ("GAAP") throughout the period therein specified (except
in the case of quarterly financial statements for the absence of footnote
disclosure and subject, in the case of interim periods, to normal year-end
adjustments which, individually, and in the aggregate are not expected to be
material).
3.7. Absence of Certain Changes. Since December 31, 2002, the
Company and its subsidiaries have conducted their business only in the ordinary
course of such business consistent with past practice and there has not been (i)
any Material Adverse Effect, (ii) any material commitment, contractual
obligation, borrowing, capital expenditure or transaction (each, a "Commitment")
entered into by the Company or any of its subsidiaries, other than (a)
Commitments in the ordinary course of business, (b) the Original Agreement and
the other agreements contemplated thereby, (c) this Agreement and (d) the SVB
Agreements, (iii) any action taken which, if taken after the date hereof, would
constitute a material breach of any provision or covenant herein, or (iv) any
material change in the Company's accounting principles, practices or methods
other than as required by concurrent changes in GAAP.
15
3.8. Absence of Litigation. There is no action, suit,
proceeding, arbitration, claim, investigation or inquiry pending or, to the
Company's knowledge, threatened by or before any governmental body against the
Company in which an unfavorable outcome, ruling or finding in any said matter,
or for all such matters taken as a whole, would reasonably be expected to have a
Material Adverse Effect. The foregoing includes, without limitation, any such
action, suit, proceeding or investigation that questions this Agreement or seeks
to delay or prevent the consummation of the transactions contemplated hereunder
or the right of the Company to execute, deliver and perform under same. The
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. No action, suit, proceeding, claim, investigation or inquiry by
the Company or any subsidiary is currently pending nor does the Company intend
to initiate any action, suit, proceeding, claim, investigation or inquiry, in
each case, that if resolved in a manner adverse to the Company, is reasonably
likely to have a Material Adverse Effect.
3.9. Intellectual Property. (i) The Company owns or, with
respect to licensed Intellectual Property, has sufficient rights to use all (A)
material patents (and any renewals and extensions thereof), patent rights (and
any applications therefor), rights of priority and other rights in inventions;
(B) trademarks, service marks, trade names and trade dress, and all
registrations and applications therefor and all legal or common-law equivalents
of any of the foregoing; (C) copyrights and rights in mask works (and any
applications or registrations for the foregoing, and all renewals and extensions
thereof), common-law copyrights and rights of authorship including all rights to
exploit any of the foregoing in any media and by any manner and means now known
or hereafter devised; (D) industrial design rights, and all registrations and
applications therefor; (E) rights in data, collections of data and databases,
and all legal or common-law equivalents thereof; (F) rights in domain names and
domain name reservations; (G) rights in trade secrets, proprietary information
and know-how (collectively with all licenses and other agreements providing the
Company with the right to use any item of the type referred to in clauses (A)
through (G), "Intellectual Property") that are necessary for the conduct of its
business as now conducted except where the failure to currently own or possess
would not have a Material Adverse Effect; (ii) the Intellectual Property is
valid, subsisting, in proper form and enforceable and all renewal fees and other
maintenance fees have been paid; (iii) the Company is in material compliance
with all contractual obligations relating to the use and protection of such of
the Intellectual Property as is used pursuant to license or other agreement;
(iv) to the knowledge of the Company there is no present or former employee,
officer or director of the Company or agent or outside contractor that holds or
claims any material right, title or interest, directly or indirectly, in or to
any Intellectual Property; and (v) to the Company's knowledge, the present
business activities and products of the Company have not and do not infringe any
known Intellectual Property or other proprietary rights of any third party, the
Company is not making unauthorized use of any confidential information or trade
secrets of any third party, the Company has not received any notice of any
asserted infringement (nor is the Company aware of any reasonable basis for any
third party asserting an infringement) by the Company of, any rights of a third
party with respect to any Intellectual Property that, individually or in the
aggregate, would have a Material Adverse Effect. The Guaranteeing Subsidiaries
own no material registrations or material applications for any Intellectual
Property.
16
3.10. Disclosure Documents. The information contained or
incorporated by reference in the Disclosure Documents was true and correct in
all material respects as of the respective dates of the filing thereof with the
SEC; and, as of such respective dates, none of the Disclosure Documents
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, except
to the extent updated or superseded by any report subsequently filed by the
Company with the SEC. The Company is not party to any material contract,
agreement or other arrangement that was required to have been filed as an
exhibit to any Disclosure Document that was not so filed, other than any of the
Loan Documents.
3.11. Books and Records. The minute books and other records of
the Company and its subsidiaries contain in all material respects accurate
records of all Company board, committee and stockholders' meetings and
accurately reflect in all material respects all other corporate action of the
stockholders and directors and any committees thereof of the Company and its
subsidiaries and all actions of the directors of the Company's subsidiaries, in
each case since January 1, 2002.
3.12. Consents. All consents, approvals, orders and
authorizations required on the part of the Company in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated herein, other than (i) in connection with the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the regulations promulgated thereunder, (ii) the filing of the Series B
Preferred Certificate of Designations and (iii) such filings required to be made
after the Initial Closing under applicable federal and state securities laws,
have been obtained and will be effective as of the Initial Closing Date other
than those with respect to which the failure to make or obtain will not have a
Material Adverse Effect. Except for the approvals contemplated at the Special
Meeting or required by Nasdaq, the execution, delivery or performance of this
Agreement, the Loan Documents and the Transaction Documents and the consummation
of the transactions contemplated herein and therein do not require the approval
of the Company's stockholders.
3.13. No Conflict. The execution and delivery of the Loan
Documents by the Company and the consummation of the transactions contemplated
thereby will not conflict with or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to a loss of a
material benefit under (i) any provision of the Certificate of Incorporation or
By-laws of the Company or (ii) any agreement or instrument, permit, franchise,
license, judgment, order, statute, law, ordinance, rule or regulations,
applicable to the Company or its properties or assets, except, in the case of
clause (ii), as would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect.
3.14. Brokers or Finders. Other than with respect to CSFB and
HLHZ, the fees of which will be borne by the Company, the Company has not
incurred, and shall not incur, directly or indirectly, any liability for any
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement, the other Loan Documents, Transaction Documents
or any transaction contemplated hereby.
3.15. Nasdaq National Market. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act and is listed on the Nasdaq
National Market ("Nasdaq"), and,
17
except as contemplated by this Agreement, the Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act or delisting the Common Stock from
Nasdaq, nor has the Company received any notification that the SEC or the
National Association of Securities Dealers, Inc. ("NASD") is contemplating
terminating such registration or listing.
3.16. No Manipulation of Stock. The Company has not taken, in
violation of applicable law, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the transactions contemplated hereby or the sale or
resale of the shares of Common Stock.
3.17. Company Not an "Investment Company". The Company has
been advised of the rules and requirements under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Company is not, and
immediately after receipt of payment for any of the Securities will not be, an
"investment company" or an entity "controlled" by an "investment company" within
the meaning of the Investment Company Act.
3.18. Title to Property and Assets. The Company and each of
its subsidiaries owns or possesses the necessary right to use or title to all
properties, assets, licenses, permits and the like required to operate its
business as currently operated, except for such properties, assets, licenses,
permits and the like, the absence of which would not result in a Material
Adverse Effect. The properties and assets of the Company and each of its
subsidiaries owned by them are owned free and clear of all Liens, except for
Permitted Liens. With respect to the property and assets it leases, the Company
and each of its subsidiaries are in compliance with such leases in all material
respects. The transactions contemplated by the Soquel Letter Agreement have been
consummated and (a) the Company's lease obligations with respect to the lease of
000 Xxxxxx Xxx have been terminated and (b) WirelessHome Corporation, a Delaware
corporation and wholly owned subsidiary of the Company now owns a fee interest
in the land and building located at 000 Xxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx, free
and clear of all Liens, except for Permitted Liens.
3.19. Labor Relations. Neither the Company nor its
subsidiaries is party to any collective bargaining agreement covering any
individual who performs services as an employee primarily for the Company or any
of its subsidiaries (including such persons who are on an approved leave of
absence, vacation, short-term disability or otherwise treated as an active
employee of the Company or any of its subsidiaries, "Employees"), and there are
no controversies or unfair labor practice proceedings pending or, to the
Company's knowledge, threatened between the Company or any of its subsidiaries
and any of their current or former Employees or any labor or other collective
bargaining unit representing any current or former Employee of the Company or
any of its subsidiaries that would reasonably be expected to result in a labor
strike, dispute, slow-down or work stoppage or otherwise have a Material Adverse
Effect. To the Company's knowledge, no organizational effort is presently being
made or, to the Company's knowledge, threatened by or on behalf of any labor
union.
18
3.20. Employee Benefits.
(a) Neither the Company nor any trade or business (whether or
not incorporated) which has been under common control or treated as a single
employer with the Company under Section 414(b), (c) or (m) of the Code (an
"ERISA Affiliate") has incurred, or is reasonably likely to incur, any liability
under Title IV of ERISA or Section 412 of the Code and none of the Plans is a
Multiemployer Plan, as defined in Section 3(37) of ERISA. Neither the Company
nor any ERISA Affiliate has incurred any liability resulting from a complete or
partial withdrawal from any Multiemployer Plan, and none of them has incurred,
or is reasonably likely to incur, any liability due to the termination or
reorganization of a Multiemployer Plan which has not been satisfied in full, and
to the Company's knowledge, no event has occurred that would subject the Company
or any ERISA Affiliate to any such liability.
(b) Each Plan has been administered in material compliance
with its terms, and other applicable laws, rules and regulations including,
without limitation, the provisions of ERISA and the Code, and there are no
material pending or, to Company's knowledge, threatened claims by, on behalf of
or involving any plan administrator or any plan trustee (other than routine
claims for benefits).
(c) No "prohibited transaction" within the meaning of Section
4975 of the Code has occurred with respect to any Plan.
(d) Each Plan that is intended to qualify under Section 401(a)
of the Code does so qualify.
(e) Except as may be required under Section 4980B of the Code,
or Section 601 of ERISA, neither the Company nor any of its subsidiaries has any
liability for post-retirement medical or life insurance benefits or coverage for
any Employee or Former Employee or any dependent of any such Employee or Former
Employee.
(f) The consummation of the transactions contemplated hereby
will not result in any increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any compensation or benefits
payable by the Company to or in respect of any Employee or Former Employee or
the beneficiary or dependent of any such Employee or Former Employee under any
Plan.
(g) No amount payable by the Company or any of its
subsidiaries to any Employee or Former Employee will fail to be deductible for
Federal income tax purposes by reason of Section 162(m) or 280G of the Code.
(h) All employee benefits practices or arrangements which are
maintained by the Company or any of its subsidiaries for the benefit of their
non-United States Employees or United States Employees located in a foreign
jurisdiction (collectively, the "Foreign Plans") have been maintained in all
material respects in accordance with the applicable laws of such foreign
jurisdiction, and all Foreign Plans required to be registered with any
governmental agency have been registered and have been maintained in good
standing with such governmental agency.
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3.21. Environmental Matters.
(a) Except as would not reasonably be likely to result in a
material liability to the Company, no underground storage tanks and no amount of
any substance that has been designated by any governmental agency or by
applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, but
excluding routine quantities of office and janitorial supplies (a "Hazardous
Material"), are present as a result of the actions of the Company, or, to the
Company's knowledge, as a result of the actions of a third party, in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that the Company or any of its subsidiaries currently
owns, operates, occupies or leases, or to the Company's knowledge, has at any
time owned, operated, occupied or leased.
(b) Except as would not reasonably be likely to result in a
material liability to the Company (in any individual case or in the aggregate),
neither the Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of or arranged for the disposal of, released or exposed
its employees or others to Hazardous Materials in violation of any federal,
state or local law, rule, regulation, treaty or statute in effect before the
Initial Closing Date related to protection of human health, safety, and the
environment, including natural resources (collectively, "Environmental Laws"),
or in a manner that would likely result in any material liability to the
Company.
(c) Except as would not reasonably be likely to result in a
material liability to the Company, the Company and its subsidiaries currently
hold and are in compliance with all approvals, permits, licenses, clearances and
consents required under Environmental Laws for the conduct of the Company's and
its subsidiaries' businesses as currently being conducted.
(d) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or to the Company's knowledge,
threatened alleging that the Company and its subsidiaries are in violation of or
liable under any Environmental Law.
(e) To the Company's knowledge, there are no material
expenditures required to maintain or achieve compliance with all applicable
Environmental Laws.
3.22. Taxes.
(a) The Company has filed (or joined in the filing of) when
due all Tax Returns required by applicable law to be filed with respect to the
Company and all Taxes shown to be due on such Tax Returns have been paid. All
such Tax Returns were true, correct and complete in all material respects as of
the time of such filing. Any Liability of the Company for Taxes not yet due and
payable, or which are being contested in good faith, in each case as of December
31, 2002, has been accrued or reserved for on the financial statements of the
Company in accordance with GAAP. Since December 31, 2002, the Company has not
incurred any material Taxes other than in the ordinary course of business.
20
(b) No current or former subsidiary of the Company has ever
been a member of any "affiliated group" (within the meaning of Section 1504(a)
of the Code) included in any consolidated federal income Tax Return filed with
the Internal Revenue Service other than an affiliated group of which the Company
is the common parent.
3.23. Insurance. All insurance policies carried by, or
covering the Company's properties are in full force and effect, and no notice of
cancellation has been given with respect to any such policy. All premiums due on
such policies have been paid in a timely manner and the Company has complied in
all material respects with the terms and provisions of such policies. The
insurance coverage provided by such policies is provided by insurers that, to
the knowledge of the Company, are solvent and is in such amount and types of
coverage which are adequate and customary for the industries in which the
Company operates.
3.24. General Solicitation; No Integration. Neither the
Company nor any other person or entity authorized by the Company to act on its
behalf has engaged in a general solicitation or general advertising (within the
meaning of Regulation D of the Securities Act) of investors with respect to
offers or sales of the Securities. The Company has not, directly or indirectly,
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Securities Act) which, to its
knowledge, is or will be integrated with the Securities sold pursuant to this
Agreement.
3.25. Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and to maintain
assets accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.26. By-Laws. The Company's By-Laws provide that all matters
submitted to a meeting of stockholders, including the vote relating to the
Special Proposals at the Special Meeting, shall require the affirmative vote of
a majority of the total number of votes cast, present in person or by proxy and
a valid quorum.
3.27. CSFB Documents. As of the date hereof, (a) the Company
has (i) repaid all amounts outstanding under the CSFB Documents and the CSFB
Documents have been terminated and (ii) satisfied all of its CSFB Secured
Obligations, and (b) the CSFB Collateral has been released from the CSFB Liens
created thereby.
3.28. Opinion of the Financial Advisor. The Company has
received an opinion of HLHZ, a copy of which has been delivered to a Special
Committee of the Board of Directors and to the Purchasers as to the fairness of
the transactions contemplated hereby.
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4. Representations and Warranties of Each Purchaser. Each
Purchaser, severally for itself and not jointly with the other Purchasers,
represents and warrants to the Company as follows:
4.1. Organization. Each Purchaser, if it is a legal entity, is
duly and validly existing under the jurisdiction of its organization.
4.2. Authorization. All action on the part of such Purchaser
necessary for the authorization, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein has been
taken. This Agreement constitutes the legal, valid and binding obligation of
such Purchaser, enforceable against such Purchaser in accordance with its terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally and by general equitable principles.
Such Purchaser has all requisite power to enter into this Agreement and to carry
out and perform its obligations under the terms of this Agreement.
4.3. Purchase Entirely for Own Account; Etc. Such Purchaser is
acquiring the Securities for its own account, and not with a view to, or for
sale in connection with, any distribution of the Securities in violation of the
Securities Act. Except as contemplated by this Agreement, such Purchaser has no
present agreement, undertaking, arrangement, obligation or commitment providing
for the disposition of the Securities. Such Purchaser, if it is a legal entity,
has not been organized, reorganized or recapitalized specifically for the
purpose of investing in the Securities.
4.4. Investor Status; Etc. Such Purchaser certifies and
represents to the Company that at the time such Purchaser acquires any of the
Securities, such Purchaser will be an "accredited investor" as defined in Rule
501 of Regulation D promulgated under the Securities Act. Such Purchaser's
financial condition is such that it is able to bear the risk of holding the
Securities for an indefinite period of time and the risk of loss of its entire
investment. Such Purchaser has been afforded the opportunity to ask questions of
and receive answers from the management of the Company concerning this
investment and has sufficient knowledge and experience in investing in companies
similar to the Company in terms of the Company's stage of development so as to
be able to evaluate the risks and merits of its investment in the Company.
4.5. Securities Not Registered. Such Purchaser understands
that the Securities have not been registered under the Securities Act, by reason
of their issuance by the Company in a transaction exempt from the registration
requirements of the Securities Act, and that the Securities must continue to be
held by such Purchaser unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration. Such Purchaser
understands that the exemptions from registration afforded by Rule 144 (the
provisions of which are known to it) promulgated under the Securities Act depend
on the satisfaction of various conditions, and that, if applicable, Rule 144 may
afford the basis for sales only in limited amounts.
4.6. No Conflict. The execution and delivery of this Agreement
by such Purchaser and the consummation of the transactions contemplated hereby
will not conflict with or result in any violation of or default by such
Purchaser (with or without notice or lapse of time,
22
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under
(i) any provision of the organizational documents of such Purchaser or (ii) any
agreement or instrument, permit, franchise, license, judgment, order, statute,
law, ordinance, rule or regulations, applicable to such Purchaser or its
respective properties or assets.
4.7. Brokers. Such Purchaser has not retained, utilized or
been represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
4.8. Consents. Except in connection with the HSR Act, all
consents, approvals, orders and authorizations required on the part of such
Purchaser in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated herein have been
obtained and will be effective as of the Initial Closing Date.
4.9. No Manipulation of Stock. The Purchasers have not taken,
in violation of applicable law, any action designed to or that might reasonably
be expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the transactions contemplated hereby or the sale
or resale of the shares of Common Stock.
5. Covenants.
5.1. HSR Act Filings. The Company and each Purchaser shall
file with the proper authorities all forms and other documents necessary to be
filed pursuant to the HSR Act, and the regulations promulgated thereunder, as
promptly as possible and shall cooperate with the each other in promptly
producing such additional information as those authorities may reasonably
require to allow early termination of the notice period provided by the HSR Act
or as otherwise necessary to comply with statutory requirements of the Federal
Trade Commission or the Department of Justice. The Company and each Purchaser
shall pay the filing fee associated with its respective filing of the HSR Act
notification.
5.2. Other Governmental Approvals. As soon as practicable
after the execution of this Agreement, the Company and each Purchaser shall file
all applications and reports and take such other action (in addition to filings
required under the HSR Act) which is reasonably required to be taken or filed
with any governmental authority in connection with the transactions contemplated
by this Agreement. The Company and each Purchaser shall give all additional
notices to third parties and take other action reasonably required to be or
taken by it under any authorization, lease, note, mortgage, indenture, agreement
or other instrument or any law, rule, regulation, demand or court or
administrative order in connection with the transactions contemplated by this
Agreement.
5.3. Further Assurances. Each party agrees to cooperate with
each other and their respective officers, employees, attorneys, accountants and
other agents, and, generally, do such other acts and things in good faith as may
be reasonable or appropriate to timely effectuate the intents and purposes of
this Agreement and the consummation of the transactions contemplated hereby,
including, but not limited to, taking any action to facilitate the filing any
23
document or the taking of any action to assist the other parties hereto in
complying with the terms of Sections 5.1 and 5.2 herein.
5.4. Board Designees.
(a) In addition to the rights granted to Warburg pursuant to
the 2002 Purchase Agreement and Section 9(e) of the Series A Preferred
Certificate of Designations, and as shall be provided for in Section 9(e) of the
Series B Preferred Certificate of Designations, Warburg and Broadview shall each
have the exclusive right to appoint one (1) director (each, a "Board Designee")
to the Board of Directors for so long as (i) Warburg or Broadview, as the case
may be, Beneficially Owns an aggregate principal amount of the Amended Notes
equal to at least twenty-five percent (25%) of the aggregate principal amount of
the Amended Notes originally issued to Warburg or Broadview, as the case may be,
pursuant to this Agreement or (ii) Warburg or Broadview, as the case may be,
Beneficially Owns at least twenty-five percent (25%) of the shares of the
Preferred Stock issued to Warburg or Broadview pursuant to this Agreement upon
exchange of the Notes (including as owned and outstanding for this purpose
shares of Common Stock issuable upon conversion of the shares of Preferred Stock
issuable to the Purchasers upon exchange for the Notes and the shares of Common
Stock issuable upon exercise of the Warrants). The Board Designees shall be duly
appointed in accordance with the Company's By-laws, Certificate of Incorporation
and the General Corporation Law of Delaware. The Warburg Board Designee and the
Broadview Board Designee so elected shall serve as a Class III Director and
Class II Director, respectively (each as designated in the Company's Certificate
of Incorporation), and until their respective successor is elected and
qualified. For so long as such membership does not conflict with any applicable
law or regulation or listing requirement of Nasdaq (as determined in good faith
by the Board of Directors of the Company), the Board Designees shall serve as a
member of the Audit Committee, Compensation Committee and each other principal
committee of the Board of Directors. Any vacancy in the position of the Board
Designee appointed by Warburg and the Board Designee appointed by Broadview may
be filled only by Warburg and Broadview, respectively. Each of the Board
Designee appointed by Warburg and the Board Designee appointed by Broadview may,
during his or her term of office, be removed at any time, with or without cause,
by and only by Warburg and Broadview, respectively, at a special meeting called
for such purpose or by written consent of Warburg and Broadview, respectively.
Any vacancy created by such removal may also be filled at such meeting or by
such consent.
(b) In addition to the Board Designee, each party hereby
agrees that following the Initial Closing, Warburg shall have the right to have
one observer (the "Board Observer") attend the meetings of the Board of
Directors as provided in Section 5.4(b) of the 2002 Purchase Agreement.
(c) Pursuant to the terms of the Original Agreement, Warburg
designated Xxxxxxx X. Xxxxxx as its initial Board Designee whose term commenced
in accordance with Section 5.4(a). Pursuant to the terms of the Original
Agreement, Broadview designated Xxxxxx Xxxxxx as its initial Board Designee
whose term commenced in accordance with Section 5.4(a).
(d) For so long as Warburg and/or Broadview have the right to
designate a Board Designee pursuant to Section 5.4(a) herein, each Board
Designee and the Board Observer
24
shall receive a copy of all materials distributed to the Board of Directors,
whether provided to the Board of Directors in advance of, during or after any
meeting of the Board of Directors, regardless of whether such Board Designee or
Board Observer shall be in attendance at any such meeting, provided, however;
that the Company has the right to withhold any information from the Board
Observer and to exclude the Board Observer from any meeting or portion thereof
if access to such information or attendance at such meeting could:
(i) in the reasonable judgment of the Company's outside
counsel, adversely affect the attorney client privilege between the Company and
its counsel;
(ii) cause the Board of Directors to breach its fiduciary
duties; or
(iii) result in a conflict between the interests of the
Company, on the one hand, and those of the Board Observer or any of its
affiliates, on the other hand.
The Company will use its reasonable best efforts to ensure that any withholding
of information or any restriction on attendance is strictly limited only to the
extent necessary set forth in the preceding sentence.
(e) Each Board Designee and the Board Observer shall be
reimbursed for out-of-pocket expenses incurred in connection with participation
as a member or observer, as the case may be, of the Board of Directors in a
manner consistent with the Company's policies for reimbursing other outside
members of the Board of Directors. In addition, each Board Designee shall be
entitled to the same compensation paid to other outside members of the Board of
Directors in his or her capacity as a director, which compensation shall be
assignable to Warburg and Broadview.
(f) For so long as Warburg and/or Broadview have the rights to
appoint the Board Designees pursuant to (i) Section 5.4(a) herein and/or Section
9(e) of the Series B Preferred Certificate of Designations or (ii) Section
5.4(a) of the 2002 Purchase Agreement and Section 9(e) of the Series A Preferred
Certificate of Designations, there shall be no greater than nine (9) members on
the Board of Directors at all times. The size of the Board of Directors shall
not be increased by any election by Warburg and Broadview to appoint their
respective Board Designees pursuant to Section 5.4(a) herein or Section 5.4(a)
of the 2002 Purchase Agreement and Section 9(e) of the Series A Preferred
Certificate of Designations.
5.5. Series B Preferred Certificate of Designations. The
Company shall file the Series B Preferred Certificate of Designations with the
Secretary of State of the State of Delaware, and satisfactory evidence of such
filing shall be delivered to the Purchasers within two Business Days following
receipt of Stockholder Approval.
5.6. Covenant Pending Each Closing. Between the date of this
Agreement and the date of each Closing, the Company will promptly advise each
Purchaser of any action or event of which it becomes aware which has the effect
of making incorrect, in any material respect, any of the Company's
representations or warranties or which has the effect of rendering any of the
Company's covenants incapable of performance.
25
5.7. Proxy Statement. The Company shall use its reasonable
best efforts to supplement, as promptly as practicable after the date hereof but
in no event later than ten (10) Business Days after the date hereof, the proxy
statement and related materials dated September 8, 2003 with respect to the
meeting of the stockholders for the purpose of approving the Special Meeting
Proposals. Thereafter, the Company shall as promptly as possible file with the
SEC the definitive proxy statement and acting through its Board of Directors,
(i) call a Special Meeting to be held at the earliest practicable date but in no
event later than November 30, 2003, for the sole purpose of voting upon the
Special Meeting Proposals and (ii) include in the supplement to the proxy
statement the recommendation of its Board of Directors that holders of the
Common Stock approve the Special Meeting Proposals; provided, however, that the
Board of Directors may withdraw or adversely modify their recommendation of the
Special Meeting Proposals if the Board of Directors determines in good faith
(after consultation with its financial advisors and legal counsel) that from a
financial point of view to the stockholders of the Company, based solely on
facts or conditions arising after the date hereof, that the issuances referred
to in clause (i) above are not in the best interests of the Company's
stockholders. In the event that the Board of Directors withdraws or adversely
modifies its recommendation of the Special Meeting Proposals, the Company shall
pay to the Purchasers, based upon their pro rata percentage of the aggregate
Purchase Price and in immediately available funds, the Incremental Interest as
liquidated damages, payable within two (2) Business Days of such withdrawal or
modification, as set forth in Section 7(b) of the Notes. Neither prior to nor at
the Special Meeting shall the Company put forth any matter, other than the
Special Meeting Proposals, to the holders of Common Stock for their approval
without the prior written consent of the Purchasers.
5.8. Subscription Right.
(a) If at any time after the date hereof, and for so long as a
Purchaser Beneficially Owns (i) an aggregate principal amount of the Amended
Notes equal to at least twenty-five percent (25%) of the aggregate principal
amount of the Amended Notes originally issued to such Purchaser pursuant to this
Agreement or (ii) at least twenty-five percent (25%) of the shares of Common
Stock issuable to such Purchaser pursuant to this Agreement and the 2002
Purchase Agreement (including upon conversion of the shares of the Preferred
Stock issuable upon exchange of the Notes and the Series A Preferred, and upon
exercise of the Warrants and Existing Warrants), the Company proposes to issue
equity securities of any kind (the term "equity securities" shall include for
these purposes any warrants, options or other rights to acquire equity
securities and debt securities convertible into equity securities) of the
Company, other than (i) shares of Common Stock issuable upon (A) conversion of
the shares of the Preferred Stock issuable upon exchange of the Notes or Series
A Preferred, or (B) upon exercise of the Warrants or the Existing Warrants, (ii)
shares of Preferred Stock issuable upon exchange of the Notes, (iii) the
Warrants, (iv) shares of Common Stock issued to the public in a firm commitment
underwriting pursuant to a registration statement filed under the Securities Act
with anticipated gross proceeds to the Company of at least $20 million, (v)
shares of Common Stock issued in connection with bona fide acquisitions,
mergers, joint venture or similar transactions, the terms of which are approved
by the Board of Directors, (vi) shares of Common Stock issued pursuant to any
stock option, stock purchase or similar plan or arrangement for the benefit of
the employees of the Company or its subsidiaries, duly adopted by the Board of
Directors, (vii) shares of Common Stock issuable upon exercise of that certain
warrant to purchase 1,080,000 shares of Common Stock issued to Motorola, Inc. on
September 9, 2003, (viii) any
26
equity securities, debt securities convertible into equity securities and the
equity securities issued upon the conversion thereof, issued in settlement of
litigation, provided such settlement is approved by the Board of Directors and
the Purchasers holding at least a majority of the outstanding aggregate
principal amount of the Notes issued pursuant to this Agreement, or (ix)
pursuant to the terms of this Agreement, then, as to each Purchaser, the
Company shall:
(i) give written notice to such Purchaser (no less than ten
(10) Business Days prior to the closing of such issuance) setting forth in
reasonable detail (A) the designation and all of the terms and provisions of the
securities proposed to be issued (the "Proposed Securities"), including, where
applicable, the voting powers, preferences and relative participating, optional
or other special rights, and the qualification, limitations or restrictions
thereof and interest rate and maturity; (B) the price and other terms of the
proposed sale of such securities; (C) the amount of the Proposed Securities; and
(D) such other information as such Purchaser may reasonably request in order to
evaluate the proposed issuance; and
(ii) offer to issue and sell to such Purchaser, on such terms
as the Proposed Securities are issued and upon full payment by such Purchaser, a
portion of the Proposed Securities equal to a percentage determined by dividing
(A) the number of shares of Common Stock Beneficially Owned by such Purchaser by
(B) the total number of shares of Common Stock then outstanding, including for
purposes of this calculation all shares of Common Stock issuable upon conversion
or exercise in full of any convertible or exercisable securities (other than
employee stock options) then outstanding.
(b) Each Purchaser must exercise its purchase rights hereunder
within ten (10) Business Days after receipt of such notice from the Company. To
the extent that the Company offers two or more securities in units, each
Purchaser must purchase such units as a whole and will not be given the
opportunity to purchase only one of the securities making up such unit. The
closing of the exercise of such subscription right shall take place
simultaneously with the closing of the sale of the Proposed Securities giving
rise to such subscription right.
(c) Upon the expiration of the 10-Business Day offering period
described above, the Company will be free to sell such Proposed Securities that
the Purchasers have not elected to purchase during the ninety (90) days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to the Purchasers. Any Proposed Securities
offered or sold by the Company after such 90 day period must be reoffered to the
Purchasers pursuant to this Section 5.8.
(d) The election by any Purchaser not to exercise its
subscription rights under this Section 5.8 in any one instance shall not affect
its right (other than in respect of a reduction in its percentage holdings) as
to any subsequent proposed issuance. Any sale of such securities by the Company
without first giving each Purchaser the rights described in this Section 5.8
shall be void and of no force and effect.
(e) Each of the Company, Warburg and Broadview hereby agree
that, effective as of the date hereof, Section 5.7 of the 2002 Purchase
Agreement shall be null and void and of no further force and effect and that the
rights of the parties thereunder shall be governed by the provisions set forth
in this Section 5.8.
27
5.9. Standstill. In the event that at any time following the
date hereof until July 22, 0000, Xxxxxxx and any of its Affiliates own more than
forty-five percent (45%) of the issued and outstanding voting securities of the
Company (the "Voting Stock"), Warburg agrees that (i) it shall be entitled to
vote (or take action by written consent in respect of) not more than forty-five
percent (45%) of the issued and outstanding shares of Voting Stock and (ii) it
will abstain from voting any shares in excess of forty-five percent (45%) of the
Voting Stock. Warburg further agrees that until July 22, 2007, except among
Warburg and any of its Affiliates, it shall not form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) with respect to the Voting Stock.
5.10. Nominating Committee; Agreement to Vote. For so long as
a Purchaser is subject to Section 5.8 herein, such Purchaser and such
Purchaser's designees on the Board of Directors shall vote (i) in favor of the
establishment of a nominating committee of the Board of Directors consisting
entirely of Independent Directors and (ii) if necessary to comply with
applicable requirements of federal law, state law, or Nasdaq relating to the
Board of Directors, in favor of an increase in the number of authorized members
of the Board of Directors such that a majority of the members of the Board of
Directors are Independent Directors. At or with respect to any election of one
or more directors (including to fill any vacancy on the Board of Directors), for
so long as a Purchaser is subject to Section 5.8 herein, such Purchaser shall
vote all of its shares of Common Stock and/or shares of Series A Preferred
and/or shares of Preferred Stock in favor of the election of any nominee to the
Board of Directors whose nomination was approved by the unanimous consent of the
Board of Directors.
5.11. Affirmative Covenants in Connection with the Sale of the
Notes. The Company agrees that, until the earlier of (i) such date that all
Notes are exchanged by the holders thereof in accordance with Section 5.13 or
(ii) the date upon which all Obligations are satisfied in full, the Company will
perform and observe all of the provisions contained in this Section 5.11.
(a) Notice. The Company shall notify the Purchasers promptly,
but in any event within two (2) Business Days of its discovery thereof, (i)
whenever any Event of Default occurs, (ii) whenever any action, suit or
proceeding is commenced by or against the Company which, if adversely
determined, would, or would be reasonably likely to, result in a Material
Adverse Effect and (iii) whenever any Material Adverse Effect occurs.
(b) Continued Existence; Compliance with Law. The Company
shall comply in all respects with its Certificate of Incorporation. The Company
shall preserve, renew and keep in full force and effect its existence as a
corporation and its material rights, licenses, certificates, and permits and
shall comply in all material respects with all laws, rules, regulations,
ordinances, orders and judgments applicable to it. The Company will obtain,
renew and extend all of the foregoing rights, certificates, permits, licenses,
certificates of compliance and the like which may be necessary for the
continuation of the operation of its business as currently conducted and will
give prompt written notice to the Purchasers of (i) any citation or order
relating thereto, (ii) any lapse, suspension, revocation, rescission or other
termination thereof, (iii) any alleged breach or violation thereof by the
Company or any other Person, (iv) any proceeding relating thereto or (v) any
refusal of any Person to grant or extend the same.
28
(c) Maintenance of Property. The Company shall at all times
maintain and preserve its property in good working order, condition and repair,
normal wear and tear excepted, and shall pay and discharge, or cause to be paid
and discharged when due, the cost of repairs to or maintenance of the same
unless such cost of repairs is contested in good faith by appropriate
proceedings or other appropriate actions promptly initiated and diligently
conducted and if the Company shall have set aside on its books such reserves, if
any, with respect thereto as are required by GAAP and deemed appropriate by the
Company and its independent accountants.
(d) Title to Property. All property, whether real or personal,
owned by the Company shall be held in the name of the Company unless otherwise
approved by the Board of Directors and the Purchasers holding at least a
majority of the outstanding aggregate principal amount of the Notes issued
pursuant to this Agreement.
(e) Information and Inspection. The Company shall furnish to
the Purchasers from time to time, upon request, financial statements of the
Company and information pertaining to any covenant, provision or condition
hereof. At all reasonable times and as often as the Purchasers may reasonably
request, upon reasonable notice, the Company shall permit any authorized
representative designated by the Purchasers to visit and inspect any of the
properties of the Company and to take extracts therefrom and to discuss the
Company's affairs, finances and accounts with the management of the Company and
the Company's independent auditors.
(f) Insurance. The Company will maintain or cause to be
maintained on all insurable properties now or hereafter owned by the Company
insurance against loss or damage by fire or other casualty to the extent
customary with respect to like properties of companies conducting similar
businesses, and will maintain or cause to be maintained public liability and
workers' compensation insurance insuring the Company to the extent customary
with respect to companies conducting similar businesses and, upon request, will
furnish to the Purchasers satisfactory evidence of the same. The Company shall
also maintain such other insurance as may be reasonably requested by the
Purchasers.
(g) Payment of Taxes. The Company will pay and discharge
promptly as they become due and payable all Taxes, assessments and other
governmental charges or levies imposed upon it or its income or any of its
property or assets, or any part thereof, as well as all lawful claims of any
kind (including claims for labor, materials and supplies) which, if unpaid,
might by law become a Lien upon its property; provided that the Company shall
not be required to pay any Taxes, assessments, charges, levies or claims if the
amount, applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings or other appropriate actions promptly initiated
and diligently conducted and if the Company shall have set aside on its books
such reserves, if any, with respect thereto as are required by GAAP and deemed
appropriate by the Company and its independent accountants.
(h) Payment of Other Indebtedness, Etc. Except as to (i)
matters being contested in good faith and by appropriate proceedings or other
appropriate action or (ii) trade payables, the Company will pay promptly when
due, or in conformance with the Company's customary practices, all other
material indebtedness, liabilities and obligations incident to the conduct of
its business.
29
5.12. Negative Covenants in Connection with the Sale of the
Notes. The Company agrees that, until the earlier of (i) such date that all
Notes are exchanged by the holders thereof in accordance with Section 5.13 or
(ii) the date upon which all Obligations are satisfied in full, the Company
shall not, directly or indirectly, take any of the actions set out in this
Section 5.12; provided, however, that nothing contained in this Section 5.12
shall prohibit the Company's Board of Directors from engaging in any action in
connection with or directed toward a merger, acquisition or strategic financing
transaction, subject to the Company's obligations under Section 6(b) of the
Notes.
(a) Liabilities. The Company shall not incur, create, assume
or permit to exist any Liabilities, except: (i) Liabilities existing on the date
hereof; (ii) Liabilities arising hereunder or any other Liabilities owed to the
Purchasers under the Loan Documents; (iii) trade accounts payable and other
unsecured Liabilities incurred and payable in the ordinary course of business;
(iv) Liabilities for Taxes, assessments, franchise fees, governmental charges,
Liens or similar claims to the extent that payment thereof shall not be required
to be made by the provisions hereof; (v) purchase money Liabilities relating to
the purchase price of equipment to be used in the business of the Company in an
aggregate outstanding amount not to exceed at any one time $1,000,000; (vi) any
renewals, extensions, substitutions, refinancings or replacements of any
Liability otherwise permitted hereunder so long as (1) the aggregate amount of
Liabilities represented thereby is not increased by such renewal, extension,
substitution, refinancing or replacement, (2) the average life and the date such
Liability is scheduled to mature are not shortened, (3) the new Liability shall
not be senior in right of payment to the Liability that is being extended,
renewed, substituted, refinanced or replaced and (4) the terms and conditions of
such Liability are not more onerous to the Company in any material respect than
the terms and conditions of the Liability renewed, extended, substituted,
refinanced or replaced; (vii) any Liabilities the net proceeds of which are used
to repay the Notes in their entirety; or (viii) any Liabilities arising under
the SVB Agreements; (ix) Liabilities owed by the Company to any of its
subsidiaries or owed by any of its subsidiaries to any other of its subsidiaries
or to the Company; (x) Liabilities incurred in connection with restructuring
plans publicly disclosed by the Company, including Liabilities associated with
terminating the Company's lease obligation under the Soquel Letter Agreement;
(xi) Liabilities incurred in connection with the Symbol patent infringement
litigation that do not constitute a Material Adverse Change; or (xii)
Liabilities incurred in connection with any settlement of litigation that is
approved by the Board of Directors and the Purchasers holding at least a
majority of the outstanding aggregate principal amount of the Notes issued
pursuant to this Agreement.
(b) Guaranties. The Company shall not pledge its credit or
property in any manner, or otherwise become responsible, for the payment or
other performance of the Liabilities or other obligations of another Person and
shall not act as a guarantor (whether of payment or of collection), surety,
co-maker or endorser for, or agree conditionally or otherwise to make any
purchase, loan or investment in order thereby to enable, another Person to
prevent or correct a default of any kind, except endorsements of negotiable
instruments for collection in the ordinary course of business.
(c) Notes, Accounts Receivable and Claims. The Company shall
not sell, discount or otherwise dispose of any material note or material account
receivable, with or without recourse, except for collection in the ordinary
course of business or in connection with
30
the SVB Agreements or the Xxxxx Xxxx indebtedness; fail to assert timely any
material claim, cause of action or contract right that it possesses against any
third party; nor agree to settle or compromise any such claim, cause of action
or contract right except for (i) settlements or compromises made in the
reasonable exercise of business judgment in the ordinary course of business or
(ii) in connection with any settlement of litigation that is approved by Board
of Directors and the Purchasers holding at least a majority of the outstanding
aggregate principal amount of the Notes issued pursuant to this Agreement.
(d) Disposal of Assets. The Company shall not sell, lease,
transfer, assign or otherwise dispose of any material part of its assets to any
Person, except for sales, leases, transfers, assignments or other dispositions
made: (i) in the ordinary course of business; (ii) in connection with the
restructuring plans publicly disclosed by the Company, (iii) in connection with
the SVB Agreements; (iv) in connection with the Xxxxx Xxxx indebtedness more
fully described on Schedule 5.12; or (v) in connection with a sale of the
property located at 000 Xxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx unanimously approved
by the Board of Directors.
(e) Amendment of Governing Documents. The Company shall not
amend or modify its Certificate of Incorporation or By-laws in any respect which
would have a material adverse effect upon the Purchasers' rights and remedies
under the Loan Documents.
(f) Reorganizations; Acquisitions. The Company shall not be a
party to any recapitalization or purchase all or a substantial part of the
capital stock, partnership interests or assets of any Person or any division or
business unit of any Person unless such transaction is unanimously approved by
the Board of Directors.
(g) Liens. The Company shall not suffer or permit any property
or asset now owned or hereafter acquired by it to be or become encumbered by any
Lien other than Permitted Liens.
(h) Capital Distributions. The Company shall not make any
capital distributions, or pay or declare any dividend or distribution, except
(i) in connection with a stock split or combination, (ii) in accordance with
this Agreement and/or the 2002 Purchase Agreement or (iii) for dividends or
distributions by the subsidiaries of the Company to the Company.
(i) Transactions with Affiliates. Except in connection with
the Loan Documents, the Company shall not pay any management or other fee to,
or, except in the ordinary course of business with its subsidiaries, enter into
any transaction with, any Affiliate.
(j) Amendments or Waivers. Except with respect to the SVB
Agreements, the Company shall not amend or cancel or consent to the amendment or
cancellation of any contract (or waive a right thereunder) in any manner that
might have the effect of materially and adversely (a) affecting its financial
condition, (b) affecting the rights of the Purchasers under the Loan Documents
or (c) decreasing or adversely affecting the value of the collateral securing
the Obligations.
(k) Accounting Matters. Except upon thirty (30) days' written
notice, the Company shall not change its fiscal year or accounting practices.
31
(l) Subsidiaries. The Company shall not form or acquire or
cause to be formed or acquired any Subsidiary, except in the ordinary course
consistent with past practice.
(m) Investments. The Company shall not make any investments
other than investments in cash equivalents, except in the ordinary course
consistent with past practice or as otherwise approved by the Board of Directors
and the Purchasers holding at least a majority of the outstanding aggregate
principal amount of the Notes issued pursuant to this Agreement.
(n) Indirect Actions. The Company shall not permit any of its
subsidiaries to take any of the actions set forth in this Section 5.12 nor
permit any of the conditions set forth in this Section 5.12 to occur with
respect to its subsidiaries; provided, however, that with respect to Section
5.12(b), Purchasers acknowledge and consent to the secured guaranties issued by
certain of the Company's subsidiaries for the benefit of SVB, and consent to any
related arrangements for the benefit of SVB approved by the Board.
5.13. Exchange of Notes for Preferred Stock.
(a) At each Purchaser's option, at any time, and from time to
time, upon the later of (i) Stockholder Approval and (ii) to the extent
required, the date any applicable waiting period under the HSR Act shall have
expired or notice of early termination of such waiting period shall have been
received by the Company and the Purchasers, all or any portion of the
outstanding principal and accrued but unpaid interest then outstanding on such
Purchaser's Notes may be exchanged for such number of shares of Preferred Stock
as shall be equal to the quotient obtained by dividing the aggregate outstanding
principal balance plus any accrued but unpaid interest then outstanding on such
Purchaser's Notes or the portion thereof to be exchanged by $100.00. If
Stockholder Approval at the Special Meeting is not obtained, then the Purchasers
shall not have the option to, and the Company shall not be required to, exchange
all or any portion of the outstanding principal and accrued but unpaid interest
then outstanding on the Notes for shares of Preferred Stock.
(b) If a Purchaser elects to exchange all or any portion of
the outstanding principal balance and accrued but unpaid interest on such
Purchaser's Note, the Purchaser shall give notice to the Company of the
principal amount of the Note and/or accrued but unpaid interest thereon to be
exchanged and the name(s) in which the certificate(s) for the shares of
Preferred Stock are to be issued. If at the time of exchange of the Notes for
shares of Preferred Stock there are insufficient authorized shares of Preferred
Stock to permit exchange in full of the Notes proposed to be so exchanged, then
the Company shall take all corporate action necessary to authorize a sufficient
number of shares of Preferred Stock to permit such exchange in full. No
fractional shares of the Preferred Stock will be issued upon exchange of the
Notes. In lieu of any fractional share to which the Purchaser would otherwise be
entitled, the Company will pay to the Purchasers in cash the amount of the
unexchanged principal balance plus accrued but unpaid interest then outstanding
on the Notes that would otherwise be exchanged for such fractional share. Upon
exchange of the Notes, the Purchasers shall surrender the Notes, duly endorsed,
at the principal offices of the Company or any transfer agent of the Company. At
its expense, the Company will, as soon as practicable thereafter, issue and
deliver to such Purchasers, at such principal office, a certificate or
certificates for the number of shares to which each such Purchaser is entitled
upon such exchange, together with other securities and property to which
32
such Purchaser is entitled upon such exchange under the terms of its Note,
including a check payable to such Purchaser for any cash amounts payable as
described herein. Upon exchange of the Notes and payment for fractional shares
as provided above, the Company will be forever released from all of its payment
obligations and liabilities under the Notes with regard to that portion of the
principal and accrued but unpaid interest being exchanged.
5.14. Stock Options. From and after the Closing Date, the
Company agrees that in the event the Company grants any stock options, stock
grants or similar rights under the terms of (i) the Company's 1995 Long-Term
Incentive Plan (the "1995 Plan"), (ii) Proxim, Inc.'s 1999 Nonstatutory Stock
Option Plan (the "1999 NSO Plan"), (iii) the 1999 Proxim Corporation Stock
Incentive Plan (the "1999 Plan") or (iv) the Company's 2001 Stock Bonus Plan for
Non-Officer Employees (the "2001 Plan" and collectively with the 1995 Plan, the
1999 NSO Plan and the 1999 Plan, the "Plans"), the Company shall, and shall
cause the applicable plan administrator to, ensure that the transactions
contemplated by the terms of this Agreement and the other Transaction Documents
shall not at any time constitute a Change of Control (as defined in the 1995
Plan, 1999 NSO Plan, 1999 Plan or 2001 Plan, as the case may be) under the
relevant plan or any of the relevant agreements governing any such option, stock
grant or similar right. The Company acknowledges and agrees that the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents do not, and will not at any time, constitute a Change of
Control (as defined in the 1999 Plan or 2001 Plan, as the case may be) under the
terms of the 1999 Plan or 2001 Plan.
6. Conditions Precedent.
6.1. Conditions to the Obligation of the Purchasers to
Consummate the Initial Closing. The several obligations of each Purchaser to
consummate the transactions to be consummated at the Initial Closing and, if
applicable, to purchase and pay for the New Notes being purchased by it at such
Initial Closing pursuant to this Agreement, are subject to the satisfaction of
the conditions precedent set forth in this Section 6.1.
(a) The representations and warranties contained herein of the
Company shall be true and correct on and as of the Initial Closing Date with the
same force and effect as though made on and as of the Initial Closing Date (it
being understood and agreed by each Purchaser that for purposes of this Section
6.1(a), in the case of any representation and warranty of the Company contained
herein (i) which is qualified by application thereto by a Material Adverse
Effect standard, such representation and warranty need be true and correct by
application thereto only of a Material Adverse Change standard, (ii) which is
not hereinabove qualified by application thereto of a materiality standard, such
representation and warranty need be true and correct only in all material
respects or (iii) which is made as of a specific date, such representation and
warranty need be true and correct only as of such specific date).
(b) The Company shall have performed in all material respects
all obligations and conditions herein required to be performed or observed by
the Company on or prior to the Initial Closing Date.
(c) Each Purchaser shall have received a certificate, dated
the Initial Closing Date, signed by each of the President and the Chief
Financial Officer of the Company, certifying on behalf of the Company that the
conditions specified in the foregoing Sections 6.1(a) and (b) have been
fulfilled.
33
(d) Each Purchaser shall have received from the Company's
counsel, Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, an opinion in form and substance
reasonably satisfactory to the Purchasers.
(e) There shall not have been any Material Adverse Change
since the Announcement Date.
(f) All corporate and other proceedings to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers and the Purchasers shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.
(g) The Company and the Collateral Agent, on behalf of the
Purchasers, and the Purchasers with respect to Articles X and XI thereof, shall
have entered into the Pledge and Security Agreement.
(h) The Collateral Agent, on behalf of the Purchasers, SVB,
the Company and the Guaranteeing Subsidiaries shall have entered into the
Intercreditor Agreement and all consents identified on Schedule 6.1(h) of the
Disclosure Schedule shall have been obtained, including all consents and waivers
required from SVB in connection with the transactions contemplated in the Loan
Documents.
(i) All UCC filings and filings shall have been made in the
United States Patent and Trademark Office in connection with the creation and
perfection of the security interests in and Liens on the Collateral granted
pursuant to the Loan Documents.
(j) Nasdaq shall have approved of and consented to the
transactions contemplated hereby.
(k) To the extent the Company and the Purchasers agree is
reasonably required, the waiting period under the HSR Act shall have expired or
notice of early termination of the waiting period shall have been received by
the Company and the Purchasers.
(l) The cancellation of the July 2003 Notes and the issuance
of the Amended Notes and, to the extent applicable, the purchase of and payment
for the New Notes as of such Initial Closing shall not be prohibited or enjoined
by any law, court order or government regulation.
6.2. Conditions to the Obligation of the Company to Consummate
the Initial Closing. The obligation of the Company to consummate the
transactions to be consummated at the Initial Closing, and to issue and sell to
each Purchaser the Notes to be purchased by it at the Initial Closing pursuant
to this Agreement, is subject to the satisfaction of the conditions precedent
set forth in this Section 6.2.
(a) The representations and warranties contained herein of
such Purchaser shall be true and correct on and as of the Initial Closing Date,
with the same force and effect as though made on and as of Initial Closing Date
(it being understood and agreed by the Company that, in the case of any
representation and warranty of such Purchaser contained herein which is
34
not hereinabove qualified by application thereto of a materiality standard, such
representation and warranty need be true and correct only in all material
respects).
(b) Such Purchaser shall have performed in all material
respects all obligations and conditions herein required to be performed or
observed by such Purchaser on or prior to the Initial Closing Date.
(c) To the extent the Company and the Purchasers agree is
reasonably required, the waiting period under the HSR Act shall have expired or
notice of early termination of the waiting period shall have been received by
the Company and the Purchasers.
Each Purchaser's obligations under this Section 6.2 shall be
several and independent from the obligations of each other Purchaser; and the
failure by any Purchaser to fulfill or comply with any of the conditions set
forth in this Section 6.2 shall not affect the obligations of the Company to any
other Purchaser to consummate the transactions contemplated by this Agreement.
6.3. Conditions to the Obligations of the Purchasers to
Consummate each Subsequent Closing. The several obligations of each Purchaser to
consummate the transactions to be consummated at each Subsequent Closing, and to
purchase and pay for the New Notes being purchased by it at each such Subsequent
Closing pursuant to this Agreement, are subject to the satisfaction of the
conditions precedent set forth in this Section 6.3.
(a) The representations and warranties contained herein of the
Company shall be true and correct on and as of each Subsequent Closing Date with
the same force and effect as though made on and as of each Subsequent Closing
Date (it being understood and agreed by each Purchaser that for purposes of this
Section 6.3(a), in the case of any representation and warranty of the Company
contained herein (i) which is qualified by application thereto by a Material
Adverse Effect standard, such representation and warranty need be true and
correct by application thereto only of a Material Adverse Change standard, (ii)
which is not hereinabove qualified by application thereto of a materiality
standard, such representation and warranty need be true and correct only in all
material respects or (iii) which is made as of a specific date, such
representation and warranty need be true and correct only as of such specific
date).
(b) The Company shall have performed in all material respects
all obligations and conditions herein required to be performed or observed by
the Company on or prior to each Subsequent Closing Date.
(c) Each Purchaser shall have received a certificate, dated
the Subsequent Closing Date, signed by each of the President and the Chief
Financial Officer of the Company, certifying on behalf of the Company that the
conditions specified in the foregoing Sections 6.3(a) and (b) have been
fulfilled.
(d) To the extent required, the waiting period under the HSR
Act shall have expired or notice of early termination of the waiting period
shall have been received by the Company and the Purchasers.
35
(e) There shall not have been any Material Adverse Change
since the Initial Closing.
(f) The Company shall not have (i) commenced any voluntary
proceeding under any provision of Title 11 of the Bankruptcy Code, as now or
hereafter amended, or any other proceeding, under any law, now or hereafter in
force, relating to bankruptcy, insolvency, reorganization, liquidation, or
otherwise to the relief of debtors or the readjustment of indebtedness; (ii)
made any assignment for the benefit of creditors or a composition or similar
arrangement with such creditors; (iii) appointed a receiver, trustee or similar
judicial officer or agent to take charge of or liquidate any of its property or
assets; and (iv) shall not have had any involuntary proceeding of the kind
described in subsections (i)-(iv) of this Section 6.5(g) commenced against it.
(g) The purchase of and payment for the New Notes as of such
Subsequent Closing shall not be prohibited or enjoined by any law, court order
or government regulation.
7. Registration of the Securities; Compliance with the
Securities Act.
7.1. Securities Law Transfer Restrictions. No Purchaser shall
sell, assign, pledge, transfer or otherwise dispose of or encumber any of the
Securities being purchased by it hereunder unless the transferee agrees in
writing to be bound by the terms of this Agreement and except (i) pursuant to an
effective registration statement under the Securities Act or (ii) pursuant to an
available exemption from registration under the Securities Act and applicable
state securities laws and, if requested by the Company, upon delivery by such
Purchaser of an opinion of counsel reasonably satisfactory to the Company to the
effect that the proposed transfer is exempt from registration under the
Securities Act and applicable state securities laws. The Company shall not
register any transfer of the Securities in violation of this Section 7.1. The
Company may, and may instruct any transfer agent for the Company to, place such
stop transfer orders as may be required on the transfer books of the Company in
order to ensure compliance with the provisions of this Section 7.1.
Notwithstanding the foregoing, the Notes shall not be transferable without the
prior written consent of the Company, except for transfers to Affiliates of the
Purchasers that agree not to further transfer the Notes.
7.2. Legends. Each certificate representing any of the
Securities shall be endorsed with the legend set forth below, and each Purchaser
covenants that, except to the extent such restrictions are waived by the
Company, it shall not transfer the shares represented by any such certificate
without complying with the restrictions on transfer described in this Agreement
and the legends endorsed on such certificate:
"THE SECURITIES REPRESENTED BY THIS [CERTIFICATE] [NOTE] [WARRANT] [AND THE
SECURITIES ISSUABLE UPON ITS [CONVERSION] [EXCHANGE] [EXERCISE]] HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT OR SUCH LAWS AND, IF
REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM THE ACT OR
SUCH LAWS."
36
7.3. Registration Procedures and Other Matters. The Company
shall:
(a) use its reasonable best efforts, subject to receipt of
necessary information from each Purchaser for inclusion in such filing, prepare
and file with the SEC within 30 days following the filing of its annual report
on the Form 10-K with the SEC for 2003, a registration statement on Form S-1, or
if available, Form S-3 (the "Registration Statement") covering the Securities
held by each Purchaser, or the Holders (defined in Section 7.4 below), from time
to time, in compliance with the Securities Act and shall amend the Registration
Statement upon the exercise by the Company of the Call Right in accordance with
the terms set forth herein;
(b) use its reasonable best efforts to cause the Registration
Statement to become effective as promptly as practicable after filing, such
efforts to include, without limiting the generality of the foregoing, preparing
and filing with the SEC any financial statements that are required to be filed
prior to the effectiveness of such Registration Statement;
(c) use its reasonable best efforts to prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith (the "Prospectus") as may be necessary
to keep the Registration Statement continuously effective and free from any
material misstatement or omission to state a material fact for a period not
exceeding, with respect to each Holder's Securities, the earlier of (i) the date
on which each Holder may sell all Securities then held by such Holder without
restriction by the volume limitations of Rule 144(e) of the Securities Act or
(ii) such time as all Securities purchased by such Holder have been sold
pursuant to a registration statement or are otherwise freely tradeable;
(d) furnish to each Holder with respect to the Securities
registered under the Registration Statement such number of copies of the
Registration Statement, Prospectuses and preliminary prospectuses in conformity
with the requirements of the Securities Act and such other documents as such
Holder may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Securities by such Holder; provided, however,
that the obligation of the Company to deliver copies of Prospectuses or
preliminary Prospectuses to such Holder shall be subject to the receipt by the
Company of reasonable assurances from such Holder that such Holder will comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with any use of
such Prospectuses or preliminary Prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in states specified in writing by each Holder and use its reasonable
best efforts to maintain such blue sky qualifications during the period the
Company is required to maintain the effectiveness of the Registration Statement
pursuant to Section 7.3(c); provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
37
(f) bear all expenses in connection with the procedures in
this Section 7.3 and the registration of the Securities pursuant to the
Registration Statement (provided, that the Holders shall bear the cost of all
underwriting discounts and selling commissions and similar fees applicable to
the sale of Securities and all fees and expenses of legal counsel for any Holder
and all transfer Taxes);
(g) advise each Holder promptly after it shall receive notice
or obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and promptly use its reasonable
best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and
(h) use its reasonable best efforts to cause the Common Stock
underlying the shares of Preferred Stock and the Warrants to be listed on Nasdaq
in connection with the filing of the Registration Statement.
Notwithstanding anything to the contrary herein, the
Registration Statement shall cover only the Securities.
7.4. Transfer of Securities; Suspension.
(a) Each Purchaser agrees that in case of any disposition of
its Securities not made pursuant to the Registration Statement to (i) a third
party who agrees to be bound by the provisions of this Section 7 and makes the
representations to the Company contained in Section 4 herein or (ii) its
partners as part of a distribution of all or part of the Securities (in each
case the "Transferee", and together with the Purchasers, the "Holders"), such
Purchaser will promptly notify the Company of any changes in the information set
forth in the Registration Statement regarding the Holders or their plans of
distribution. The Company agrees, in case of such sale, transfer or distribution
(to the extent made in accordance with Section 7.1), to promptly file one or
more post-effective amendments to the Registration Statement or a supplement to
the related Prospectus, naming each Transferee as a Selling Shareholder in
accordance with the provisions of the Securities Act.
(b) Except in the event that paragraph (c) below applies, the
Company shall (i) prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that, as thereafter delivered
to the purchasers of Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; (ii)
provide each Holder copies of any documents filed pursuant to Section 7.4(b)(i);
and (iii) inform each Holder that the Company has complied with its obligations
in Section 7.4(b)(i) (or that, if the Company has filed a post-effective
amendment to the Registration Statement which has not yet been declared
effective, the Company will notify each Holder to that effect, will use its
reasonable best efforts
38
to secure the effectiveness of such post-effective amendment as promptly as
possible and will promptly notify each Holder pursuant to Section 7.4(b)(i)
herein when the amendment has become effective).
(c) Subject to paragraph (d) below, in the event (i) of any
request by the SEC or any other federal or state governmental authority during
the period of effectiveness of the Registration Statement for amendments or
supplements to a Registration Statement or related Prospectus or for additional
information; (ii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) of any event or circumstance which, upon the
advice of its counsel, necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or (v) the Company determines in good faith that
offers and sales pursuant to the Registration Statement should not be made by
reason of the presence of material undisclosed circumstances or developments
with respect to which the disclosure that would be required in such a
Registration Statement or related Prospectus is premature, would have an adverse
effect on the Company or is otherwise inadvisable, then the Company shall
deliver a certificate in writing to each Holder (the "Suspension Notice") to the
effect of the foregoing and, upon receipt of such Suspension Notice, such Holder
will refrain from selling any Securities pursuant to the Registration Statement
(a "Suspension") until such Holder's receipt of copies of a supplemented or
amended Prospectus prepared and filed by the Company, or until it is advised in
writing by the Company that the current Prospectus may be used, and has received
copies of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. In the event of any
Suspension, the Company will use its reasonable best efforts to cause the use of
the Prospectus so suspended to be resumed as soon as reasonably practicable
after the delivery of a Suspension Notice to each Holder. In addition to and
without limiting any other remedies (including, without limitation, at law or at
equity) available to such Holder, such Holder shall be entitled to specific
performance in the event that the Company fails to comply with the provisions of
this Section 7.4(c).
(d) Notwithstanding the foregoing paragraphs of this Section
7.4, no Holder shall be prohibited from selling Securities under the
Registration Statement as a result of Suspensions on more than three occasions
of not more than 30 days each in any twelve month period unless, in the good
faith judgment of the Board of Directors, upon the written opinion of counsel,
the sale of Securities under the Registration Statement in reliance on this
paragraph 7.4(d) would be reasonably likely to cause a violation of the
Securities Act or the Exchange Act and result in liability to the Company.
39
(e) Provided that a Suspension is not then in effect, each
Holder may sell Securities under the Registration Statement, provided that it
arranges for delivery of a current Prospectus to the transferee of such
Securities. Upon receipt of a request therefor, the Company will provide an
adequate number of current Prospectuses to such Holder and to supply copies to
any other parties requiring such Prospectuses.
(f) Each Holder acknowledges and agrees that the Securities
sold pursuant to the Registration Statement are not transferable on the books of
the Company unless the stock certificate submitted to the transfer agent
evidencing such Securities is accompanied by a certificate reasonably
satisfactory to the Company to the effect that (i) the Securities have been sold
in accordance with such Registration Statement and (ii) the requirement of
delivering a current Prospectus has been satisfied.
(g) In the event of a sale of Securities by any Holder
pursuant to the Registration Statement, such Holder shall deliver to the
Company's transfer agent an appropriate notification of the sale, so that the
Securities may be properly transferred.
7.5. Company Registration.
(a) If the Company shall determine to register any of its
equity securities either for its own account or for the account of other
stockholders at any time prior to the effectiveness of the Registration
Statement, other than (i) a registration relating solely to employee benefit
plans, (ii) a registration relating solely to a SEC Rule 145 transaction (iii) a
registration relating solely to securities issued in connection with settlement
of litigation otherwise approved in the manner specified in Section
5.12(a)(xii), or (iv) a registration on any registration form which does not
permit secondary sales or does not include substantially the same information as
would be required to be included in a registration statement covering the sale
of Securities, the Company will:
(i) promptly give to each of the Holders a written notice
thereof (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) if so requested by the Holders of at least fifty-one
percent (51%) or more of the Securities (on an as-converted, as exercised
basis), include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein, all the
Securities specified in a written request or requests made by the Holders within
fifteen (15) days after receipt of the written notice from the Company described
in clause (i) above, except as set forth in Section 7.5(b) below. Such written
request may specify all or a part of the Holders' Securities. In the event any
Holder requests inclusion in a registration pursuant to this Section 7.5 in
connection with a distribution of Securities to its partners, the registration
shall provide for the resale by such partners, if requested by such Holder.
40
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 7.5(a)(i) herein. In such event, the right of each of
the Holders to registration pursuant to this Section 7.5 shall be conditioned
upon such Holders' participation in such underwriting and the inclusion of such
Holders' Securities in the underwriting to the extent provided herein. The
Holders whose shares are to be included in such registration shall (together
with the Company and the other stockholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
underwriting by the Company. Notwithstanding any other provision of this Section
7.5, if the representative determines that marketing factors require a
limitation on the number of shares to be underwritten, the representative may
limit the number of Securities to be included in the registration and
underwriting. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner: The securities, including the Securities, of the Company held
by stockholders of the Company (other than securities held by holders who by
contractual right demanded such registration and securities to be offered by the
Company) shall be excluded from such registration and underwriting to the extent
required by such limitation, and, if a limitation on the number of shares
permits additional shares to be included in the registration and underwriting,
each of the Holders and other holders requesting to have their shares included
in such registration will have the right to include such shares in such
registration (allocated pro rata among such Holders and holders on the basis of
the relative number of shares requested to be registered by such Holders and
holders up to the permitted amount). If any of the Holders or any officer,
director or other stockholder disapproves of the terms of any such underwriting,
he may elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. Notwithstanding the
foregoing, if at any time after giving written notice referred to above, and
prior to the effective date of the applicable registration statement filed in
connection therewith, the Company determines for any reason not to proceed with
the proposed registration statement, the Company may, at its election, give
written notice of such determination to the Holders that have elected to have
their Securities included in such registration and thereupon will be relieved of
its obligations to register such Securities in connection with such
registration.
7.6. Indemnification.
(a) For the purpose of this Section 7.6:
(i) the term "Selling Stockholder" shall include each Holder
and any Affiliate of such Holder; and
(ii) the term "Registration Statement" shall include the
Prospectus in the form first filed with the SEC pursuant to Rule 424(b) of the
Securities Act or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) filing is required, exhibit, supplement or
amendment included in or relating to the Registration Statement referred to in
Section 7.1.
41
(b) The Company agrees to indemnify and hold harmless each
Selling Stockholder and its officers, directors, partners, employees and agents
and each underwriter of Securities, if any, and each Person who controls any
such underwriter from and against any losses, claims, damages or liabilities to
which such Person may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon (i) any untrue
statement of a material fact contained in the Registration Statement as amended
at the time of effectiveness or any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any failure by the Company to fulfill any undertaking included in the
Registration Statement as amended at the time of effectiveness, and the Company
will reimburse such Selling Stockholder for any reasonable legal or other
out-of-pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim, or preparing to defend
any such action, proceeding or claim, provided, however, that the Company shall
not be liable in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement made in such
Registration Statement or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Selling Stockholder specifically for use in preparation of the
Registration Statement or the failure of such Selling Stockholder to comply with
its covenants and agreements contained in Section 7.4 herein respecting sale of
the Securities or any statement or omission in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Selling Stockholder prior
to the pertinent sale or sales by the Selling Stockholder. The Company shall
reimburse each Selling Stockholder for the amounts provided for herein on demand
as such expenses are incurred.
(c) Each Selling Stockholder, severally and not jointly,
agrees to indemnify and hold harmless the Company (and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, each of its officers, directors, employees and
agents from and against any losses, claims, damages or liabilities to which the
Company (or any such officer, director, employee, agent or controlling Person)
may become subject (under the Securities Act or otherwise), insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any failure by a Selling
Stockholder to comply with the covenants and agreements contained in Section 7.4
herein respecting the sale of the Securities, or (ii) any untrue statement of a
material fact contained in the Registration Statement or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading if and to the extent that such untrue statement or
omission was made in reliance upon and in conformity with written information
furnished by or on behalf of any Selling Stockholder specifically for use in
preparation of the Registration Statement, and each Selling Stockholder,
severally and not jointly, will reimburse the Company (or such officer,
director, employee, agent or controlling Person), as the case may be, for any
legal or other out-of-pocket expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim; provided,
however, that the obligation of each Selling Stockholder to indemnify the
Company (or such officer, director, employee, agent or controlling Person) shall
be limited to the net amount received by such Selling Stockholder from the sale
of its Securities.
42
(d) Promptly after receipt by any indemnified Person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying Person pursuant to this Section 7.6,
such indemnified Person shall notify the indemnifying Person in writing of such
claim or of the commencement of such action, but the omission to so notify the
indemnifying Person will not relieve it from any liability which it may have to
any indemnified Person under this Section 7.6 (except to the extent that such
omission materially and adversely affects the indemnifying Person's ability to
defend such action) or from any liability otherwise than under this Section 7.6.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified Person, the indemnifying Person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified Person promptly after receiving the aforesaid
notice from such indemnified Person, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified Person. After
notice from the indemnifying Person to such indemnified Person of its election
to assume the defense thereof, such indemnifying Person shall not be liable to
such indemnified Person for any legal expenses subsequently incurred by such
indemnified Person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified Person, for the same
counsel to represent both the indemnified Person and such indemnifying Person or
any affiliate or associate thereof, the indemnified Person shall be entitled to
retain its own counsel at the expense of such indemnifying Person; provided,
further, however, that no indemnifying Person shall be responsible for the fees
and expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying Person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying Person shall have approved the terms of such settlement; provided,
however, that such consent shall not be unreasonably withheld. No indemnifying
Person shall, without the prior written consent of the indemnified Person,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified Person is or could have been a party and indemnification
could have been sought hereunder by such indemnified Person, unless such
settlement includes an unconditional release of such indemnified Person from all
liability on claims that are the subject matter of such proceeding.
(e) If the indemnification provided for in this Section 7.6 is
unavailable to or insufficient to hold harmless an indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying Person shall contribute to the amount paid or payable by
such indemnified Person as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and any Purchaser,
as well as any other Selling Shareholders under such registration statement on
the other in connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, in the case of an
untrue statement, whether the untrue statement relates to information supplied
by the Company on the one hand or any Purchaser or other Selling Shareholder on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement. The Company and each
Purchaser agree that it would not be just and equitable if contribution pursuant
to this subsection (e) were determined by pro rata allocation (even if the
Purchasers and other Selling Shareholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified Person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified Person in connection with
43
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Selling Stockholder shall be required to
contribute any amount in excess of the amount by which the net amount received
by such Selling Stockholder from the sale of the Securities to which such loss
relates exceeds the amount of any damages which such Selling Stockholder has
otherwise been required to pay by reason of such untrue statement (except in the
event of fraud by such Selling Stockholder). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The Selling Stockholder's obligations in this
subsection to contribute shall be in proportion to the respective sale of
Securities of such Selling Stockholder and shall not be joint with any other
Selling Shareholders.
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 7.6, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 7.6
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement as required by the Securities Act and the Exchange
Act. The parties are advised that federal or state public policy as interpreted
by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 7.6, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 7.6 and further agree not to attempt to assert any
such defense.
7.7. Termination of Conditions and Obligations. The conditions
precedent imposed by this Section 7 upon the transferability of the Securities
shall cease and terminate as to any particular number of the Securities when
such Securities shall have been effectively registered under the Securities Act
and sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering such Securities or
at such time as an opinion of counsel reasonably satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.
7.8. Information Available. So long as the Registration
Statement is effective covering the resale of Securities owned by each Holder,
the Company will furnish to each Holder, upon the reasonable request of such
Holder, an adequate number of copies of the Prospectuses to supply to any other
party requiring such Prospectuses; and upon the reasonable request of any
Purchaser, the President or the Chief Financial Officer of the Company (or an
appropriate designee thereof) will meet with such Purchaser or a representative
thereof at the Company's headquarters to discuss all information relevant for
disclosure in the Registration Statement covering the Securities and will
otherwise cooperate with any Holder's conducting an investigation for the
purpose of reducing or eliminating such Holder exposure to liability under the
Securities Act, including the reasonable production of information at the
Company's headquarters; provided, that the Company shall not be required to
disclose any confidential information to any holder or meet at its headquarters
with any Purchaser until and unless such Holder or Purchaser shall have entered
into a confidentiality agreement in form and substance reasonably satisfactory
to the Company with the Company with respect thereto.
44
7.9. Delay of Registration. The Holders shall have no right to
take any action to restrain, enjoin or otherwise delay any registration pursuant
to this Section 7 as a result of any controversy that may arise with respect to
the interpretation or implementation of this Agreement.
8. [Intentionally Omitted.]
9. Miscellaneous Provisions.
9.1. Public Statements or Releases. Neither the Company nor
any Purchaser shall make any public announcement with respect to the existence
or terms of this Agreement or the transactions provided for herein without the
prior approval of the other parties, which shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, nothing in this Section 9.1 shall
prevent any party from making any public announcement it considers necessary in
order to satisfy its obligations under the law or the rules of any national
securities exchange, provided such party, to the extent practicable, provides
the other parties with an opportunity to review and comment on any proposed
public announcement before it is made.
9.2. Rights Cumulative. Each and all of the various rights,
powers and remedies of the parties shall be considered to be cumulative with and
in addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
9.3. Pronouns. All pronouns or any variation thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
9.4. Notices.
(a) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be given
hereunder shall be sent by postage prepaid first class mail, courier or
facsimile or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder. The date of giving any notice shall
be the date of its actual receipt.
(b) All correspondence to the Company shall be addressed as
follows:
Proxim Corporation
000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
(c) All correspondence to any Purchaser shall be sent to such
Purchaser at the address set forth in EXHIBIT A.
45
(d) Any Person may change the address to which correspondence
to it is to be addressed by notification as provided for herein.
9.5. Captions. The captions and paragraph headings of this
Agreement are solely for the convenience of reference and shall not affect its
interpretation.
9.6. Severability. Should any part or provision of this
Agreement be held unenforceable or in conflict with the applicable laws or
regulations of any jurisdiction, the invalid or unenforceable part or provisions
shall be replaced with a provision which accomplishes, to the extent possible,
the original business purpose of such part or provision in a valid and
enforceable manner, and the remainder of this Agreement shall remain binding
upon the parties hereto.
9.7. Confidentiality. Except as and to the extent required by
law, each party (the "Recipient") shall not disclose or use, and shall direct
its representatives not to disclose or use to the detriment of the other parties
hereto (the "Disclosing Party"), any Confidential Information furnished, or to
be furnished, by the Disclosing Party or its representatives to the Recipient or
its representatives at any time or in any manner other than in connection with
the Proposed Transaction. For purposes of this paragraph, "Confidential
Information" means any non-public, proprietary or confidential information with
respect to a Disclosing Party, unless (a) such information is already known to
the Recipient or its representatives or to others not bound by a duty of
confidentiality or such other information becomes publicly available through no
fault of the Recipient or its representatives, (b) the use of such information
is necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Proposed Transaction and the other
parties hereto have consented to such disclosure, (c) the information is
disclosed to an affiliate of the Recipient in connection with the consummation
of the Proposed Transaction or (d) the furnishing of the information is legally
required in connection with legal proceedings or by any governmental agency;
provided, however, that the party seeking to disclose such information must
first provide to the other parties the content of the proposed disclosure, the
reasons that such disclosure is required, and the time and places that the
disclosure will be made. Upon the written request of the Disclosing Party, the
Recipient will promptly return to the Disclosing Party or destroy any
Confidential Information in its possession and certify in writing to the
Disclosing Party that it has done so.
9.8. Governing Law; Injunctive Relief.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) Each of the parties hereto acknowledges and agrees that
damages will not be an adequate remedy for any material breach or violation of
this Agreement if such material breach or violation would cause immediate and
irreparable harm (an "Irreparable Breach"). Accordingly, in the event of a
threatened or ongoing Irreparable Breach, each party hereto shall be entitled to
seek, in any state or federal court in the State of New York, equitable relief
of a kind appropriate in light of the nature of the ongoing or threatened
Irreparable Breach, which relief may include, without limitation, specific
performance or injunctive relief; provided, however, that if the party bringing
such action is unsuccessful in obtaining the relief sought, the
46
moving party shall pay the non-moving party's reasonable costs, including
attorney's fees, incurred in connection with defending such action. Such
remedies shall not be the parties' exclusive remedies, but shall be in addition
to all other remedies provided in this Agreement.
9.9. Waiver. No waiver of any term, provision or condition of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or be construed as, a further or continuing waiver of any
such term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
9.10. Expenses. The Company shall pay all documented fees and
expenses incurred by the Purchasers in connection with the transactions
contemplated hereby including, without limitation, all legal, consulting and
accounting fees incurred under and in connection with the execution and delivery
of the Original Agreement, this Agreement and the other Transaction Documents
("Transaction Fees"). Payments due pursuant to this Section 9.9 will be made at
each Closing for all documented fees and expenses incurred but unpaid as of such
Closing; provided, that in the event each applicable Closing occurs, or if a
Closing does not occur then upon termination of this Agreement, and in any
event, any remaining payments will be made not later than 30 days after a xxxx
for such fees and expenses has been sent by the Purchasers to the Company. The
Purchasers will be entitled, at their option, to receive payment of the
Transaction Fees through a reduction in the aggregate purchase price to be paid
by the Purchasers at each Closing.
9.11. Assignment. The rights and obligations of the parties
hereto shall inure to the benefit of and shall be binding upon the authorized
successors and permitted assigns of each party. None of the parties may assign
its rights or obligations under this Agreement or designate another Person (i)
to perform all or part of its obligations under this Agreement or (ii) to have
all or part of its rights and benefits under this Agreement, in each case
without the prior written consent of the other parties, provided, however, that
the Purchasers shall have the right to assign and transfer all or a portion of
its rights and obligations under this Agreement to one or more of their
respective Affiliates. In the event of any assignment in accordance with the
terms of this Agreement, the assignee shall specifically assume and be bound by
the provisions of the Agreement by executing and agreeing to an assumption
agreement reasonably acceptable to the Company.
9.12. Counterparts. This Agreement may be signed in one or
more counterparts, each of which shall be an original, but all of which together
shall constitute one instrument
9.13. 2002 Purchase Agreement. Except as expressly set forth
herein, each party acknowledges and agrees that the 2002 Purchase Agreement
shall remain in full force and effect.
9.14. Entire Agreement. This Agreement, the Notes and the
other Loan Documents constitute the entire agreement between the parties hereto
respecting the subject matter hereof and supersedes all prior agreements,
negotiations, understandings, representations and statements respecting the
subject matter hereof, whether written or oral. No modification, alteration,
waiver or change in any of the terms of this Agreement shall be valid or binding
upon the parties hereto unless made in writing and duly executed by the Company
and Purchasers holding in the aggregate at least a majority of the aggregate
principal amount of the Notes or least a majority of the shares of Preferred
Stock issued or to be issued pursuant to this Agreement.
47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written.
PROXIM Corporation
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President and Chief Executive Officer
PURCHASERS:
WARBURG PINCUS PRIVATE EQUITY VIII, L.P.
By: WARBURG, XXXXXX & CO.,
its General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxx
Title: Partner
BROADVIEW CAPITAL PARTNERS L.P.
By: Broadview Capital Partners Management LLC
its General Partner
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
BROADVIEW CAPITAL PARTNERS QUALIFIED
PURCHASER FUND L.P.
By: Broadview Capital Partners Management LLC
its General Partner
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
[Signature page to Amended and Restated Securities Purchase Agreement]
BROADVIEW CAPITAL PARTNERS AFFILIATES FUND LLC
By: Broadview Capital LLC
its Manager
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
[Signature page to Amended and Restated Securities Purchase Agreement]
EXHIBIT A
SCHEDULE OF PURCHASERS
Principal Amount Original Warrant New Warrant Maximum
Purchaser of Amended Notes Coverage Issuable upon Coverage Issuable upon Commitment Under
Name and Address Purchased Stockholder Approval Stockholder Approval the Call Right
------------------- ---------------------- ---------------------- ------------------
Warburg Pincus Private Equity $ 26,000,000 15,600,000 5,200,000 $ 8,666,667
VIII, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Fax No. 000-000-0000
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
Broadview Capital $ 484,000 290,400 96,800 $ 161,333
Partners L.P.
000 Xxxxx Xxxx, 00xx Xxxxx
Xxxxxx Xxxx, XX 00000-0000
Broadview Capital $ 3,502,800 2,101,680 700,560 $ 1,167,600
Partners Qualified Purchaser
Fund L.P.
000 Xxxxx Xxxx, 00xx Xxxxx
Xxxxxx Xxxx, XX 00000-0000
Broadview Capital Partners $ 13,200 7,920 2640 $ 4,400
Affiliates Fund LLC
000 Xxxxx Xxxx, 00xx Xxxxx
Xxxxxx Xxxx, XX 00000-0000
TOTAL $ 30,000,000 18,000,000 6,000,000 $10,000,000
EXHIBIT B
FORM OF AMENDED NOTES
See Exhibit 2
EXHIBIT C
FORM OF NEW NOTES
(Intentionally Omitted)
EXHIBIT D
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
SERIES B CONVERTIBLE PREFERRED STOCK
(Intentionally Omitted)
EXHIBIT E
FORM OF ORIGINAL WARRANT
(Intentionally Omitted)
EXHIBIT F
FORM OF NEW WARRANT
(Intentionally Omitted)
EXHIBIT G
FORM OF AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
(Intentionally Omitted)
EXHIBIT H
FORM OF AMENDED AND RESTATED INTERCREDITOR AGREEMENT
(Intentionally Omitted)
EXHIBIT 2
THE SECURITIES REPRESENTED BY THIS AMENDED NOTE AND THE SECURITIES ISSUABLE UPON
ITS EXCHANGE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED,
SOLD, ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE ACT OR SUCH LAWS AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED
TRANSFER IS EXEMPT FROM THE ACT OR SUCH LAWS.
THIS AMENDED NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF AN AMENDED AND
RESTATED INTERCREDITOR AGREEMENT, DATED AS OF OCTOBER __, 2003, BY AND AMONG
SILICON VALLEY BANK, WARBURG PINCUS PRIVATE EQUITY VIII, L.P., IN ITS CAPACITY
AS COLLATERAL AGENT, PROXIM CORPORATION, PROXIM WIRELESS NETWORKS, INC.,
WIRELESS HOME CORPORATION AND PROXIM INTERNATIONAL HOLDINGS, INC. (FORMERLY
WESTERN MULTIPLEX INTERNATIONAL HOLDINGS, INC.)
FORM OF
AMENDED AND RESTATED
SECURED SUBORDINATED PROMISSORY NOTE
$___________ October __, 2003
THIS AMENDED AND RESTATED SECURED SUBORDINATED PROMISSORY NOTE (THE "AMENDED
NOTE") ISSUED PURSUANT TO THE PURCHASE AGREEMENT (AS DEFINED HEREIN) AMENDS AND
RESTATES THAT CERTAIN SECURED PROMISSORY NOTE DATED JULY 30, 2003, PAYABLE BY
THE MAKER (AS DEFINED HEREIN) TO THE ORDER OF THE HOLDER (AS DEFINED HEREIN)
(THE "ORIGINAL NOTE"). THIS AMENDED NOTE IS NOT INTENDED TO, AND DOES NOT,
CONSTITUTE AN INTERRUPTION, SUSPENSION OF CONTINUITY, DISCHARGE OF PRIOR DUTIES,
TERMINATION, NOVATION OR SATISFACTION OF THE OBLIGATIONS, INDEBTEDNESS OR
LIABILITIES REPRESENTED BY THE ORIGINAL NOTE, OR OF ANY LIENS OR SECURITY
INTERESTS SECURING SUCH ORIGINAL NOTE, AND THIS AMENDED NOTE IS ENTITLED TO ALL
OF THE RIGHTS AND BENEFITS ORIGINALLY PERTAINING TO THE ORIGINAL NOTE, AS SUCH
RIGHTS AND BENEFITS ARE AMENDED AND MODIFIED AS PROVIDED HEREIN AND IN THE OTHER
LOAN DOCUMENTS.
FOR VALUE RECEIVED, Proxim Corporation, a Delaware corporation
(the "Maker" or the "Company"), hereby unconditionally promises to pay to the
order of
__________________ (the "Holder"), having an address at ____________________, at
such address or at such other place as may be designated in writing by the
Holder, or its permitted assigns, the original aggregate principal sum of
______________ ($________.00), together with interest from July 30, 2003 on the
unpaid principal balance of this Amended Note outstanding at a rate per annum
equal to twenty-five percent (25%) (computed on the basis of the actual number
of days elapsed in a 365-day year) per annum and continuing on the outstanding
principal until this Amended Note is exchanged pursuant to the terms set forth
in the Purchase Agreement or indefeasibly and irrevocably paid in full by the
Maker; provided, however, that the interest rate then in effect, as adjusted
pursuant to the following paragraph herein (if applicable), shall automatically,
and without action by any party, increase by five percent (5%) on the date the
Company exercises its Call Right if such exercise occurs prior to Stockholder
Approval and the interest rate herein shall thereafter remain at such rate,
subject to adjustment as provided below, until the date Stockholder Approval is
obtained, and on such date the interest rate, if increased pursuant to the terms
of this sentence, shall automatically be decreased by five percent (5%). All
payments of principal and interest by the Maker under this Amended Note,
including without limitation amounts payable pursuant to Section 6(b), shall be
made in cash in immediately available funds on the Maturity Date (as defined in
Section 1 below).
From and after the Maturity Date, every amount due and owing
under this Amended Note shall automatically, and without action by any party
hereto, bear interest at an annual rate five percent (5%) above the interest
rate otherwise then in effect (the "Default Interest Rate"). Commencing after
the Maturity Date, any accrued but unpaid interest on this Amended Note shall be
payable on demand and shall accrue until the obligation of the Maker with
respect to the payment of such interest has been discharged (whether before or
after judgment). In no event shall any interest charged, collected or reserved
under this Amended Note exceed the maximum rate then permitted by applicable law
and if any such payment is paid by the Maker, then such excess sum shall be
credited by the Holder as a payment of principal.
1. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated:
"Amended Note" shall have the meaning ascribed to such term in
in the first paragraph herein.
"Amended Notes Obligations" shall have the meaning ascribed to
such term in the Pledge and Security Agreement.
"Blockage Period" shall have the meaning ascribed to such term
in Section 8 herein.
"Business Day" shall mean any day except a Saturday or Sunday
or day on which banking institutions are legally authorized to close in the City
of New York.
"Call Right" shall have the meaning ascribed to such term in
the Purchase Agreement.
"Change of Control" shall have the meaning ascribed to such
term in the Form of Certificate of Designations, Preferences and Rights of the
Series B Convertible Preferred Stock, attached as Exhibit D to the Purchase
Agreement.
-2-
"Change of Control Premium Payment" shall have the meaning
ascribed to such term in Section 6(b) herein.
"Collateral" shall have the meaning ascribed to such term in
the Pledge and Security Agreement.
"Collateral Agent" shall mean Warburg.
"Common Stock" shall mean the class A common stock, par value
$.01 per share, of the Maker.
"Default Interest Rate" shall have the meaning ascribed to
such term in the third paragraph herein.
"Default Notice" shall have the meaning ascribed to such term
in Section 8 herein.
"Event of Default" shall have the meaning ascribed to such
term in Section 6(a) herein.
"Guaranteeing Subsidiaries" shall have the meaning ascribed to
such term in the Purchase Agreement.
"Holder" shall have the meaning ascribed to such term in the
first paragraph herein.
"Incremental Interest" shall have the meaning ascribed to such
term in Section 6(b) herein.
"Loan Document" shall have the meaning ascribed to such term
in the Purchase Agreement.
"Maker" shall have the meaning ascribed to such term in the
first paragraph herein.
"Material Adverse Change" shall have the meaning ascribed to
such term in the Purchase Agreement.
"Maturity Date" shall mean the earliest of (i) the date on
which any Event of Default shall have occurred, (ii) any date on which the
Holder shall have demanded payment of this Amended Note pursuant to Section 6(b)
herein and (iii) September 30, 2004.
"New Notes" shall have the meaning ascribed to such to such
term in the Pledge and Security Agreement.
"New Noteholders" shall have the meaning ascribed to such term
in the Pledge and Security Agreement.
"Notes" shall have the meaning ascribed to such terms in the
Purchase Agreement.
"Original Note" shall have the meaning ascribed to such term
in the first paragraph herein.
"Pledge and Security Agreement" shall mean the Amended and
Restated Pledge and Security Agreement, dated as of October __, 2003, by and
among the Maker, the Collateral
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Agent and the Purchasers (for the purposes of agreeing to and accepting the
provisions set forth in Article X and Article XI therein).
"Preferred Stock" shall mean the shares of Series B
Convertible Preferred Stock, par value $.01 per share, of the Maker.
"Prepayment Notice" shall have the meaning ascribed to such
term in Section 4 herein.
"Pro Rata Percentage" shall mean with respect to the Holder a
percentage equal to a fraction, the numerator of which is the aggregate
principal amount of this Amended Note and the denominator of which is the
aggregate principal amount of all of the Notes then outstanding.
"Purchase Agreement" shall mean the Amended and Restated
Securities Purchase Agreement, dated as of October __, 2003 and as that
agreement may be amended from time to time, by and among the Maker and the
Purchasers.
"Purchase Price" shall have the meaning ascribed to such term
in the Purchase Agreement.
"Purchasers" shall have the meaning ascribed to such term in
the Purchase Agreement.
"Representative" means, for purposes of Section 8 herein, any
agent or other representative in respect of any Senior Debt; provided that if,
and for so long as, any Senior Debt lacks such a representative, then the
"Representative" for such Senior Debt shall at all times constitute the holders
of a majority in outstanding principal amount of such Senior Debt. The initial
"Representative" is Warburg which shall act as such notwithstanding any
provision in the Purchase Agreement or the other Loan Documents.
"Required Holders" shall mean the holders of at least a
majority of the outstanding aggregate principal amount of the Amended Notes.
"Senior Debt" shall mean all obligations of the Maker under or
in respect of the New Notes, including obligations set forth in the New Notes,
the Purchase Agreement, the Pledge and Security Agreement and any of the other
Loan Documents, including without limitation obligations for principal, premium,
interest, incremental interest, purchase price, fees, costs and expenses,
indemnities and reimbursement of advances. "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate or rates
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of all monetary obligations (including guarantees thereof) of
every nature of the Maker under any indebtedness ("New Debt") issued or incurred
to refund, refinance, replace or extend the indebtedness ("Old Debt") evidenced
by the New Notes, provided that the principal amount of such New Debt does not
exceed the principal amount of the Old Debt and the provisions of the New Debt
relative to priority, ranking and security of or with respect to the New Debt
are substantially the same as the corresponding provisions of the Old Debt.
"Special Meeting" shall have the meaning ascribed to such term
in the Purchase Agreement.
-4-
"Special Meeting Proposals" shall have the meaning ascribed to
such term in the Purchase Agreement.
"Stockholder Approval" shall have the meaning ascribed to such
term in the Purchase Agreement.
"Warburg" shall mean Warburg Pincus Private Equity VIII, L.P.
"Warrants" shall have the meaning ascribed to such term in the
Purchase Agreement.
2. Amended and Restated Securities Purchase Agreement. This
Amended and Restated Secured Subordinated Promissory Note (this "Amended Note")
is one of the several Notes (including both subordinated and senior secured
promissory notes) of the Maker issued pursuant to the Purchase Agreement. This
Amended Note is subject to the terms and conditions of, and entitled to the
benefit of, the provisions of the Purchase Agreement. This Amended Note is
transferable and assignable to any person to whom such transfer is permissible
under applicable law. The Maker agrees to issue from time to time a replacement
Amended Note in the form hereof to facilitate such transfers and assignments. In
addition, after delivery of an indemnity in form and substance satisfactory to
the Maker, the Maker also agrees to issue a replacement Amended Note if this
Amended Note is lost, stolen, mutilated or destroyed.
3. Security. As collateral for the satisfaction of and payment
in full of the Maker's Amended Notes Obligations, including the repayment in
full of the principal of premium, if any, and interest (including Incremental
Interest, if any) on this Amended Note, and all costs of enforcement hereof and
thereof, the Maker has granted to the Holder, pursuant to the Pledge and
Security Agreement and any intellectual property security agreement executed by
the Maker and the Collateral Agent, security interests in the Collateral. As
further set forth in the Pledge and Security Agreement, the security interests
created thereunder are continuing security interests and shall remain in effect
until the earlier of (i) the indefeasible payment in full of the Amended Notes
Obligations and (ii) the date this Amended Note is exchanged for shares of
Preferred Stock pursuant to the Purchase Agreement.
4. Payments. This Amended Note may be prepaid in whole or in
part at any time or from time to time without premium or penalty after, and only
after, the date the Maker's stockholders vote on the Special Meeting Proposals
at the Special Meeting, provided, however, that any partial prepayments pursuant
to this Section 4 shall be made in an aggregate amount of not less than
twenty-five percent (25%) of the original aggregate principal amount of the
Amended Notes (or such lesser aggregate principal amount as remains outstanding
at the time of prepayment) and any such prepayment must be made on a pro rata
basis to all holders of the Amended Notes then outstanding; provided, further,
that an Event of Default shall not have occurred prior to the date of prepayment
by the Company; provided, further, that the Company shall provide written notice
to the Holder setting forth the date of such prepayment (the "Prepayment
Notice"), which date shall be at least 10 Business Days from the date of receipt
by the Holder of the Prepayment Notice, with the presumption that the Prepayment
Notice is received by the Holder within three Business Days of the date of
delivery. The Holder may exchange this Amended Note for shares of Preferred
Stock in accordance with the terms set forth in Section 5.13 of the Purchase
Agreement at any time prior to the prepayment date specified in the Prepayment
Notice. Any voluntary prepayment of this Amended Note shall be applied first
-5-
to the payment of interest (including Incremental Interest, if any) accrued and
unpaid on this Amended Note and second to the payment of principal. All payments
by the Maker under this Note shall be made without set-off, defense or
counterclaim and be free and clear and without any deduction or withholding for
any taxes or fees of any nature whatever, unless the obligation to make such
deduction or withholding is imposed by law. The principal balance and all
accrued but unpaid interest (including Incremental Interest, if any) on this
Note shall be paid in full on the Maturity Date.
5. Waiver. No delay or omission on the part of the Holder in
exercising any right under this Note shall operate as a waiver of such right or
of any other right of the Holder, nor shall any delay, omission or waiver on any
one occasion be deemed a bar to or waiver of the same or any other right on any
future occasion. The Maker hereby forever waives presentment, demand,
presentment for payment, protest, notice of protest, notice of dishonor of this
Note and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note.
6. Event of Default.
(a) The Maker agrees that:
(i) upon the failure to pay when due the principal balance and
accrued interest (including Incremental Interest, if any) hereunder;
(ii) if the Maker shall fail or omit to perform, observe or
satisfy any agreement, covenant or other provision contained or referred to in
Section 5.11(a)(i), 5.11(b) (as to corporate existence) or 5.12 of the Purchase
Agreement;
(iii) if the Maker shall fail or omit to perform, observe or
satisfy any agreement, covenant or other provision (other than those referred to
in Section 6(a)(i) or 6(a)(ii) herein) contained or referred to in any other
Section of this Amended Note or any other Loan Document and such failure shall
not have been fully corrected within 10 days after the Maker's receipt from the
Holder of written notice that the specified possible default is to be remedied
or ten days after the Maker shall become aware thereof or if the failure cannot
be cured within ten (10) days after the Maker's attempts in such 10-day period,
and the failure may be cured within a reasonable time, then the Maker shall have
an additional period of not more than ten (10) days to attempt to cure the
failure;
(iv) if any representation, warranty or statement made by the
Maker in or pursuant to this Amended Note or any other Loan Document shall be
false or incorrect in any material respect when made;
(v) if the Maker or any Guaranteeing Subsidiary (1) commences
any voluntary proceeding under any provision of Title 11 of the United States
Code, as now or hereafter amended, or commences any other proceeding, under any
law, now or hereafter in force, relating to bankruptcy, insolvency,
reorganization, liquidation, or otherwise to the relief of debtors or the
readjustment of indebtedness, (2) makes any assignment for the benefit of
creditors or a composition or similar arrangement with such creditors, or (3)
appoints a receiver, trustee or similar judicial officer or agent to take charge
of or liquidate any of its property
-6-
or assets or upon the commencement against the Maker or any Guaranteeing
Subsidiary of any involuntary proceeding of the kind described in this
paragraph;
(vi) upon the acceleration of any other indebtedness of the
Maker for borrowed money that has an outstanding principal amount in excess of
$1,000,000;
(vii) upon the rendering of a judgment or judgments against
the Maker or any of its subsidiaries involving an amount in excess of $4,000,000
and such judgment or judgments shall not have been vacated, discharged, stayed
or bonded pending appeal within 30 days from the entry thereof;
(viii) subject to Section 6(b)(ii), upon a Change of Control;
(ix) if prior to the Special Meeting, the Maker shall issue,
or agree to issue, in a transaction exempt from registration under the Act
shares of Common Stock, or Common Stock equivalents, in an amount in excess of
15% of the shares of Common Stock then outstanding, other than pursuant to the
Purchase Agreement;
(x) upon the occurrence and during the continuance of a
Material Adverse Change;
(xi) if any lien created by the Loan Documents shall cease to
be effective;
(xii) if the Maker's Board of Directors or a special committee
thereof withdraws or adversely modifies its recommendation relating to the
Special Meeting Proposals in accordance with Section 5.7 of the Purchase
Agreement; or
(xiii) if any Event of Default has occurred under the New
Notes,
(any of (i) through (xiii), an "Event of Default"), then upon the occurrence of
any such Event of Default all unpaid principal and accrued interest (including
Incremental Interest, if any) under this Amended Note shall become immediately
due and payable (A) upon election of the Required Holders, with respect to (i)
through (iv) and (vi) through (xiii), and (B) automatically, with respect to
(v), in each case without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Maker.
(b) In addition to the remedies set forth in Section 6(a)
above: (i) if at any time prior to receipt of Stockholder Approval, but other
than in connection with a Change of Control, the Maker's Board of Directors
withdraws or adversely modifies its recommendation relating to the Special
Meeting Proposals, the Maker shall pay to the Holder in immediately available
funds, in addition to any other amounts, whether principal or interest, due
hereon, incremental interest as liquidated damages in an amount in cash equal to
the Holder's Pro Rata Percentage of three and one-third percent (3 1/3%) of the
aggregate outstanding principal on all of the outstanding Notes ("Incremental
Interest"), payable within two Business Days of such withdrawal or modification;
and (ii) upon the occurrence of a Change of Control, at the option of the
Holder, one hundred fifty percent (150%) of all unpaid principal and accrued but
unpaid interest under this Amended Note shall become immediately due and payable
upon demand by the Holder and presentment by the Holder of this Amended Note to
the Maker (the "Change of
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Control Premium Payment"), that in no event shall the portion of the Change of
Control Premium Payment attributable to the aggregate accrued but unpaid
interest under the Notes exceed Ten Million Dollars ($10,000,000) in connection
with this Section 6(b)(ii).
(c) As further set forth in the Pledge and Security Agreement,
and in addition to the remedies set forth in Section 6(a) and Section 6(b)
above, upon the occurrence of an Event of Default, the Collateral Agent shall
have all the rights and remedies as a secured party under the Uniform Commercial
Code of the State of New York.
7. Additional Remedies Upon Default. Subject to the last
paragraph of Section 6(a) hereof, upon an Event of Default hereunder, and during
the continuation thereof, and subject to the provisions of the Loan Documents,
the Holder may exercise any other right, power or remedy as may be provided
herein or in any other Loan Document or as may be provided at law or in equity,
including, without limitation, the right to recover judgment against the Maker
for any amount due either before, during or after any proceedings for the
enforcement of any of the Collateral or any realization upon any of the
foregoing.
8. Subordination.
(a) Amended Note Subordinated to Senior Debt.
The Maker covenants and agrees, and the Holder and any of its
transferees and assigns, by acceptance of this Amended Note, likewise covenant
and agree, that this Amended Note is issued subject to the provisions of this
Section 8 and that the payment of all Amended Notes Obligations under or with
respect to this Amended Note by the Maker shall, to the extent and in the manner
herein set forth, be subordinated and junior in right of payment to the prior
payment in full in cash of all Senior Debt; that the subordination is for the
benefit of, and shall be enforceable directly by, the New Noteholders; and that
each New Noteholder, whether its New Notes are now outstanding or hereafter
created, incurred, assumed or guaranteed, shall be deemed to have acquired
Senior Debt in reliance upon the covenants and provisions contained in the
Purchase Agreement, the other Loan Documents and this Amended Note.
(b) No Payment on this Amended Note in Certain Circumstances.
(i) If any Event of Default occurs in the payment when due,
whether at maturity, upon prepayment, by declaration or otherwise, of any
principal of, accrued but unpaid interest (including Incremental Interest) on or
fees with respect to, any Senior Debt, no payment of any kind or character shall
be made by, or on behalf of, the Maker or any other person on its behalf, with
respect to any Amended Notes Obligations under or with respect to this Amended
Note, or to acquire this Amended Note for cash or property or otherwise. In
addition, if any other Event of Default occurs and is continuing with respect to
any Senior Debt either causing the automatic acceleration of the maturity
therefor or permitting the holders of such Senior Debt then outstanding to
accelerate the maturity thereof and if the Representative for such Senior Debt
gives notice of the Event of Default to the Collateral Agent if required, or if
the Representative is Warburg then upon the Collateral Agent's actual knowledge
of such Event of Default (a "Default Notice"), then, unless and until all Events
of Default have been cured or waived or have ceased to exist or the Collateral
Agent receives notice thereof from the Representative terminating the Blockage
Period (as defined below), or if the Representative is Warburg then upon actual
termination of the Blockage Period, during the 179 days after the delivery or
date of
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such Default Notice (the "Blockage Period"), neither the Maker nor any other
person on its behalf shall (i) make any payment of any kind or character with
respect to any Amended Notes Obligations on, under or with respect to this
Amended Note or (ii) acquire this Amended Note for cash, property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a Blockage
Period extend beyond 179 days from the date the payment on this Amended Note was
due and only one such Blockage Period may be commenced within any 360
consecutive days. No Event of Default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Senior Debt
shall be, or be made, the basis for the commencement of a second Blockage Period
by the Representative of such Senior Debt whether or not within a period of 360
consecutive days, unless such Event of Default shall have been cured or waived
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action, or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period that, in
either case, would give rise to an Event of Default pursuant to any provisions
under which an Event of Default previously existed or was continuing shall
constitute a new Event of Default for this purpose).
(ii) In the event that, notwithstanding the foregoing, any
payment shall be received by the Holder when such payment is prohibited by
Section 8(b)(i), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to the Collateral Agent for the benefit of, each
New Noteholder.
Nothing contained in this Section 8 shall limit the right of
the Holder to take any action to accelerate the maturity of this Amended Note or
to make a demand pursuant to Section 6(b) or to pursue any rights or remedies
hereunder; provided that all Senior Debt thereafter due or declared to be due
shall first be paid in full in cash before the Holder is entitled to receive any
payment of any kind or character with respect to Amended Notes Obligations under
or with respect to this Amended Note.
(c) Payment Over of Proceeds Upon Dissolution, Etc.
(i) Upon any payment or distribution of assets of the Maker of
any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Maker or
in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Maker or its property, whether voluntary or
involuntary, all New Notes Obligations shall first be paid in full in cash, or
such payment duly provided for to the satisfaction of the New Noteholders,
before any payment or distribution of any kind or character is made on account
of any Amended Notes Obligations under or with respect to this Amended Note, or
for the acquisition of this Amended Note for cash or property or otherwise. Upon
any such dissolution, winding-up, liquidation, reorganization, receivership or
similar proceeding, any payment or distribution of assets of the Maker of any
kind or character, whether in cash, property or securities, to which the Holder
would be entitled, except for the provisions hereof, shall be paid by the Maker
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
person making such payment or distribution, or by the Holder if received by it,
to the Collateral Agent, for the benefit of each New Noteholder for application
to the payment of the Senior Debt remaining unpaid until all such Senior Debt
has been paid in full in cash after giving effect to any concurrent payment,
distribution or provision therefor to, on behalf of or for the New Noteholders.
-9-
(ii) To the extent that any payment of the Senior Debt
(whether by or on behalf of the Maker, as proceeds of security or enforcement of
any right of setoff or otherwise) is declared to be fraudulent or preferential,
set aside or required to be paid to any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar person under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then, if such
payment is recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar person, the Senior Debt or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
(iii) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of Company of any kind or character, whether
in cash, property or securities, shall be received by the Holder when such
payment or distribution is prohibited by this Section 8(c), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to the Collateral Agent for the benefit of, each New Noteholder for
application to the payment of the Senior Debt remaining unpaid until all such
Senior Debt has been paid in full in cash, after giving effect to any concurrent
payment, distribution or provision therefor to, on behalf of or for the New
Noteholders.
(iv) The consolidation of the Maker with, or the merger of the
Maker with or into, another corporation or the liquidation or dissolution of the
Maker following the conveyance or transfer of all or substantially all of its
assets, to another corporation as long as permitted under the terms of the
Senior Debt, shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 8 if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, assume
the Maker's obligations hereunder.
(d) Subrogation.
Subject to the payment in full in cash of all Senior Debt, the
Holder shall be subrogated to the rights of the New Noteholders to receive
payments or distributions of cash, property or securities of the Maker
applicable to the Senior Debt until the New Notes shall be paid in full; and,
for the purposes of such subrogation, no such payments or distributions to the
New Noteholders by or on behalf of the Maker or by or on behalf of the New
Noteholders by virtue of this Section 8 which otherwise would have been made to
the Holder shall, as between the Maker and the Holder, be deemed to be a payment
by Maker to or on account of the Senior Debt, it being understood that the
provisions of this Section 8 are and are intended solely for the purpose of
defining the relative rights of the Holder, on the one hand, and the New
Noteholders, on the other hand.
(e) Obligations of Company Unconditional.
Nothing contained in this Section 8 or elsewhere in the
Purchase Agreement or the other Loan Documents is intended to or shall impair,
as among the Maker, its creditors other than the New Noteholders, and the
Holder, the obligation of the Maker, which is absolute and unconditional, to pay
to the Holder the principal of and any accrued but unpaid interest (including
Incremental Interest, if any) on this Amended Note as and when the same shall
become due and payable in accordance with its terms, or is intended to or shall
affect the relative rights of the Holder and creditors of the Maker other than
the New Noteholders, nor shall anything herein or therein prevent the Holder
from exercising all remedies otherwise permitted by applicable law upon default
under the Purchase Agreement, the other
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Loan Documents or this Amended Note, subject to the rights, if any, in respect
of cash, property or securities of the Maker received upon the exercise of any
such remedy.
(f) Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Maker
referred to in this Section 8, the Holder shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any
insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation,
reorganization or similar case or proceeding is pending, or upon a certificate
of the receiver, trustee in bankruptcy, liquidating trustee, receiver, assignee
for the benefit of creditors, agent or other person making such payment or
distribution, delivered to the Holder, for the purpose of ascertaining the
persons entitled to participate in such payment or distribution, the New
Noteholders and other indebtedness of the Maker, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 8.
(g) Subordination Rights Not Impaired by Acts or Omissions of
the Maker or the New Noteholders.
No right of any present or future New Noteholders to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Maker or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
the Maker with the terms of this Amended Note, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, in accordance with Section 10.2 of the Pledge and Security Agreement,
the New Noteholders may, at any time and from time to time, without the consent
of or notice to the Holder and without impairing or releasing the subordination
provided in this Section 8 or the obligations hereunder of the Holder to the New
Noteholders, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, the
Senior Debt, or otherwise amend or supplement in any manner the Senior Debt, or
any instrument evidencing the same or any agreement under which the Senior Debt
is outstanding; (ii) sell, exchange, release, or otherwise deal with any
property pledged, mortgaged or otherwise securing the Senior Debt; (iii) release
any person liable in any manner for the payment or collection of the Senior
Debt; and (iv) exercise or refrain from exercising any rights against Maker and
any other person.
(h) This Section Not to Prevent Events of Default.
The failure to make a payment on account of principal of or
accrued but unpaid interest (including Incremental Interest) on the Notes by
reason of any provision of this Section 8 will not be construed as preventing
the occurrence of an Event of Default.
(i) Exchange of this Amended Note for Preferred Stock.
This Section 8 shall have no effect on the right of the Holder
to exchange this Amended Note for Preferred Stock pursuant to the terms of the
Purchase Agreement.
9. Amendment. None of the terms or provisions of this Amended
Note may be excluded, modified or amended except by a written instrument duly
executed by the Holder and
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the Maker expressly referring to this Amended Note and setting forth the
provision so excluded, modified or amended.
10. Costs. If action is instituted to collect on this Amended
Note, the Maker promises to pay all costs and expenses, including reasonable
attorney's fees, incurred in connection with such action.
11. Governing Law. This Amended Note shall be governed by, and
construed in accordance with, the laws of the State of New York.
12. Notices. All notices hereunder shall be given in writing and
shall be deemed delivered when received by the other party hereto at the address
set forth in the Purchase Agreement or at such other address as may be specified
by such party from time to time in accordance with the Purchase Agreement.
[Remainder of Page Intentionally Left Blank]
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This Amended Note shall be binding upon the successors or
assigns of the Maker and shall inure to the benefit of the successors and
assigns of the Holder.
PROXIM CORPORATION
By:
----------------------------
Name: Xxxxxx Xxxxxxxx
Title: President and Chief Executive
Officer
[Amended Note Signature Page]
