Exhibit 7
EXECUTION COPY
between
and
PALM, INC.
Dated as of December 22, 2008
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page |
ARTICLE I DEFINITIONS & INTERPRETATIONS |
|
|
2 |
|
|
|
|
|
|
1.1 Certain Definitions |
|
|
2 |
|
1.2 Additional Definitions |
|
|
9 |
|
1.3 Certain Interpretations |
|
|
10 |
|
|
|
|
|
|
ARTICLE II THE TRANSACTION |
|
|
10 |
|
|
|
|
|
|
2.1 Purchase and Sale |
|
|
10 |
|
2.2 Closing |
|
|
11 |
|
2.3 Requested Post-Closing Transfer |
|
|
11 |
|
|
|
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
|
|
14 |
|
|
|
|
|
|
3.1 Authorization |
|
|
14 |
|
3.2 Non-Contravention and Required Consents |
|
|
15 |
|
3.3 Required Governmental Approvals |
|
|
15 |
|
3.4 Organization and Standing |
|
|
15 |
|
3.5 Subsidiaries |
|
|
16 |
|
3.6 Capitalization |
|
|
16 |
|
3.7 Offering Valid |
|
|
18 |
|
3.8 Company SEC Reports |
|
|
18 |
|
3.9 Company Financial Statements |
|
|
18 |
|
3.10 No Undisclosed Liabilities |
|
|
19 |
|
3.11 Absence of Certain Changes |
|
|
20 |
|
3.12 Material Contracts |
|
|
20 |
|
3.13 Title and Sufficiency of Properties and Assets; Liens, Condition, Etc. |
|
|
20 |
|
3.14 Intellectual Property |
|
|
21 |
|
3.15 Tax Matters |
|
|
22 |
|
3.16 Company Plans |
|
|
23 |
|
3.17 Permits |
|
|
24 |
|
3.18 Compliance with Laws |
|
|
24 |
|
3.19 Environmental Matters |
|
|
25 |
|
3.20 Litigation |
|
|
25 |
|
3.21 Insurance |
|
|
25 |
|
3.22 Related Party Transactions |
|
|
26 |
|
3.23 Brokers |
|
|
26 |
|
3.24 Company Rights Agreement |
|
|
26 |
|
3.25 State Anti-Takeover Statutes |
|
|
26 |
|
|
|
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ELEVATION |
|
|
26 |
|
|
|
|
|
|
4.1 Organization |
|
|
26 |
|
4.2 Authorization |
|
|
27 |
|
4.3 Non-Contravention and Required Consents |
|
|
27 |
|
4.4 Required Governmental Approvals |
|
|
27 |
|
i
TABLE OF CONTENTS
(Continued)
|
|
|
|
|
|
|
Page |
4.5 Litigation |
|
|
28 |
|
4.6 Purchase Entirely for Own Account |
|
|
28 |
|
4.7 Accredited Investor; Investment Experience |
|
|
28 |
|
4.8 Restricted Securities |
|
|
28 |
|
4.9 Stockholders’ Agreement |
|
|
29 |
|
4.10 Legends |
|
|
29 |
|
4.11 Brokers |
|
|
29 |
|
4.12 Sufficient Funds |
|
|
29 |
|
|
|
|
|
|
ARTICLE V COVENANTS OF THE PARTIES |
|
|
29 |
|
|
|
|
|
|
5.1 Interim Conduct of Business |
|
|
29 |
|
5.2 Rights Plan |
|
|
31 |
|
5.3 Reasonable Best Efforts to Complete |
|
|
31 |
|
5.4 Anti-Takeover Laws |
|
|
31 |
|
5.5 Notification of Certain Matters |
|
|
31 |
|
5.6 Public Statements and Disclosure |
|
|
32 |
|
5.7 Confidentiality |
|
|
32 |
|
5.8 Section 16 Matters |
|
|
32 |
|
5.9 Capital |
|
|
32 |
|
5.10 Series B Preferred Stock Certificate of Designation Amendment |
|
|
32 |
|
5.11 Allocation of Purchase Price |
|
|
33 |
|
5.12 Series B Stockholders Agreement |
|
|
33 |
|
|
|
|
|
|
ARTICLE VI CONDITIONS TO THE CLOSING |
|
|
33 |
|
|
|
|
|
|
6.1 Conditions Precedent to Each Party’s Obligations to Consummate the Closing
|
|
|
33 |
|
6.2 Conditions Precedent to the Obligations of Elevation |
|
|
34 |
|
6.3 Conditions Precedent to the Obligations of the Company |
|
|
35 |
|
|
|
|
|
|
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER |
|
|
36 |
|
|
|
|
|
|
7.1 Termination |
|
|
36 |
|
7.2 Notice of Termination; Effect of Termination |
|
|
37 |
|
7.3 Fees and Expenses |
|
|
37 |
|
7.4 Amendment |
|
|
37 |
|
7.5 Extension; Waiver |
|
|
37 |
|
|
|
|
|
|
ARTICLE VIII GENERAL PROVISIONS |
|
|
37 |
|
|
|
|
|
|
8.1 Survival of Representations, Warranties and Covenants |
|
|
37 |
|
8.2 Notices |
|
|
38 |
|
8.3 Assignment |
|
|
39 |
|
8.4 Entire Agreement |
|
|
39 |
|
8.5 Third Party Beneficiaries |
|
|
39 |
|
8.6 Severability |
|
|
39 |
|
8.7 Remedies |
|
|
39 |
|
8.8 No Recourse |
|
|
40 |
|
-ii-
TABLE OF CONTENTS
(Continued)
|
|
|
|
|
|
|
Page |
8.9 Governing Law |
|
|
40 |
|
8.10 Consent to Jurisdiction |
|
|
40 |
|
8.11 WAIVER OF JURY TRIAL |
|
|
40 |
|
8.12 Company Disclosure Letter References |
|
|
41 |
|
8.13 Counterparts |
|
|
41 |
|
-iii-
TABLE OF CONTENTS
(Continued)
Exhibits
A – Certificate of Designation
B – Form of Warrant
C – Amended and Restated Registration Rights Agreement
D – Amended and Restated Stockholders’ Agreement
E – Rights Agreement Amendment
-iv-
THIS
SECURITIES PURCHASE AGREEMENT (this “
Agreement”) is made and entered into as of
December 22, 2008 between
Elevation Partners, L.P., a
Delaware limited partnership
(“
Elevation”) and Palm, Inc., a
Delaware corporation (the “
Company”). All
capitalized terms used in this Agreement shall have the respective meanings ascribed thereto in
ARTICLE I, unless otherwise defined herein.
W I T N E S S E T H:
WHEREAS, the parties contemplate a transaction pursuant to which, upon the terms and subject
to the conditions set forth in this Agreement, the Company will sell and issue to Elevation 100,000
detachable units (each, a “Unit” and collectively, the “Purchased Units”) for a
purchase price of $1,000 per Unit (the “Transaction”), which Units are each comprised of
(i) one (1) newly-issued share of Company Series C Preferred Stock (all such shares purchased by
Elevation or permitted assignee hereto, collectively, the “Purchased Shares”), the rights,
preferences and privileges of which are to be set forth in a Certificate of Designation, the form
of which is attached hereto as Exhibit A (the “Certificate of Designation”), and
(ii) warrants for the purchase of 70 shares of Company Common Stock (all such warrants purchased by
Elevation or permitted assignee hereto, collectively, the “Purchased Warrants”), the form
of which is attached hereto as Exhibit B (the “Warrant”), for an aggregate purchase
price of $100,000,000 to be paid in two installments as provided herein.
WHEREAS, the Company Board has (i) determined that it is in the best interests of the Company
and its stockholders, and declared it advisable, to enter into this Agreement providing for the
Transaction in accordance with the General Corporation Law of the State of
Delaware (the
“
DGCL”), upon the terms and subject to the conditions set forth herein, and (ii) approved
the execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby in accordance with the DGCL upon the terms and conditions contained herein.
WHEREAS, Elevation has approved the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby in accordance with applicable Law upon the
terms and conditions contained herein.
WHEREAS, as a condition to the consummation of the Transaction, the Company and Elevation will
enter into the Amended and Restated Stockholders’ Agreement and the Amended and Restated
Registration Rights Agreement on the Closing Date.
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition
and inducement to the willingness of Elevation to enter into this Agreement, the Company and
Computershare Trust Company of New York are entering into an amendment (the “Rights Agreement
Amendment”) to that certain Preferred Stock Rights Agreement, dated as of September 25, 2000,
as amended (the “Company Rights Agreement”), so as to render the rights issued thereunder
inapplicable to this Agreement and the transactions contemplated hereby.
WHEREAS, Elevation and the Company desire to make certain representations, warranties,
covenants and agreements in connection with the Investment and to prescribe certain
conditions with respect to the consummation of the transactions contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the representations,
warranties, covenants and agreements set forth herein, as well as other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, and
intending to be legally bound hereby, Elevation and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS & INTERPRETATIONS
1.1 Certain Definitions. For all purposes of and under this Agreement, the following
capitalized terms shall have the following respective meanings:
(a) “Affiliate” shall mean, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control with such Person. For
purposes of the immediately preceding sentence, the term “control” (including, with correlative
meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with
respect to any Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether through ownership of
voting securities, by contract or otherwise.
(b) “Amended and Restated Registration Rights Agreement” means that certain Amended
and Restated Registration Rights Agreement to be dated as of the Closing Date between the Company
and Elevation in substantially the form attached hereto as Exhibit C.
(c) “Amended and Restated Stockholders’ Agreement” means that certain Amended and
Restated Stockholders’ Agreement to be dated as of the Closing Date between the Company and
Elevation in substantially the form attached hereto as Exhibit D.
(d) “Antitrust Law” means the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended,
the HSR Act, the Federal Trade Commission Act, as amended, and all other Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization
or restraint of trade or significant impediments or lessening of competition or the creation or
strengthening of a dominant position through merger or acquisition, in each case that are
applicable to the transactions contemplated by this Agreement.
(e) “Business Day” shall mean any day, other than a Saturday, Sunday and any day which
is a legal holiday under the laws of the State of California or New York or is a day on which
banking institutions located in the States of California or New York are authorized or required by
Law or other governmental action to close.
(f) “Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder, or any successor statute, rules and regulations thereto.
-2-
(g) “Company Balance Sheet” shall mean the consolidated balance sheet of the Company
and its Subsidiaries as of August 29, 2008.
(h) “Company Board” shall mean the Board of Directors of the Company.
(i) “Company Capital Stock” shall mean the Company Common Stock and the Company
Preferred Stock.
(j) “Company Common Stock” shall mean the Common Stock, par value $0.001 per share, of
the Company, together with the Preferred Stock Purchase Rights appurtenant thereto issued under the
Company Rights Agreement.
(k) “Company ESPP” shall mean the Company’s 1999 Amended and Restated Employee Stock
Purchase Plan, as amended.
(l) “Company IP” shall mean all Intellectual Property that is owned by or used by the
Company or any of its Subsidiaries in connection with the business of the Company and its
Subsidiaries.
(m) “Company IP Agreements” shall mean all material contracts (i) under which the
Company or any of its Significant Subsidiaries uses any Licensed Company IP incorporated into any
Company Product, other than licenses and related services agreements for generally commercially
available, off-the-shelf software programs, or (ii) under which the Company or any of its
Significant Subsidiaries has licensed to others the right to use any Company IP, other than
agreements entered into in the ordinary course of business.
(n) “Company Material Adverse Effect” shall mean any change, effect, event,
circumstance or development (each a “Change”, and collectively, “Changes”),
individually or in the aggregate, and taken together with all other Changes, that is or would
reasonably be expected to be materially adverse to the business, operations, assets (including
intangible assets), liabilities, financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole; provided, however, that no Change (by itself or when aggregated
or taken together with any and all other Changes) resulting from or arising out of any of the
following shall be deemed to be or constitute a “Company Material Adverse Effect,” and no Change
(by itself or when aggregated or taken together with any and all other such Changes) resulting from
or arising out of any of the following shall be taken into account when determining whether a
“Company Material Adverse Effect” has occurred or may, would or could occur: (A) general economic
conditions in the United States or any other country (or changes therein), general conditions in
the financial markets in the United States or any other country (or changes therein) and general
political conditions in the United States or any other country (or changes therein), in any such
case to the extent that such conditions do not have a substantially disproportionate impact on the
Company and its Subsidiaries, taken as a whole, relative to other companies in the industries or
geographies in which the Company operates; (B) general conditions in the industries in which the
Company and its Subsidiaries conduct business (or changes therein), in any such case to the extent
that such conditions do not have a substantially disproportionate impact on the Company and its
Subsidiaries, taken as a whole, relative to other companies in the industries or geographies in
which the Company operates; (C) any conditions arising out of acts of terrorism
-3-
or war, weather conditions or earthquakes to the extent that such conditions do not have a
substantially disproportionate impact on the Company and its Subsidiaries, taken as a whole,
relative to other companies similarly situated in the industries or geographies in which the
Company operates; (D) the announcement of this Agreement or the pendency of the transactions
contemplated hereby; (E) compliance with the terms of, or the taking of any action required or
expressly contemplated by, this Agreement other than Section 5.1, or the failure to take any action
in the ordinary course of business prohibited by this Agreement; (F) any actions taken outside of
the ordinary course of business at the written request of, or with the written consent of,
Elevation, or failure to take action, or such other Changes, in each case, to which Elevation has
approved, consented to or requested; (G) any changes in Law or in GAAP; (H) changes in the
Company’s stock price or the trading volume of the Company’s stock, in and of itself (it being
understood that the facts or occurrences giving rise or contributing to such failure that are not
otherwise excluded from the definition of a “Company Material Adverse Effect” may be deemed to
constitute, or be taken into account in determining whether there has been, is or would be a
Company Material Adverse Effect); (I) any failure by the Company to meet any published analyst
estimates or expectations of the Company’s revenue, earnings or other financial performance or
results of operations for any period, in and of itself (it being understood that the facts or
occurrences giving rise or contributing to such failure that are not otherwise excluded from the
definition of a “Company Material Adverse Effect” may be deemed to constitute, or be taken into
account in determining whether there has been, is or would be a Company Material Adverse Effect);
or (J) any legal proceedings made or brought by any of the current or former stockholders of the
Company (on their own behalf or on behalf of the Company) related to this Agreement or any of the
transactions contemplated hereby; provided, further, that in determining whether a “Company
Material Adverse Effect” has occurred or may, would or could occur, the matters set forth on
Section 1.1(n) of the Company Disclosure Letter shall be taken into account.
(o) “Company Options” shall mean any options to purchase shares of Company Common
Stock outstanding under any of the Company Stock Plans.
(p) “Company Plan” shall mean any “employee benefit plan” (within the meaning of
Section 3(3) of ERISA), employment, bonus, stock option, stock purchase or other equity-based,
benefit, incentive compensation, profit sharing, savings, retirement (including early retirement
and supplemental retirement), disability, insurance, vacation, employee loan, incentive, deferred
compensation, supplemental retirement (including termination indemnities and seniority payments),
severance, termination, retention, change of control and other similar fringe, welfare or other
employee benefit plans, programs, agreement, contracts, policies or binding arrangements (whether
or not subject to ERISA) under which any current or former director, officer, independent
contractor or employee of the Company or its Subsidiaries has any present or future right to
benefits or under which the Company or its Subsidiaries is obligated to contribute for such current
or former directors, officers, independent contractors or employees.
(q) “Company Preferred Stock” shall mean the Preferred Stock, par value $0.001 per
share, of the Company.
-4-
(r) “Company RSU” shall mean any restricted stock unit or performance shares with
respect to Company Common Stock outstanding under any of the Company Stock Plans.
(s) “Company Series B Preferred Stock” shall mean the Series B Preferred Stock, par
value $0.001 per share, of the Company, together with the Preferred Stock Purchase Rights
appurtenant thereto issued under the Company Rights Agreement (as amended pursuant to Section 5.2).
(t) “Company Series C Preferred Stock” shall mean the Series C Preferred Stock, par
value $0.001 per share, of the Company, together with the Preferred Stock Purchase Rights
appurtenant thereto issued under the Company Rights Agreement (as amended pursuant to Section 5.2).
(u) “Company Stock-Based Award” shall mean each right of any kind, contingent or
accrued, to receive shares of Company Common Stock or benefits measured in whole or in part by the
value of a number of shares of Company Common Stock granted under the Company Stock Plans or
Company Plans (including performance shares, restricted stock, restricted stock units, phantom
units, deferred stock units and dividend equivalents, but not including any 401(k) plan of the
Company), other than rights under the Company ESPP and Company Options.
(v) “Company Stock Plans” shall mean (i) the Company’s Amended and Restated 1999 Stock
Plan, Amended and Restated 1999 Director Option Plan and Amended and Restated 2001 Stock Option
Plan for Non-Employee Directors, (ii) the Handspring, Inc. 1998 Equity Incentive Plan, as amended,
the Handspring, Inc. 1999 Executive Equity Incentive Plan, as amended, and the Handspring, Inc.
2000 Equity Incentive Plan, as amended, (iii) the Inducement Option Agreement between the Company
and Xxxxxxxx Xxxxxxxxxx and the Inducement Restricted Stock Unit Agreement between the Company and
Xxxxxxxx Xxxxxxxxxx, and (iv) any other compensatory option plans assumed by the Company pursuant
to a merger, acquisition or other similar transaction pursuant to which there are outstanding
awards as of the date hereof.
(w) “Credit Agreement” shall mean the Credit Agreement among the Company, the lenders
party thereto, JPMorgan Chase Bank, N.A. and Xxxxxx Xxxxxxx Senior Funding, Inc., dated as of
October 24, 2007.
(x) “
Delaware Law” shall mean the DGCL and any other applicable law (including common
law) of the State of
Delaware.
(y) “Domain Name” shall mean any or all of the following and all worldwide rights in,
arising out of, or associated therewith: domain names, uniform resource locators (“URLs”)
and other names and locators associated with the Internet.
(z) “Environmental Law” shall mean any and all applicable Laws and regulations
promulgated thereunder, relating to the protection of the environment (including ambient air,
surface water, groundwater or land) or natural resources or exposure of any
-5-
individual to Hazardous Substances or otherwise relating to the production, use, emission,
storage, treatment, transportation, recycling, disposal, discharge, release or other handling of
any Hazardous Substances or the investigation, clean-up or other remediation or analysis thereof
and shall include the European Union Restriction of Hazardous Substances and Waste Electrical and
Electronic Equipment Directives and any other similar Laws.
(aa) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder, or any successor statue, rules and
regulations thereto.
(bb) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, or any successor statute, rules and regulations
thereto.
(cc) “GAAP” shall mean generally accepted accounting principles, as applied in the
United States.
(dd) “Governmental Authority” shall mean any government, any governmental or
regulatory entity or body, department, commission, board, agency or instrumentality, and any court,
tribunal or judicial body, in each case whether federal, state, county, provincial, and whether
local or foreign.
(ee) “Hazardous Substance” shall mean any substance, material or waste that is
characterized or regulated under any Environmental Law as “hazardous,” “pollutant,” “waste,”
“contaminant,” “toxic” or words of similar meaning or effect, and shall include petroleum and
petroleum products, polychlorinated biphenyls and asbestos.
(ff) “HSR Act” shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder, or any successor statute, rules and
regulations thereto.
(gg) “Intellectual Property” shall mean any or all of the following and all United
States and foreign rights in, arising out of, or associated therewith: (i) all patents and
applications therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof (“Patents”); (ii) all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets, proprietary information,
know how, confidential information, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) all copyrights, copyrights registrations and
applications for registration thereof, throughout the world (“Copyrights”); (iv) all Domain
Names; (v) all industrial designs and any registrations and applications therefor throughout the
world; (vi) all trade names, logos, common law trademarks and service marks, trademark and service
xxxx registrations and applications therefor throughout the world (“Trademarks”); (vii) all
databases and data collections and all rights therein throughout the world; and (viii) any similar
or equivalent rights to any of the foregoing (as applicable).
(hh) “Knowledge” of the Company, with respect to any matter in question, shall mean
the actual knowledge of any directors or executive officers of the Company.
-6-
(ii) “Law” shall mean any and all applicable federal, state, local, municipal, foreign
or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or other requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any Governmental Authority.
(jj) “Leases” shall mean all Contracts under which real property is currently leased,
licensed or subleased by the Company or any of its Subsidiaries or otherwise used or occupied by
the Company or any of its Subsidiaries.
(kk) “Legal Proceeding” shall mean any action, claim, suit, litigation, proceeding
(public or private) or criminal prosecution by or before any Governmental Authority.
(ll) “Liabilities” shall mean any liability, obligation or commitment of any kind
(whether accrued, absolute, contingent, matured, unmatured or otherwise and whether or not required
to be recorded or reflected on a balance sheet prepared in accordance with GAAP).
(mm) “Licensed Company IP” shall mean all Company IP, other than the Owned Company IP.
(nn) “Lien” shall mean any lien, pledge, hypothecation, charge, mortgage, security
interest, encumbrance, claim, option, right of first refusal, preemptive right, community property
interest or restriction of any nature (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
(oo) “Order” shall mean any order, judgment, decision, decree, injunction, ruling,
writ or assessment of any Governmental Authority (whether temporary, preliminary or permanent) that
is binding on any Person or its property under applicable Law.
(pp) “Owned Company IP” shall mean that portion of the Company IP that is owned by the
Company and its Subsidiaries.
(qq) “Permitted Liens” shall mean any of the following: (i) Liens for Taxes,
assessments and governmental charges or levies either not yet delinquent or which are being
contested in good faith and by appropriate proceedings and for which appropriate reserves have been
established to the extent required by GAAP; (ii) mechanics, carriers’, workmen’s, warehouseman’s,
repairmen’s, materialmen’s or other Liens or security interests arising in the ordinary course of
business that are not yet due or that are being contested in good faith and by appropriate
proceedings (and for which adequate retainage or other reserves are held); (iii) Liens imposed by
applicable Law (other than Tax Law); (iv) pledges or deposits to secure obligations under workers’
compensation Laws or similar legislation or to secure public or statutory obligations; (v) pledges
and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds,
performance bonds and other obligations of a similar nature, in each case in the ordinary course of
business; (vi) defects, imperfections or irregularities in title, easements, covenants and rights
of way and other similar restrictions, each of which is of record, and zoning, building and other
similar codes or restrictions, in each case that do not adversely
-7-
affect in any material respect the current use and operation of the applicable property owned,
leased, used or held for use by the Company or any of its Subsidiaries; (vii) Liens the existence
of which are disclosed in the notes to the consolidated financial statements of the Company
included in the Company’s Annual Report on Form 10-K for the year ended May 30, 2008 or the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 29, 2008; (viii) any
other Liens that do not secure a liquidated amount, that have been incurred or suffered in the
ordinary course of business and that would not, individually or in the aggregate, have a material
effect on the Company; (ix) statutory, common law or contractual liens of landlords and (x) Liens
arising under the Credit Agreement and/or the Guarantee and Collateral Agreement dated as of
October 27, 2007 among the Company, certain of its subsidiaries and JPMorgan Chase Bank, N.A..
(rr) “Person” shall mean any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization, entity or Governmental Authority.
(ss) “Xxxxxxxx-Xxxxx Act” shall mean the Xxxxxxxx-Xxxxx Act of 2002, as amended, and
the rules and regulations promulgated thereunder, or any successor statute, rules or regulations
thereto.
(tt) “SEC” shall mean the United States Securities and Exchange Commission or any
successor thereto.
(uu) “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, or any successor statute, rules or regulations thereto.
(vv) “Significant Subsidiary” means (i) Palm Ireland Investment Incorporated, (ii)
Palm Global Operations Limited, (iii) Palm Europe Limited and (iv) Palm Asia Pacific Limited.
(ww) “Subsidiary” of any Person shall mean (i) a corporation more than fifty percent
(50%) of the combined voting power of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one of more other Subsidiaries of such Person or by such Person
and one or more other Subsidiaries thereof, (ii) a partnership of which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof,
directly or indirectly, is the general partner and has the power to direct the policies, management
and affairs of such partnership, (iii) a limited liability company of which such Person or one or
more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof,
directly or indirectly, is the managing member and has the power to direct the policies, management
and affairs of such company or (iv) any other Person (other than a corporation, partnership or
limited liability company) in which such Person, or one or more other Subsidiaries of such Person
or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and power to direct the policies, management and affairs thereof.
-8-
(xx) “Tax” shall mean (i) any and all federal, state, local and foreign taxes,
including taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise, property and other similar taxes, together with all interest, penalties and
additions imposed with respect to such amounts whether disputed or not, (ii) any liability for the
payment of any amounts of the type described in clause (i) as a result of being or ceasing to be a
member of an affiliated, consolidated, combined or unitary group for any period (including any
liability under Treasury Regulation Section 1.1502-6 or any comparable provision of foreign, state
or local law) and (iii) any liability for the payment of any amounts of the type described in
clause (i) or (ii) as a result of any express or implied obligation to indemnify any other Person
or as a result of any obligations under any agreements or arrangements with any other Person with
respect to such amounts and including any liability for taxes of a predecessor entity.
(yy) “Tax Returns” shall mean any return, report, information return or other document
(including any related or supporting information) filed or required to be filed with any taxing
authority with respect to Taxes.
(zz) “Transaction Agreements” means this Agreement, the Amended and Restated
Stockholders’ Agreement, the Amended and Restated Registration Rights Agreement, the Warrants and
the Certificate of Designation.
1.2 Additional Definitions. The following capitalized terms shall have the respective
meanings ascribed thereto in the respective sections of this Agreement set forth opposite each of
the capitalized terms below:
|
|
|
Term |
|
Section Reference |
Agreement
|
|
Preamble |
Blue Sky
|
|
4.8 |
Certificate of Designation
|
|
Recitals |
Closing
|
|
2.2(a) |
Closing Date
|
|
2.2(a) |
Company
|
|
Preamble |
Company Disclosure Letter
|
|
ARTICLE III |
Company Rights Agreement
|
|
Recitals |
Company SEC Reports
|
|
3.8 |
Company Securities
|
|
3.6(c) |
Confidentiality Agreement
|
|
5.7 |
Consent
|
|
3.3 |
Contracts
|
|
3.12(a)(ii) |
Deferred Purchase Price Date
|
|
2.2(c) |
DGCL
|
|
Recitals |
Elevation
|
|
Preamble |
Material Contract
|
|
3.12(a) |
Minimum Proceeds
|
|
2.3(b) |
Permits
|
|
3.17 |
-9-
|
|
|
Term |
|
Section Reference |
Purchase Price
|
|
2.1 |
Purchased Shares
|
|
Recitals |
Purchased Warrants
|
|
Recitals |
Related Party
|
|
8.8 |
Rights Agreement Amendment
|
|
Recitals |
Series B Preferred Certificate of Designation
|
|
5.10 |
Strip
|
|
2.3(a) |
Subsidiary Securities
|
|
3.5(b) |
Successor Entity
|
|
8.8 |
Termination Date
|
|
7.1(b) |
Trade Secrets
|
|
3.15(c) |
Transaction
|
|
Recitals |
Transfer Deadline
|
|
2.3(b) |
Transfer Request
|
|
2.3(b) |
Warrant
|
|
Recitals |
1.3 Certain Interpretations.
(a) Unless otherwise indicated, all references herein to Articles, Sections, Annexes, Exhibits
or Schedules, shall be deemed to refer to Articles, Sections, Annexes, Exhibits or Schedules of or
to this Agreement, as applicable.
(b) Unless otherwise indicated, the words “include,” “includes” and “including,” when used
herein, shall be deemed in each case to be followed by the words “without limitation.”
(c) The table of contents and headings set forth in this Agreement are for convenience of
reference purposes only and shall not affect or be deemed to affect in any way the meaning or
interpretation of this Agreement or any term or provision hereof.
(d) Unless otherwise indicated, all references herein to the Subsidiaries of a Person shall be
deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or
the context otherwise requires.
(e) The parties hereto agree that they have been represented by counsel during the negotiation
and execution of this Agreement and, therefore, waive the application of any Law, holding or rule
of construction providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document.
ARTICLE II
THE TRANSACTION
2.1 Purchase and Sale. Subject to and upon the terms and conditions of this
Agreement, including the satisfaction or waiver of the applicable conditions set forth in ARTICLE
VI, the Company agrees to issue and sell to Elevation, and Elevation agrees to
-10-
purchase from the
Company, the Purchased Units for an aggregate purchase price of $100,000,000 (the “Purchase
Price”), to be paid in two installments as provided herein, free and clear of any Liens, other
than Liens imposed by the Transaction Agreements and/or applicable Law.
2.2 Closing.
(a) Subject to the provisions of this Agreement, including the satisfaction or waiver of the
conditions set forth in ARTICLE VI (other than those conditions that by their terms are to
be satisfied at the Closing, but subject to the satisfaction or waiver thereof), the closing of the
Transaction (the “Closing”) shall take place at the offices of Xxxxx Xxxx & Xxxxxxxx, 0000
Xx Xxxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx, at a time and date to be specified by the parties, which
shall be no later than 9:00 a.m. (California time) on January 31, 2009, or at such other time, date
and location as the parties hereto agree in writing (the “Closing Date”).
(b) At the Closing:
(i) the Company shall deliver, or cause to be delivered, to Elevation, stock certificate(s)
representing such number of shares of Company Series C Preferred Stock and Warrants representing
such number of Purchased Warrants which, together, represent the Purchased Units; and
(ii) Elevation shall deliver, or cause to be delivered, to the Company the first installment
of the Purchase Price in an amount equal to $1,000 (the “First Installment Payment” and the
date on which such payment is made, the “First Installment Payment Date”) by wire transfer
of immediately available funds to an account that the Company shall designate at least two Business
Days prior to the Closing Date (or if not so designated, then by certified or official bank check
payable in immediately available funds to the order of the Company in such amount).
(c) At the later of the Closing and January 15, 2009 (the “Second Installment Payment
Date”), Elevation shall deliver, or cause to be delivered, to the Company an amount equal to
$99,999,000 (the “Second Installment Payment,” and collectively with the First Installment
Payment, the “Installment Payments”) by wire transfer of immediately available funds to an
account that the Company shall designate at least two Business Days prior to the Second Installment
Payment Date.
2.3 Requested Post-Closing Transfer.
(a) It is the intention of the parties hereto that the Company have the right to require
Elevation, under certain circumstances and subject to certain conditions as provided in this
Section 2.3, to transfer a portion of the Units purchased by Elevation under this Agreement to
designated financial institutions or pursuant to an underwritten public offering for a purchase
price per Unit equal to or greater than the purchase price per Unit hereunder (a “Proposed
Transfer”). The Company agrees to keep Elevation reasonably informed on a prompt basis of the
status of and any developments regarding any potential Proposed Transfer, including any proposed
terms of such Proposed Transfer and the identity of any prospective transferee, and will
-11-
provide
Elevation with drafts of all agreements proposed to be entered into and Disclosure Documents
proposed to be delivered with respect to any Proposed Transfer. All such agreements will be
provided to Elevation as early as reasonably practicable under the circumstances (and in any event
at least five (5) Business Days prior to execution of such agreements) and shall be subject to
Elevation’s review and reasonable comment, which shall be completed as soon as practicable, but in
any event prior to the expiration of such five (5) Business Day period. Upon the terms and subject
to the conditions set forth in this Section 2.3, Elevation agrees to transfer the number of Units
specified in any Transfer Request up to an aggregate of 49,000 Units to one or more financial
institutions or pursuant to an underwritten public offering as designated by the Company in any
Transfer Request complying with the requirements of this Section 2.3. At any time and from time to
time after the Closing, the Company shall have the right to deliver to Elevation a written notice
requesting a Proposed Transfer (a “Transfer Request”), which Transfer Request must: (i)
provide that the transfer will be consummated no less than three (3) Business Days after delivery
of such Transfer Request but no later than March 31, 2009 (the “Transfer Deadline”), (ii)
describe all material terms with respect to such Proposed Transfer, which terms must include that
the purchase price will be payable solely in cash by the transferee by wire transfer of immediately
available funds and that such purchase price will result in Elevation receiving net proceeds of no
less than $1,000 per Unit (the “Minimum Proceeds”) at the closing of such Proposed Transfer
and (iii) include copies of all agreements proposed to be entered into and Disclosure Documents to
be delivered with respect to such transfer. All agreements and arrangements to be entered into by
Elevation with respect to such Proposed Transfer must be reasonably satisfactory in form and
substance to Elevation and conform to the requirements provided in this Section 2.3. If and to the
extent the purchase price payable in respect of any transferred Unit exceeds the Minimum Proceeds
(such amount, an “Excess Payment”) then the terms of such Proposed Transfer shall provide
that such Excess Payment shall be payable directly to the Company or, to the extent such terms do
not so provide, the Transfer Request shall include the wire transfer information as to the account
of the Company to which Elevation shall pay such Excess Payment and upon receipt thereof Elevation
shall immediately transfer the Excess Payment to the Company to such account.
(b) In furtherance of any Proposed Transfer with respect to which a Transfer Request has been
delivered in accordance with the provisions of this Section 2.3, Elevation agrees to take the
following actions to the extent necessary to effect the Proposed Transfer pursuant to the Transfer
Request: (i) enter into customary agreements providing for the transfer
of the relevant securities, including a customary underwriting agreement to the extent
applicable, in each case in form and substance reasonably satisfactory to Elevation, and provided
that any such agreements (1) shall contain no representations and warranties by Elevation other
than as to Elevation’s execution, delivery and performance of such agreements, ownership and title
to the securities to be transferred and information provided for inclusion in any offering
documentation to the extent such information was provided in writing by Elevation and stated to be
specifically for use therein, and (2) shall provide that Elevation shall have no liability with
respect to such Proposed Transfer or such agreements except to the extent it breaches such
representations and warranties or fails to fulfill its obligation to transfer the securities being
sold thereunder in breach of the agreement, (ii) agree to “market-standoff” or lockup obligations
in customary form provided that any such obligation expires on or before the Restricted Period
Termination Date (as such term is defined in the Amended and Restated Stockholders’ Agreement), and
(iii) enter
-12-
into a customary power-of-attorney and custody arrangement in connection with such
Proposed Transfer to the extent necessary. The obligation of Elevation to effect any Proposed
Transfer is subject to: (A) the representation and warranty of the Company contained in the last
sentence of Section 2.3(c) being true and correct in all respects; (B) the representations and
warranties of the Company contained in Section 3.1, Section 3.6(e), the fourth sentence of Section
3.8, Section 3.9(a), Section 3.24 and Section 3.25 being true and correct in all material respects
as of the date of consummation of any Proposed Transfer, and the Company shall deliver Elevation a
certificate certifying to such effect, validly executed for and on behalf of the Company by a duly
authorized officer of the Company; (C) Elevation’s reasonable satisfaction that the Company has
complied with, and that the Proposed Transfer will comply with, all applicable state and federal
securities laws, including with respect to disclosure obligations; and (D) to the extent reasonably
requested by Elevation in connection with an underwritten public offering, delivery of customary
comfort letters and legal opinions.
(c) In connection with any Proposed Transfer with respect to which a Transfer Request has been
delivered the Company shall prepare and furnish to Elevation in accordance with this Section 2.3
such disclosure materials regarding the Company and the Company’s securities, including the Units,
as are necessary for the consummation of the Proposed Transfer in accordance with the requirements
of the Securities Act and any other applicable state of federal securities law (such disclosure
materials, together with any amendment or supplement thereto and all documents incorporated therein
by reference, the “Disclosure Documents”). The Company hereby represents and warrants to
Elevation that the Disclosure Documents will not, on each of the date of the Transfer Request, the
date of delivery to the transferee to which such Transfer Request relate and on the date of the
consummation of the Proposed Transfer, contain any untrue statement of material fact or omit to
state any material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(d) The Company shall pay all reasonable fees and expenses incurred by Elevation in connection
with each Proposed Transfer (including any transfer taxes associated therewith and all reasonable
fees and expenses of Elevation’s counsel and other advisors) and shall provide customary
indemnification to the purchasers of such securities (and any underwriters thereof) in connection
with the Proposed Transfer (and any underwritten offering thereof). In addition, the Company shall
(i) indemnify and hold harmless Elevation, its Affiliates
and their respective Related Parties (the foregoing, collectively, the “Indemnified
Parties”) from and against all claims, losses, damages and liabilities, joint or several,
actions or proceedings (whether commenced or threatened in writing) in respect thereof
(“Claims”) and expenses suffered or incurred by any of them arising out of or based upon
any Proposed Transfer, the Disclosure Documents and any breach of the representations and
warranties of the Company referred to in Section 2.3(b) except, in the case of any Indemnified
Party, to the extent such Claims arise from the breach by Elevation of its obligations pursuant to
this Section 2.3, and (ii) reimburse each Indemnified Party promptly upon demand for any reasonable
fees and disbursements of counsel and any other reasonable expenses actually incurred in connection
with investigating and defending or settling any such Claim; provided, the indemnity
agreement contained in this Section 2.3(d) shall not apply to amounts paid in settlement of any
such Claim if such settlement is effected without the consent of the Company (which consent shall
not be
-13-
unreasonably withheld or delayed). The Company also agrees that if for any reason the
foregoing indemnification is unavailable to the Indemnified Parties or insufficient to hold the
Indemnified Parties harmless, then the Company shall contribute to the amount paid or payable to
the Indemnified Parties as a result of such Claim in such proportion as is appropriate to reflect
the relative fault of the Company and such Indemnified Parties in connection with the actions which
resulted in such Claim and any other relevant equitable considerations. The provisions of this
Section 2.3(d) are intended to be for the benefit of, and shall be enforceable by, each Indemnified
Party, its heirs and representatives and shall be in addition to any obligations which the Company
may otherwise have under other agreements or otherwise.
(e) Notwithstanding anything to the contrary in the Amended and Restated Stockholders’
Agreement, Elevation agrees that during the period commencing on the Closing Date and ending on the
date of the Transfer Deadline, except pursuant to and in furtherance of any Transfer Request,
Elevation shall not (i) transfer more than 50,000 Units to a third party other than a successor or
assignee bound by the obligations of Elevation hereunder , or (ii) cause more than 50,000 shares of
Company Series C Preferred Stock to be converted into Company Common Stock or Warrants for the
purchase of more than 3,500,000 shares of Company Common Stock to be exercised, and any attempt by
Elevation to transfer, convert or exercise such securities in violation of this Section 2.3(e)
shall be void and have no force or effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as set forth in the disclosure schedule delivered by the Company to Elevation on
the date of this Agreement (the “Company Disclosure Letter”), or (ii) as set forth in any
Company SEC Reports filed by the Company with the SEC prior to the date hereof and after January 1,
2007 (other than in any “risk factor” disclosure or any other forward looking statements set forth
therein), the Company hereby represents and warrants to Elevation as follows:
3.1 Authorization. The Company has all requisite corporate power and authority to
execute and deliver this Agreement and the other Transaction Agreements and to consummate the
transactions
contemplated by the Transaction Agreements and to perform its obligations thereunder. The
execution and delivery of this Agreement and the other Transaction Agreements by the Company and
the consummation by the Company of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company and no additional corporate
proceedings on the part of the Company are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been, and the other
Transaction Agreements will be at the Closing, duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Elevation, this Agreement constitutes,
and the other Transaction Agreements will constitute at the Closing, legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with their respective
terms, except that such enforceability (a) may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting or relating to creditors’ rights
generally, and (b) is subject to general principles of equity.
-14-
3.2 Non-Contravention and Required Consents. The execution, delivery or performance
by the Company of this Agreement, the consummation by the Company of the transactions contemplated
hereby and the compliance by the Company with any of the provisions hereof do not and will not (i)
violate or conflict with any provision of the certificate of incorporation or bylaws of the
Company, (ii) subject to obtaining such Consents set forth in Section 3.3 of the Company Disclosure
Letter, violate, conflict with, or result in the breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right of termination or
acceleration under, any Material Contract, (iii) assuming compliance with the matters referred to
in Section 3.3, violate or conflict with any Law or Order applicable to the Company or any of its
Subsidiaries or by which any of their properties or assets are bound, or (iv) result in the
creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries
that in the aggregate are material to the Company and its Subsidiaries, taken as a whole, other
than Permitted Liens, except in the case of each of clauses (ii) and (iii) above, for such
violations, conflicts, defaults, terminations, accelerations or Liens which would not, individually
or in the aggregate, have a Company Material Adverse Effect or have a material adverse effect on
the ability of the parties to consummate the Transaction.
3.3
Required Governmental Approvals. No consent, approval, Order or authorization of,
or filing or registration with, or notification to (any of the foregoing being a
“
Consent”), any Governmental Authority is required on the part of the Company in connection
with the execution, delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby, except (i) the filing and recordation of
the Certificate of Designation with the Secretary of State of the State of
Delaware and such
filings with Governmental Authorities to satisfy the applicable laws of states in which the Company
and its Subsidiaries are qualified to do business, (ii) such filings and approvals as may be
required by any federal or state securities laws, including compliance with any applicable
requirements of the Exchange Act, (iii) compliance with any applicable requirements of the HSR Act
and any applicable foreign
Antitrust Laws, and (iv) such other Consents, the failure of which to obtain would not,
individually or in the aggregate, have a Company Material Adverse Effect.
3.4
Organization and Standing . The Company is a corporation duly incorporated,
validly existing and in good standing under
Delaware Law. Each of the Company and its Subsidiaries
has the requisite corporate power and authority to carry on its respective business as it is
presently being conducted and to own, lease or operate its respective properties and assets, except
in the case of such Subsidiaries other than the Significant Subsidiaries as would not, individually
or in the aggregate, have a Company Material Adverse Effect. Each of the Company and its
Subsidiaries is duly qualified to do business and the Company is in good standing in each
jurisdiction where the character of its properties owned or leased or the nature of its activities
make such qualification necessary (to the extent the “good standing” concept is applicable in the
case of any jurisdiction outside the United States), except where the failure to be so qualified or
in good standing would not, individually or in the aggregate, have a Company Material Adverse
Effect. The Company has delivered or made available to Elevation complete and correct copies of
(a) the certificates of incorporation and bylaws or other constituent documents, as amended to date
and currently in full force and effect, of the Company and its Significant Subsidiaries, and (b)
the final minutes of all meetings of the Company Board and
-15-
each committee of the Company Board
(other than minutes of such meetings that are related to the Company Board’s evaluation of its
strategic alternatives, business combination transactions and other related matters, including the
Transaction). Neither the Company nor any of its Subsidiaries is in violation of its certificate
of incorporation, bylaws or other applicable constituent documents, except for such violations that
would not, individually or in the aggregate, have a Company Material Adverse Effect.
3.5 Subsidiaries(a) All of the outstanding capital stock of, or other equity or voting
interest in, each Significant Subsidiary of the Company (i) have been duly authorized, validly
issued and are fully paid and nonassessable and (ii) are owned, directly or indirectly, by the
Company, free and clear of all Liens and free of any other restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other equity or voting
interest) that would prevent the operation by the Surviving Corporation of such Significant
Subsidiary’s business as presently conducted. No Subsidiary of the Company owns any shares of
Company Common Stock.
(b) There are no outstanding (i) securities of the Company or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock of, or other equity or voting interest
in, any Subsidiary of the Company, (ii) options, warrants, rights or other commitments or
agreements to acquire from the Company or any of its Subsidiaries, or that obligate the Company or
any of its Subsidiaries to issue, any capital stock of, or other equity or voting interest in, or
any securities convertible into or exchangeable for shares of capital stock of, or other equity or
voting interest in, any Subsidiary of the Company, (iii) obligations of the Company to grant,
extend or enter into any subscription, warrant, right, convertible or exchangeable security or
other similar agreement or commitment relating to any capital stock of,
or other equity or voting interest (including any voting debt) in, any Subsidiary of the
Company (the items in clauses (i), (ii) and (iii), together with the capital stock of the
Subsidiaries of the Company, being referred to collectively as “Subsidiary Securities”), or
(iv) other obligations by the Company or any of its Subsidiaries to make any payments based on the
price or value of any shares of any Subsidiary of the Company. There are no outstanding agreements
of any kind which obligate the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding Subsidiary Securities.
3.6 Capitalization.
(a) As the date of this Agreement, the authorized capital stock of the Company consists of (i)
2,000,000,000 shares of Company Common Stock, and (ii) 125,000,000 shares of Company Preferred
Stock, of which, 2,000,000 shares have been designated Series A Participating Preferred Stock and
325,000 shares have been designated Series B Preferred Stock. As of November 28, 2008: (A)
110,541,274 shares of Company Common Stock were issued and outstanding, (B) 325,000 shares of
Company Series B Preferred Stock were issued and outstanding, and (C) there were no shares of
Company Capital Stock held by the Company as treasury shares. All outstanding shares of Company
Common Stock are validly issued, fully paid, nonassessable and free of any preemptive rights.
Since November 28, 2008, the Company has not sold or issued or repurchased, redeemed or otherwise
acquired any shares of Company Capital Stock (other than issuances pursuant to the exercise of
Company Options granted under a
-16-
Company Stock Plan or the vesting of other Company Stock-Based
Awards, and repurchases, redemptions or other acquisitions pursuant to agreements contemplated by a
Company Stock Plan).
(b) The Company has reserved 31,056,325 shares of Company Common Stock for issuance under the
Company Stock Plans. As of November 28, 2008, with respect to the Company Stock Plans, there were
outstanding Company Options and Company RSUs with respect to 23,294,035 shares of Company Common
Stock and 1,425,874 shares of Company Common Stock issuable under other Company Stock-Based Awards
(excluding Company Options and Company RSUs) issued under the Company Stock Plans and, since such
date, the Company has not granted, committed to grant or otherwise created or assumed any
obligation with respect to any Company Options, other than as approved or authorized by the
Company’s Compensation Committee or the Company’s Compensation Committee Chair. Each Company
Option was granted with an exercise price per share equal to or greater than the per share fair
market value (as such term is used in Code Section 409A and the Department of Treasury regulations
and other interpretive guidance issued thereunder) of the Company Common Stock underlying such
Company Option on the grant date thereof and was otherwise issued in compliance with applicable
Law.
(c) Except as set forth in this Section 3.6, as of the date of this Agreement, there are (i)
no outstanding shares of capital stock of, or other equity or voting interest in, the Company, (ii)
no outstanding securities of the Company convertible into or exchangeable for shares of capital
stock of, or other equity or voting interest in, the Company, (iii) no outstanding
options, warrants, rights or other commitments or agreements to acquire from the Company, or
that obligates the Company to issue, any capital stock of, or other equity or voting interest in,
or any securities convertible into or exchangeable for shares of capital stock of, or other equity
or voting interest in, the Company, (iv) no obligations of the Company to grant, extend or enter
into any subscription, warrant, right, convertible or exchangeable security or other similar
agreement or commitment relating to any capital stock of, or other equity or voting interest
(including any voting debt) in, the Company (the items in clauses (i), (ii), (iii) and (iv),
together with the capital stock of the Company, being referred to collectively as “Company
Securities”) and (v) no other obligations by the Company or any of its Subsidiaries to make any
payments based on the price or value of any Company Securities. There are no outstanding
agreements of any kind which obligate the Company or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any Company Securities.
(d) Neither the Company nor any of its Significant Subsidiaries is a party to any agreement
relating to the voting of, requiring registration of, or granting any preemptive rights,
anti-dilutive rights or rights of first refusal or other similar rights with respect to any
securities of the Company.
(e) (i) Upon the filing of the Certificate of Designation, the Purchased Shares will be duly
authorized and (ii) the Company Common Stock into which the Purchased Shares or Purchased Warrants
may be convertible or exercisable have been duly authorized and validly reserved for issuance.
When the Purchased Shares and Purchased Warrants are issued and paid for in accordance with the
provisions of this Agreement and the Certificate of Designation, all
-17-
such Purchased Shares and
Purchased Warrants (A) will be duly authorized, validly issued, fully paid, nonassessable and free
of preemptive or similar rights and (B) will be delivered to Elevation (or other assignee as
contemplated under Section 8.3) free and clear of all Liens, excluding Liens imposed by the
Transaction Agreements and/or applicable Law. When the shares of Company Common Stock into which
the Purchased Shares or Purchased Warrants may be convertible or exercisable are issued in
accordance with the provisions of the Certificate of Designation or such Purchased Warrants, all
such shares (A) will be duly authorized, validly issued, fully paid, nonassessable and free of
preemptive or similar rights and (B) will be delivered to Elevation (or its Permitted Transferees,
as such term is defined in the Amended and Restated Stockholders’ Agreement) free and clear of all
Liens, excluding Liens imposed by the Transaction Agreements and/or applicable Law.
3.7 Offering Valid. Assuming the accuracy of the representations and warranties of
Elevation contained in Sections 4.6 and 4.7 hereof, the offer, sale and issuance of the Purchased
Shares and Purchased Warrants and the conversion of the Purchased Shares into, or exercise of
Purchased Warrants for, Company Common Stock will be exempt from the registration requirements of
the Securities Act and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of all applicable Blue
Sky laws.
3.8 Company SEC Reports. The Company has filed all forms, reports and documents with the SEC that have been required
to be filed by it under applicable Laws prior to the date hereof, and the Company will file prior
to the Closing all forms, reports and documents with the SEC that are required to be filed by it
under applicable Laws prior to such time (all such forms, reports and documents, together with all
exhibits and schedules thereto, the “Company SEC Reports”). Each Company SEC Report
complied, or will comply, as the case may be, as of its filing date, as to form in all material
respects with the applicable requirements of the Securities Act or the Exchange Act, as the case
may be, each as in effect on the date such Company SEC Report was, or will be, filed. True and
correct copies of all Company SEC Reports filed prior to the date hereof have been furnished to
Elevation or are publicly available in the Electronic Data Gathering, Analysis and Retrieval
(XXXXX) database of the SEC. As of its filing date (or, if amended or superseded by a filing prior
to the date of this Agreement, on the date of such amended or superseded filing), each Company SEC
Report did not and will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. None of the Company’s Subsidiaries is
required to file any forms, reports or other documents with the SEC. No executive officer of the
Company has failed to make the certifications required of him or her under Section 302 or 906 of
the Xxxxxxxx-Xxxxx Act with respect to any Company SEC Report. Neither the Company nor any of its
executive officers has received notice from any Governmental Authority challenging or questioning
the accuracy, completeness, form or manner of filing of such certifications.
3.9 Company Financial Statements.
(a) The consolidated financial statements of the Company and its Subsidiaries filed with the
Company SEC Reports have complied or will comply, as the case may be, with the
-18-
published rules and
regulations of the SEC in effect at the time of filing with respect thereto and each of such
financial statements have been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods and at the dates involved (except as may be indicated in
the notes thereto or as otherwise permitted by Form 10-Q with respect to any financial statements
filed on Form 10-Q), and fairly present in all material respects, or will present in all material
respects, as the case may be, the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and the consolidated results of operations and cash flows for
the periods then ended.
(b) The Company has established and maintains, adheres to and enforces a system of internal
accounting controls which are effective in providing reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements in accordance with GAAP,
including policies and procedures that (i) require the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the assets of the Company
and its Subsidiaries, (ii) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with GAAP, and that receipts and
expenditures of the Company and its Subsidiaries are being made only in accordance with appropriate
authorizations of management and the Company Board and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the assets of the Company and its Subsidiaries. Neither the
Company nor, to the Knowledge of the Company, the Company’s independent auditors, has identified or
been made aware of (A) any significant deficiency or material weakness, in each case which has not
been subsequently remediated, in the system of internal accounting controls utilized by the Company
and its Subsidiaries, taken as a whole, or (B) any fraud that involves the Company’s management or
other employees who have a role in the preparation of financial statements or the internal
accounting controls utilized by the Company.
(c) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to
become a party to, any joint venture, partnership agreement or any similar Contract (including any
Contract relating to any transaction, arrangement or relationship between or among the Company or
any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any
structured finance, special purpose or limited purpose entity or Person, on the other hand (such as
any arrangement described in Section 303(a)(4) of Regulation S-K of the SEC)) where the purpose or
effect of such arrangement is to avoid disclosure of any material transaction involving the Company
or any its Subsidiaries in the Company’s consolidated financial statements.
3.10 No Undisclosed Liabilities. Neither the Company nor any of its Subsidiaries has
any Liabilities of a nature required to be reflected or reserved against on a balance sheet
prepared in accordance with GAAP, other than (a) Liabilities reflected or otherwise reserved
against in the Company Balance Sheet or in the consolidated financial statements of the Company and
its Subsidiaries included in the Company SEC Reports filed prior to the date of this Agreement, (b)
Liabilities arising under this Agreement or incurred in connection with the transactions
contemplated by this Agreement, and (c) Liabilities that do not and would not have a Company
Material Adverse Effect.
-19-
3.11 Absence of Certain Changes. Since the date of the Company Balance Sheet through
the date hereof, except for actions expressly contemplated by this Agreement, the business of the
Company and its Significant Subsidiaries has been conducted, in all material respects, in the
ordinary course consistent with past practice, and there has not been or occurred, and there does
not exist, any Company Material Adverse Effect that is continuing.
3.12 Material Contracts.
(a) For all purposes of and under this Agreement, a “Material Contract” shall mean:
(i) all contracts restricting the payment of dividends upon, or the redemption, conversion or
exercise of, the Company Series C Preferred Stock, the Purchased Warrants or the Company Common
Stock issuable upon conversion thereof; and
(ii) any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of
the SEC, other than those agreements and arrangements described in Item 601(b)(10)(iii)) with
respect to the Company and its Subsidiaries, taken as whole (the Material Contracts together with
any lease, binding commitment, option, insurance policy, benefit plan or other contract, agreement,
instrument or obligation (whether oral or written) to which the Company or any of its Subsidiaries
may be bound, the “Contracts”).
(b) Section 3.12(b) of the Company Disclosure Letter contains a complete and accurate list of
all Material Contracts to or by which the Company or any of its Subsidiaries is a party or is
bound.
(c) Each Material Contract and every other Contract of the Company or its Subsidiaries, the
breach or termination of which, would have a Company Material Adverse Effect, is valid and binding
on the Company (and/or each such Subsidiary of the Company party thereto) and is in full force and
effect, and neither the Company nor any of its Subsidiaries that is a party thereto, nor, to the
Knowledge of the Company, any other party thereto, is in breach of, or default under, any such
Contract, and no event has occurred that with notice or lapse of time or both would constitute such
a breach or default thereunder by the Company or any of its Subsidiaries, or, to the Knowledge of
the Company, any other party thereto, except for such failures to be in full force and effect and
such breaches and defaults that would not, individually or in the aggregate, have a Company
Material Adverse Effect.
3.13 Title and Sufficiency of Properties and Assets; Liens, Condition, Etc. Neither
the Company nor any of its Subsidiaries owns any real property. The Company and each of its
Subsidiaries have good and valid title to their respective owned properties and assets, and good
and valid title to their respective leasehold estates in leased properties and assets, in each case
subject to no Liens, other than Permitted Liens. The properties and assets owned and leased by the
Company and its Subsidiaries are sufficient to carry on their businesses as they are now being
conducted in all material respects. Except as would not, individually or in the aggregate, have a
Company Material Adverse Effect, (a) all of the Leases are valid and in full force and effect
against the Company or any of its Subsidiaries party thereto and, to the Company’s Knowledge, the
counterparties thereto, and (b) there is not, under any of such Leases, any existing default by
-20-
the
Company or any of its Subsidiaries which, with notice or lapse of time or both, would become a
default by the Company or any of its Subsidiaries.
3.14 Intellectual Property.
(a) To the Company’s Knowledge, all of the issued Patents, registered Copyrights and
registered Trademarks included within Owned Company IP are valid, enforceable and unexpired, and
have not been canceled or abandoned.
(b) The Owned Company IP does not infringe or misappropriate, the Intellectual Property of any
third party except as would not reasonably be expected to result in, individually or in the
aggregate, a Company Material Adverse Effect. No Legal Proceeding to
which the Company is a party is pending, or to the Company’s Knowledge, threatened, against
the Company, that (i) would cancel, limit or challenge the ownership, use, value, validity or
enforceability of any Owned Company IP, (ii) would cancel, limit or challenge the Company’s use of
any Licensed Company IP, or (iii) alleges any material infringement or misappropriation by the
Company or any of its Subsidiaries, or by the use of any of its or their current products or
services or other operation of the Company’s or its Subsidiaries’ business, of the Intellectual
Property rights of any third party, and the Company has no Knowledge of any facts or circumstances
that would create a valid basis for the same. The Company and its Significant Subsidiaries are not
subject to any Order that restricts or impairs the use of any Company IP.
(c) To the Company’s Knowledge, the Company and each of its Significant Subsidiaries has taken
reasonable and appropriate steps to protect and maintain the Owned Company IP, including without
limitation the confidentiality of any confidential information or trade secrets included in the
Owned Company IP (collectively, the “Trade Secrets”), except to the extent that failure to
do so would not have a Company Material Adverse Effect. To the Company’s Knowledge, all use and
disclosure by the Company or any of its Significant Subsidiaries of Trade Secrets owned by another
Person have been pursuant to the terms of a written agreement with such Person or was otherwise
lawful. Without limiting the foregoing, the Company and its Significant Subsidiaries have and
enforce a policy requiring employees and those of its consultants and contractors involved in the
development of any Intellectual Property to execute a confidentiality and assignment agreement
substantially in the Company’s standard form previously provided to Elevation.
(d) The Company and its Significant Subsidiaries take all reasonable actions to protect the
confidentiality, integrity and security of its software, databases, systems, networks and Internet
sites and all information stored or contained therein or transmitted thereby from any unauthorized
use, access, interruption or modification by third parties. The Company’s and its Significant
Subsidiaries’ products, software, databases, systems, networks and Internet sites are free from any
material defect, malicious computer code or programs that can cause harm to computer systems or
other software, including any material worms, bugs viruses, Trojan horses, documentation error or
corruptant, malware or any “spyware”, and anything similar to the foregoing. The Company and its
Subsidiaries comply in all material respects with all relevant laws, rules and regulations and
their own policies with respect to the privacy of all users and customers and any of their
personally identifiable information, and no claims have been asserted
-21-
or, to the Company’s
Knowledge, threatened against the Company or any Subsidiary by any person alleging a violation of
any of the foregoing.
(e) To the Knowledge of the Company, (A) no third parties to the Company IP Agreements are in
material breach thereof, (B) there are no pending disputes regarding the scope of the Company IP
Agreements, performance under the Company IP Agreements, or with respect to payments made or
received under the Company IP Agreements, and (C) the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereunder will not result in the breach of, or
create on behalf of any third party the right to terminate or modify any Company IP Agreement.
(f) To the Company’s Knowledge, as of the date hereof, none of the Company’s products that are
distributed by the Company or its Subsidiaries use, incorporate or have embedded in them any
source, object or other software code subject to an “open source,” “copyleft” or other similar
types of license terms (including, without limitation, any GNU General Public License, Library
General Public License, Lesser General Public License, Mozilla License, Berkeley Software
Distribution License, Open Source Initiative License, MIT, Apache or public domain licenses, and
the like) that requires or conditions the disclosure, licensing or distribution of the source code
of any material Owned Company IP that is embedded in such Company’s products.
3.15 Tax Matters.
(a) The Company and each of its Subsidiaries have filed all Tax Returns required to have been
filed as of the date hereof (or extensions have been duly obtained) and have paid all Taxes
required to have been paid by it through the date hereof, except where failure to file such Tax
Returns or pay such Taxes would not reasonably be expected to result, individually or in the
aggregate, in a Company Material Adverse Effect, and except to the extent such Taxes are both
(A) being challenged in good faith and (B) adequately provided for on the financial statements.
(b) Neither the Company nor any Subsidiary has any current liability, and the Company has no
knowledge of any events or circumstances which could result in any liability, for Taxes of any
Person (other than the Company and its Subsidiaries) (i) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii)
by contract or (iv) otherwise, except for those liabilities that would not reasonably be expected
to result in, individually or in the aggregate, a Company Material Adverse Effect.
(c) None of the Company or any of its Subsidiaries is a party to, is bound by or has any
obligation under any material Tax sharing or material Tax indemnity agreement or similar Contract
or arrangement, except for agreements among the Company and its Subsidiaries, that would not
reasonably be expected to result in, individually or in the aggregate, a Company Material Adverse
Affect.
(d) All Taxes required to be withheld, collected or deposited by or with respect to Company
and each of its Subsidiaries have been timely withheld, collected or
-22-
deposited as the case may be,
and to the extent required, have been paid to the relevant taxing authority, except for such
failures to withhold, collect or deposit that would not reasonably be expected to result in,
individually or in the aggregate, a Company Material Adverse Effect.
(e) No deficiencies for any Taxes have been proposed or assessed in writing against or with
respect to the Company or any of its Subsidiaries, and there is no outstanding audit, assessment,
dispute or claim concerning any Tax liability of the Company or any of its Subsidiaries pending or
raised by an authority in writing. No written claim has ever been made by any Governmental
Authority in a jurisdiction where neither the Company nor any of its
Subsidiaries files Tax Returns that it is or may be subject to taxation by that jurisdiction.
Neither the Company nor any of its Subsidiaries has granted any waiver of any federal, state, local
or foreign statute of limitations with respect to, or any extension of a period for the assessment
of, any Tax.
(f) There are no material Liens with respect to Taxes upon any of the assets or properties of
either the Company or any of its Subsidiaries, other than with respect to Taxes not yet delinquent.
(g) No closing agreement pursuant to section 7121 of the Code (or any similar provision of
state, local or foreign law) has been entered into by or with respect to the Company or any of its
Subsidiaries.
(h) Neither the Company nor any of its Subsidiaries has participated in a “listed transaction”
within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
3.16 Company Plans.
(a) With respect to each Company Plan, no liability has been incurred and there exists no
condition or circumstances in connection with which the Company or any of its Subsidiaries would
reasonably be expected to be subject to any liability that is reasonably likely, individually or in
the aggregate, to have a Company Material Adverse Effect, in each case under ERISA, the Code, or
any other Law. The Company and its Subsidiaries are in compliance with all federal, state, local
and foreign requirements regarding employment, except for any failures to comply that are not
reasonably likely, individually or in the aggregate, to have a Company Material Adverse Effect.
(b) Except as would not, individually or in the aggregate, have a Company Material Adverse
Effect, none of the Company, any of its Subsidiaries, or, to the Knowledge of the Company, any of
their respective directors, officers, employees or agents has, with respect to any Company Plan,
engaged in or been a party to any non-exempt “prohibited transaction,” as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, which could reasonably be expected to result in
the imposition of a penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, in each case applicable to the Company, any of its Subsidiaries or any
Company Plan or for which the Company or any of its Subsidiaries has any indemnification.
-23-
(c) Neither the execution or delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement (whether alone or in conjunction with any other
event(s)), will (A) result in any payment or benefit becoming due or payable, or required to be
provided, to any director, employee or independent contractor of the Company or any of its
Subsidiaries, (B) increase the amount or value of any benefit or compensation otherwise payable or
required to be provided to any such director, employee or independent contractor, (C) result in
the acceleration of the time of payment, vesting or funding of any such benefit or compensation,
(D) limit or restrict the right of the Company to merge, amend or terminate any of
the Company Plans or (E) result in “parachute payments” (as defined in Section 280G of the
Code), including any payments under any of the Company Plans which would not be deductible under
Section 280G of the Code.
(d) Except as would not, individually or in the aggregate, have a Company Material Adverse
Effect, no Company Plan that is subject to Section 409A of the Code has been materially modified
(as defined under Section 409A of the Code) since October 3, 2004 and all such Company Plans
subject to Section 409A of the Code have been operated and administered in good faith compliance
with Section 409A of the Code from the period beginning December 31, 2004 through the date hereof.
(e) As of the date hereof, there is no material labor dispute, strike or work stoppage against
the Company or any of its Subsidiaries pending or, to the Knowledge of the Company, threatened
which may interfere with the business activities of the Company or any of its Subsidiaries, except
where such dispute, strike or work stoppage is not reasonably likely, individually or in the
aggregate, to have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has or, to the Knowledge of the Company, is negotiating, any material collective
bargaining agreement, labor union contract or trade union agreement relating to its employees.
There is no material labor or trade union organizing activity pending or, to the Knowledge of the
Company, threatened, with respect to the Company or any of its Subsidiaries.
(f) There are no pending or, to the Knowledge of the Company, threatened, labor strikes,
walkouts, work stoppages, slow-downs or lockouts involving the Company or any of its Subsidiaries
that would reasonably be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
3.17 Permits. The Company and its Significant Subsidiaries have, and are in
compliance with the terms of, all permits, licenses, authorizations, consents, approvals and
franchises from Governmental Authorities required to conduct their businesses as currently
conducted (“Permits”), and no suspension or cancellation of any such Permits is pending or,
to the Knowledge of the Company, threatened, except for such noncompliance, suspensions or
cancellations that would not, individually or in the aggregate, have a Company Material Adverse
Effect.
3.18 Compliance with Laws. The Company and each of its Subsidiaries is in compliance
with all Law and Orders applicable to the Company and its Subsidiaries or to the conduct of the
business or operations of the Company and its Subsidiaries, except for such
-24-
violations or
noncompliance that would not, individually or in the aggregate, have a Company Material Adverse
Effect. No representation or warranty is made in this Section 3.18 with respect to (a) compliance
with the Exchange Act, to the extent such compliance is covered in Section 3.8 and Section 3.9, (b)
applicable laws with respect to Taxes, which are covered in Section 3.15, (c) ERISA and other
employee benefit-
related matters, which are covered in Section 3.16, or (d) Environmental Laws, which are
covered in Section 3.19.
3.19 Environmental Matters. Except for such matters as would not, individually or in
the aggregate, have a Company Material Adverse Effect:
(a) The Company and its Subsidiaries and their respective operations are in compliance with
all applicable Environmental Laws, which compliance includes the possession and maintenance of, and
compliance with, all Permits required under applicable Environmental Laws for the operation of the
business of the Company and its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries has transported, produced, processed,
manufactured, generated, used, treated, handled, stored, released or disposed of any Hazardous
Substances, except in compliance with applicable Environmental Laws, at any property that the
Company or any of its Subsidiaries has at any time owned, operated, occupied or leased.
(c) Neither Company nor any of its Subsidiaries has exposed any employee or any third party to
Hazardous Substances in violation of any Environmental Law.
(d) Neither the Company nor any of its Subsidiaries is a party to or is the subject of any
pending, or, to the Knowledge of the Company, threatened, Legal Proceeding alleging any Liability
or responsibility under or noncompliance with any Environmental Law or seeking to impose any
financial responsibility for any investigation, cleanup, removal, containment or any other
remediation or compliance under any Environmental Law. Neither the Company nor any of its
Subsidiaries is subject to any Order or agreement by or with any Governmental Authority or third
party imposing any material liability or obligation with respect to any of the foregoing.
3.20 Litigation. Except as specifically set forth in the Company’s quarterly report
on Form 10-Q for the fiscal quarter ended August 29, 2008, there is no Legal Proceeding pending, or
to the Company’s Knowledge, currently threatened against the Company or any of its Subsidiaries
(including with respect to any Company Plan) which would reasonably be expected to result in,
individually or in the aggregate, a Company Material Adverse Effect. No court or government or
regulatory authority has imposed or, to the Company’s Knowledge is threatening to impose, a
material adverse Order on the Company and its Subsidiaries. As of the date hereof, except as set
forth in the Company’s quarterly report on Form 10-Q for the fiscal quarter ended August 29, 2008,
there is no material Legal Proceeding by the Company or any of its Subsidiaries currently pending.
3.21 Insurance. The Company and its Significant Subsidiaries have all material
policies of insurance covering the Company, its Significant Subsidiaries or any of their respective
employees,
properties or assets, including policies of life, property, fire, workers’
-25-
compensation,
products liability, directors’ and officers’ liability and other casualty and liability insurance,
that is in a form and amount that is customarily carried by persons conducting business similar to
that of the Company and which the Company believes is adequate for the operation of its business.
All such insurance policies are in full force and effect, no notice of cancellation has been
received, and there is no existing default or event which, with the giving of notice or lapse of
time or both, would constitute a default, by any insured thereunder, except for such defaults that
would not, individually or in the aggregate, have a Company Material Adverse Effect. There is no
material claim pending under any of such policies as to which coverage has been denied or disputed
by the underwriters of such policies and there has been no threatened termination of any such
policies.
3.22 Related Party Transactions. Except for compensation or other employment
arrangements in the ordinary course, there are no transactions, agreements, arrangements or
understandings between the Company or any of its Subsidiaries, on the one hand, and any Affiliate
(including any director or officer) thereof, but not including any wholly-owned Subsidiary of the
Company, on the other hand, that would be required to be disclosed pursuant to Item 404 of
Regulation S-K under the Securities Act in the Company’s Form 10-K or proxy statement pertaining to
an annual meeting of stockholders.
3.23 Brokers. Except for Xxxxxx Xxxxxxx & Co., there is no financial advisor,
investment banker, broker, finder, agent or other Person that has been retained by or is authorized
to act on behalf of the Company or any of its Subsidiaries who is entitled to any financial
advisor’s, investment banking, brokerage, finder’s or other fee or commission in connection with
the transactions contemplated by this Agreement.
3.24 Company Rights Agreement. The Company has amended the Company Rights Agreement
in the form attached hereto as Exhibit E.
3.25 State Anti-Takeover Statutes. Neither Section 203 of the DGCL nor any other
state takeover statute or similar statute or regulation applies to or purports to apply to the
Transaction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ELEVATION
Elevation hereby represents and warrants to the Company as follows:
4.1
Organization. Elevation is duly organized, validly existing and in good standing under the laws of the
State of
Delaware and has the requisite corporate power and authority to conduct its business as it
is presently being conducted and to own, lease or operate its respective properties and assets.
Elevation is duly qualified to do business and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its activities make such qualification
necessary, except where the failure to be so qualified or in good standing would not, individually
or in the aggregate, prevent or materially delay the consummation of the
-26-
transactions contemplated
by this Agreement or the ability of Elevation to fully perform its covenants and obligations under
this Agreement.
4.2 Authorization. Elevation has all requisite corporate power and authority to
execute and deliver this Agreement and the Amended and Restated Stockholders’ Agreement and to
consummate the transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the Amended and
Restated Stockholders’ Agreement by Elevation and the consummation by Elevation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary corporate or other
action on the part of Elevation, and no other corporate or other proceeding on the part of
Elevation is necessary to authorize, adopt or approve this Agreement, the Amended and Restated
Stockholders’ Agreement and the transactions contemplated hereby and thereby. This Agreement has
been, and the Amended and Restated Stockholders’ Agreement will be at the Closing, duly executed
and delivered by Elevation and, assuming the due authorization, execution and delivery by the
Company, constitute legal, valid and binding obligations of Elevation, enforceable against it in
accordance with their respective terms, except that such enforceability (a) may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting or
relating to creditors’ rights generally, and (b) is subject to general principles of equity.
4.3 Non-Contravention and Required Consents. The execution, delivery or performance
by Elevation of this Agreement, the consummation by Elevation of the transactions contemplated
hereby and the compliance by Elevation with any of the provisions hereof do not and will not (i)
violate or conflict with any provision of the limited partnership agreement of Elevation, (ii)
violate, conflict with, or result in the breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or acceleration under,
any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Elevation is a party or by which
Elevation or any of its properties or assets may be bound, (iii) assuming compliance with the
matters referred to in Section 4.4, violate or conflict with any Law or Order applicable to
Elevation or by which any of their properties or assets are bound or (iv) result in the creation of
any Lien (other than Permitted Liens) upon any of the properties or assets of Elevation, except in
the case of each of clauses (ii), (iii) and (iv) above, for such violations, conflicts, defaults,
terminations, accelerations or Liens which would not, individually or in the aggregate, prevent or
materially delay the consummation
of the transactions contemplated by this Agreement or the ability of Elevation to fully
perform its covenants and obligations under this Agreement.
4.4 Required Governmental Approvals. No Consent of any Governmental Authority is
required on the part of Elevation or any of its Affiliates in connection with the execution,
delivery and performance by Elevation of this Agreement and the consummation by Elevation of the
transactions contemplated hereby, except (i) such filings and approvals as may be required by any
federal or state securities laws, including compliance with any applicable requirements of the
Exchange Act, (ii) compliance with any applicable requirements of the HSR Act and any applicable
foreign Antitrust Laws, (iii) any Consents that may be required in connection with the
-27-
transactions
contemplated by Section 2.3, and (iv) such other Consents, the failure of which to obtain would
not, individually or in the aggregate, prevent or materially delay the consummation of the
transactions contemplated by this Agreement or the ability of Elevation to fully perform its
covenants and obligations under this Agreement.
4.5 Litigation. There is no Legal Proceeding pending or, to the knowledge of
Elevation, threatened, against or affecting Elevation or any of its properties that would,
individually or in the aggregate, prevent or materially delay the consummation of the transactions
contemplated by this Agreement or the ability of Elevation to fully perform its covenants and
obligations under this Agreement. Elevation is not subject to any outstanding Order that would,
individually or in the aggregate, prevent or materially delay the consummation of the transactions
contemplated by this Agreement or the ability of Elevation to fully perform its covenants and
obligations under this Agreement.
4.6 Purchase Entirely for Own Account. Subject to the transactions contemplated by
Section 2.3, the Purchased Shares and the Purchased Warrants will be acquired for investment for
Elevation’s own account, not as a nominee or agent, and not with a view to the resale, distribution
or offering of any part thereof, and Elevation has no present intention of selling, granting any
participation in, or otherwise distributing the same. Elevation does not presently have any
contract, undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to the Purchased Shares and the
Purchased Warrants or the Company Common Stock into which the Purchased Shares and Purchased
Warrants are, respectively, convertible and exercisable.
4.7 Accredited Investor; Investment Experience. Elevation has such knowledge and
experience in financial and business matters that it is capable of evaluating the merits and risks
of the prospective investment in the Purchased Shares and the Purchased Warrants, it is able to
bear the economic consequences thereof, and it qualifies as an “accredited investor” as such term
is defined in Rule 501 of Regulation D promulgated under the Securities Act. Elevation is
experienced in evaluating and investing in securities of
emerging publicly traded high technology companies and acknowledges that it can bear the
economic risk of its investment. Elevation is a “U.S. Person” as that term is defined in the
Internal Revenue Code of 1986, as amended, and has not been formed for the specific purpose of
acquiring the Purchased Shares.
4.8 Restricted Securities. Elevation understands that the Purchased Shares and the
Purchased Warrants have not been, and will not be, registered under the Securities Act or any state
securities (“Blue Sky”) law, by reason of a specific exemption from the registration
provisions of the Securities Act and the applicable Blue Sky laws, which depend upon, among other
things, the bona fide nature of the investment intent and the accuracy of Elevation’s
representations as expressed herein. Elevation understands that as such the Purchased Shares and
the Purchased Warrants (and the Company Common Stock into which such Purchased Shares and the
Purchased Warrants are, respectively, convertible and exercisable) are characterized as “restricted
securities” under the Securities Act and that under the Securities Act and applicable regulations
such Purchased Shares and Purchased Warrants (and the Company Common Stock into which such
Purchased Shares and Purchased Warrants are, respectively, convertible and exercisable) may be
resold without registration under the Securities Act only in
-28-
certain limited circumstances.
Elevation represents that it is familiar with Rule 144 promulgated under the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and by the Securities
Act.
4.9 Stockholders’ Agreement. The Purchased Shares shall be subject to the restrictions
contained in the Amended and Restated Stockholders’ Agreement.
4.10 Legends. It is understood that the Purchased Shares, and any securities issued
in respect thereof or exchange therefor, may bear one or all of the following legends:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS. IN ADDITION, THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE TERMS OF A STOCKHOLDERS’ AGREEMENT AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT
IN ACCORDANCE WITH SUCH AGREEMENT.”
4.11 Brokers. No agent, broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission payable by the Company in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Elevation.
4.12 Sufficient Funds. Elevation has legally binding capital commitments sufficient
to, and will have, on the First Installment Payment Date and the Second Installment Payment Date,
respectively, sufficient funds to, pay the Installment Payment payable at such date pursuant to
Section 2.2.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 Interim Conduct of Business. Except as set forth in Section 5.1 of the Company
Disclosure Letter or otherwise expressly contemplated by the terms of this Agreement, prior to the
Closing, each of the Company and its Subsidiaries shall not, without the prior consent of
Elevation:
(a) amend or modify its certificate of incorporation, its bylaws or the Certificate of
Designation in a manner that would require the consent of the holders of the Company Series C
Preferred Stock if effected following the Closing (other than the filing of the Certificate of
Designation, and an amendment to the Series B Preferred Certificate of
-29-
Designation pursuant to
Section 5.10, with the Secretary of State of the State of
Delaware at or prior to the Closing);
(b) (A) declare, set aside or pay any dividends on, or make any other distributions (whether
in cash, securities or other property) in respect of, or convertible into or exchangeable or
exercisable for, any of its capital stock (other than dividends and distributions by a direct or
indirect wholly-owned Subsidiary of the Company to its parent); (B) adjust, split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or any of its other
securities; (C) purchase, redeem or otherwise acquire any shares of its capital stock or any other
of its securities or any rights, warrants or options to acquire any such shares or other
securities, other than repurchases of Company Common Stock pursuant to existing compensation,
benefits, option, restricted share or employment agreement or plan existing on the date hereof; or
(D) take any action that would result in an adjustment of the conversion price under the Company
Series C Preferred Shares had the Company Series C Preferred Shares been outstanding at the time of
such action;
(c) change the number of directors from nine (9) members or change the current and anticipated
future structure of the Company Board, except as contemplated by the Amended and Restated
Stockholders’ Agreement;
(d) amend, alter or change the rights, preferences, privileges or powers of the Company Common
Stock or the Company Series C Preferred Stock or designate or amend the rights, preferences or
privileges of any other series of Company Preferred Stock;
(e) issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any Company Securities, except for issuances of Company Securities which would not
require the prior vote or written consent of holders representing at the least a majority of the
then-outstanding shares of Company Series C Preferred Stock pursuant to Section 4(c) of the
Certificate of Designation if the Certificate of Designation were deemed to be effective and shares
of Series C Preferred Stock outstanding as of the date of this Agreement;
(f) (A) file, or consent by answer or otherwise to the filing against the Company or any of
its Subsidiaries of, a petition for relief or reorganization or arrangement or any other petition
in bankruptcy, insolvency, reorganization, moratorium or other similar Law of any jurisdiction, (B)
make an assignment for the benefit of the creditors of the Company or any of its Subsidiaries, (C)
consent to the appointment of a custodian, receiver, trustee or other officer with similar powers
with respect to the Company or any of its Subsidiaries or with respect to any substantial part of
its or their property, or (D) take any corporate action for the purpose of any of the foregoing;
(g) dissolve, liquidate or wind up the Company; or
(h) authorize any of, or commit to agree to take, any of the foregoing actions.
-30-
5.2 Rights Plan. Prior to the Second Installment Payment Date, the Company shall further
amend the Company Rights Agreement in a manner reasonably satisfactory to Elevation to comply with
the intention expressed in Section 4.5 of the Amended and Restated Stockholders’ Agreement.
5.3 Reasonable Best Efforts to Complete.
(a) Upon the terms and subject to the conditions set forth in this Agreement, each of
Elevation and the Company shall use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the other party or
parties hereto in doing, all things reasonably necessary, proper or advisable under applicable Law
to consummate and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including using reasonable best efforts to: (i) cause the
conditions to the Transaction set forth in ARTICLE VI to be satisfied; (ii) obtain all
necessary actions or non-actions, waivers, consents, approvals, orders and authorizations from
Governmental Authorities and make all necessary registrations, declarations and filings with
Governmental Authorities; and (iii) execute or deliver any additional instruments reasonably
necessary to consummate the transactions contemplated by, and to fully carry out the purposes of,
this Agreement.
(b) Each of Elevation and the Company shall cooperate with one another in good faith to (i)
promptly determine whether any filings are required to be or should be made, and whether any other
consents, approvals, permits or authorizations are required to be or should
be obtained, from any Governmental Authority under any other applicable Law in connection with
the transactions contemplated hereby, and (ii) promptly make any filings, furnish information
required in connection therewith and seek to obtain timely any such consents, permits,
authorizations, approvals or waivers that the parties determine are required to be or should be
made or obtained in connection with the transactions contemplated hereby.
5.4 Anti-Takeover Laws. In the event that any state anti-takeover or other similar
Law is or becomes applicable to this Agreement or any of the transactions contemplated by this
Agreement, the Company and Elevation shall use their respective reasonable best efforts to ensure
that the transactions contemplated by this Agreement may be consummated as promptly as practicable
on the terms and subject to the conditions set forth in this Agreement and otherwise to minimize
the effect of such Law on this Agreement and the transactions contemplated hereby.
5.5 Notification of Certain Matters. Prior to the Closing, the Company shall give
prompt written notice to Elevation of the occurrence or non-occurrence of any event known to the
Company the occurrence or non-occurrence of which would reasonably be expected to cause any
representation or warranty contained in ARTICLE III to be untrue, or the failure of the
Company to comply with or satisfy any covenant or agreement under this Agreement. Prior to the
Closing, Elevation shall give prompt written notice to the Company of the occurrence or
non-occurrence of any event known to Elevation the occurrence or non-occurrence of which would
reasonably be expected to cause any representation or warranty contained in ARTICLE IV to
be
-31-
untrue, or the failure of Elevation to comply with or satisfy any covenant or agreement under
this Agreement.
5.6 Public Statements and Disclosure. Neither the Company nor Elevation shall issue
any public release or make any public announcement or disclosure concerning this Agreement or the
transactions contemplated by this Agreement without the prior written consent of the other (which
consent shall not be unreasonably withheld, delayed or conditioned), except as such release,
announcement or disclosure may be required by applicable Law or the rules or regulations of any
applicable United States securities exchange or regulatory or Governmental Authority to which the
relevant party is subject or submits, wherever situated, in which case the party required to make
the release or announcement shall use its reasonable best efforts to allow the other party or
parties hereto reasonable time to comment on such release or announcement in advance of such
issuance (it being understood that the final form and content of any such release or announcement,
as well as the timing of any such release or announcement, shall be at the final discretion of the
disclosing party).
5.7 Confidentiality. Elevation acknowledges that it is bound by the Confidentiality
Agreement, dated November 13, 2007 (the “Confidentiality Agreement”), between the Company
and Elevation,
which Confidentiality Agreement will continue in full force and effect in accordance with its
terms, subject to Section 8.4.
5.8 Section 16 Matters. Prior to the Closing, the Company shall take all such steps
as may be required to cause any acquisitions or dispositions of shares of capital stock of the
Company in connection with the transactions contemplated by this Agreement (including derivative
securities of such shares) by each Person who is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to the Company or will become subject to such reporting
requirements with respect to the Company to be exempt under Rule 16b-3 promulgated under the
Exchange Act.
5.9 Capital. Subject to, and in accordance with, Section 154 of the DGCL, the Company
shall, by resolution of the Company Board, as of the Closing, determine that (i) the “capital”
(within the meaning of Section 154 of the DGCL) of the Purchased Shares and the Company Common
Stock to be issued upon the exercise of any Purchased Warrants shall be the aggregate par value of
such Purchased Shares or the aggregate par value of such Company Common Stock, as the case may be,
(ii) the portion of the Purchase Price applicable to such Purchased Shares in excess of the capital
(determined pursuant to clause (i)) shall be “surplus” (within the meaning of Section 154 of the
DGCL), and (iii) with respect to the shares of Company Common Stock to be issued upon the exercise
of any Purchased Warrants, the excess of (A) the sum of the portion of the Purchase Price paid in
respect of such Purchased Warrants and the exercise price in connection with such exercise over (B)
the capital (determined pursuant to clause (i)) shall be “surplus” (within the meaning of Section
154 of the DGCL).
5.10 Series B Preferred Stock Certificate of Designation Amendment. The parties
hereto agree to take all actions required to amend the certificate of designation of the Series B
Preferred Stock of the Company (the “Series B Preferred Certificate of Designation”) and to
cause the filing of such amendment to the Series B Preferred Certificate of Designation with, and
-32-
the acceptance thereof by, the Secretary of State of the State of
Delaware at or prior to the
Closing to conform to the appropriate provisions in the Series B Preferred Certificate of
Designation to those in Sections 1(b)(ii), 2(a), 2(b)(v), 2(b)(vi), 4(a), 4(b)(i), 4(b)(iv),
4(c)(ii), 4(c)(iv), 4(d), 4(f), 5(b), 5(c) (it being understood that the only change shall be a new
sentence added to the end of such Section), 7(a)(ii)(D), 8(d), 8(q), 8(x) and 8(uu) of the
Certificate of Designation.
5.11 Allocation of Purchase Price. As soon as practicable after the Closing, the
Company shall deliver to Elevation a statement allocating the Purchase Price between the Purchased
Shares and the Purchased Warrants comprising the Purchased Units. If within 10 days after the
delivery of such statement Elevation notifies the Company in writing that Elevation objects to the
allocation, the Company and Elevation shall use commercially reasonable efforts to resolve such
dispute within 20 days. In the event that the Company and Elevation are unable to resolve such
dispute within 20 days, the Company and Elevation shall jointly retain a nationally recognized bank
or appraisal firm
(the “Appraisal Firm”) to resolve the dispute. The costs, fees and expenses of the
Appraisal Firm shall be borne equally by the Company and Elevation. The Company and Elevation
agree to be bound for all tax purposes by the allocation, and shall not take any contrary tax
position regarding such allocation, unless otherwise required pursuant to a “determination” (as
defined in Section 1313(a) of the Code) or a comparable concept under applicable law.
5.12 Series B Stockholders Agreement. The Company agrees that the execution, delivery
and performance of this Agreement and the other Transaction Agreements, and the consummation of,
and any actions taken by any of the Elevation Entities (as defined in the Series B Stockholders
Agreement) or their respective Affiliates in connection with, the transactions contemplated hereby
and thereby shall not violate the terms of that certain Palm, Inc. Stockholders Agreement, dated as
of October 24, 2007 (the “Series B Stockholders Agreement”), by and among the Company,
Elevation and the other parties thereto
ARTICLE VI
CONDITIONS TO THE CLOSING
6.1 Conditions Precedent to Each Party’s Obligations to Consummate the Closing. The
respective obligations of Elevation and the Company to consummate the Closing shall be subject to
the satisfaction or waiver (where permissible under applicable Law) of each of the following
conditions:(a) Any material clearances, consents, approvals, orders and authorizations of
Governmental Authorities required to permit the consummation of the Closing, if applicable, shall
have been obtained.
(b) No Governmental Authority of competent jurisdiction shall have (i) enacted, issued or
promulgated any Law that is in effect and has the effect of making the Closing illegal in any
jurisdiction in which the Company has material business or operations or which has the effect of
prohibiting or otherwise preventing the consummation of the Closing in any jurisdiction in which
the Company has material business or operations, or (ii) issued or granted any Order that is in
effect and has the effect of making the Closing illegal in any jurisdiction in which the Company
has material business or operations or which has the effect of prohibiting or
-33-
otherwise preventing
the consummation of the Closing in any jurisdiction in which the Company has material business or
operations.
(c) The Certificate of Designation shall have been accepted for filing with the Secretary of
State of the State of Delaware.
6.2 Conditions Precedent to the Obligations of Elevation. The obligations of
Elevation to consummate the Closing shall be subject to the satisfaction or waiver of each of the
following conditions, any of which may be waived exclusively by Elevation:
(a) The Company shall have performed in all material respects the obligations that are to be
performed by it under this Agreement at or prior to the Closing Date, including the amendment of
the Company Rights Agreement pursuant to Section 5.2.
(b) The representations and warranties of the Company set forth in this Agreement shall be
true and correct on and as of the Closing Date with the same force and effect as if made on and as
of such date, except (i) for any failure to be so true and correct which has not had and would not
have, individually or in the aggregate, a Company Material Adverse Effect (other than the
representations and warranties of the Company set forth in Sections 3.6(a), 3.6(b), 3.6(e), 3.24
and 3.25 which shall be true and correct in all material respects), (ii) for changes contemplated
by this Agreement, and (iii) for those representations and warranties which address matters only as
of a particular date, which representations and warranties shall have been true and correct as of
such particular date, except for any failure to be so true and correct as of such particular date
which has not had and would not, individually or in the aggregate, have a Company Material Adverse
Effect; provided, however, that, for purposes of determining the accuracy of the representations
and warranties of the Company set forth in the Agreement for purposes of this Section 6.2(a)(ii),
all “Company Material Adverse Effect” and “material” qualifications set forth in such
representations and warranties shall be disregarded.
(c) Since the date of this Agreement, no Company Material Adverse Effect shall have occurred
and be continuing.
(d) Neither a Triggering Event (as defined in the Certificate of Designation) nor a
Fundamental Change (as defined in the Certificate of Designation) shall have occurred.
(e) Elevation shall have received a certificate of the Company, validly executed for and on
behalf of the Company and in its name by a duly authorized officer thereof, certifying that the
conditions set forth in Section 6.2(a), Section 6.2(b), Section 6.2(c) and Section 6.2(d) have been
satisfied.
(f) The Company shall have executed and delivered to Elevation the Amended and Restated
Stockholders’ Agreement.
(g) The Company shall have executed and delivered to Elevation the Amended and Restated
Registration Rights Agreement.
-34-
(h) Elevation shall have received from legal counsel to the Company an opinion in customary
form as to: (i) the corporate power and authority of the Company to conduct its business, execute
and deliver this Agreement, the Amended and Restated Stockholders’ Agreement, the Amended and
Restated Registration Rights Agreement and the Warrants (collectively, the “Covered
Agreements”) and perform its obligations thereunder; (ii)
due authorization, execution and delivery of the Covered Agreements; (iii) the Covered
Agreements being valid and binding obligations of the Company; (iv) the enforceability of the
Covered Agreements; (v) due authorization of the Purchased Shares, the Purchased Warrants, and the
Common Stock issuable upon conversion or exercise thereof and such securities upon issuance being
validly issued, fully paid and nonassessable; (vi) the Company Series C Preferred Stock having the
rights, preferences, privileges and restrictions set forth in the Certificate of Designation; (vii)
the due authorization and approval and filing of the Certificate of Designation; and (viii) due
reservation of the Company Common Stock underlying the Company Series C Preferred Stock and
Warrants, which opinion shall be addressed to Elevation and dated as of the Closing Date.
6.3 Conditions Precedent to the Obligations of the Company. The obligations of the
Company to consummate the Closing shall be subject to the satisfaction or waiver of each of the
following conditions, any of which may be waived exclusively by the Company:
(a) The representations and warranties of Elevation set forth in this Agreement shall be true
and correct on and as of the Closing Date with the same force and effect as if made on and as of
such date, except (i) for any failure to be so true and correct that would not, individually or in
the aggregate, prevent or materially delay the consummation of the transactions contemplated by
this Agreement or the ability of Elevation to fully perform its covenants and obligations under
this Agreement, (ii) for changes contemplated by this Agreement, and (iii) for those
representations and warranties which address matters only as of a particular date, which
representations shall have been true and correct as of such particular date, except for any failure
to be so true and correct as of such particular date that would not, individually or in the
aggregate, prevent or materially delay the consummation of the transactions contemplated by this
Agreement or the ability of Elevation to fully perform its covenants and obligations under this
Agreement.
(b) Elevation shall have performed in all material respects the obligations that are to be
performed by it under this Agreement at or prior to the Closing.
(c) The Company shall have received a certificate of Elevation, validly executed for and on
behalf of Elevation by a duly authorized officer thereof, certifying that the conditions set forth
in Section 6.3(a) and Section 6.3(b) have been satisfied.
(d) Elevation shall have executed and delivered to the Company the Amended and Restated
Stockholders’ Agreement.
(e) Elevation shall have executed and delivered to the Company the Amended and Restated
Registration Rights Agreement.
-35-
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and the Transaction may be
abandoned at any time prior to the occurrence of the Closing (it being agreed that the party hereto
terminating this Agreement or determining to abandon the Transaction pursuant to this Section 7.1
shall give prompt written notice of such termination or abandonment to the other party or parties
hereto):
(a) by mutual written agreement of Elevation and the Company;
(b) by either Elevation or the Company if the Closing shall not have occurred by February 28,
2009 (the “Termination Date”); provided, however, that the right to terminate this
Agreement or abandon the Transaction pursuant to this Section 7.1(b) shall not be available to any
party hereto whose action or failure to fulfill any obligation under this Agreement has been the
principal cause of or resulted in any of the conditions to the Transaction set forth in ARTICLE
VI having failed to be satisfied on or before the Termination Date and such action or failure
to act constitutes a material breach of this Agreement;
(c) by either Elevation or the Company if any Governmental Authority of competent jurisdiction
shall have (i) enacted, issued or promulgated any Law that is in effect and has the effect of
making the Transaction illegal in any jurisdiction in which the Company has material business or
operations or which has the effect of prohibiting or otherwise preventing the consummation of the
Transaction in any jurisdiction in which the Company has material business or operations, or (ii)
issued or granted any Order that is in effect and has the effect of making the Transaction illegal
in any jurisdiction in which the Company has material business or operations or which has the
effect of prohibiting or otherwise preventing the Transaction in any jurisdiction in which the
Company has material business or operations, and such Order has become final and non-appealable;
(d) by the Company, in the event that (i) the Company is not then in material breach of its
covenants, agreements and other obligations under this Agreement, and (ii) Elevation shall have
breached or otherwise violated any of its material covenants, agreements or other obligations under
this Agreement, or any of the representations and warranties of Elevation set forth in this
Agreement shall have become inaccurate, in either case such that the conditions to the Transaction
set forth in Section 6.3 are not capable of being satisfied by the Termination Date; or
(e) by Elevation, in the event that (i) Elevation is not then in material breach of its
covenants, agreements and other obligations under this Agreement, and (ii) (A) the Company shall
have breached or otherwise violated any of their respective material covenants, agreements or other
obligations under this Agreement, or (B) any of the representations and warranties of the Company
set forth in this Agreement shall have become inaccurate, in either case such that the conditions
to the Transaction set forth in Section 6.2 are not capable of being satisfied by the Termination
Date.
-36-
7.2 Notice of Termination; Effect of Termination. Any proper and valid termination of
this Agreement pursuant to Section 7.1 shall be effective immediately upon the delivery of written
notice of the terminating party to the other party or parties hereto, as applicable. In the event
of the termination of this Agreement pursuant to Section 7.1, this Agreement shall be of no further
force or effect without liability of any party or parties hereto, as applicable (or any partner,
member, stockholder, director, officer, employee, affiliate, agent or other representative of such
party or parties) to the other party or parties hereto, as applicable, except (a) for the terms of
this Section 7.2, Section 7.3 and ARTICLE VIII, each of which shall survive the termination
of this Agreement, and (b) that nothing herein shall relieve any party or parties hereto, as
applicable, from liability for any willful breach of, or fraud in connection with, this Agreement.
In addition to the foregoing, no termination of this Agreement shall affect the obligations of the
parties hereto set forth in the Confidentiality Agreement, all of which obligations shall survive
termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses. Subject to Section 2.3, all fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be paid by the party
or parties, as applicable, incurring such expenses whether or not the Transaction is consummated.
7.4 Amendment. Subject to applicable Law and subject to the other provisions of this
Agreement, this Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of Elevation and the Company.
7.5 Extension; Waiver. At any time and from time to time prior to the Closing Date,
any party or parties hereto may, to the extent legally allowed and except as otherwise set forth
herein, (a) extend the time for the performance of any of the obligations or other acts of the
other party or parties hereto, as applicable, (b) waive any inaccuracies in the representations and
warranties made to such party or parties hereto contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or conditions for the benefit
of such party or parties hereto contained herein. Any agreement on the part of a party or parties
hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party or parties, as applicable. Any delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations, Warranties and Covenants. The representations,
warranties and covenants of the Company and Elevation contained in this Agreement shall terminate
at the Closing Date, and only the covenants that by their terms
survive or are to be performed at or after the Closing shall so survive the Closing; provided,
however, that the representations and warranties of the Company set forth in Section 3.1, Section
3.6(e), the fourth sentence of Section 3.8, Section 3.9(a), Section 3.24 and Section 3.25 shall
survive the Closing Date until the expiration of the statute of limitations therefor.
-37-
8.2 Notices. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service, or sent via
telecopy (receipt confirmed) to the parties at the following addresses or facsimile numbers (or at
such other address or telecopy numbers for a party as shall be specified by like notice):
|
(a) |
|
if to Elevation, to: |
|
|
|
|
Elevation Partners, L.P.
00 Xxxx 00xx Xxxxxx, 00 Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Facsimile No.: (000) 000-0000 |
|
|
|
|
with copies (which shall not constitute notice) to: |
|
|
|
|
Elevation Partners
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Facsimile No.: (000) 000-0000 |
|
|
|
|
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxxx Xxxxxx, Esq.
Facsimile No.: (000) 000-0000 |
|
|
(b) |
|
if to the Company to: |
|
|
|
|
Palm, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000 |
|
|
|
|
with copies (which shall not constitute notice) to: |
|
|
|
|
Xxxxx Xxxx & Xxxxxxxx
0000 Xx Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxx
Facsimile: (000) 000-0000 |
-38-
8.3 Assignment. Except as otherwise expressly provided herein, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the other parties, except
that Elevation may assign its rights and obligations hereunder to the management company of
Elevation or the general partner of the general partner of Elevation or any of their controlled
Affiliates (including Elevation Employee Side Fund, LLC) without the prior written consent of the
Company; provided that no such assignment of its rights or obligations hereunder shall relieve
Elevation of its obligations hereunder with respect to the Company to the extent that an assignee
does not perform its obligations hereunder. Each such assignee (i) agrees to be bound jointly and
severally with the assignor hereunder, (ii) agrees that the representations, warranties, covenants
and other agreements made by Elevation herein shall be deemed to have been made by such assignee,
and (iii) shall execute a counterpart to this Agreement, the execution of which shall constitute
such assignee’s agreement to the terms of this Section 8.3.
8.4 Entire Agreement. This Agreement and the documents and instruments and other
agreements among the parties hereto as contemplated by or referred to herein, including the Company
Disclosure Letter and the Exhibits hereto, constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof; provided, however,
the Confidentiality Agreement shall not be superseded, shall survive any termination of this
Agreement and shall continue in full force and effect until terminated in accordance with its
terms.
8.5 Third Party Beneficiaries. Other than the Indemnified Parties who shall be third
party beneficiaries of Section 2.3, this Agreement is not intended to, and shall not, confer any
rights or remedies upon any Person other than the parties hereto or otherwise create any
third-party beneficiary hereto.
8.6 Severability. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction to be illegal,
void or unenforceable, the
remainder of this Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or unenforceable provision.
8.7 Remedies. Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. Notwithstanding the foregoing, the
liability of any party hereto for Damages with respect to any breach of this Agreement shall not
exceed an amount equal to the Purchase Price. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is accordingly
-39-
agreed that the
parties shall be entitled to obtain an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity. Without limiting the generality of the foregoing, the parties
hereto acknowledge and hereby agree that each of the Company and Elevation shall be entitled to
specifically enforce the terms and provisions of this Agreement to prevent breaches of, or to
enforce compliance with, those covenants and obligations set forth in Article II.
8.8 No Recourse. No Person other than Elevation and its successors and assigns shall
have any obligation hereunder and (a) notwithstanding that Elevation is a partnership, no recourse
hereunder or under any Closing certificate delivered in connection herewith shall be had against
any Related Party of Elevation or any Related Party of any of Elevation’s Related Parties, whether
by the enforcement of any judgment or assessment or by any legal or equitable proceeding, and (b)
no personal liability whatsoever will attach to, be imposed on or otherwise incurred by any Related
Party of Elevation or any Related Party of any of Elevation’s Related Parties under this Agreement
or any Closing certificate delivered in connection herewith or for any claim based on, in respect
of, or by reason of such obligations hereunder or by their creation. Nothing in this Section 8.8
shall relieve any Person for any liability for fraud. As used herein, “Related Party”
shall mean any former, current or future director, officer, employee, agent, general or limited
partner, manager, member, affiliate, stockholder, assignee or representative of the undersigned or
any of its successors or permitted assigns or any former, current or future director, officer,
employee, agent, general or limited partner, manager, member, affiliate, stockholder, assignee or
representative of any of the foregoing, other than Elevation or its assignees hereunder, or any
Successor Entity. As used herein, “Successor Entity” means, to the extent Elevation, any
of its assigns hereunder, or any Successor Entity (i) consolidates with or merges with any other
Person and is not the continuing or surviving entity of such consolidation or merger or (ii)
transfers or
conveys all or a substantial portion of its properties and other assets to any Person, the
continuing or surviving entity or such Person.
8.9 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof.
8.10 Consent to Jurisdiction. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction and venue of any state court located within New Castle County, State of
Delaware in connection with any matter based upon or arising out of this Agreement or the
transactions contemplated hereby, agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware for such persons and waives and covenants not to
assert or plead any objection which they might otherwise have to such jurisdiction, venue and
process. Each party hereto hereby agrees not to commence any legal proceedings relating to or
arising out of this Agreement or the transactions contemplated hereby in any jurisdiction or courts
other than as provided herein.
8.11 WAIVER OF JURY TRIAL. EACH OF ELEVATION AND THE COMPANY HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR
-40-
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
ELEVATION OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
8.12 Company Disclosure Letter References. The parties hereto agree that the disclosure set forth in any particular section or
subsection of the Company Disclosure Letter shall be deemed to be an exception to (or, as
applicable, a disclosure for purposes of) (i) the representations and warranties (or covenants, as
applicable) of the Company that are set forth in the corresponding section or subsection of this
Agreement, and (ii) any other representations and warranties (or covenants, as applicable) of the
Company that are set forth in this Agreement, but in the case of this clause (ii) only if the
relevance of that disclosure as an exception to (or a disclosure for purposes of) such other
representations and warranties (or covenants, as applicable) is reasonably apparent on the face of
such disclosure or from the requirement of the representation or warranty giving rise to such
disclosure.
8.13 Counterparts. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other party, it
being understood that all parties need not sign the same counterpart.
[Remainder of Page Intentionally Left Blank]
-41-
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by their
respective duly authorized officers to be effective as of the date first above written.
|
|
|
|
|
|
|
|
|
|
|
ELEVATION PARTNERS, L.P. |
|
|
|
PALM, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
By: Elevation Associates, L.P., as general partner |
|
|
|
By: |
|
/s/ Xxxxxx X. Xxxxxxxx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: Elevation Associates, LLC, as general partner |
|
|
|
Name: |
|
Xxxxxx X. Xxxxxxxx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title: |
|
President & CEO |
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Xxxx Xxxxxxxx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name: |
|
Xxxx Xxxxxxxx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title: |
|
Member |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF SERIES C CONVERTIBLE PREFERRED STOCK
OF
PALM, INC.
Palm, Inc. (the “Company”), a corporation organized and existing under the General
Corporation Law of the State of Delaware (the “DGCL”), hereby certifies, pursuant to
Section 151 of the DGCL, that the following resolutions were duly adopted by its Board of Directors
(the “Board”) on December 22, 2008:
WHEREAS, the Company’s Restated Certificate of Incorporation (the “Certificate of
Incorporation”), authorizes 125,000,000 shares of preferred stock, par value $0.001 per share
(the “Preferred Stock”), issuable from time to time in one or more series; and
WHEREAS, the Certificate of Incorporation authorizes the Board to provide by resolution for
the issuance of the shares of Preferred Stock in one or more series, and to establish from time to
time the number of shares to be included in each such series, and to fix the designation, powers,
privileges, preferences, and relative participating, optional or other rights, if any, of the
shares of each such series and the qualifications, limitations or restrictions thereof;
NOW, THEREFORE, BE IT RESOLVED, that a series of Preferred Stock with the powers,
designations, preferences and rights and the qualifications, limitations and restrictions thereof,
as provided herein is hereby authorized and established as follows:
SECTION 1. Number; Designation; Rank.
(a) This series of convertible participating Preferred Stock is designated as the “Series C
Convertible Preferred Stock” (the “Series C Preferred Stock”). The number of shares
constituting the Series C Preferred Stock is 100,000 shares, par value $0.001 per share.
(b) The Series C Preferred Stock ranks, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the Company:
(i) senior in preference and priority to the common stock of the Company, par value $0.001 per
share (the “Common Stock”), the series of Preferred Stock of the Company that is designated
as “Series A Participating Preferred Stock”, par value $0.001 per share (the “Series A
Preferred Stock”) and each other class or series of Equity Security (as defined in SECTION
8(s)) of the Company the terms of which do not expressly provide that it ranks senior in preference
or priority to or on parity, without preference or priority, with the Series C Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up of the Company
(collectively with the Common Stock, the “Junior Securities”);
(ii) on parity, without preference and priority, with the series of Preferred Stock of the
Company that is designated as “Series B Convertible Preferred Stock”, par value $0.001
per share
(the “Series B Preferred Stock”) and each other class or series of Equity Security of the
Company, the terms of which expressly provide that it will rank on parity, without preference or
priority, with the Series C Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company (collectively, the “Parity
Securities”), and
(iii) junior in preference and priority to each other class or series of Equity Security of
the Company the terms of which expressly provide that it will rank senior in preference or priority
to the Series C Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company (collectively, the “Senior Securities”).
SECTION 2. Dividends.
(a) Participating Dividends. Each holder of issued and outstanding Series C Preferred
Stock will be entitled to receive, when, as and if declared by the Board, out of funds legally
available for the payment of dividends for each share of Series C Preferred Stock, dividends of the
same type as any dividends or other distribution, whether in cash, in kind or in other property,
payable or to be made on outstanding shares of Common Stock (or Reference Property, to the extent
applicable), in an amount equal to the amount of such dividends or other distribution as would be
made on the largest number of shares of Common Stock (or Reference Property, to the extent
applicable) into which such share of Series C Preferred Stock could be converted on the applicable
record date for such dividends or other distribution on the Common Stock (or Reference Property, to
the extent applicable), assuming such converted shares of Common Stock (or Reference Property, to
the extent applicable) were outstanding on the applicable record date for such dividend or other
distribution and without giving effect to the limitations set forth in SECTION 5(b) (the
“Participating Dividends”); provided, however, that notwithstanding the
above, the holders of Series C Preferred Stock shall not be entitled to receive any dividends or
distributions for which an adjustment to the Conversion Price shall be made pursuant to SECTION
5(f)(i)(A) (and such dividends or distributions that are not payable to the holders of Series C
Preferred Stock as a result of this proviso shall not be deemed to be Participating Dividends);
provided, further, however, that notwithstanding the above, the holders of
Series C Preferred Stock shall not be entitled to receive any dividends or distributions of Rights
if, following the occurrence of a Distribution Date in respect of such Rights, an adjustment to the
Conversion Price would be made pursuant to SECTION 5(f)(ii) (assuming, for purposes of this SECTION
2(a), that the holder of such shares of Series C Preferred Stock were not an Acquiring Person or an
Affiliate (as defined in the Company Rights Plan or its comparable term/provision under any
successor or substitute shareholder rights plan) or an Associate (as defined in the Company Rights
Plan or its comparable term/provision under any successor or substitute shareholder rights plan) of
such Acquiring Person)(and such dividends or distributions that are not payable to the holders of
Series C Preferred Stock as a result of this proviso shall not be deemed to be Participating
Dividends).
(i) Participating Dividends are payable at the same time as and when such dividend or
other distribution on Common Stock (or Reference Property, to the extent applicable) is paid to the
holders of Common Stock (or Reference Property, to the extent applicable); provided,
-2-
however, that
no such dividend or distribution on Common Stock (or Reference Property, to the extent applicable)
shall be made unless and until the Participating Dividends are paid (or are concurrently
being paid) pursuant to this SECTION 2(a)(i).
(b) Conditional Dividends. Following the occurrence of a Triggering Event (as defined
below), and for so long as such Triggering Event continues, each holder of issued and outstanding
Series C Preferred Stock will be entitled to receive, out of funds legally available for the
payment of dividends for each share of Series C Preferred Stock, with respect to each dividend
period, dividends at a rate per annum equal to the Conditional Rate multiplied by the sum of
(A) $1,000 per share (the “Original Liquidation Amount”) plus (B) any accrued and unpaid
dividends that are payable on such share of Series C Preferred Stock, in each case as adjusted for
any stock dividends, splits, combinations and similar events (the “Conditional Dividends”
and, together with the Participating Dividends and Unpaid Conditional Dividends, the
“Dividends”). Any Conditional Dividends payable pursuant to this SECTION 2(b) shall be in
addition to any Participating Dividends payable pursuant to SECTION 2(a) hereof. In addition, the
right of the holders of the Series C Preferred Stock to receive the Conditional Dividend is in
addition to, and not in lieu of, any remedies such holders may have at law or equity.
(i) Conditional Dividends will accrue and cumulate from the date on which a Triggering Event
occurs, and are payable quarterly in arrears on the last day of each March, June, September and
December, or, if such date is not a Business Day, the succeeding Business Day (each such day, a
“Conditional Dividend Payment Date”) until such date as the Triggering Event is no longer
continuing; provided, however, that if Conditional Dividends remain unpaid after a Triggering Event
is no longer continuing, dividends will accrue and cumulate in an amount equal to (such dividends,
“Unpaid Conditional Dividends”) the product of (A) (x) the amount of unpaid Conditional
Dividends plus (y) the amount of unpaid Unpaid Conditional Dividends and (B) the Conditional Rate.
Any Unpaid Conditional Dividends payable pursuant to this SECTION 2(b)(i) shall be in addition to
any Participating Dividends payable pursuant to SECTION 2(a) hereof. In addition, the right of the
holders of the Series C Preferred Stock to receive the Unpaid Conditional Dividends is in addition
to, and not in lieu of, any remedies such holders may have at law or equity.
(ii) The amount of Conditional Dividends and Unpaid Conditional Dividends payable for each
full quarterly dividend period will be computed by dividing the annual rate by four. The amount of
Conditional Dividends and Unpaid Conditional Dividends payable for any dividend period shorter or
longer than a full quarterly dividend period, will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(iii) Conditional Dividends and Unpaid Conditional Dividends will be paid to the holders of
record of Series C Preferred Stock as they appear in the records of the Company at the close of
business on the 15th day of the calendar month in which the applicable Conditional Dividend Payment
Date falls if in March, June, September or December (or on the 15th day of the calendar month prior
to the month the Conditional Dividend Payment Date falls if the Conditional Dividend Payment Date
falls in April, July, October or January) or on such other date designated by
-3-
the Board for the
payment of Conditional Dividends (and/or Unpaid Conditional Dividends, as the case may be) that is
not more than 60 days or less than 10 days prior to such Conditional Dividend Payment Date. Any
payment of a Conditional Dividend or Unpaid Conditional Dividend will first be credited against the
earliest accumulated but unpaid Conditional Dividend or Unpaid Conditional Dividend due with
respect to such share that remains payable.
(iv) Conditional Dividends and Unpaid Conditional Dividends are payable only in cash.
Conditional Dividends and Unpaid Conditional Dividends will accrue and cumulate whether or not the
Company has earnings or profits, whether or not there are funds legally available for the payment
of Conditional Dividends or Unpaid Conditional Dividends and whether or not Conditional Dividends
or Unpaid Conditional Dividends are declared. Conditional Dividends and Unpaid Conditional
Dividends will accumulate and compound quarterly to the extent they are not paid when due.
(v) While a Triggering Event has occurred and is continuing, neither the Company nor any of
its subsidiaries may (A) declare, pay or set aside for payment any dividends or distributions on
any Junior Securities of the Company, (B) repurchase, redeem or otherwise acquire any Junior
Securities of the Company or (C) make any loan or other advance to any direct or indirect owner of
a majority of the Common Stock (or Reference Property, to the extent applicable) or any subsidiary
of any such owner.
(vi) Neither the Company nor any of its subsidiaries may (A) declare, pay or set aside for
payment any dividends or distributions on any Junior Securities of the Company or (B) repurchase,
redeem or otherwise acquire any Junior Securities of the Company, unless in each case the Company
has sufficient lawful funds immediately following such action such that the Company would be
legally permitted to redeem in full (x) the Series C Preferred Stock for the Regular Liquidation
Preference and (y) the Series B Preferred Stock for the Regular Liquidation Preference (as defined
in the Certificate of Designation of the Series B Preferred Stock). Notwithstanding anything in
this Agreement to the contrary, neither the Company nor any of its subsidiaries may exercise any
optional redemption with respect to any preferred stock that constitutes Junior Securities of the
Company if, at the time of such optional redemption, the Company could not have incurred additional
Indebtedness pursuant to SECTION 4(f) equal in amount to the optional redemption price of the
preferred stock being redeemed.
(vii) Each of the following shall constitute a “Triggering Event” for the purposes hereof:
(A) a failure by the Company to pay any Mandatory Redemption Price on the Mandatory
Redemption Date or the Optional Redemption Price on the Optional Redemption Date for any
reason, including the absence of funds legally available for such payment;
(B) a failure by the Company to deliver the Fundamental Change Notice to the holders of
shares of Series C Preferred Stock pursuant to SECTION 7(a)(iii)
-4-
hereof within the time
period provided therein or to pay the Repurchase Price in respect of all shares of Series C
Preferred Stock on the Repurchase Date pursuant to SECTION 7 for any reason, including the
absence of funds legally available for such payment;
(C) a failure by the Company to deliver any cash and shares of Common Stock (or
Reference Property, to the extent applicable), when such cash and shares of Common Stock (or
Reference Property, to the extent applicable), if any, are required to be delivered upon
conversion of the Series C Preferred Stock pursuant to SECTION 5 hereof,
where the Company does not remedy such default within ten (10) days after the date such
cash and shares of Common Stock (or Reference Property, to the extent applicable), if any,
are required to be delivered;
(D) a failure to pay any Participating Dividends on any date dividends or other
distributions on Common Stock (or Reference Property, to the extent applicable) are paid;
and
(E) for so long as the Board Representation Entitlement is one or more Preferred
Directors, a material violation by the Company of any term of or condition set forth in this
Certificate of Designation other than those referenced in the preceding clauses (A) through
(D), where the Company does not cure such violation within thirty (30) days after the
receipt of written notice from Elevation of such breach (it being understood that this
clause (E) shall no longer apply from and after the date on which the Board Representation
Entitlement is zero (0) Preferred Directors).
(c) If Dividends are not paid in full or a sum sufficient for such full payment is not so set
apart upon the Series C Preferred Stock, all Dividends declared upon the Series C Preferred Stock
and all dividends declared on any Parity Securities shall be declared pro rata so that the amount
of Dividends declared per share of the Series C Preferred Stock and dividends declared per share of
such Parity Securities shall in all cases bear to each other the same ratio that accrued and unpaid
Dividends per share on the Series C Preferred Stock and accrued and unpaid dividends per share of
such Parity Securities bear to each other.
(d) The Company shall take all actions necessary or advisable under the DGCL to permit the
payment of Dividends to the holders of Series C Preferred Stock. Holders of Series C Preferred
Stock are not entitled to any dividend, whether payable in cash, in kind or other property, in
excess of the Dividends as provided in this SECTION 2.
SECTION 3. Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company,
each share of Series C Preferred Stock entitles the holder thereof to receive and to be paid out of
the assets of the Company available for distribution, before any distribution or payment may be
made to a holder of any Junior Securities, an amount in cash per share equal to the greater of:
(i) the sum of (A) the Original Liquidation Amount per share plus (B) all accrued and unpaid
-5-
Dividends, if any, on such share of Series C Preferred Stock, in each case as adjusted for any
stock dividends, splits, combinations and similar events (such sum, as adjusted, the “Regular
Liquidation Preference”), and (ii) an amount equal to the amount the holders of Series C
Preferred Stock would have received per share of Series C Preferred Stock upon liquidation,
dissolution or winding up of the Company had such holders converted their shares of Series C
Preferred Stock into shares of Common Stock (or Reference Property, to the extent applicable)
immediately prior thereto (the “Participating Liquidation Preference,” and such greater
amount, the “Liquidation Preference”).
(b) If upon any such liquidation, dissolution or winding up of the Company, the assets of the
Company available for distribution are insufficient to pay the holders of Series C Preferred Stock
the full Liquidation Preference and the holders of all Parity Securities the full liquidation
preferences to which they are entitled, the holders of Series C Preferred Stock and such Parity
Securities will share ratably in any such distribution of the assets of the Company in proportion
to the full respective amounts to which they are entitled.
(c) After payment to the holders of Series C Preferred Stock of the full Liquidation
Preference to which they are entitled, the holders of Series C Preferred Stock as such will have no
right or claim to any of the assets of the Company.
(d) The value of any property not consisting of cash that is distributed by the Company to the
holders of the Series C Preferred Stock will equal the Fair Market Value thereof on the date of
distribution.
(e) For the purposes of this SECTION 3, a Fundamental Change (in and of itself) shall be
deemed not to be a liquidation, dissolution or winding-up of the Company subject to this SECTION 3
(it being understood that an actual liquidation, dissolution or winding up of the Company in
connection with a Fundamental Change will be subject to this SECTION 3).
SECTION 4. Voting Rights; Board Representation.
(a) The holders of Series C Preferred Stock are entitled to vote on all matters on which the
holders of Common Stock are entitled to vote, and except as otherwise provided herein or by law,
the holders of Series C Preferred Stock will vote together with the holders of Series B Preferred
Stock and Common Stock as a single class. Each holder of Series C Preferred Stock is entitled to a
number of votes equal to the number of shares of Common Stock into which all of the outstanding
shares of Series C Preferred Stock held by such holder on the record date for any such vote are
convertible as of such record date; provided, however, that in any vote of the
holders of the Series B Preferred Stock, Series C Preferred Stock, Common Stock and any other
securities that constitute Voting Stock (as defined in the Stockholders’ Agreement) voting together
as a single class to the extent that the voting power of a holder together with its Affiliates
would exceed 39.9% (the “Maximum Voting Percentage”) of the Maximum Voting Power of the
Company, then the aggregate number of votes entitled to be cast by such holder and its Affiliates
with respect to the Series C Preferred Stock held by such holder and its Affiliates will be reduced
to that number (not less than
-6-
zero) that results in the aggregate voting power of such holder and
its Affiliates being equal to the Maximum Voting Percentage of the Maximum Voting Power of the
Company. For purposes of this Certificate of Designation, “Maximum Voting Power” means, at
the time of determination of the Maximum Voting Power, the total number of votes which may be cast
by all capital stock on a matter subject to the vote of the Common Stock, Series B Preferred Stock,
Series C Preferred Stock and any other securities that constitute Voting Stock (as defined in the
Stockholders’ Agreement) voting together as a single class and after giving effect to any
limitation on voting power set forth in this Certificate of Designation or the Certificate of
Designation of the Series B Preferred Stock and the certificate of designation or other similar
document governing Voting Stock.
(b) Notwithstanding SECTION 4(a) hereof:
(i) The holders of Series C Preferred Stock and the holders of the Series B Preferred Stock
will vote together as a single class for the election of Preferred Directors, if any, but are not
entitled to vote, either as a separate class or together with the holders of Common Stock as a
single class, for the election of directors other than Preferred Directors.
(ii) Following a Fundamental Change (a “Non-Constituent Issuer Fundamental Change”)
pursuant to which the Series C Preferred Stock is converted, or convertible, into a security of an
entity other than (x) the Company or (y) the surviving entity of a merger or consolidation to which
the Company is a constituent party, the Series C Preferred Stock (or the security into which it is
converted (the “Conversion Security”)) shall not entitle the holder thereof to vote on any
matters other than those set forth in SECTION 4(c)(i), (ii), (iii) and (v) (but only to the extent
clause (v) relates to clauses (i), (ii) and (iii)) below and such other matters (if any) as shall
be required by law. For purposes of clarity, to the extent that the Conversion Security does not
entitle the holders thereof to vote on any matters other than those set forth in SECTION 4(c)(i),
(ii), (iii) and (v) (but only to the extent clause (v) relates to clauses (i), (ii) and (iii))
below and such other matters (if any) as shall be required by law, the conversion of the Series C
Preferred Stock into the Conversion Security shall not be deemed to be an amendment, repeal,
alteration, addition, deletion or other change to the powers, preferences, rights or privileges of
the Series C Preferred Stock in a manner adverse to the holders thereof.
(c) So long as any shares of Series C Preferred Stock are outstanding, the Company may not
take any of the following actions (including by means of merger, consolidation, reorganization,
recapitalization or otherwise) without the prior vote or written consent of holders representing at
least (x) a majority of the then-outstanding shares of Series C Preferred Stock, voting together as
a separate class, and (y) solely in the case of clause (iii) below, so long as Elevation and its
Affiliates hold in the aggregate not less than 40% of the then outstanding shares of Series C
Preferred Stock, a majority of the then-outstanding shares of Series C Preferred Stock held by
Elevation and its Affiliates:
(i) any increase or decrease in the authorized amount of shares of Series C Preferred Stock,
except for the cancellation and retirement of shares set forth in SECTION 9(a);
-7-
(ii) any issuance of additional shares of Series C Preferred Stock after the Original Issuance
Date;
(iii) any amendment, repeal, alteration, addition, deletion or other change to the powers,
preferences, rights or privileges of the Series C Preferred Stock in a manner adverse to the
holders thereof (whether by Board resolution, amendment to the Certificate of Incorporation or
Bylaws, merger, consolidation or otherwise);
(iv) the consummation of any merger, consolidation or other transaction to which the Company
or any of its subsidiaries is a party in connection with, or that would result in, a Fundamental
Change or the Company seeking or obtaining any consent, waiver or amendment to the
Credit Agreement in connection with or following a Fundamental Change, in each case unless
either (A) the condition set forth in clause (i) or (ii) of SECTION 7(b) has been satisfied or (B)
either (x) upon consummation of such Fundamental Change the holders of Series C Preferred Stock
would be entitled to receive for each share of Series C Preferred Stock cash equal to or greater
than the Repurchase Price or (y) the provisions of SECTION 7(b) are not applicable to such
Fundamental Change as a result of the proviso to SECTION 7(b).
(v) agree to do any of the foregoing actions set forth in clause (c)(i) through (c)(v), unless
such agreement expressly provides that the Company’s obligation to undertake any of the foregoing
is subject to the prior approval of holders of Series C Preferred Stock;
provided, that if after the Original Issuance Date there is a change in the applicable
rules of the Exchange on which the Common Stock is listed at the time such change becomes effective
that would cause the Common Stock to be delisted by such Exchange as a result of the terms of this
clause (c), the voting rights of the holders of the Series C Preferred Stock set forth in this
clause (c) shall thereafter be limited to the extent required by such changed rules for the Common
Stock to continue to be listed on such Exchange.
Without expanding the scope of the foregoing voting rights of Series C Preferred Stock, it is
understood that in the context of a Fundamental Change, so long as immediately following such
Fundamental Change:
(i) the Series C Preferred Stock (or any preferred security into which the Series C Preferred
Stock is converted in such Fundamental Change as contemplated by clause (ii)(B) below) is
convertible into the kind and amount of shares of capital stock, other securities or other property
receivable upon such Fundamental Change by a holder of a number of shares of Common Stock (or
Reference Property, to the extent applicable) issuable upon conversion of such shares of Series C
Preferred Stock in accordance with SECTION 5(e); and
(ii) the Series C Preferred Stock either:
(A) remains outstanding with the same powers, preferences, rights and privileges set
forth on this Certificate of Designation, or
-8-
(B) is exchanged for preferred securities of the Survivor of a Fundamental Change,
which preferred securities have the same powers, preferences, rights and privileges
(other than those that by their terms automatically terminate or otherwise are
altered following such a Fundamental Change pursuant to the terms of this Certificate
of Designation) as the Series C Preferred Stock (“New Preferred Stock”),
provided that to the extent that SECTION 4(g) would no longer be applicable
following the consummation of such Fundamental Change as a result of the proviso to
SECTION 4(g) below, the New Preferred Stock need not be senior in preference or
priority to or on parity, without preference or priority, with other preferred
securities of such Survivor of a Fundamental Change with respect to dividend rights
or rights upon liquidation, dissolution or winding up of such entity; and,
provided further, that such
exchange does not result in income tax consequences generally to U.S. individual
holders of the Series C Preferred Stock that are more severe than the income tax
consequences such holders would have suffered if such holders had been holders of
Common Stock and been treated as such in the Fundamental Change; and
(iii) in connection with such Fundamental Change, no action takes place that would otherwise
require the approval of the holders of the Series C Preferred Stock pursuant to this SECTION 4(c),
the Series C Preferred Stock shall not have any vote or consent as a separate class with respect to
such Fundamental Change.
(d) Right to Designate/Elect Preferred Directors. From and after the Original Issuance
Date, the holders of shares of Series C Preferred Stock, voting together with the holders of shares
of Series B Preferred Stock (collectively, the “Preferred Stock”) as a separate class by a
majority of the shares of Common Stock issuable upon conversion of the then-outstanding shares of
Preferred Stock as of any applicable record date, shall have the exclusive right to elect a total
number of directors (such persons, the “Preferred Directors”), to the Board equal to the
Board Representation Entitlement. If the holders of Preferred Stock fail to elect a sufficient
number of Preferred Directors sufficient to fill the Board Representation Entitlement, then any
directorship not so filled shall remain vacant until such time as the holders of Preferred Stock
fill such directorship by vote or by written consent in lieu of a meeting; and no such directorship
may be filled by stockholders of the Company other than the holders of Preferred Stock. In
addition, upon the occurrence of an increase in the authorized number of directors then
constituting the Board that results in an increase of the Board Representation Entitlement to a
number greater than the number of Preferred Directors then serving on the Board, the authorized
number of Preferred Directors on the Board shall be increased immediately so that the total
authorized number of Preferred Directors is equal to the Board Representation Entitlement at such
time.
(i) Term of Office. Unless a Preferred Director’s term of office shall have terminated
prior to such time pursuant to SECTION 4(d)(ii), (iii), (iv), (v), (vi) or (vii) below, such
Preferred Director designated or elected pursuant to this SECTION 4 shall serve until the next
-9-
special or annual meeting of stockholders of the Company called for the purpose of electing
Preferred Directors at which such Preferred Director is up for election or at any special meeting
of the holders of Preferred Stock, as the case may be, for the purpose of removing Preferred
Directors, or until his or her successor shall be duly elected.
(ii) Removal and Vacancies. So long as the Board Representation Entitlement is equal
to at least one (1), a majority of the directors may call, and upon the written request of holders
of record of 50% of the then outstanding shares of Preferred Stock (determined on the basis of the
shares of Common Stock issuable upon conversion of the then-outstanding shares of Preferred Stock),
addressed to the Secretary of the Company at the principal office of the Company, shall call, a
special meeting of the holders of shares of Preferred Stock, for the sole purpose of filling any
vacancy caused by the resignation, death or removal of a Preferred Director (but only to the extent
required to maintain the then applicable Board Representation Entitlement), or to remove
from office a Preferred Director with or without cause. Such meeting shall be held as soon as
reasonably practicable after delivery of such request to the Secretary, at the place and upon the
notice provided by law and in the Bylaws for the holding of meetings of stockholders. Subject to
SECTION 4(d)(iii), (iv), (v), (vi) or (vii) below, only the holders of a majority of the
then-outstanding shares of Preferred Stock, voting together as a single class on an as-converted
basis, are entitled to fill any vacancy caused by the resignation, death or removal of a Preferred
Director (but only to the extent required to maintain the then applicable Board Representation
Entitlement), and only the holders of Preferred Stock are entitled to remove from office a
Preferred Director without cause. Any Preferred Director may be removed from office (A) with or
without cause by holders of a majority of the shares of Common Stock issuable upon conversion of
the then-outstanding shares of Preferred Stock or (B) only for cause by the holders of a majority
of the then-outstanding shares of Common Stock, provided that in such case the holders of Preferred
Stock shall not be entitled to vote on an as-converted basis with the Common Stock with respect to
such removal for cause.
(iii) Change Following Uncured Share Ownership Reduction. Upon the occurrence of an
Uncured Share Ownership Reduction, following the expiration of the applicable Share Ownership
Reduction Cure Period (assuming an Uncured Share Ownership Reduction still exists), the number of
Preferred Directors on the Board (but not the number of directors constituting the whole Board)
shall be reduced immediately so that the total number of Preferred Directors after the occurrence
of an Uncured Share Ownership Reduction is equal to the Board Representation Entitlement at such
time. To effect such reduction, the term of office of the requisite number of Preferred Directors
shall immediately end, such person(s) shall cease to be director(s), and neither the remaining
Preferred Directors nor the holders of shares of Preferred Stock shall have any right to elect or
appoint a Preferred Director to replace such director. To the extent that there is more than one
Preferred Director on the Board immediately prior to the Uncured Share Ownership Reduction, the
holders of a majority of shares of Common Stock issuable upon the conversion of the
then-outstanding shares of Preferred Stock shall have the right to designate which of the Preferred
Directors’ terms shall end pursuant to this SECTION 4(d)(iii); provided, that if holders of
a majority of the shares of Common Stock issuable upon conversion of the then-outstanding shares of
Preferred
-10-
Stock fail to designate in advance which of the Preferred Directors’ terms shall end, the
directors (other than Preferred Directors) shall then be entitled to make such designation.
(iv) Change Following Board Size Decrease. Upon the occurrence of a decrease in the
authorized number of directors then constituting the Board that, as a result thereof results in a
reduction of the Board Representation Entitlement to less than the then authorized number of
Preferred Directors (a “Board Size Decrease”), the number of Preferred Directors on the
Board shall be reduced immediately so that the total number of Preferred Directors is equal to the
Board Representation Entitlement at such time; provided, that if the Board Size Decrease
goes into effect during a Share Ownership Reduction Cure Period, then such reduction shall not take
effect until the expiration of such Share Ownership Reduction Cure Period, provided that upon such
expiration, the Board Representation Entitlement is less than the then authorized number of
Preferred Directors. To effect such reduction, the term of office of that number of Preferred
Directors required to reduce the number of Preferred Directors to the new Board Representation
Entitlement shall immediately end, such person(s) shall cease to be director(s), and neither the
remaining Preferred Directors nor the holders of shares of Preferred Stock shall have any
right to elect or appoint a Preferred Director to replace such director at such time. To the extent
that there is more than one Preferred Director on the Board immediately prior to the Board Size
Decrease, the holders of a majority of the shares of Common Stock issuable upon conversion of the
then-outstanding shares of Preferred Stock shall have the right to designate which of the Preferred
Directors’ terms shall end pursuant to this SECTION 4(d)(iv); provided, that if holders of
a majority of the shares of Common Stock issuable upon conversion of the then-outstanding shares of
Preferred Stock fail to designate in advance which of the Preferred Directors’ terms shall end, the
directors (other than Preferred Directors) shall then be entitled to make such designation.
(v) Loss of Preferred Directors on a Non-Constituent Issuer Fundamental Change. Upon
the occurrence of a Non-Constituent Issuer Fundamental Change, the terms of office of all Preferred
Directors shall immediately end, such persons shall cease to be directors, and the holders of
shares of Preferred Stock shall not have any right to elect or appoint Preferred Directors to
replace the directors whose terms of office shall have ended.
(vi) Loss of Preferred Director on a Fundamental Change Other than a Non-Constituent
Issuer Fundamental Change. Upon the occurrence of a Fundamental Change other than a
Non-Constituent Issuer Fundamental Change, if the Board Representation Entitlement is at least
one (1) Preferred Director at such time, the terms of office of all but one (1) Preferred Directors
shall immediately end, such persons shall cease to be directors (notwithstanding the proviso in
SECTION 4(d)(vi) below), and neither the remaining Preferred Director nor the holders of shares of
Preferred Stock shall have any right to elect or appoint Preferred Directors to replace the
directors whose terms of office shall have ended pursuant to this SECTION 4(d)(vi). To the extent
that there is more than one Preferred Director on the Board immediately prior to such Fundamental
Change, the holders of a majority of the Preferred Stock shall have the right to designate which of
the Preferred Directors’ terms shall end pursuant to this SECTION 4(d)(vi); provided, that
if holders of a
-11-
majority of the Preferred Stock fail to designate in advance which of the Preferred
Directors’ terms shall end, the directors (other than Preferred Directors) shall then be entitled
to make such designation.
(vii) Loss of Board Representation Entitlement. From and after the first time that the
Investor Stockholders in the aggregate cease to (A) Beneficially Own or (B) have all Economic
Rights and Voting Rights with respect to a majority of the shares of Preferred Stock issued on the
Original Issuance Date (including, for purposes of this calculation, shares of Preferred Stock
pledged pursuant to a bona fide pledge, but not a foreclosure thereon, but excluding, for purposes
of this calculation, shares subject to Shared Beneficial Ownership with any Person other than
another Investor Stockholder or a Permitted Transferee), then the holders of Preferred Stock shall
cease to have any rights under this SECTION 4(d) (including, without limitation, the right to vote
to fill any vacancies of Preferred Directors); provided, however, that if,
immediately following such time, the Investor Stockholders continue to benefit from the contractual
rights set forth in Section 2.1 of the Stockholders Agreement (Board Representation), each
Preferred Director serving on the Board at such time (the “Transition Time”) shall continue
as a director, but not as a Preferred Director (other than with respect to SECTION 4(d)(iii),
pursuant to which such director shall not
continue as a director if the conditions therein for the elimination of such director’s seat
are met), until the next special or annual meeting of stockholders of the Company called for the
purpose of electing directors, or until his or her successor shall be elected. From and after the
Transition Time, the holders of shares of Preferred Stock shall not have any right, voting as a
separate class, to elect or appoint a Preferred Director to replace such director.
(viii) Filling Vacancy Upon Cessation of Preferred Director. Any vacancy resulting
from the cessation of the term of office of a Preferred Director pursuant to SECTION 4(d)(iii),
(v), (vi) or (vii) may be filled by either (A) the Board or (B) the holders of Common Stock
generally, and not the holders of Preferred Stock voting as a separate class, in accordance with
the Certificate of Incorporation, the Bylaws of the Company and applicable law.
(e) Exchange Compliance. Notwithstanding the foregoing, the rights of the holders of
the Series C Preferred Stock set forth in SECTION 4(a) to vote as a single class with the Common
Stock shall be subject to applicable rules of the Exchange on which the Company is then listed to
the extent required such that the Common Stock shall continue to be listed on such Exchange,
including, without limitation, compliance by the Company with Rule 4351 of Nasdaq (or any successor
thereto) insofar as it may be applied in the event that the Conversion Price is determined to be
less than the “market value” as defined in such rules, and such rights to vote with the Common
Stock shall be accordingly reduced or otherwise modified to the minimum extent required to comply
with such rules. For the avoidance of doubt, in no event shall this SECTION 4(e) operate to reduce
the number of Preferred Directors to be designated pursuant to SECTION 4(d), and it shall be the
obligation of the Company to ensure that the membership of the Board satisfies the applicable rules
of the Exchange on which the Company is then listed, including without limitation Rule 4350(c) of
Nasdaq, without any reduction in the number of Preferred Directors pursuant to SECTION 4(d).
-12-
(f) Approval Rights over Debt Incurrence. So long as any shares of Preferred Stock
are outstanding and the Elevation Beneficial Ownership Percentage exceeds 30%, the Company may not
and will cause its subsidiaries to not, without the prior vote or written consent of holders
representing at least a majority of the shares of Common Stock issuable upon conversion of the
then-outstanding shares of Preferred Stock, voting together as a separate class, incur
Indebtedness; provided, however, that the Company and its subsidiaries may incur
Indebtedness if, after giving effect to the incurrence of such Indebtedness, the Total Leverage
Ratio would be equal to or less than 3.00 to 1.00. Notwithstanding the foregoing, the Company and
its subsidiaries may:
(i) incur Indebtedness under the revolving portion of the Credit Agreement or any Successor
Credit Agreement so long as the maximum principal amount that may be incurred under the revolving
portion of any such Successor Credit Agreement does not exceed the maximum principal amount that
may be drawn down under the revolving portion of the Credit Agreement; and
(ii) extend, renew, replace or refinance any Indebtedness existing as of November 30, 2008
provided that such extending, renewal, replacement or refinancing Indebtedness shall not be in a
principal amount that exceeds the principal amount of the Indebtedness being
extended, renewed, replaced or refinanced (plus any capitalized or “PIK” interest accruing for
a period of six months, any redemption premium payable by the terms of such Indebtedness thereon
and other reasonable amounts paid, and reasonable fees and expenses incurred, in connection with
such extension, renewal, replacement or refinancing).
For purposes of this SECTION 4(f), the following defined terms shall have the following
meanings:
“Consolidated EBITDA” means Consolidated EBITDA as such term is defined in the Credit
Agreement.
“Credit Agreement” means that certain Credit Agreement dated as of October 24, 2007
among the Company, as Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, and Xxxxxx Xxxxxxx Senior Funding, Inc., as Syndication Agent, as in effect
on December 21, 2008 and without giving effect to any amendments, supplements or other
modifications thereof after December 21, 2008.
“Indebtedness” means, with respect to any person, without duplication, all obligations
of such person for borrowed money, all obligations of such person evidenced by bonds, debentures,
notes or similar instruments or letters of credit, all capital lease obligations, all guarantees by
such person of indebtedness of other persons, all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or encumbrance on any property or rights of such person, all obligations, contingent or
otherwise, of such person as an account party in respect of letters of credit, letters of guaranty
and in respect of
-13-
bankers’ acceptances and all obligations to redeem or repurchase preferred stock
of the Company prior to the Maturity Date.
“Successor Credit Agreement” means any successor to, substitute for or replacement of
the Credit Agreement.
“Total Leverage Ratio” means, on any date, the ratio of Indebtedness as of such date
to Consolidated EBITDA for the period of four consecutive fiscal quarters of the Company ended on
such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the
fiscal quarter of the Company most-recently ended prior to such date).
(g) Approval Rights over Senior and Parity Security Issuances. So long as any shares
of Preferred Stock are outstanding, the Company may not (including by means of merger,
consolidation, reorganization, recapitalization or otherwise) without the prior vote or written
consent of holders representing at least a majority of the shares of Common Stock issuable upon
conversion of the then-outstanding shares of Preferred Stock, voting together as a separate class,
authorize (and if authorized, increase the authorized amount), create or issue (including by way of
reclassification or otherwise) any Senior Securities or Parity Securities; provided,
however, that this SECTION 4(g) shall not apply following a Fundamental Change (i) if the
issuer of the Preferred Stock following such Fundamental Change is a public company whose common
stock (or American Depositary
Shares (“ADSs”) or American Depositary Receipts (“ADRs”) in respect of such
ADSs) is traded on an Exchange and (ii) if following such Fundamental Change the shares of capital
stock entitled to vote generally in the election of directors and the Preferred Stock (treated on
an as-converted basis) immediately prior to such transaction (or series of related transactions)
are converted into and/or continue to represent (on an as-converted basis in the case of the
Preferred Stock and treating any ADSs or ADRs as if they were the underlying shares to which they
relate), in the aggregate, less than 40% of the total voting power of all shares of capital stock
that are entitled to vote generally in the election of directors of the entity surviving or
resulting from such transaction (or ultimate parent thereof).
SECTION 5. Conversion.
Each share of Series C Preferred Stock is convertible into shares of Common Stock (or
Reference Property, to the extent applicable) as provided in this SECTION 5.
(a) Conversion at the Option of Holders of Series C Preferred Stock. Subject to
SECTION 5(b) hereof, each holder of Series C Preferred Stock is entitled to convert, at any time
and from time to time after the 16th day following the Original Issuance Date, at the option and
election of such holder, any or all shares of outstanding Series C Preferred Stock held by such
holder into a number of duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Reference Property, to the extent applicable) equal to the amount (the
“Conversion Amount”) determined by dividing (i) the Regular Liquidation Preference for each
share of Series C Preferred Stock to be converted by such holder by (ii) the Conversion Price in
effect at the time of conversion.
-14-
The “Conversion Price” initially is $3.25, as adjusted
from time to time as provided in SECTION 5(f). In order to convert shares of Series C Preferred
Stock into shares of Common Stock (or Reference Property, to the extent applicable), the holder
must surrender the certificates representing such shares of Series C Preferred Stock, accompanied
by transfer instruments reasonably satisfactory to the Company, free of any adverse interest or
liens at the office of the Company’s transfer agent for the Series C Preferred Stock (or at the
principal office of the Company, if the Company serves as its own transfer agent), together with
written notice that such holder elects to convert all or such number of shares represented by such
certificates as specified therein. With respect to a conversion pursuant to this SECTION 5(a), the
date of receipt of such certificates, together with such notice, by the transfer agent or the
Company will be the date of conversion (the “Conversion Date”).
(b) Limitations on Conversion. Notwithstanding SECTION 5(a), the Company shall not
effect any conversion of the Series C Preferred Stock or otherwise issue shares of Common Stock
pursuant to SECTION 5(a) hereof, and no holder of Series C Preferred Stock will be permitted to
convert shares of Series C Preferred Stock into shares of Common Stock to the extent that the
holder exercising such conversion right (together with such holder’s Affiliates) would (immediately
after giving effect to such conversion and after giving effect to any limitation on voting power
set forth in this Certificate of Designation or the Certificate of Designation of the Series B
Preferred Stock) Beneficially Own outstanding shares of Preferred Stock and Common Stock and any
other securities that constitute Voting Stock (as defined in the Stockholders’ Agreement)
representing in the aggregate more than the Maximum Voting Percentage of the Maximum Voting Power
of the Company. For purposes of the foregoing sentence, the number of shares of Common Stock
Beneficially Owned by a holder and its Affiliates shall include the number of shares of Common
Stock issuable upon conversion of the Series C Preferred Stock with respect to which a conversion
notice has been given, but shall exclude the number of shares of Common Stock which would be
issuable upon conversion of the remaining, unconverted portion of the Series C Preferred Stock or
the Series B Preferred Stock Beneficially Owned by such holder or any of its Affiliates and shall
also exclude any shares of Common Stock which would be issuable upon exercise of any warrants
Beneficially Owned by such holder or any of its Affiliates. Upon the written request of the
holder, the Company shall within one (1) Business Day confirm in writing to any holder the number
of shares of Common Stock then-outstanding. Under no circumstance will any holder be entitled to
receive cash for any shares of Series C Preferred Stock not convertible solely as a result of the
limitations set forth in this SECTION 5(b). Anything in this SECTION 5(b) to the contrary
notwithstanding, but subject to the terms and conditions of the Stockholder’s Agreement, the
provisions of this SECTION 5(b) will not apply to any conversion of the Series C Preferred Stock in
connection with a substantially concurrent sale of the Common Stock issuable upon conversion to a
person who is not an Affiliate of the converting holder.
(c) Conversion at the Option of the Company. On and after the three-year anniversary
of the Original Issuance Date, at the Company’s option and election, in whole but not in part, all
shares of Series C Preferred Stock may be converted automatically into a number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or Reference Property, to the
extent applicable) equal to the Conversion Amount on the date of written notice by
-15-
the Company to
the holders of Series C Preferred Stock notifying such holders of the conversion contemplated by
this SECTION 5(c), which conversion shall occur on the date specified in such notice, not less than
10 nor more than 30 days following the date of such notice (which shall be the Conversion Date in
respect of a conversion pursuant to this SECTION 5(c), provided that such notice may be
delivered by the Company only if (i) (A) the average closing price per share of the Common Stock on
the Exchange on which shares of the Common Stock are then listed during the 30 consecutive trading
days ending on the trading day immediately preceding the Business Day on which such notice is
delivered and (B) the closing price per share of the Common Stock on the Exchange on which shares
of the Common Stock are then listed for at least twenty (20) of such thirty (30) consecutive
trading days (including the last fifteen (15) trading days of such thirty (30) day period) is at
least 300% of the Conversion Price then in effect, and (ii) all requisite arrangements with the
Company’s transfer agent, the Exchange on which shares of the Common Stock are then listed, and any
other requisite securities intermediary (including The Depository Trust Company and Cede & Co., if
applicable) to permit the immediate trading of such shares of Common Stock on the Conversion Date
shall have been completed. Once delivered, such notice shall be irrevocable, unless the Company
obtains the written consent of the holders representing a majority of the outstanding shares of
Series C Preferred Stock. Notwithstanding the foregoing, the holders of Series C Preferred Stock
shall continue to have the right to convert their shares of Series C Preferred Stock pursuant to
SECTION 5(a) until and through the Conversion Date contemplated in this SECTION 5(c) and if such
shares of Series C Preferred Stock are converted pursuant to SECTION 5(a) such shares shall not
longer be converted pursuant to this SECTION 5(c) and the Company’s notice delivered to the holders
pursuant to this SECTION 5(c) shall automatically terminate with respect to such shares converted
pursuant to SECTION 5(a). The limitations on conversion set forth
in SECTION 5(b) shall not apply to any exercise of the Company’s conversion right pursuant to
this SECTION 5(c).
(d) Fractional Shares. No fractional shares of Common Stock (or Reference Property,
to the extent applicable) will be issued upon conversion of the Series C Preferred Stock. In lieu
of fractional shares, the Company shall pay cash equal to such fractional amount multiplied by the
Fair Market Value as of the Conversion Date. If more than one share of Series C Preferred Stock is
being converted at one time by the same holder, then the number of full shares issuable upon
conversion will be calculated on the basis of the aggregate number of shares of Series C Preferred
Stock converted by such holder at such time.
(e) Mechanics of Conversion.
(i) As soon as practicable after the Conversion Date (and in any event within three Business
Days), the Company shall promptly issue and deliver to such holder a certificate for the number of
shares of Common Stock (or Reference Property, to the extent applicable) to which such holder is
entitled, together with a check or cash for payment of fractional shares, if any, in exchange for
the certificates formerly representing shares of Series C Preferred Stock. Such conversion will be
deemed to have been made on the Conversion Date, and the person (as defined in SECTION 8) entitled
to receive the shares of Common Stock (or Reference Property,
-16-
to the extent applicable) issuable
upon such conversion shall be treated for all purposes as the record holder of such shares of
Common Stock (or Reference Property, to the extent applicable) on such Conversion Date. In case
fewer than all the shares represented by any such certificate are to be converted, a new
certificate shall be issued representing the unconverted shares without cost to the holder thereof,
except for any documentary, stamp or similar issue or transfer tax due because any certificates for
shares of Common Stock (or Reference Property, to the extent applicable) or Series C Preferred
Stock are issued in a name other than the name of the converting holder. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of Common Stock (or Reference
Property, to the extent applicable) upon conversion or due upon the issuance of a new certificate
for any shares of Series C Preferred Stock not converted other than any such tax due because shares
of Common Stock (or Reference Property, to the extent applicable) or a certificate for shares of
Series C Preferred Stock are issued in a name other than the name of the converting holder.
(ii) The Company shall at all times reserve and keep available, free from any preemptive
rights, out of its treasury or authorized but unissued shares of Common Stock (or Reference
Property, to the extent applicable) (or a combination of both) for the purpose of effecting the
conversion of the Series C Preferred Stock the full number of shares of Common Stock (or Reference
Property, to the extent applicable) deliverable upon the conversion of all outstanding Series C
Preferred Stock (as may be adjusted from time to time pursuant to the terms of this SECTION 5 and
assuming for the purposes of this calculation that all outstanding shares of Series C Preferred
Stock are held by one holder), and the Company shall take all actions to amend its Certificate of
Incorporation to increase the authorized amount of Common Stock (or Reference Property, to the
extent applicable) if necessary therefor. Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value of the shares of Common Stock (or Reference
Property, to the extent applicable) issuable upon conversion of the
Series C Preferred Stock, the Company will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock (or Reference Property, to the extent applicable) at such
adjusted Conversion Price.
(iii) From and after the Conversion Date, the shares of Series C Preferred Stock to be
converted on such Conversion Date will no longer be deemed to be outstanding; and all rights of the
holder thereof as a holder of Series C Preferred Stock (except the right to receive from the
Company the Common Stock (or Reference Property, to the extent applicable) upon conversion) shall
cease and terminate with respect to such shares; provided, that in the event that a share
of Series C Preferred Stock is not converted due to a default by the Company or because the Company
is otherwise unable to issue the requisite shares of Common Stock (or Reference Property, to the
extent applicable), such share of Series C Preferred Stock will remain outstanding and will be
entitled to all of the rights as provided herein. Any shares of Series C Preferred Stock that have
been converted will, after such conversion, be deemed cancelled and retired and, following the
filing of any certificate required by the DGCL, have the status of authorized but unissued
Preferred Stock, without designation as to series until such shares are once more designated as
part of a particular series by the Board.
-17-
(iv) If the conversion is in connection with any sale, transfer or other disposition of the
Common Stock (or Reference Property, to the extent applicable) issuable upon conversion of the
Series C Preferred Stock, the conversion may, at the option of any holder tendering any share of
Series C Preferred Stock for conversion, be conditioned upon the closing of the sale, transfer or
the disposition of shares of Common Stock (or Reference Property, to the extent applicable)
issuable upon conversion of Series C Preferred Stock with the underwriter, transferee or other
acquirer in such sale, transfer or disposition, in which event such conversion of such shares of
Series C Preferred Stock shall not be deemed to have occurred until immediately prior to the
closing of such sale, transfer or other disposition.
(v) The Company shall comply with all federal and state laws, rules and regulations and
applicable rules and regulations of the Exchange on which shares of the Common Stock (or Reference
Property, to the extent applicable) are then listed. If any shares of Common Stock (or Reference
Property, to the extent applicable) to be reserved for the purpose of conversion of shares of
Series C Preferred Stock require registration with or approval of any person or group (as defined
in SECTION 8) under any federal or state law or the rules and regulations of the Exchange on which
shares of the Common Stock (or Reference Property, to the extent applicable) are then listed before
such shares may be validly issued or delivered upon conversion, then the Company will, as
expeditiously as possible, use its reasonable best efforts to secure such registration or approval,
as the case may be. So long as any Common Stock (or Reference Property, to the extent applicable)
into which the shares of Series C Preferred Stock are then convertible is then listed on an
Exchange, the Company will list and keep listed on such Exchange, upon official notice of issuance,
all shares of such Common Stock (or Reference Property, to the extent applicable) issuable upon
conversion.
(vi) All shares of Common Stock (or Reference Property, to the extent applicable) issued upon
conversion of the shares of Series C Preferred Stock will, upon issuance by the Company, be duly
and validly issued, fully paid and nonassessable, not issued in violation of any preemptive rights
arising under law or contract and free from all taxes, liens and charges with respect to the
issuance thereof, and the Company shall take no action which will cause a contrary result.
(vii) If, prior to both (x) a Triggering Event and (y) a Distribution Date, shares of Series C
Preferred Stock are converted into Common Stock (or Reference Property, to the extent applicable),
upon the conversion of such shares of Series C Preferred Stock, the shares of Common Stock (or
Reference Property, to the extent applicable) issued in respect thereof shall be issued with the
same Rights, if any, attached thereto as are attached to the then-outstanding shares of Common
Stock (or Reference Property, to the extent applicable). If, prior to a Triggering Event, but
following the occurrence of a Distribution Date and prior to the expiration or redemption of the
Rights, shares of Series C Preferred Stock are converted into Common Stock (or Reference Property,
to the extent applicable), upon the conversion of such shares of Series C Preferred Stock, the
holders of such Common Stock shall receive the number of Rights which would have been attached to
such Common Stock assuming the Distribution Date had not occurred prior to such conversion.
-18-
(f) Adjustments to Conversion Price.
(i) Adjustment for Change in Capital Stock.
(A) If the Company shall, at any time and from time to time while any of the Series C
Preferred Stock is outstanding, issue a dividend or make a distribution on its Common Stock
(or Reference Property, to the extent applicable) payable in shares of its Common Stock (or
Reference Property, to the extent applicable) to all holders of its Common Stock (or
Reference Property, to the extent applicable), then the Conversion Price at the opening of
business on the Ex-Dividend Date for such dividend or distribution will be adjusted by
multiplying such Conversion Price by a fraction:
(1) the numerator of which shall be the number of shares of Common Stock (or
Reference Property, to the extent applicable) outstanding at the close of business on
the Business Day immediately preceding such Ex-Dividend Date; and
(2) the denominator of which shall be the sum of the number of shares of Common
Stock (or Reference Property, to the extent applicable) outstanding at the close of
business on the Business Day immediately preceding the Ex-Dividend Date for such
dividend or distribution, plus the total number of shares of Common Stock (or
Reference Property, to the extent applicable) constituting such dividend or other
distribution.
If any dividend or distribution of the type described in this SECTION 5(f)(i)(A) is declared
but not so paid or made, the Conversion Price shall again be adjusted to the Conversion
Price
which would then be in effect if such dividend or distribution had not been declared. Except
as set forth in the preceding sentence, in no event shall the Conversion Price be increased
pursuant to this SECTION 5(f)(i)(A).
(B) If the Company shall, at any time or from time to time while any of the Series C
Preferred Stock is outstanding, subdivide or reclassify its outstanding shares of Common
Stock (or Reference Property, to the extent applicable) into a greater number of shares of
Common Stock (or Reference Property, to the extent applicable), then the Conversion Price in
effect at the opening of business on the day upon which such subdivision becomes effective
shall be proportionately decreased, and conversely, if the Company shall, at any time or
from time to time while any of the Series C Preferred Stock is outstanding, combine or
reclassify its outstanding shares of Common Stock (or Reference Property, to the extent
applicable) into a smaller number of shares of Common Stock (or Reference Property, to the
extent applicable), then the Conversion Price in effect at the opening of business on the
day upon which such combination or reclassification becomes effective shall be
proportionately increased. In each such case, the Conversion Price shall be adjusted by
multiplying such Conversion Price by a fraction, the numerator of which shall be
-19-
the number
of shares of Common Stock (or Reference Property, to the extent applicable) outstanding
immediately prior to such subdivision or combination and the denominator of which shall be
the number of shares of Common Stock (or Reference Property, to the extent applicable)
outstanding immediately after giving effect to such subdivision, combination or
reclassification. Such reduction or increase, as the case may be, shall become effective
immediately after the opening of business on the day upon which such subdivision,
combination or reclassification becomes effective.
(ii) Adjustment for Rights Issued under Rights Plan. If at any time and from time to
time while any shares of Series C Preferred Stock are outstanding there shall occur a Rights Plan
Triggering Event, the Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect at the opening of business on the Rights
Triggering Date by a fraction:
(A) the numerator of which shall be the sum of (1) the number of shares of Common Stock
(or Reference Property, to the extent applicable) outstanding at the close of business on
the Business Day immediately preceding the Rights Triggering Date, plus (2) (x) the
aggregate Exercise Price (as defined in the Company Rights Plan or its comparable
term/provision under any successor or substitute shareholder rights plan) payable to the
Company, assuming that all Rights then-outstanding that are capable of being exercised are
immediately exercised following the Rights Plan Triggering Event, divided by (y) the Current
Market Price; and
(B) the denominator of which shall be the sum of (1) the number of shares of Common
Stock outstanding at the close of business on the Business Day immediately preceding the
Rights Triggering Date, plus (2) the aggregate number of shares of Common Stock (or
Reference Property, to the extent applicable) into which the Rights then-outstanding are
exercisable for (immediately following such Rights Plan Triggering
Event) (such number of shares of Common Stock, the “Underlying Common Stock
Amount”);
Such adjustment shall become effective immediately after the opening of business on the Rights
Triggering Date;
To the extent that shares of Common Stock (or Reference Property, to the extent applicable)
are not delivered pursuant to such Rights prior to the expiration or termination of any Rights
(other than as a result of the repurchase of those Rights by the Company), upon expiration or
termination of such Rights (“Expired Rights”) the Conversion Price shall be readjusted to
the Conversion Price that would then be in effect had the adjustments made upon the occurrence of a
Rights Plan Triggering Event been made without taking into account such Expired Rights. Except as
set forth in this paragraph, in no event shall the Conversion Price be increased pursuant to this
SECTION 5(f)(ii).
-20-
Notwithstanding the foregoing, the Conversion Price as adjusted pursuant to this SECTION
5(f)(ii) shall not apply to any shares of Series C Preferred Stock Beneficially Owned by a Person
who is an Acquiring Person, and, with respect to such shares, the Conversion Price shall be the
Conversion Price in effect immediately prior to the Rights Triggering Date.
(iii) Adjustment for Certain Tender Offers or Exchange Offers. In case the Company or
any of its subsidiaries shall, at any time or from time to time, while any of the Series C
Preferred Stock is outstanding, distribute cash or other consideration in respect of a tender offer
or an exchange offer (that is treated as a “tender offer” under U.S. federal securities
laws) made by the Company or any subsidiary for all or any portion of the Common Stock (or
Reference Property, to the extent applicable), where the sum of the aggregate amount of such cash
distributed and the aggregate Fair Market Value as of the Expiration Date (as defined below), of
such other consideration distributed (such sum, the “Aggregate Amount”) expressed as an
amount per share of Common Stock (or Reference Property, to the extent applicable) validly tendered
or exchanged, and not withdrawn, pursuant to such tender offer or exchange offer as of the
Expiration Time (as defined below) (such tendered or exchanged shares of Common Stock (or Reference
Property, to the extent applicable), the “Purchased Shares”) exceeds the Closing Price per
share of the Common Stock (or Reference Property, to the extent applicable) on the first Trading
Day immediately following the last date (such last date, the “Expiration Date”) on which
tenders or exchanges could have been made pursuant to such tender offer or exchange offer (as the
same may be amended through the Expiration Date), then, and in each case, immediately after the
close of business on such date, the Conversion Price shall be decreased so that the same shall
equal the price determined by multiplying the Conversion Price in effect immediately prior to the
close of business on the Trading Day immediately following the Expiration Date by a fraction:
(A) the numerator of which shall be equal to the product of (A) the number of shares of
Common Stock (or Reference Property, to the extent applicable) outstanding as of the
Expiration Time (including all Purchased Shares) and (B) the Closing Price per share of the
Common Stock (or Reference Property, to the extent applicable) on the first Trading Day
immediately following the Expiration Date; and
(B) the denominator of which is equal to the sum of (A) the Aggregate Amount and (B)
the product of (I) an amount equal to (1) the number of shares of Common Stock (or Reference
Property, to the extent applicable) outstanding as of the last time (the “Expiration Time”)
at which tenders or exchanges could have been made pursuant to such tender offer or exchange
offer less (2) the Purchased Shares and (II) the Closing Price per share of the Common Stock
(or Reference Property, to the extent applicable) on the first Trading Day immediately
following the Expiration Date.
An adjustment, if any, to the Conversion Price pursuant to this SECTION 5(f)(iii) shall
become effective immediately prior to the opening of business on the second Trading Day
immediately following the Expiration Date. In the event that the Company or a
-21-
subsidiary is
obligated to purchase shares of Common Stock (and Reference Property, to the extent
applicable) pursuant to any such tender offer or exchange offer, but the Company or such
subsidiary is permanently prevented by applicable law from effecting any such purchases, or
all such purchases are rescinded, then the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender offer or exchange offer
had not been made. Except as set forth in the preceding sentence, if the application of this
SECTION 5(f)(iii) to any tender offer or exchange offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer or exchange offer under
this SECTION 5(f)(iii).
(iv) Adjustments for Issuances of Additional Shares of Common Stock.
(A) Definitions. For purposes of this SECTION 5(f)(iv), the following
definitions apply:
(1) “Convertible Securities” means any debt or other evidences of
indebtedness, capital stock, rights, options, warrants or other securities directly
or indirectly convertible into or exercisable or exchangeable for Common Stock
(including Reference Property, if applicable).
(2) “Additional Shares of Common Stock” means any shares of Common Stock
issued (whether from the Company’s treasury or authorized and unissued shares of
capital stock) or, as provided in SECTION 5(f)(iv)(B) below, deemed to be issued by
the Company after the Original Issuance Date; provided that, notwithstanding anything
to the contrary contained herein, Additional Shares of Common Stock shall not include
issuances of Common Stock (including any deemed issuance pursuant to SECTION
5(f)(iv)(B)) which are (1) pursuant to employee benefit plans and compensation
related arrangements approved by the board of directors of the Company (including any
duly authorized committee or delegee thereof) or (2) to Elevation or any of its
Affiliates pursuant to the exercise of their respective preemptive rights.
(3) (iii) “Measurement Date” means, with respect to a transaction, the
public announcement of such transaction (or, if no such public announcement is made,
the date of issuance).
(B) Deemed Issuances of Additional Shares of Common Stock. The maximum number
of shares of Common Stock (as set forth in the instrument relating thereto without regard to
any provision contained therein for a subsequent adjustment of such number) issuable upon
the exercise, conversion or exchange of Convertible Securities will be deemed to be
Additional Shares of Common Stock issued as of the time of the issuance of such Convertible
Securities; provided, however, that:
-22-
(1) No adjustment in the Conversion Price will be made upon the subsequent
issuance of shares of Common Stock upon the exercise, conversion or exchange of such
Convertible Securities;
(2) To the extent that Additional Shares of Common Stock are not issued pursuant
to any such Convertible Security upon the expiration or termination of an unissued,
unexercised, unconverted or unexchanged Convertible Security, the Conversion Price
will be readjusted to the Conversion Price that would have been in effect had such
Convertible Security (to the extent outstanding immediately prior to such expiration
or termination) never been issued; and
(3) In the event of any change in the number of shares of Common Stock issuable
upon the exercise, conversion or exchange of any Convertible Security, excluding a
change resulting from any transaction giving rise to an adjustment pursuant to
SECTION 5(f)(i)(B), but including periodic or scheduled accretions or adjustments to
a Convertible Security, interest and dividends paid in kind, repricings of the
exercise or conversion price of such Convertible Securities or otherwise, the
Conversion Price then in effect will be readjusted to the Conversion Price that would
have been in effect if, on the date of issuance, such Convertible Security were
exercisable, convertible or exchangeable for such changed number of shares of Common
Stock.
(C) Determination of Consideration. The Fair Market Value of the consideration
received by the Company for the issue of any Additional Shares of Common Stock will be
computed as follows:
(1) Cash and Property. Aggregate consideration consisting of cash and
other property will: (x) insofar as it consists of cash, be computed at the
aggregate of cash received by the Company, excluding amounts paid or payable for
accrued interest or accrued dividends; (y) insofar as it consists of property other
than cash, be computed at the Fair Market Value thereof on the Measurement Date; and
(3) insofar as it consists of both cash and other property, be the proportion of such
consideration so received.
(2) Convertible Securities. The aggregate consideration per share
received by the Company for Convertible Securities will be determined by dividing:
(x) the total amount, if any, received or receivable by the Company as consideration
for the issuance of such Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the full and complete exercise, conversion
or exchange of such Convertible Securities, by (y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without
-23-
regard to any
provision contained therein for a subsequent adjustment of such number) issuable upon
the full and complete exercise, conversion or exchange of such Convertible
Securities.
(D) In the event the Company shall, at any time and from time to time during the period
ending on the second anniversary of the Original Issuance Date while any of the Series C
Preferred Stock is outstanding, issue or sell Additional Shares of Common Stock (or
Reference Property, to the extent applicable) for a consideration per share, as determined
by such consideration’s Fair Market Value in accordance with SECTION 5(f)(iv)(C), less than
the Conversion Price in effect immediately prior to such issuance (a “Below Conversion
Price Issuance”), then if the aggregate Fair Market Value of the aggregate consideration
received by the Company in respect of any such single or series of related Below Conversion
Price Issuances is greater than $30,000,000, the Conversion Price in effect immediately
after such Below Conversion Price Issuance shall be reduced to the Fair Market Value of the
consideration per share received by the Company in respect of such Below Conversion Price
Issuance or, in the case of a series of Below Conversion Price Issuances, the lowest Fair
Market Value of consideration per share received in any such Below Conversion Price
Issuance.
(E) Except in the case of Below Conversion Price Issuances giving rise to an adjustment
pursuant to SECTION 5(f)(iv)(D), in the event the Company shall, at any time and from time
to time while any of the Series C Preferred Stock is outstanding, issue or sell Additional
Shares of Common Stock (or Reference Property, to the extent applicable), in a Below
Conversion Price Issuance, the Conversion Price in effect immediately after such Below
Conversion Price Issuance shall be reduced so that the same shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to such Below Conversion
Price Issuance by a fraction:
(1) the numerator of which shall be the sum of (a) the number of shares of
Common Stock (or Reference Property, to the extent applicable) outstanding
immediately prior to such Below Conversion Price Issuance (on a fully diluted basis
based on the treasury method) (such number of shares of Common Stock, the “Number
of Fully Diluted Shares of Common Stock”); plus (b) (x) the Fair Market Value of
the aggregate consideration received by the Company in respect of such Below
Conversion Price Issuance, divided by (y) the Conversion Price in effect immediately
prior to such Below Conversion Price Issuance; and
(2) the denominator of which shall be the sum of (a) the Number of Fully Diluted
Shares of Common Stock, plus (b) the number of such Additional Shares of Common Stock
issued in such Below Conversion Price Issuance.
-24-
(F) Any adjustment made pursuant to this SECTION 5(f)(iv) shall become effective
immediately upon the date of such Below Conversion Price Issuance.
(G) Notwithstanding the foregoing, in no event shall any adjustment pursuant to this
SECTION 5(f)(iv) cause the Conversion Price to be less than $2.5185 (the “Floor
Price”), provided that such Floor Price shall be adjusted in the same manner as the
Conversion Price to reflect any adjustments made in accordance with this SECTION 5(f) (other
than adjustments pursuant to this SECTION 5(f)(iv)).
(v) Disposition Events.
(A) If any of the following events (any such event, a “Disposition Event”)
occurs:
(1) any reclassification or exchange of the Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination); or
(2) any merger, consolidation or other combination to which the Company is a
constituent party;
in each case, as a result of which the holders of Common Stock shall be entitled to receive
cash, securities or other property for their shares of Common Stock, the Company or the surviving
entity of the merger, consolidation or other combination shall provide that the Series C Preferred
Stock converted following the effective date of any Disposition Event, shall be calculated based on
the kind and amount of cash, securities or other property (collectively, “Reference
Property”) received upon the occurrence of such Disposition Event by a holder of Common Stock
holding, immediately prior to the transaction, a number of shares of Common Stock equal to the
Conversion Amount immediately prior to such Disposition Event; provided that if the Disposition
Event provides the holders of Common Stock with the right to receive more than a single type of
consideration determined based in part upon any form of stockholder election, the Reference
Property shall be comprised of the weighted average of the types and amounts of consideration
received by the holders of the Common Stock. The Company may not cause, or agree to cause, a
Disposition Event to occur, unless the issuer of any securities or other property into which the
Series C Preferred Stock becomes convertible agrees, for the express benefit of the holders of
record of Series C Preferred Stock (including making them beneficiaries of such agreement), to
issue such securities or property.
(B) The above provisions of this SECTION 5(f)(v) shall similarly apply to successive
Disposition Events. If this SECTION 5(f)(v) applies to any
event or occurrence, neither SECTION 5(f)(i) nor SECTION 5(f)(iii) shall apply;
provided, however, that this SECTION 5(f)(v) shall not apply to any stock
split or combination to which SECTION 5(f)(i) is applicable or to a liquidation, dissolution
or winding up to which SECTION 3 applies. To the extent that equity securities of a company
are received by the
-25-
holders of Common Stock of the Company in connection with a Disposition
Event, the portion of the Series C Preferred Stock which will be convertible into such
equity securities will continue to be subject to the anti-dilution adjustments set forth in
this SECTION 5(f).
(vi) Minimum Adjustment. Notwithstanding the foregoing, the Conversion Price will not
be reduced if the amount of such reduction would be an amount less than $0.01, but any such amount
will be carried forward and reduction with respect thereto will be made at the time that such
amount, together with any subsequent amounts so carried forward, aggregates to $0.01 or more.
(vii) Limitation on Adjustment; When No Adjustment Required.
(A) No adjustment need be made for the issuance of Common Stock (and Reference
Property, to the extent applicable) or any securities convertible into or exchangeable for
Common Stock (and Reference Property, to the extent applicable) or carrying the right to
purchase Common Stock (and Reference Property, to the extent applicable) or any such
security except to the extent explicitly required herein.
(B) No adjustment need be made for rights to purchase Common Stock (or Reference
Property, to the extent applicable) pursuant to a Company plan for reinvestment of dividends
or interest.
(C) No adjustment need be made for a change in the par value or no par value of the
Common Stock (or Reference Property, to the extent applicable).
(D) To the extent the Series C Preferred Stock becomes convertible pursuant to this
SECTION 5 into cash, no adjustment need be made thereafter as to the cash. Interest will
not accrue on the cash.
(viii) Rules of Calculation; Treasury Stock. All calculations will be made to the
nearest one-hundredth of a cent or to the nearest one-ten thousandth of a share. Except as
explicitly provided herein, the number of shares of Common Stock (or Reference Property, to the
extent applicable) outstanding will be calculated on the basis of the number of issued and
outstanding shares of Common Stock (or Reference Property, to the extent applicable), not including
shares held in the treasury of the Company. The Company shall not pay any dividend on or make any
distribution to shares of Common Stock (or Reference Property, to the extent applicable) held in
treasury.
(ix) Waiver. Notwithstanding the foregoing, the Conversion Price will not be reduced
if the Company receives, prior to the effective time of the adjustment to the Conversion Price,
written notice from the holders representing at least a majority of the then-outstanding shares
of Series C Preferred Stock, voting together as a separate class, that no adjustment is to be
made as the result of a particular issuance of Common Stock (or Reference Property, to the extent
applicable) or other dividend or other distribution on shares of Common Stock. This waiver will be
limited in
-26-
scope and will not be valid for any issuance of Common Stock (or Reference Property, to
the extent applicable) or other dividend or other distribution on shares of Common Stock (or
Reference Property, to the extent applicable) not specifically provided for in such notice.
(x) Tax Adjustment. Anything in this SECTION 5 notwithstanding, the Company shall be
entitled to make such downward adjustments in the Conversion Price, in addition to those required
by this SECTION 5, as the Board in its sole discretion shall determine to be advisable in order
that any event treated for federal income tax purposes as a dividend or stock split will not be
taxable to the holders of Common Stock (or Reference Property, to the extent applicable).
(xi) Par Value. Anything in this SECTION 5 notwithstanding, no adjustment to the
Conversion Price shall reduce the Conversion Price below the then par value per share of Common
Stock (or Reference Property, to the extent applicable), and any such purported adjustment shall
instead reduce the Conversion Price to such par value.
(xii) No Duplication. If any action would require adjustment of the Conversion Price
pursuant to more than one of the provisions described in this SECTION 5 in a manner such that such
adjustments are duplicative, only one adjustment shall be made.
(g) Notice of Record Date. In the event of:
(i) any stock split or combination of the outstanding shares of Common Stock (or Reference
Property, to the extent applicable);
(ii) any declaration or making of a dividend or other distribution to holders of Common Stock
(or Reference Property, to the extent applicable) in Additional Shares of Common Stock, any other
capital stock, other securities or other property (including but not limited to cash and evidences
of indebtedness);
(iii) any reclassification or change to which SECTION 5(f)(i)(B) applies;
(iv) the dissolution, liquidation or winding up of the Company; or
(v) any other event constituting a Fundamental Change of the type described in clause (i) of
the definition thereof in SECTION 8(x);
then the Company shall file with its corporate records and mail to the holders of the Series C
Preferred Stock at their last addresses as shown on the records of the Company, at least 10 days
prior to the record date specified in (A) below or 10 days prior to the date specified in
(B) below, a notice stating:
(A) the record date of such stock split, combination, dividend or other distribution,
or, if a record is not to be taken, the date as of which the holders of
-27-
Common Stock (or Reference Property, to the extent applicable) of record to be entitled
to such stock split, combination, dividend or other distribution are to be determined, or
(B) the date on which such reclassification, change, liquidation, dissolution, winding
up or other Fundamental Change described in clause (i) of the definition thereof in SECTION
8(x), is estimated to become effective, and the date as of which it is expected that holders
of Common Stock (or Reference Property, to the extent applicable) of record will be entitled
to exchange their shares of Common Stock (or Reference Property, to the extent applicable)
for the capital stock, other securities or other property (including but not limited to cash
and evidences of indebtedness) deliverable upon such reclassification, change, liquidation,
dissolution, winding up or other Fundamental Change.
Disclosures made by the Company in any filings required to be made under the Exchange Act
shall be deemed to satisfy the notice requirements set forth in this SECTION 5(g).
(h) Certificate of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this SECTION 5, the Company at its expense shall
promptly as reasonably practicable compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series C Preferred Stock a certificate, signed by an
officer of the Company, setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based and shall file a copy of such certificate
with its corporate records. The Company shall, upon the reasonable written request of any holder
of Series C Preferred Stock, furnish to such holder a similar certificate setting forth (i) the
calculation of such adjustments and readjustments in reasonable detail, (ii) the Conversion Price
then in effect, and (iii) the number of shares of Common Stock (or Reference Property, to the
extent applicable) and the amount, if any, of capital stock, other securities or other property
(including but not limited to cash and evidences of indebtedness) which then would be received upon
the conversion of Series C Preferred Stock.
SECTION 6. Redemption.
Each share of Series C Preferred Stock is redeemable as provided in this SECTION 6.
(a) Mandatory Redemption.
(i) On October 24, 2014 (the “Maturity Date”), or, if not a Business Day, the first
Business Day thereafter, the Company shall redeem (subject to the legal availability of funds
therefor) all, but not less than all, of the outstanding shares of Series C Preferred Stock at a
redemption price per share equal to the Regular Liquidation Preference (the “Mandatory
Redemption Price”). To the extent that the Company has insufficient funds to redeem all of the
outstanding shares of Series C Preferred Stock, the Company shall use available funds to redeem a
pro rata portion of the Series C Preferred Stock held by each holder thereof; provided,
however, that the failure to redeem all the Series C Preferred Stock on the Mandatory
Redemption Date shall continue to constitute a Triggering Event.
-28-
(ii) The “Mandatory Redemption Date” shall be the same date as the Maturity Date or,
if not a Business Day, the first Business Day thereafter. The Company shall deliver a notice of
redemption not less than 10 nor more than 60 days prior to the Mandatory Redemption Date, addressed
to the holders of record of the Series C Preferred Stock as they appear in the records of the
Company as of the date of such notice. Each notice must state the following: (A) the Mandatory
Redemption Date; (B) the Mandatory Redemption Price as of the scheduled Mandatory Redemption Date
(it being understood that the actual Mandatory Redemption Price will be determined as of the actual
Mandatory Redemption Date); (C) the name of the redemption agent to whom, and the address of the
place to where, the Series C Preferred Stock are to be surrendered for payment of the Mandatory
Redemption Price; and (D) that Conditional Dividends, if any, on the shares to be redeemed will
cease to accrue on such Mandatory Redemption Date, provided that the Mandatory Redemption Price and
the Dividends accrued through the day immediately preceding the Mandatory Redemption Date shall
have been paid on the Mandatory Redemption Date.
(b) Optional Redemption upon Certain Fundamental Changes.
(i) In connection with a Fundamental Change of the type described in clause (i) of the
definition of “Fundamental Change” in SECTION 8(x) (a “Triggering Fundamental Change”)
where as a result of such transaction the Series C Preferred Stock become convertible solely into
cash (the amount of such cash with respect to each share of Series C Preferred Stock, the
“Fundamental Change Price”), the Company, at its option and election, may redeem (out of
funds legally available therefor) all, but not less than all, of the outstanding shares of Series C
Preferred Stock at a Redemption Price equal to 101% of the Regular Liquidation Preference (the
“Optional Redemption Price” and collectively with the Mandatory Redemption Price, the
“Redemption Price”); provided, that the consummation of such redemption and the
payment of the Optional Redemption Price shall be subject to the consummation of the Triggering
Fundamental Change.
(ii) If the Company elects to redeem the Series C Preferred Stock pursuant to SECTION 6(b)(i),
the “Optional Redemption Date” shall be the date on which the Triggering Fundamental Change
is consummated. The Company shall deliver a notice of redemption not less than 10 nor more than 30
Business Days prior to the Optional Redemption Date, addressed to the holders of record of the
Series C Preferred Stock as they appear in the records of the Company as of the date of such
notice. Each notice must state the following: (A) the expected Optional Redemption Date; (B) the
Optional Redemption Price as of the expected Optional Redemption Date (it being understood that the
actual Optional Redemption Price will be determined as of the actual Optional Redemption Date); (C)
the Fundamental Change Price as of the expected Optional Redemption Date; (D) the name of the
redemption agent to whom, and the address of the place to where, the Series C Preferred Stock are
to be surrendered for payment of the Optional Redemption Price; (E) that Conditional Dividends, if
any, on the shares to be redeemed will cease to accrue on such Optional Redemption Date provided
that the Optional Redemption Price and Dividends accrued through the day immediately preceding the
Optional Redemption Date shall have been paid on the Optional Redemption Date; and (F) that the
consummation of the redemption and the payment of the Optional Redemption Price shall be subject to
the consummation of the Triggering Fundamental
-29-
Change. Each holder shall have the right,
exercisable upon notice to the Company at any time prior to the Optional Redemption Date, to elect
to convert the Series C Preferred Stock and receive the
Fundamental Change Price in lieu of the Optional Redemption Price with respect to each share
of Series C Preferred Stock held by such holder to the extent such Triggering Fundamental Change is
consummated.
(c) Mechanics of Redemption.
(i) Unless waived in writing by the holders representing a majority of the outstanding shares
of Series C Preferred Stock, on or prior to the Mandatory Redemption Date or Optional Redemption
Date, as applicable, the Company shall deposit with a redemption agent in trust, upon delivery of
the Company’s redemption notice pursuant to SECTION 6(a) or SECTION 6(b), funds consisting of cash
or cash equivalents sufficient to pay the Mandatory Redemption Price on the Mandatory Redemption
Date or the Optional Redemption Price on the Optional Redemption Date, as the case may be. The
redemption agent must be a bank or trust company in good standing, organized under the laws of the
United States of America or any jurisdiction thereof. The deposit in trust with the redemption
agent shall be irrevocable as of the Mandatory Redemption Date or Optional Redemption Date, as
applicable (such date, the “Irrevocable Date”), except that the Company shall be entitled
to receive from the redemption agent (i) the applicable Redemption Price with respect to shares of
Series C Preferred Stock that are no longer to be redeemed, whether by conversion or otherwise; and
(ii) the interest or other earnings, if any, earned on any such deposit. The holders of the shares
redeemed shall have no claim to such interest or other earnings, and any funds so deposited with
the redemption agent and unclaimed by the holders of the Series C Preferred Stock entitled thereto
at the expiration of one year from the Mandatory Redemption Date or Optional Redemption Date, as
the case may be, shall be repaid, together with any interest or other earnings thereon, to the
Company, and after any such repayment, the holders of the shares entitled to the funds so returned
to the Company shall look only to the Company for such payment, without interest. Notwithstanding
the deposit of such funds, the Company shall remain liable for the payment of the applicable
Redemption Price to the extent such Redemption Price is not paid as provided herein.
(ii) The redemption agent on behalf of the Company shall pay the applicable Redemption Price
on the Mandatory Redemption Date or Optional Redemption Date, as the case may be, upon surrender of
the certificates representing the shares of Series C Preferred Stock to be redeemed (properly
endorsed or assigned for transfer, if the Company shall so require and letters of transmittal and
instructions therefor on reasonable terms are included in the notice sent by the Company);
provided that if such certificates are lost, stolen or destroyed, the Company may require
such holder to indemnify the Company, in a reasonable amount and in a reasonable manner, and post a
customary bond in respect of such indemnity, prior to paying such Redemption Price.
(iii) From and after the Irrevocable Date, shares of Series C Preferred Stock to be redeemed
on the Mandatory Redemption Date or Optional Redemption Date, as the case may be, will no longer be
deemed to be outstanding; and all powers, designations, preferences and
-30-
other rights of the holder
thereof as a holder of Series C Preferred Stock (except the right to receive from the Company the
applicable Redemption Price) shall cease and terminate with respect to such shares;
provided that in the event that a share of Series C Preferred Stock is not redeemed due to
a default in payment by the Company or because the Company is otherwise unable to pay the
applicable Redemption Price in cash in full, such share of Series C Preferred Stock will
remain outstanding and will be entitled to all of the powers, designations, preferences and other
rights (including but not limited to the accrual and payment of dividends and the conversion
rights) as provided herein.
(iv) Notwithstanding anything in this SECTION 6 to the contrary, each holder shall retain the
right to convert shares of Series C Preferred Stock to be redeemed at any time on or prior to the
Mandatory Redemption Date or Optional Redemption Date, as the case may be; provided,
however, that any shares of Series C Preferred Stock converted prior to the Mandatory
Redemption Date or Optional Redemption Date, as the case may be, shall not be redeemed pursuant to
this SECTION 6.
(v) Any redemption of the Series C Preferred Stock pursuant to this SECTION 6 (such
redemption, the “Redemption”) shall be payable out of any cash legally available therefor,
and if there is not a sufficient amount of cash available, then out of the remaining assets of the
Company legally available therefor (valued at the fair market value thereof on the date of payment,
as determined by the Board). At the time of the Redemption, the Company shall take all actions
required or permitted under Delaware law to permit the redemption of the Series C Convertible
Preferred Stock, including, without limitation, through the revaluation of its assets in accordance
with Delaware law, to make funds legally available for such redemption.
SECTION 7. Fundamental Change.
(a) Offer to Repurchase.
(i) Subject to SECTION 7(b), in connection with any Fundamental Change other than a
Fundamental Change in which Elevation or any of its Affiliates is the acquiror or is otherwise a
constituent party (or Affiliate thereof) to the transaction that results in such Fundamental
Change, the Company shall, or shall cause the Survivor of a Fundamental Change (such Survivor of a
Fundamental Change, the “Acquirer”) to, make an offer to repurchase, at the option and
election of the holder thereof, each share of Series C Preferred Stock then-outstanding (the
“Fundamental Change Offer”) at a purchase price per share (such amount being the
“Repurchase Price”) (x) in cash equal to 101% of the Regular Liquidation Preference or, (y)
at the sole election of the Company (the “Company Election”), subject to the conditions set
forth in SECTION 7(a)(ii) below, a number of shares of common stock (or American Depositary Shares
(“ADSs”) or American Depositary Receipts (“ADRs”) in respect of such ADSs), which
are publicly tradable and listed on an Exchange at the time of receipt, of the Acquirer or any
direct or indirect parent thereof (such shares of common stock, “Acquirer Stock”, and the
issuer of such shares, the
-31-
“Successor Public Company”) with an aggregate market value
(equal on a per share or per ADS/ADR basis to the closing sale price for such security on the
principal Exchange on which such security is traded, on the trading day immediately preceding the
issuance of such common stock or ADSs/ADRs to the relevant holders of Series C Preferred Stock)
equal to 105% of the Regular Liquidation Preference. The Company Election must be made in the
Fundamental Change Notice
delivered pursuant to SECTION 7(a)(iii) and shall become irrevocable from the date thereof
unless otherwise consented to by the holders of a majority of the Class B Preferred Stock.
(ii) The Company’s right to elect to pay the Repurchase Price with Acquirer Stock is subject
to the following conditions:
(A) the issuance of the Acquirer Stock shall have been registered under the Securities Act;
(B) Rule 145 promulgated under the Securities Act shall permit the sale of such Acquirer Stock
by the holder thereof (and any of its Affiliates) within a period of three months immediately
following the Repurchase Date;
(C) the Acquirer Stock (or ADSs representing the Acquirer Stock, or ADRs in respect thereof)
issued to the holders of Series C Preferred Stock shall be listed on an Exchange;
(D) the aggregate number of shares of Acquirer Stock issuable to any record holder of Series C
Preferred Stock and such holder’s Affiliates (including shares issuable in respect of both Series B
Preferred Stock and Series C Preferred Stock) shall not exceed the lesser of the number of shares
equal to (x) 4.9% of all then-outstanding shares of Acquirer Stock (based on the number of
outstanding shares of Acquirer Stock set forth in Acquirer’s most recently available filing with
the Securities and Exchange Commission) and (y) three (3) times the average daily trading volume of
Acquirer Stock (or American Depositary Shares representing the Acquirer Stock, or American
Depositary Receipts in respect thereof) on an Exchange for the four (4) weeks immediately preceding
the Repurchase Date.
(iii) The “Repurchase Date” shall be the date on which the Fundamental Change is
consummated (provided that in the case of a Fundamental Change described in clause (ii) of the
definition thereof, the Repurchase Date shall be a date no later than 20 days following the date of
the first public announcement of such Fundamental Change having occurred (including, for these
purposes, the filing of a Schedule 13D pursuant to the Exchange Act)). As soon as practicable
after the announcement of such transaction or execution of such agreement providing for such
Fundamental Change, the Company shall commence the Fundamental Change Offer by delivering a notice
(the “Fundamental Change Notice”), not less than 10 nor more than 60 days prior to the
expected Repurchase Date, addressed to the holders of record of the Series C Preferred Stock as
they appear in the records of the Company as of the date of announcement of such transaction or
execution of such agreement providing for such Fundamental Change. Each notice must state that:
-32-
(A) the Fundamental Change Offer may be accepted by delivery of a written revocable notice
specifying the number of shares to be repurchased; (B) the expected Repurchase Price as of the
expected Repurchase Date (it being understood that the actual Repurchase Price will be determined
as of the actual Repurchase Date); (C) the name of the paying agent to whom, and the address of the
place to where, the Series C Preferred Stock are to be surrendered for payment of the Repurchase
Price; (D) any shares of Series C Preferred Stock not tendered for payment shall continue to be
outstanding and holders thereof shall remain entitled to, among other things, the payment of
dividends thereon and exercise their conversion rights (whether on the date of consummation of
the Fundamental Change or otherwise), (E) the consummation of the Fundamental Change Offer and the
payment of the Repurchase Price shall be subject to the consummation of the Fundamental Change, and
the Fundamental Change Offer shall not be consummated in the event the Company elects to effect a
conversion pursuant to SECTION 5(c), and (F) the circumstances and material facts regarding such
Fundamental Change. If the Fundamental Change is not consummated, the Fundamental Change Offer
shall be automatically withdrawn.
(iv) Notwithstanding this SECTION 7, the Fundamental Change Offer shall be subject to, and be
made in compliance with, Regulation 14E under the Exchange Act and any other federal and state
securities laws, as applicable, including any applicable time periods. The Company shall notify
the holders Series C Preferred Stock of the results of the Fundamental Change Offer on or as soon
as practicable after the Repurchase Date.
(b) Effectiveness of SECTION 7. Notwithstanding anything contained herein to the
contrary, this SECTION 7 shall be void and of no effect, the Company shall have no obligation
(contingent or otherwise) under this SECTION 7 and no Fundamental Change Offer or repurchase
pursuant to this SECTION 7 may be made by the Company pursuant to this SECTION 7 unless and until
(i) the Company has received a consent to the existence of this provision and the obligations of
the Company hereunder from the appropriate parties to the Credit Agreement or any successor to,
substitute for or replacement of the Credit Agreement or (ii) all obligations and commitments under
the Credit Agreement or any such successor, substitute or replacement have expired or been
terminated, provided that the provisions of this SECTION 7(b) shall not be applicable to
any Fundamental Change in which the Company has elected to pay the Repurchase Price with Acquirer
Stock in accordance with SECTION 7(a). The Company shall have no obligation pursuant to this
Certificate of Designation or any other agreement or commitment to seek such consent.
(c) Mechanics of Repurchase.
(i) Unless waived by the holders representing a majority of the outstanding shares of Series C
Preferred Stock, the Company shall deposit with a paying agent in trust by the Repurchase Date),
funds consisting of cash or cash equivalents sufficient to pay the cash portion of the Repurchase
Price on the Repurchase Date. The paying agent must be a bank or trust company in good standing,
organized under the laws of the United States of America or any jurisdiction thereof. The deposit
in trust with the paying agent shall be irrevocable as of the Repurchase Date, except that the
Company shall be entitled to receive from the paying agent
-33-
(A) Repurchase Prices with respect to
shares of Series C Preferred Stock that are no longer to be repurchased, whether by conversion,
withdrawal of an election or tender or otherwise and (B) the interest or other earnings, if any,
earned on any such deposit. The holders of the shares repurchased shall have no claim to such
interest or other earnings, and any funds so deposited with the paying agent and unclaimed by the
holders of the Series C Preferred Stock entitled thereto at the expiration of one year from the
Repurchase Date shall be repaid, together with any interest or other earnings thereon, to the
Company, and after any such repayment, the holders of the shares entitled to the funds so returned
to the Company shall look only to the Company for such payment, without
interest. Notwithstanding the deposit of such funds, the Company shall remain liable for the
payment of the Repurchase Price to the extent such Repurchase Price is not paid as provided herein.
(ii) The paying agent on behalf of the Company shall pay the Repurchase Price on the
Repurchase Date upon surrender of the certificates representing the shares of Series C Preferred
Stock to be repurchased (properly endorsed or assigned for transfer, if the Company shall so
require and letters of transmittal and instructions therefor on reasonable terms are included in
the notice sent by the Company); provided that if such certificates are lost, stolen or
destroyed, the Company may require such holder to indemnify the Company, and post a customary bond
in respect of such indemnity, in a reasonable amount and in a reasonable manner, prior to paying
such Repurchase Price.
(iii) In case fewer than all the shares represented by any such certificate are to be
repurchased, a new certificate shall be issued representing the unrepurchased shares without cost
to the holder thereof, except for any documentary, stamp or similar issue or transfer tax due
because any certificate for shares Series C Preferred Stock are issued in a name other than the
name of the selling holder. The Company shall pay any documentary, stamp or similar issue or
transfer tax due upon the issuance of a new certificate for any shares of Series C Preferred Stock
not repurchased other man any such tax due because a certificate for shares Series C Preferred
Stock is issued in a name other than the name of the selling holder.
(iv) Subject to clause (vi) below, from and after the Repurchase Date, shares of the Series C
Preferred Stock to be repurchased on such Repurchase Date will no longer be deemed to be
outstanding; and all powers, designations, preferences and other rights of the holder thereof as a
holder of Series C Preferred Stock (except the right to receive from the Company the Repurchase
Price) shall cease and terminate with respect to such shares; provided that in the event
that a share of Series C Preferred Stock is not repurchased due to a default in payment by the
Company or because the Company is otherwise unable to pay the Repurchase Price in full, such share
of Series C Preferred Stock will remain outstanding and will be entitled to all of the powers,
designations, preferences and other rights (including but not limited to the payment of dividends
and the conversion rights) as provided herein.
(v) Notwithstanding anything in this SECTION 7 to the contrary, each holder shall retain the
right to (A) convert shares of Series C Preferred Stock to be repurchased at any time on or prior
to the Repurchase Date or (B) withdraw an election to have such shares
-34-
repurchased or any tender of
such shares in the Fundamental Change Offer on or prior to the Repurchase Date; provided,
however, that, where a holder of Series C Preferred Stock exercises its rights under (A) or
(B) above, the shares of Series C Preferred Stock of such holder shall not be repurchased pursuant
to this SECTION 7.
(vi) The Company shall not be required to make a Fundamental Change Offer if an Affiliate in
control of the Company makes the Fundamental Change Offer in the manner, at the times and otherwise
in compliance with the requirements set forth in this SECTION 7 and purchases all shares of
Series C Preferred Stock validly tendered and not withdrawn under such Fundamental Change Offer;
provided, that if an Affiliate in control of the Company makes such
repurchase, the shares of Series C Preferred Stock so purchased shall remain outstanding in
the hands of such Affiliate.
(vii) The Company may not enter into any agreement providing for a Fundamental Change unless
the Acquirer agrees to cause the Company to make the repurchases contemplated in this SECTION 7 and
agrees, for the benefit of the holders of record of the Series C Preferred Stock (including making
them beneficiaries of such agreement), that to the extent the Company is not legally able to
repurchase the Class B Preferred Stock, the Acquirer will purchase the Class B Preferred Stock.
(viii) Any repurchase of the Series C Preferred Stock pursuant to this SECTION 7 shall be
payable out of any cash legally available therefor, and if there is not a sufficient amount of cash
available, then out of the remaining assets of the Company legally available therefor (valued at
the fair market value thereof on the date of payment, as determined by the Board). The Company
shall take all actions required or permitted under Delaware law to permit the repurchase of the
Series C Preferred Stock, including, without limitation, through the revaluation of its assets in
accordance with Delaware law, to make funds legally available for such repurchase.
SECTION 8. Additional Definitions. For purposes of these resolutions, the following
terms shall have the following meanings:
(a) “Acquiring Person” shall have the meaning given thereto in the Company Rights Plan
(or its comparable term/provision under any successor or substitute shareholder rights plan).
(b) “Affiliate” means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is under common
control with, such specified Person, for so long as such Person remains so associated to the
specified Person. Notwithstanding the foregoing, (i) the Company, its subsidiaries and its other
controlled Affiliates shall not be considered Affiliates of any Investor Stockholder or their
Permitted Transferees, (ii) the portfolio companies in which the Investor Stockholders, any other
Elevation Entities or any other Elevation Partners’ investment fund that is Controlled by or under
common Control with an Elevation Entity have directly or indirectly made a debt or equity
investment shall
-35-
not be considered Affiliates of the Investor Stockholders or their Permitted
Transferees if the Investor Stockholders, alone, or together with their Permitted Transferees, (x)
in the aggregate Beneficially Own securities that would comprise (upon conversion, exchange or
exercise of any rights, options, warrants or similar securities, if applicable) less than 50% of
the Maximum Voting Power of such portfolio company and (y) do not constitute, nor do they have the
contractual or other legal right to elect, a majority of the members of the board or other
governing body of such portfolio company, unless such portfolio company has received Confidential
Information, directly or indirectly, or has been provided assistance with respect to the
acquisition, holding, voting or disposition of capital stock from an Investor Stockholder or any of
its Affiliates or has otherwise acted in concert with an Investor Stockholder or any of its
Affiliates with respect to the acquisition, holding, voting or disposition of capital stock and
(iii) a corporation or other entity (a “Specified
Entity”) with respect to which (x) none of the Investor Stockholders or Elevation
Entities has directly or indirectly made a debt or equity investment and (y) none of the Investor
Stockholders, alone or together with their Permitted Transferees, constitute, or have the
contractual or other legal right to elect, a majority of the members of the board or other
governing body of such Specified Entity (and which otherwise is not controlled by an Elevation
Entity), but which is an Affiliate of an individual who would be considered a controlling Affiliate
of an Elevation Entity, will not be considered an Affiliate of the Investor Stockholders or their
Permitted Transferees unless such Specified Entity has received Confidential Information, directly
or indirectly or has been provided assistance with respect to the acquisition, holding, voting or
disposition of capital stock from an Investor Stockholder or any of its Affiliates or has otherwise
acted in concert with an Investor Stockholder or any of its Affiliates with respect to the
acquisition, holding, voting or disposition of capital stock. For avoidance of doubt, Permitted
Transferees shall be deemed to be Affiliates of the Investor Stockholders.
(c) “Beneficial Owner”, “Beneficially Own” and “Beneficial Ownership”
have the meaning given such term in Rule 13d-3 under the Exchange Act, and a person’s beneficial
ownership of securities will be calculated in accordance with the provisions of such Rule;
provided, however, that (i) a person will be deemed to be the beneficial owner of
any security which may be acquired by such person whether within 60 days or thereafter, upon the
conversion, exchange or exercise of any rights, options, warrants or similar securities to
subscribe for, purchase or otherwise acquire (x) capital stock of any person or (y) debt or other
evidences of indebtedness, capital stock or other securities directly or indirectly convertible
into or exercisable or exchangeable for such capital stock of such person and (ii) a person shall
be deemed to be the beneficial owner of any securities with which a person has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or disposing of such
securities.
(d) “Board Representation Entitlement” means a number of Preferred Directors (rounded
to the nearest whole number) equal to the product of (x) the total number of members then
comprising the full Board (including the Preferred Directors) and (y) the lesser of (1) 39.9% and
(2) the Elevation Beneficial Ownership Percentage; provided, however, that,
notwithstanding the foregoing, (A) from and after the first time that the Investor Stockholders
(including, for this purpose, their Permitted Transferees) cease to (x) Beneficially Own and
(y) have all Economic
-36-
Rights and Voting Rights with respect to a number of shares of Preferred
Stock (calculated on an as-converted basis) equal to a majority of the shares of Series B Preferred
Stock issued on October 24, 2007 (including, for purposes of this calculation, shares of Preferred
Stock pledged pursuant to a bona fide pledge, but not a foreclosure thereon, but excluding, for
purposes of this calculation, shares subject to Shared Beneficial Ownership with any Person other
than another Investor Stockholder or a Permitted Transferee), the Board Representation Entitlement
shall be zero (0) Preferred Directors, (B) from and after the occurrence of a Non-Constituent
Issuer Fundamental Change, the Board Representation Entitlement shall be zero (0) Preferred
Directors and (C) from and after the occurrence of a Fundamental Change described in clause (i) of
the definition thereof other than a Non-Constituent Issuer Fundamental Change, the Board
Representation Entitlement shall be no more than one (1) Preferred Director; provided,
further, that no reduction in the Board Representation Entitlement resulting from a
decrease in the Elevation Beneficial Ownership
Percentage shall occur until the expiration of any applicable Share Ownership Reduction Cure
Period.
(e) “Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or obligated to close.
(f) “capital stock” means any and all shares, interests, participations or other
equivalents (however designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited) or equivalent ownership interests in or issued by such
person, and with respect to the Company includes, without limitation, any and all shares of Common
Stock and the Preferred Stock.
(g) “Closing Price” of the Common Stock (or Reference Property, to the extent
applicable) on any date means the closing sale price per share (or if no closing sale price is
reported, the average of the bid and ask prices or, if more than one in either case, the average of
the average bid and the average ask prices) on that date as reported in composite transactions for
the principal U.S. securities exchange on which the Common Stock (or Reference Property, to the
extent applicable) is listed or admitted for trading or, if the Common Stock (or Reference
Property, to the extent applicable) is not listed or admitted for trading on a U.S. national or
regional securities exchange, as reported on the quotation system on which such security is quoted.
If the Common Stock (or Reference Property, to the extent applicable) is not listed or admitted for
trading on a United States national or regional securities exchange and not reported on a quotation
system on the relevant date, the “closing price” will be the last quoted bid price for the Common
Stock (or Reference Property, to the extent applicable) in the over-the-counter market on the
relevant date as reported by the National Quotation Bureau or similar organization. If the Common
Stock (or Reference Property, to the extent applicable) is not so quoted, the last reported sale
price will be the average of the mid-point of the last bid and ask prices for the Common Stock (or
Reference Property, to the extent applicable) on the relevant date from each of at least three
nationally recognized investment banking firms selected by the Company for this purpose.
-37-
(h) “Company Rights Plan” means that certain Preferred Stock Rights Agreement, dated
as of September 25, 2000, as amended, between the Company and Computershare Trust Company of New
York, as successor to Equiserve Trust Company, N.A. and Fleet National Bank.
(i) “Control” and “Controlled by” have the meaning set forth in Rule 12b-2 of
the Exchange Act.
(j) “Conditional Rate” means an annual rate equal to the prime rate of JPMorgan Chase
Bank N.A. on the Conditional Dividend Payment Date plus 4%.
(k) “Confidential Information” shall have the meaning set forth in the Stockholders’
Agreement.
(l) “Current Market Price” shall mean the average of the closing prices per share of
Common Stock for each of the five consecutive trading days ending on the trading day immediately
preceding a Rights Triggering Date.
(m) “Distribution Date” shall have the meaning given thereto in the Company Rights
Plan (or its comparable term/provision under any successor or substitute shareholder rights plan).
(n) “Economic Rights” means the right to the full pecuniary interest (which may be
subject to a bona fide pledge, but not a foreclosure thereon) in the Series C Preferred Stock,
including, without limitation, the right to receive dividends and distributions, proceeds upon
liquidation and receive the proceeds of, disposition or conversion of the Series C Preferred Stock.
For the avoidance of doubt, any contractual encumbrance resulting from a bona fide incurrence of
indebtedness for money borrowed (including an obligation to repay such indebtedness with the
proceeds of any Transfer of, or dividend or distribution on, any shares of Series C Preferred Stock
or Conversion Shares) not incurred in violation of Section 3.1 of the Stockholders’ Agreement shall
not be deemed to be a Transfer, loss or reduction in the Economic Rights associated with such
shares of Series C Preferred Stock.
(o) “Effective Time” has the meaning ascribed to it in the Stockholders Agreement.
(q) “
Elevation Beneficial Ownership Percentage” means, at any time, the quotient of
(a) the aggregate number of shares of Common Stock Beneficially Owned, but excluding Shared
Beneficial Ownership of Common Stock, by the Investor Stockholders divided by (b) the sum of
(i) the total number of shares of Common Stock outstanding at such time plus (ii) the number of
shares of Common Stock into which the outstanding shares of Series B Preferred Stock and Series C
Preferred Stock are entitled to convert at such time plus (iii) the number of shares of Common
Stock issuable upon the exercise of Warrants (as defined in the
Securities Purchase Agreement) plus
-38-
(iv) the number of shares of Common Stock issuable upon the conversion, exchange or issuance of any
Equity Securities of the Company sold in any Offering described in clause (ii) of the definition of
Offering. For purposes hereof, if a Share Ownership Reduction Cure Period shall have ever taken
place (on one or more occasions), and at the end of such Shares Ownership Reduction Cure Period
there is a reduction in the number of Preferred Directors pursuant to SECTION 4(d)(iii) of this
Certificate of Designation, then the Elevation Beneficial Ownership Percentage shall be deemed at
any point in time thereafter to be no greater than the lowest Elevation Beneficial Ownership
Percentage that shall have existed at the end of any such Share Ownership Reduction Cure Period.
(r) “Elevation Entity” shall have the meaning set forth in the Stockholders’
Agreement.
(s) “Equity Securities” means (x) any shares of capital stock of the Company, (y) any
rights, options, warrants or similar securities to subscribe for, purchase or otherwise acquire
any shares of capital stock of the Company, and (z) capital stock or other equity securities
directly or indirectly convertible into or exercisable or exchangeable for any shares of capital
stock of the Company, excluding, for all purposes, any debt, including, without limitation, any
debt convertible into any of the foregoing described in clauses (x) through (z).
(t) “Exchange” means Nasdaq or the New York Stock Exchange, as the case may be.
(u) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
(v) “Ex-Dividend Date” means, with respect to any issuance or distribution, the first
date on which the shares of Common Stock trade on the applicable exchange or in the applicable
market, regular way, without the right to receive such issuance or distribution.
(w) “Fair Market Value” of Common Stock or any other security or property means the
fair market value thereof as determined in good faith by the Board, which determination must be set
forth in a written resolution of the Board, in accordance with the following rules:
(i) for Common Stock or other security traded or quoted on an Exchange, the Fair Market Value
will be the average of the closing prices of such security on such Exchange over a ten (10)
consecutive trading day period, ending on the trading day immediately prior to the date of
determination;
(ii) for any security that is not so traded or quoted, the Fair Market Value shall be
determined: (x) mutually by the Board and the holders of at least a majority of the
then-outstanding shares of Series C Preferred Stock, or (y) by a nationally recognized investment
bank, appraisal or accounting firm (whose fees and expenses will be paid by the Company) selected
by mutual agreement between the Board and the holders representing a majority of the
then-outstanding shares of Series C Preferred Stock; or
-39-
(iii) for any other property, the Fair Market Value shall be determined by the Board in good
faith assuming a willing buyer and a willing seller in an arms’-length transaction;
provided that if holders representing a majority of the then-outstanding shares of Series C
Preferred Stock object to a determination of the Board made pursuant to this clause (iii), the Fair
Market Value of such property shall be as determined by nationally recognized investment bank,
appraisal or accounting firm (whose fees and expenses will be paid by the Company) selected by
mutual agreement between the Board and such holders.
(x) “Fundamental Change” means the occurrence of any of the following:
(i) any merger, consolidation, stock or asset purchase, recapitalization or other business
combination transaction (or series of related transactions) as a result of which the shares of
capital stock of the Company entitled to vote generally in the election of directors and the
Series B Preferred Stock and the Series C Preferred Stock (treated on an as-converted basis)
immediately prior to such transaction (or series of related transactions) are converted into
and/or continue to represent (on an as-converted basis in the case of the Series B Preferred Stock
and Series C Preferred Stock), in the aggregate, less than 50% of the total voting power of all
shares of capital stock that are entitled to vote generally in the election of directors of the
entity surviving or resulting from such transaction (or ultimate parent thereof);
(ii) any person or group, together with any Affiliates thereof (other than any Investor
Stockholder, as defined in the Stockholders Agreement, or any of their respective Affiliates), has,
directly or indirectly, become the Beneficial Owner of more than 50% of the total voting power of
all shares of capital stock of the Company that are entitled to vote generally in the election of
directors;
(iii) the sale, transfer or disposition, including but not limited to any spin-off or in-kind
distribution (a “Divestiture”), by the Company or by one or more of its subsidiaries of all
or substantially all of the assets, business or securities of the Company (on a consolidated basis)
to any person or group (other than the Company or its wholly-owned subsidiaries); provided
that a Fundamental Change shall not include a spin-off or similar in-kind distribution to the
stockholders of the Company in which the holders of Series B Preferred Stock and Series C Preferred
Stock are entitled to such distribution as Dividends without other adjustment to the Conversion
Price if the rights of the holders of Series B Preferred Stock and Series C Preferred Stock
pursuant to the Certificate of Designation and the Stockholders Agreement are preserved after
giving effect to such spin-off or in-kind distribution.
(y) “group” has the meaning assigned to such term in Section 13(d)(3) of the Exchange
Act.
(z) “hereof”; “herein” and “hereunder” and words of similar import
refer to these resolutions as a whole and not merely to any particular clause, provision, section
or subsection.
-40-
(aa) “Investor Stockholder” shall have the meaning ascribed thereto in the
Stockholders’ Agreement.
(bb) “Market Disruption Event” means the occurrence or existence for more than one
half hour period in the aggregate on any scheduled Trading Day for the Common Stock (or Reference
Property, to the extent applicable) of any suspension or limitation imposed on trading (by reason
of movements in price exceeding limits permitted by the Nasdaq National Market or otherwise) in the
Common Stock (or Reference Property, to the extent applicable) or in any options, contracts or
future contracts relating to the Common Stock (or Reference Property, to the extent applicable),
and such suspension or limitation occurs or exists at any time before 1:00 p.m. (New York City
time) on such day.
(cc) “Nasdaq” means The NASDAQ Stock Market.
(dd) “Offering” shall have the meanings ascribed thereto in the Stockholders’
Agreement.
(ee) “Original Issuance Date” means the date on which the first share of Series C
Preferred Stock was issued.
(ff) “person” means any individual, corporation, limited liability company, limited or
general partnership, joint venture, association, joint-stock company, trust, unincorporated
organization, government, any agency or political subdivisions thereof or other “person” as
contemplated by Section 13(d) of the Exchange Act.
(gg) “Permitted Transferee” shall have the meaning set forth in the Stockholders’
Agreement.
(hh) “Right to Vote” means the right to direct the voting of the Series C Preferred
Stock with respect to any matter for which the Series C Preferred Stock is entitled to vote.
(ii) “Rights” shall have the meaning given thereto in the Company Rights Plan (or the
comparable right under any successor or substitute shareholder rights plan).
(jj) “Rights Plan Triggering Event” shall have the meaning given thereto in the
Company Rights Plan (or its comparable term/provision under any successor or substitute shareholder
rights plan).
(kk) “Rights Triggering Date” means the date on which a Triggering Event occurs.
(ll) “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
-41-
(nn) “Shared Beneficial Ownership” means Beneficial Ownership in which (a) voting
power is shared with another Person, except in the case of the Investor Stockholders and their
Permitted Transferees, to the extent that such shared voting power is shared only with another
Investor Stockholder or Permitted Transferee and/or (b) the Investor Stockholders and/or their
Permitted Transferees have effected a Transfer to a Person other than a Permitted Transferee,
provided that any contractual encumbrance resulting from a bona fide incurrence of
indebtedness for money borrowed (including an obligation to repay such indebtedness with the
proceeds of any Transfer of, or dividend or distribution on, any shares of Series C Preferred Stock
or Conversion Shares) not incurred in violation of Section 3.1 of the Stockholders’ Agreement shall
not be deemed to be a Transfer, loss or reduction in the Beneficial Ownership associated with such
shares of Series C Preferred Stock.
(oo) “Share Ownership Reduction Cure Period” means the period commencing on the date
the Company provides the Company Notice (as defined in the Stockholders’ Agreement) and ending on
the date 60 days thereafter.
(pp) “Stockholders’ Agreement” means the Amended and Restated Stockholders Agreement,
dated the Original Issuance Date, by and among the Company and the Investor Stockholders, as it may
be amended from time to time in accordance with the terms thereof.
(qq) “Survivor of Fundamental Change” means the issuer of the securities received by
the holders of Common Stock (or Reference Property, to the extent applicable) (in their capacities
as such) upon the consummation of a Fundamental Change, to the extent the holders of Common Stock
(or Reference Property, to the extent applicable) receive other securities in exchange, conversion
or substitution of their Common Stock (or Reference Property, to the extent applicable) in the
transaction that resulted in such Fundamental Change.
(rr) “Total Current Voting Power” shall have the meaning set forth in the
Stockholders’ Agreement.
(ss) “Trading Day” means any day on which (i) there is no Market Disruption Event and
(ii) Nasdaq or, if the Common Stock (or Reference Property, to the extent applicable) is not listed
on Nasdaq, the principal national securities exchange on which the Common Stock (or Reference
Property, to the extent applicable) is listed, is open for trading or, if the Common Stock (or
Reference Property, to the extent applicable) is not so listed, admitted for trading or quoted, any
Business Day. A Trading Day only includes those days that have a scheduled closing time of 4:00
p.m. (New York City time) or the then standard closing time for regular trading on the relevant
exchange or trading system.
(tt) “Transfer” means, directly or indirectly, to sell, transfer, assign, pledge
(other than a bona fide pledge not in violation of Section 3.1(b) of the Stockholders’ Agreement
(but not a
-42-
foreclosure thereon)), encumber, hypothecate or similarly dispose of, either voluntarily
or involuntarily, or to enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, assignment, pledge (other than a bona fide pledge not in violation
of Section 3.1(b) of the Stockholders’ Agreement (but not a
foreclosure thereon)), encumbrance,
hypothecation or similar disposition of, any shares of Series C Preferred Stock or Conversion
Shares beneficially owned by a person or any interest (including any Economic Rights or Voting
Rights or creation of Shared Beneficial Ownership) in any shares of Series C Preferred Stock or
Conversion Shares beneficially owned by a Person.
(uu) “Uncured Share Ownership Reduction” means a decrease, for any reason, in the
Elevation Beneficial Ownership Percentage that results in a reduction in the number of Directors
that constitutes the Board Representation Entitlement; provided, however that if,
during an applicable Share Ownership Reduction Cure Period, the Elevation Beneficial Ownership
Percentage (as determined pursuant to the definition thereof in SECTION 8(q), including the last
sentence thereof) is increased to, and maintained at, the minimum Elevation Beneficial Ownership
Percentage necessary to avoid a reduction in the number of Directors that constitutes the Board
Representation Entitlement as of immediately prior to such decrease, then such decrease in the
Elevation Beneficial Ownership Percentage shall not be an Uncured Share Ownership Reduction (it
being understood that any subsequent decrease in Elevation Beneficial Ownership Percentage that
results in a reduction in
the number of Directors that constitutes the Board Representation Director Entitlement may
again qualify as an Uncured Share Ownership Reduction).
(vv) “Voting Rights” shall mean the power to vote or direct the voting of any security
(subject to any bona fide pledge, but not foreclosure thereon).
SECTION 9. Miscellaneous. For purposes of these resolutions, the following provisions
shall apply:
(a) Status of Cancelled Shares. Shares of Series C Preferred Stock which have been
converted, redeemed, repurchased or otherwise cancelled shall be retired and, following the filing
of any certificate required by the DGCL, have the status of authorized and unissued shares of
Preferred Stock, without designation as to series until such shares are once more, subject to
SECTION 4, designated as part of a particular Series by the Board.
(b) Severability. If any right, preference or limitation of the Preferred Stock set
forth in this resolution (as such resolution may be amended from time to time) is invalid, unlawful
or incapable of being enforced by reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so amended) which can be given effect
without the invalid, unlawful or unenforceable right, preference or limitation shall, nevertheless,
remain in full force and effect, and no right, preference or limitation herein set forth shall be
deemed dependent upon any other such right, preference or limitation unless so expressed herein.
-43-
(c) Headings. The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions hereof.
[Rest of page intentionally left blank.]
-44-
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation to be executed by a
duly authorized officer of the Company as of December 22, 2008.
|
|
|
|
|
|
|
|
|
PALM, INC. |
|
|
|
|
|
|
|
|
|
|
|
By: |
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
Title: |
|
|
|
|
EXHIBIT B
PALM, INC.
WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK OF PALM, INC.
|
|
|
No. [•]
|
|
Warrant to Purchase
[•] Shares |
|
|
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR
ANY NON-U.S. OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, VOTING AND OTHER MATTERS AS SET FORTH IN THE AMENDED AND RESTATED
STOCKHOLDERS’ AGREEMENT, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE COMPANY OR
ANY SUCCESSOR THERETO. |
FOR VALUE RECEIVED, Palm, Inc., a Delaware corporation (the “
Company”), hereby
certifies that
Elevation Partners, L.P., its successor or permitted assigns (the “
Holder”),
is entitled, subject to the provisions of this Warrant, to purchase from the Company, at the times
specified herein, up to an aggregate of [•] fully paid and non-assessable shares of Common Stock,
par value $0.001 per share, of the Company (the “
Common Stock”), at a purchase price per
share of Common Stock equal to the Exercise Price (as hereinafter defined). The number of shares
of Common Stock to be received upon the exercise of this Warrant and the Exercise Price are subject
to adjustment from time to time as hereinafter set forth, and all references to “Common Stock”,
“Warrant Shares” and “Exercise Price” herein shall be deemed to include any such adjustment or
series of adjustments.
1. Definitions. (a) The following terms, as used herein, have the following meanings:
“Affiliate” shall have the meaning ascribed to such term in the Amended and Restated
Stockholders’ Agreement.
“Amended and Restated Stockholders’ Agreement” means the Amended and Restated
Stockholders’ Agreement, dated as of [•], by and among the Company and the Investor Stockholders
(as defined therein) party thereto, as amended, modified or supplemented from time to time.
“Board” means the Board of Directors of the Company.
“Business Day” means any day, other than a Saturday, Sunday and any day which is a
legal holiday under the laws of the State of California or New York or is a day on which banking
institutions located in the States of California or New York are authorized or required by law or
other governmental action to close.
“Current Market Price Per Common Share” as of any date means the average of the Daily
Prices per share of Common Stock for the five (5) consecutive trading days immediately prior to
such date.
“Daily Price” means (i) if the shares of Common Stock then are listed and traded on
the New York Stock Exchange, Inc. (“NYSE”) or the Nasdaq Stock Market, Inc.
(“Nasdaq”), the closing sale price or, if no closing sale price is reported, the last
reported sale price of the shares of Common Stock on NYSE or Nasdaq on such date, (ii) if the
shares of Common Stock then are not listed and traded on NYSE or Nasdaq, the closing sale price or,
if no closing sale price is reported, the last reported sale price of the shares of Common Stock on
such date by the principal national securities exchange on which the shares are listed and traded
or (iii) if the shares of Common Stock then are not listed and traded on any such securities
exchange, the last quoted bid price on such date for the shares of Common Stock in the
over-the-counter market as reported by Pink Sheets LLC or similar organization. If on any
determination date the shares of Common Stock are not quoted by any such organization or such bid
price is not available, the Current Market Price Per Common Share shall be the fair market value of
the shares of Common Stock on such date as determined by a nationally recognized independent
investment banking firm retained mutually agreed upon by the Company and the Holder.
“Ex-Dividend Date” means, with respect to any issuance or distribution, the first date
on which the shares of Common Stock trade on the applicable exchange or in the applicable market,
regular way, without the right to receive such issuance or distribution.
“Exercise Price” means $3.25 per Warrant Share, as adjusted from time to time as
provided herein.
“Expiration Date” means October 24, 2014 at 5:00 p.m., New York City time, or if such
day is not a Business Day, then on the next succeeding day that shall be a Business Day.
“Fair Market Value” of Common Stock or any other security or property means the fair
market value thereof as determined in good faith by the Board, which determination must be set
forth in a written resolution of the Board, in accordance with the following rules: (i) for Common
Stock or other security traded or quoted on an Exchange, the Fair Market Value will be the average
of the closing prices of such security on such Exchange over a ten (10) consecutive trading day
period, ending on the trading day immediately prior to the date of determination; (ii) for any
security that is not so traded or quoted, the Fair Market Value shall be determined: (x) mutually
by the Board and the holders of at least a majority of the then-outstanding shares of Series C
Preferred Stock, or (y) by a nationally recognized investment bank, appraisal or accounting firm
(whose fees and expenses will be paid by the Company) selected by mutual agreement between the
Board and the holders representing a majority of the then-outstanding shares of Series C Preferred
Stock; or (iii) for any other property, the Fair Market Value shall be determined by the Board in
good faith assuming a willing buyer
2
and a willing seller in an arms’-length transaction; provided that if holders representing a
majority of the then-outstanding shares of Series C Preferred Stock object to a determination of
the Board made pursuant to this clause (iii), the Fair Market Value of such property shall be as
determined by nationally recognized investment bank, appraisal or accounting firm (whose fees and
expenses will be paid by the Company) selected by mutual agreement between the Board and such
holders.
“Market Disruption Event” means the occurrence or existence for more than one half
hour period in the aggregate on any scheduled Trading Day for the Common Stock (or Reference
Property, to the extent applicable) of any suspension or limitation imposed on trading (by reason
of movements in price exceeding limits permitted by the Nasdaq or otherwise) in the Common Stock
(or Reference Property, to the extent applicable) or in any options, contracts or future contracts
relating to the Common Stock (or Reference Property, to the extent applicable), and such suspension
or limitation occurs or exists at any time before 1:00 p.m. (New York City time) on such day.
“Original Issuance Date” shall mean [ ].1
“Rights Plan Exercise Price” shall have the same meaning as “Exercise Price” set forth
in the Company Rights Agreement or its comparable term/provision under any successor or substitute
shareholder rights plan.
“Rights Plan Triggering Event” shall have the meaning given thereto in the Certificate
of Designation relating to the Company’s Series C Preferred Stock.
“Rights Triggering Date” means the date on which a Rights Plan Triggering Event
occurs.
“Trading Day” means any day on which (i) there is no Market Disruption Event and (ii)
Nasdaq or, if the Common Stock (or Reference Property, to the extent applicable) is not listed on
Nasdaq, the principal national securities exchange on which the Common Stock (or Reference
Property, to the extent applicable) is listed, is open for trading or, if the Common Stock (or
Reference Property, to the extent applicable) is not so listed, admitted for trading or quoted, any
Business Day. A Trading Day only includes those days that have a scheduled closing time of 4:00
p.m. (New York City time) or the then standard closing time for regular trading on the relevant
exchange or trading system.
|
|
|
1 |
|
Date of original issuance of Warrant. |
3
“Warrant Shares” means the shares of Common Stock deliverable upon exercise of this
Warrant, as adjusted from time to time.
(b) Capitalized terms used but not defined herein shall have the meanings assigned to
such terms in the Amended and Restated Stockholders’ Agreement.
2. Exercise of Warrant; Term.
(a) Subject to paragraph 2(f), the Holder is entitled to exercise the right to
purchase the Warrant Shares represented by this Warrant, in whole or in part, but not for
less than 100,000 Warrant Shares (or such lesser number of Warrant Shares which may then
constitute the maximum number purchasable pursuant to this Warrant), such number being
subject to adjustment as provided in paragraph 10, at any time or from time to time after
the 16th day following the original date of issuance, until the Expiration Date.
To exercise this Warrant, the Holder shall deliver to the Company (i) an executed Warrant
Exercise Notice substantially in the form annexed hereto and (ii) this Warrant. Upon such
delivery and payment (the “Exercise Date”), the Holder shall be deemed to be the
holder of record of the Warrant Shares subject to such exercise and shall have all of the
rights associated with such Warrant Shares to which the Holder is entitled pursuant to this
Warrant, notwithstanding that the stock transfer books of the Company shall then be closed
or that certificates representing such Warrant Shares shall not then be actually delivered
to the Holder.
(b) If the Holder exercises this Warrant in part, this Warrant shall be surrendered by
the Holder to the Company and a new Warrant of the same tenor and for the unexercised
number of Warrant Shares shall be executed by the Company within a reasonable time, and in
any event not exceeding three (3) Business Days after the Exercise Date. The Company shall
register the new Warrant in the name of the Holder or in such name or names of its
transferee pursuant to paragraph 6 hereof as may be directed in writing by the Holder, and
deliver the new Warrant to the Person or Persons entitled to receive the same.
(c) Subject to paragraph 2(e), upon surrender of this Warrant and delivery of the
Warrant Exercise Notice in conformity with the foregoing provisions, the Company shall
transfer to the Holder appropriate evidence of ownership of any Warrant Shares and/or other
securities or property (including any money) to which the Holder is entitled, registered or
otherwise placed in, or payable to the order of, the Holder or such name or names of its
transferee pursuant to paragraph 6 hereof as may be directed in writing by the Holder, and
shall deliver such evidence of ownership and any other securities or property (including
any money) to the Person or Persons entitled to receive the same, together with an amount
in cash in lieu of any fraction of a share as provided in paragraph 5 below, within a
reasonable time, not to exceed three (3) Business Days after the Exercise Date.
4
(d) Upon exercise of the Warrant pursuant to paragraph 2(a), the Holder shall be
entitled to receive Warrant Shares equal to the value (as determined below) of the Warrant
(or the portion thereof being exercised) by surrender of this Warrant and delivery of the
Warrant Exercise Notice, in which event the Company will promptly issue to the Holder a
number of Warrant Shares computed using the following equation:
X
= (A - B) x C
A
where:
|
|
|
|
|
|
|
|
|
X
|
|
=
|
|
the number of Warrant Shares issuable to the Holder upon
exercise pursuant to this paragraph 2(d). |
|
|
|
|
|
|
|
|
|
A
|
|
=
|
|
the Current Market Price Per Common Share (as of the
Exercise Date). |
|
|
|
|
|
|
|
|
|
B
|
|
=
|
|
the Exercise Price (as of the Exercise Date). |
|
|
|
|
|
|
|
|
|
C
|
|
=
|
|
the number of Warrant Shares issuable under this Warrant
or, if only a portion of this Warrant is being exercised, the portion of the
Warrant being exercised (as of the Exercise Date). |
If the foregoing calculation results in zero or a negative number, then no Warrant Shares
shall be issued upon exercise pursuant to this paragraph 2(d).
(e) The Company may at any time in its sole discretion deliver a written notice (a
“Cash Settlement Notice”) to the Holder setting forth its intention to exercise its
right to pay the Holder in cash in lieu of delivery of any shares of Common Stock upon any
exercise of this Warrant as contemplated by this paragraph 2(e). The Cash Settlement
Notice shall specify the date from which it shall be effective, which shall be no earlier
than thirty (30) Business Days after delivery. The Cash Settlement Notice will be
effective until such time as the Company amends such Cash Settlement Notice with a
superseding Cash Settlement Notice or revokes such Cash Settlement Notice by delivery of a
written notice of revocation delivered to the Holder (a “Revocation Notice”). A
Cash Settlement Notice may be amended or revoked by the Company at any time, and following
delivery of a Revocation Notice, the Company may deliver a new Cash Settlement Notice
pursuant to this paragraph 2(e). In the event that the Company has delivered a Cash
Settlement Notice pursuant to the requirements of this paragraph 2(e) which is effective at
the time this Warrant is being exercised pursuant to paragraph 2(a), in lieu of delivery of
any shares of Common Stock upon such exercise, the Company will pay to the Holder an amount
in cash equal to the result obtained by multiplying (a) the number of shares of Common
Stock issuable upon exercise pursuant to paragraph 2(d), by (b) the Current Market Price
Per Common Share at the date of such exercise.
5
(f) No Holder will be permitted to exercise the right to purchase Warrant Shares
represented by this Warrant to the extent that the Holder exercising such right (together
with such Holder’s Affiliates) would immediately after giving effect to such exercise and
after giving effect to any limitation on voting power set forth in the Series B Certificate
of Designation and the Series C Certificate of Designation beneficially own outstanding
equity voting securities of the Company representing more than 39.9% of the total number of
votes which may be cast on a general matter of the Company at which all classes of equity
voting securities of the Company are entitled to vote.
3. Restrictive Legend. Certificates representing shares of Common Stock issued pursuant to
this Warrant shall bear a legend substantially in the form of the legend set forth on the first
page of this Warrant to the extent that and for so long as such legend is required pursuant to the
Amended and Restated Stockholders’ Agreement or applicable securities laws.
4. Reservation of Shares; Listing. The Company hereby agrees at all times to keep reserved
for issuance and delivery upon exercise of this Warrant such number of its authorized but unissued
shares of Common Stock or other securities of the Company from time to time issuable upon exercise
of this Warrant as will be sufficient to permit the exercise in full of this Warrant. The Company
hereby represents that all such shares shall be duly authorized and, when issued upon such exercise
pursuant to the terms of this Warrant, shall be validly issued, fully paid and non-assessable, free
and clear of all liens, security interests, charges and other encumbrances or restrictions on sale
(other than restrictions on transfer contemplated by paragraph 6 or those created by the Holder)
and free and clear of all preemptive rights. The Company will use its reasonable best efforts to
ensure that the Common Stock may be issued without violation of any law or regulation applicable to
the Company or of any requirement of any securities exchange applicable to the Company on which the
shares of Common Stock are listed or traded.
5. No Fractional Warrant Shares or Scrip. No fractional Warrant Shares or scrip representing
fractional Warrant Shares shall be issued upon the exercise of this Warrant. In lieu of delivery
of any such fractional Warrant Share upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Current Market Price Per Common Share at
the date of such exercise.
6. Transfer or Assignment of Warrant. Subject to compliance with the Amended and Restated
Stockholders’ Agreement, the Holder shall be entitled, without obtaining the consent of the
Company, to assign and transfer this Warrant or any rights hereunder, at any time in whole or from
time to time in part, but not for less than 100,000 Warrant Shares (or such lesser number of
Warrant Shares which may then constitute the maximum number purchasable pursuant to this Warrant),
such number being subject to adjustment as provided in paragraph 10, to any Person or Persons.
Subject to the preceding sentence, upon surrender of this Warrant to the Company, together with the
attached Warrant Assignment Form duly executed, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee or assignees named in such instrument of
assignment and, if the Holder’s entire interest is not being assigned, in
6
the name of the Holder and this Warrant shall promptly be canceled. All expenses (other than
stock transfer taxes) and other charges payable in connection with the preparation, execution and
delivery of the new Warrants pursuant to this paragraph 6 shall be paid by the Company.
7. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares (or other
securities) to the Holder upon exercise of this Warrant shall be made without charge to the Holder
for any issue or transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
8. Exchange and Registry of Warrant. The Company shall maintain a registry showing the name
and address of the Holder as the registered holder of this Warrant, and the Company shall be
entitled to rely in all respects, prior to written notice to the contrary, upon such registry.
This Warrant is exchangeable, upon the surrender hereof by the Holder to the Company, for a new
Warrant or Warrants of like tenor and representing the right to purchase the same aggregate number
of Warrant Shares.
9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence
satisfactory to it (in the exercise of its reasonable discretion) of the loss, theft, destruction
or mutilation of this Warrant, and in the case of any such loss, theft or destruction, upon the
receipt of a bond, indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and date and
representing the right to purchase the same aggregate number of Warrant Shares as provided for in
such lost, stolen, destroyed or mutilated Warrant.
10. Anti-dilution Provisions.
(a) Adjustment for Change in Capital Stock.
(i) If the Company shall, at any time or from time to time, while this Warrant
is outstanding, issue a dividend or make a distribution on its Common Stock (or
Reference Property, to the extent applicable) payable in shares of its Common Stock
(or Reference Property, to the extent applicable) to all holders of its Common
Stock (or Reference Property, to the extent applicable), then, at the opening of
business on the Ex-Dividend Date for such dividend or distribution:
(1) The Exercise Price will be adjusted by multiplying such Exercise
Price by a fraction: (A) the numerator of which shall be the number of
shares of Common Stock (or Reference Property, to the extent applicable)
outstanding at the close of business on the Business Day immediately
preceding such Ex-Dividend Date; and (B) the denominator of which shall be
the sum of the number of shares of Common Stock (or Reference Property, to
the extent
7
applicable) outstanding at the close of business on the Business Day
immediately preceding the Ex-Dividend Date for such dividend or
distribution, plus the total number of shares of Common Stock (or
Reference Property, to the extent applicable) constituting such dividend
or other distribution; and
(2) The number of Warrant Shares will be adjusted by multiplying
such number by a fraction: (A) the numerator of which shall be the
Exercise Price immediately prior to the adjustment pursuant to Section
10(a)(i)(1) and (B) the denominator of which shall be the Exercise Price
immediately after such adjustment.
If any dividend or distribution of the type described in this Section 10(a)(i) is
declared but not so paid or made, the Exercise Price shall again be adjusted to the
Exercise Price which would then be in effect if such dividend or distribution had
not been declared. Except as set forth in the preceding sentence, in no event
shall the Exercise Price be increased or the number of Warrant Shares be decreased
pursuant to this Section 10(a)(i).
(ii) If the Company shall, at any time or from time to time while this Warrant
is outstanding, subdivide or reclassify its outstanding shares of Common Stock (or
Reference Property, to the extent applicable) into a greater number of shares of
Common Stock (or Reference Property, to the extent applicable), then the Exercise
Price in effect at the opening of business on the day upon which such subdivision
becomes effective shall be proportionately decreased, and conversely, if the
Company shall, at any time or from time to time while this Warrant is outstanding,
combine or reclassify its outstanding shares of Common Stock (or Reference
Property, to the extent applicable) into a smaller number of shares of Common Stock
(or Reference Property, to the extent applicable), then the Exercise Price in
effect at the opening of business on the day upon which such combination or
reclassification becomes effective shall be proportionately increased. In each
such case, effective immediately after the opening of business on the day upon
which such subdivision, combination or reclassification becomes effective:
(1) The Exercise Price shall be adjusted by multiplying such
Exercise Price by a fraction, the numerator of which shall be the number
of shares of Common Stock (or Reference Property, to the extent
applicable) outstanding immediately prior to such subdivision or
combination and the denominator of which shall be the number of shares of
Common Stock (or Reference Property, to the extent applicable) outstanding
immediately after giving effect to such subdivision, combination or
reclassification; and
8
(2) The number of Warrant Shares will be adjusted by multiplying
such number by a fraction: (A) the numerator of which shall be the
Exercise Price immediately prior to the adjustment pursuant to Section
10(a)(ii)(1) and (B) the denominator of which shall be the Exercise Price
immediately after such adjustment.
(b) Cash Dividends and Distributions. If the Company shall, at any time or
from time to time, while this Warrant is outstanding, issue a dividend or make a
distribution on its Common Stock (or Reference Property, to the extent applicable) payable
in cash, assets, rights or other property (other than shares of its Common Stock) to all
holders of its Common Stock (or Reference Property, to the extent applicable), then, at the
opening of business on the Ex-Dividend Date for such dividend or distribution:
(i) The Exercise Price will be adjusted by multiplying such Exercise Price by
a fraction: (A) the numerator of which shall be the Fair Market Value per share of
Common Stock as of the last Trading Day preceding the such Ex-Dividend Date less
the Fair Market Value of the cash, assets, rights or other property paid per share
of Common Stock in such dividend or distribution; and (B) the denominator of which
shall be the Fair Market Value per share of Common Stock as of the last Trading Day
before the Ex-Dividend Date; and
(ii) The number of Warrant Shares will be adjusted by multiplying such number
by a fraction: (A) the numerator of which shall be the Exercise Price immediately
prior to the adjustment pursuant to Section 10(b)(i) and (B) the denominator of
which shall be the Exercise Price immediately after such adjustment.
If any dividend or distribution of the type described in this Section 10(b) is declared
but not so paid or made, the Exercise Price shall again be adjusted to the Exercise Price
which would then be in effect if such dividend or distribution had not been declared.
Except as set forth in the preceding sentence, in no event shall the Exercise Price be
increased or the number of Warrant Shares be decreased pursuant to this Section 10(b).
(c) Adjustment for Rights Issued under Rights Plan. If at any time and from
time to time while this Warrant is outstanding there shall occur a Rights Plan Triggering
Event, then, effective immediately after the opening of business on the Rights Triggering
Date:
(i) The Exercise Price shall be adjusted so that the same shall equal the
price determined by multiplying the Exercise Price in effect at the opening of
business on the Rights Triggering Date by a fraction: (i) the numerator of which
shall be the sum of (A) the number of shares of
9
Common Stock (or Reference Property, to the extent applicable) outstanding on the
close of business on the Business Day immediately preceding the Rights Triggering
Date, plus (B) (x) the aggregate Rights Plan Exercise Price payable to the Company,
assuming that all Rights then-outstanding that are capable of being exercised are
immediately exercised following the Rights Plan Triggering Event, divided by (y)
the Current Market Price Per Common Share as of the Rights Triggering Date; and
(ii) the denominator of which shall be the sum of (A) the number of shares of
Common Stock outstanding at the close of business on the Business Day immediately
preceding the Rights Triggering Date, plus (B) the aggregate number of shares of
Common Stock (or Reference Property, to the extent applicable) into which the
Rights then-outstanding are exercisable for (immediately following such Rights Plan
Triggering Event); and
(ii) The number of Warrant Shares will be adjusted by multiplying such number
by a fraction: (A) the numerator of which shall be the Exercise Price immediately
prior to the adjustment pursuant to Section 10(c)(i) and (B) the denominator of
which shall be the Exercise Price immediately after such adjustment.
To the extent that shares of Common Stock (or Reference Property, to the extent applicable)
are not delivered pursuant to such Rights prior to the expiration or termination of any
Rights (other than as a result of the repurchase of those Rights by the Company), upon
expiration or termination of such Rights (“Expired Rights”) the Exercise Price and
number of Warrant Shares issuable under this Warrant shall be readjusted to the Exercise
Price and number of Warrant Shares issuable that would then be in effect had the
adjustments made upon the occurrence of a Rights Plan Triggering Event been made without
taking into account such Expired Rights. Except as set forth in this paragraph, in no event
shall the Exercise Price be increased or the number of Warrants Shares issuable be
decreased pursuant to this Section 10(c). Notwithstanding the foregoing, the Exercise
Price and number of Warrant Shares as adjusted pursuant to this Section 10(c) shall not
apply to any Warrants Beneficially Owned by a Person who is an Acquiring Person, and, with
respect to such shares, the Exercise Price and number of Warrant Shares shall be the
Exercise Price and number of Warrant Shares in effect immediately prior to the Rights
Triggering Date.
(d) Adjustment for Certain Tender Offers or Exchange Offers. In case the
Company or any of its subsidiaries shall, at any time or from time to time, while this
Warrant is outstanding, distribute cash or other consideration in respect of a tender offer
or an exchange offer (that is treated as a “tender offer” under U.S. federal
securities laws) made by the Company or any subsidiary for all or any portion of the Common
Stock (or Reference Property, to the extent applicable), where the sum of the aggregate
amount of such cash distributed and the aggregate Fair Market Value as of the Expiration
Date (as defined below), of
10
such other consideration distributed (such sum, the “Aggregate Amount”) expressed
as an amount per share of Common Stock (or Reference Property, to the extent applicable)
validly tendered or exchanged, and not withdrawn, pursuant to such tender offer or
exchange offer as of the Expiration Time (as defined below) (such tendered or
exchanged shares of Common Stock (or Reference Property, to the extent applicable), the
“Purchased Shares”) exceeds the Daily Price per share of the Common Stock (or
Reference Property, to the extent applicable) on the first Trading Day immediately
following the last date (such last date, the “Expiration Date”) on which tenders or
exchanges could have been made pursuant to such tender offer or exchange offer (as the same
may be amended through the Expiration Date), then, effective immediately prior to the
opening of business on the second Trading Day immediately following the Expiration Date:
(i) The Exercise Price shall be decreased so that the same shall equal the
price determined by multiplying the Exercise Price in effect immediately prior to
the close of business on the Trading Day immediately following the Expiration Date
by a fraction: (i) the numerator of which shall be equal to the product of (A) the
number of shares of Common Stock (or Reference Property, to the extent applicable)
outstanding as of the Expiration Time (including all Purchased Shares) and (B) the
Daily Price per share of the Common Stock (or Reference Property, to the extent
applicable) on the first Trading Day immediately following the Expiration Date; and
(ii) the denominator of which is equal to the sum of (A) the Aggregate Amount and
(B) the product of (I) an amount equal to (x) the number of shares of Common Stock
(or Reference Property, to the extent applicable) outstanding as of the last time
(the “Expiration Time”) at which tenders or exchanges could have been made pursuant
to such tender offer or exchange offer less (y) the Purchased Shares and (II) the
Daily Price per share of the Common Stock (or Reference Property, to the extent
applicable) on the first Trading Day immediately following the Expiration Date; and
(ii) The number of Warrant Shares issuable upon exercise of this Warrant will
be adjusted by multiplying such number by a fraction: (A) the numerator of which
shall be the Exercise Price immediately prior to the adjustment pursuant to Section
10(d)(i) and (B) the denominator of which shall be the Exercise Price immediately
after such adjustment.
In the event that the Company or a subsidiary is obligated to purchase shares of Common
Stock (and Reference Property, to the extent applicable) pursuant to any such tender offer
or exchange offer, but the Company or such subsidiary is permanently prevented by
applicable law from effecting any such purchases, or all such purchases are rescinded, then
the Exercise Price and number of Warrant Shares issuable shall again be adjusted to be the
Exercise Price and number of Warrant Shares issuable which would then be in effect if such
tender offer or exchange offer had not been made. Except as set forth in the preceding
sentence,
11
if the application of this Section 10(d) to any tender offer or exchange offer would
result in an increase in the Exercise Price or reduction in the number of Warrant Shares
issuable, no adjustment shall be made for such tender offer or exchange offer under this
Section 10(d).
(e) Adjustments for Issuances of Additional Shares of Common Stock.
(i) Definitions. For purposes of this Section 10(e), the following
definitions apply:
(1) “Convertible Securities” means any debt or other
evidences of indebtedness, capital stock, rights, options, warrants or
other securities directly or indirectly convertible into or exercisable or
exchangeable for Common Stock (including Reference Property, if
applicable).
(2) “Additional Shares of Common Stock” means any shares of
Common Stock issued (whether from the Company’s treasury or authorized and
unissued shares of capital stock) or, as provided in Section 10(e)(ii)
below, deemed to be issued by the Company after the Original Issuance
Date; provided that, notwithstanding anything to the contrary contained
herein, Additional Shares of Common Stock shall not include issuances of
Common Stock (including any deemed issuance pursuant to Section 10(e)(ii))
which are (x) pursuant to employee benefit plans and compensation related
arrangements approved by the board of directors of the Company (including
any duly authorized committee or delegee thereof) or (y) to Elevation or
any of its Affiliates pursuant to the exercise of their respective
preemptive rights.
(3) “Measurement Date” means, with respect to a transaction,
the public announcement of such transaction (or, if no such public
announcement is made, the date of issuance).
(ii) Deemed Issuances of Additional Shares of Common Stock. The
maximum number of shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise, conversion or exchange of
Convertible Securities will be deemed to be Additional Shares of Common Stock
issued as of the time of the issuance of such Convertible Securities; provided,
however, that:
(1) No adjustment in the Exercise Price will be made upon the
subsequent issuance of shares of Common Stock upon the exercise,
conversion or exchange of such Convertible Securities;
12
(2) To the extent that Additional Shares of Common Stock are not
issued pursuant to any such Convertible Security upon the expiration or
termination of an unissued, unexercised, unconverted or unexchanged
Convertible Security, the Exercise Price will be readjusted to the
Exercise Price that would have been in effect had such Convertible
Security (to the extent outstanding immediately prior to such expiration
or termination) never been issued; and
(3) In the event of any change in the number of shares of Common
Stock issuable upon the exercise, conversion or exchange of any
Convertible Security, excluding a change resulting from any transaction
giving rise to an adjustment pursuant to Section 10(a)(ii), but including
periodic or scheduled accretions or adjustments to a Convertible Security,
interest and dividends paid in kind, repricings of the exercise or
conversion price of such Convertible Securities or otherwise, the Exercise
Price then in effect will be readjusted to the Exercise Price that would
have been in effect if, on the date of issuance, such Convertible Security
were exercisable, convertible or exchangeable for such changed number of
shares of Common Stock.
(iii) Determination of Consideration. The Fair Market Value of the
consideration received by the Company for the issue of any Additional Shares of
Common Stock will be computed as follows:
(1) Cash and Property. Aggregate consideration consisting of
cash and other property will: (x) insofar as it consists of cash, be
computed at the aggregate of cash received by the Company, excluding
amounts paid or payable for accrued interest or accrued dividends; (y)
insofar as it consists of property other than cash, be computed at the
Fair Market Value thereof on the Measurement Date; and (3) insofar as it
consists of both cash and other property, be the proportion of such
consideration so received.
(2) Convertible Securities. The aggregate consideration per share
received by the Company for Convertible Securities will be determined by
dividing: (x) the total amount, if any, received or receivable by the
Company as consideration for the issuance of such Convertible Securities,
plus the minimum aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration)
payable to the Company upon the full and complete exercise, conversion or
13
exchange of such Convertible Securities, by (y) the maximum number of
shares of Common Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the full and complete exercise,
conversion or exchange of such Convertible Securities.
(iv) In the event the Company shall, at any time and from time to time while
any of the Warrants is outstanding, issue or sell Additional Shares of Common Stock
(or Reference Property, to the extent applicable) for a consideration per share, as
determined by such consideration’s Fair Market Value in accordance with Section
10(e)(iii), less than the Exercise Price in effect immediately prior to such
issuance (a “Below Exercise Price Issuance”), then, effective immediately
upon the date of such Below Exercise Price Issuance:
(1) The Exercise Price in effect immediately after such Below
Exercise Price Issuance shall be reduced so that the same shall equal the
price determined by multiplying the Exercise Price in effect immediately
prior to such Below Exercise Price Issuance by a fraction: (1) the
numerator of which shall be the sum of (a) the number of shares of Common
Stock (or Reference Property, to the extent applicable) outstanding
immediately prior to such Below Exercise Price Issuance (on a fully
diluted basis based on the treasury method) (such number of shares of
Common Stock, the “Number of Fully Diluted Shares of Common Stock”); plus
(b) (x) the Fair Market Value of the aggregate consideration received by
the Company in respect of such Below Exercise Price Issuance, divided by
(y) the Exercise Price in effect immediately prior to such Below Exercise
Price Issuance, and (2) the denominator of which shall be the sum of (a)
the Number of Fully Diluted Shares of Common Stock, plus (b) the number of
such Additional Shares of Common Stock issued in such Below Exercise Price
Issuance; and
(2) The number of Warrant Shares issuable upon exercise of this
Warrant shall be adjusted by multiplying such number by a fraction: (A)
the numerator of which shall be the Exercise Price immediately prior to
the adjustment pursuant to Section 10(e)(iv)(1) and (B) the denominator of
which shall be the Exercise Price immediately after such adjustment.
(v) Notwithstanding the foregoing, in no event shall any adjustment pursuant
to this Section 10(e) cause the Conversion Price to be
14
less than $2.49002 (the “Floor Price”) or the number of Warrant
Shares issuable to be greater than the number of Warrant Shares issuable at such
Conversion Price, provided that such Floor Price and corresponding number of
Warrant Shares issuable shall be adjusted in the same manner as the Conversion
Price and number of Warrant Shares issuable to reflect any adjustments made in
accordance with this Section 10 (other than adjustments pursuant to this Section
10(e)).
(f) Disposition Event. If any of the following events (any such event, a
“Disposition Event”) occurs: (i) any reclassification or exchange of the Common
Stock (other than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination); or (ii) any merger,
consolidation or other combination to which the Company is a constituent party, in each
case, as a result of which the holders of Common Stock shall be entitled to receive cash,
securities or other property for their shares of Common Stock, the Company or the surviving
entity of the merger, consolidation or other combination shall provide that this Warrant be
exercised following the effective date of any Disposition Event, shall be calculated based
on the kind and amount of cash, securities or other property (collectively, “Reference
Property”) received upon the occurrence of such Disposition Event by a holder of Common
Stock holding, immediately prior to the transaction, a number of shares of Common Stock
equal to the number of Warrant Shares issuable under this Warrant immediately prior to such
Disposition Event; provided that if the Disposition Event provides the holders of Common
Stock with the right to receive more than a single type of consideration determined based
in part upon any form of stockholder election, the Reference Property shall be comprised of
the weighted average of the types and amounts of consideration received by the holders of
the Common Stock. The Company may not cause, or agree to cause, a Disposition Event to
occur, unless the issuer of any securities or other property for which this Warrant becomes
exercisable agrees, for the express benefit of the holders of record of this Warrant
(including making them beneficiaries of such agreement), to issue such securities or
property. The provisions of this Section 10(f) shall similarly apply to successive
Disposition Events. If this Section 10(e) applies to any event or occurrence, neither
Section 10(a) nor Section 10(d) shall apply; provided, however, that this Section 10(f)
shall not apply to any stock split or combination to which Section 10(a) is applicable.
To the extent that equity securities of a company are received by the holders of Common
Stock of the Company in connection with a Disposition Event, the portion of this Warrant
which will be exercisable for such equity securities will continue to be subject to the
anti-dilution adjustments set forth in this Section 10.
|
|
|
2 |
|
Closing market price prior to signing. |
15
(g) Minimum Adjustment. Notwithstanding the foregoing, the Exercise Price
will not be reduced (and the corresponding increase to the number of Warrant Shares will
not occur) if the amount of such reduction would be an amount less than $0.01, but
any such amount will be carried forward and reduction with respect to the Exercise Price
(and increase with respect to the number of Warrant Shares) will be made at the time that
such amount, together with any subsequent amounts so carried forward, aggregates to $0.01
or more.
(h) Limitation on Adjustment; When No Adjustment Required.
(i) No adjustment need be made for the issuance of Common Stock (and Reference
Property, to the extent applicable) or any securities convertible into or
exchangeable for Common Stock (and Reference Property, to the extent applicable) or
carrying the right to purchase Common Stock (and Reference Property, to the extent
applicable) or any such security except to the extent explicitly required herein.
(ii) No adjustment need be made for rights to purchase Common Stock (or
Reference Property, to the extent applicable) pursuant to a Company plan for
reinvestment of dividends or interest.
(iii) No adjustment need be made for a change in the par value or no par value
of the Common Stock (or Reference Property, to the extent applicable).
(iv) To the extent this Warrant becomes exercisable pursuant to Section 10
into cash, no adjustment need be made thereafter as to the cash. Interest will not
accrue on the cash.
(i) Rules of Calculation; Treasury Stock. All calculations will be made to
the nearest one-hundredth of a cent or to the nearest one-ten thousandth of a share.
Except as otherwise explicitly provided herein, the number of shares of Common Stock (or
Reference Property, to the extent applicable) outstanding will be calculated on the basis
of the number of issued and outstanding shares of Common Stock (or Reference Property, to
the extent applicable), not including shares held in the treasury of the Company. The
Company shall not pay any dividend on or make any distribution to shares of Common Stock
(or Reference Property, to the extent applicable) held in treasury.
(j) Waiver. Notwithstanding the foregoing, the Exercise Price will not be
reduced and number of Warrant Shares issuable will not be increased if the Company
receives, prior to the effective time of the adjustment to the Exercise Price and number of
Warrant Shares issuable, written notice from the Holder that no adjustment is to be made as
the result of a particular issuance of Common Stock (or Reference Property, to the extent
applicable) or other dividend or other distribution on shares of Common Stock. This waiver
will be limited in scope
16
and will not be valid for any issuance of Common Stock (or Reference Property, to the
extent applicable) or other dividend or other distribution on shares of Common Stock (or
Reference Property, to the extent applicable) not specifically provided for in such notice.
(k) Tax Adjustment. Anything in this Section 10 notwithstanding, the Company
shall be entitled to make such downward adjustments in the Exercise Price (and
corresponding increases in the number of Warrant Shares issuable), in addition to those
required by this Section 10, as the Board in its sole discretion shall determine to be
advisable in order that any event treated for federal income tax purposes as a dividend or
stock split will not be taxable to the holders of Common Stock (or Reference Property, to
the extent applicable).
(l) Par Value. Anything in this Section 10 notwithstanding, no adjustment to
the Exercise Price shall reduce the Exercise Price below the then par value per share of
Common Stock (or Reference Property, to the extent applicable), and any such purported
adjustment shall instead reduce the Exercise Price to such par value.
(m) No Duplication. If any action would require adjustment of the Exercise
Price and the number of Warrant Shares pursuant to more than one of the provisions
described in this Section 10 in a manner such that such adjustments are duplicative, only
one adjustment shall be made.
(n) Notice of Record Date. In the event of:
(i) any stock split or combination of the outstanding shares of Common Stock
(or Reference Property, to the extent applicable);
(ii) any declaration or making of a dividend or other distribution to holders
of Common Stock (or Reference Property, to the extent applicable) in Additional
Shares of Common Stock, any other capital stock, other securities or other property
(including but not limited to cash and evidences of indebtedness);
(iii) any reclassification or change to which Section 10(a)(ii) applies;
(iv) the dissolution, liquidation or winding up of the Company; or
(v) any Disposition Event;
then the Company shall file with its corporate records and mail to the holders of the Warrants at
their last addresses as shown on the records of the Company, at least 10 days
17
prior to the record date specified in (A) below or 10 days prior to the date specified in (B)
below, a notice stating:
(A) the record date of such stock split, combination, dividend or
other distribution, or, if a record is not to be taken, the date as of
which the holders of Common Stock (or Reference Property, to the extent
applicable) of record to be entitled to such stock split, combination,
dividend or other distribution are to be determined, or
(B) the date on which such reclassification, change, liquidation,
dissolution, winding up or Disposition Event is estimated to become
effective, and the date as of which it is expected that holders of Common
Stock (or Reference Property, to the extent applicable) of record will be
entitled to exchange their shares of Common Stock (or Reference Property,
to the extent applicable) for the capital stock, other securities or other
property (including but not limited to cash and evidences of indebtedness)
deliverable upon such reclassification, change, liquidation, dissolution,
winding up or other Fundamental Change.
Disclosures made by the Company in any filings required to be made under the Exchange Act shall be
deemed to satisfy the notice requirements set forth in this Section 10(m).
(o) Certificate of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Exercise Price and the number of Warrant Shares pursuant to this
Section 10, the Company at its expense shall promptly as reasonably practicable compute
such adjustment or readjustment in accordance with the terms hereof and furnish to each
holder of Warrants a certificate, signed by an officer of the Company, setting forth such
adjustment or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based and shall file a copy of such certificate with its corporate records.
The Company shall, upon the reasonable written request of any holder of Warrants, furnish
to such holder a similar certificate setting forth (i) the calculation of such adjustments
and readjustments in reasonable detail, (ii) the Exercise Price then in effect, and (iii)
the number of shares of Common Stock (or Reference Property, to the extent applicable) and
the amount, if any, of capital stock, other securities or other property (including but not
limited to cash and evidences of indebtedness) which then would be received upon the
exercise of the Warrant.
11. Notices. Any notice, demand or delivery authorized by this Warrant shall be in writing
and shall be given to the Holder or the Company, as the case may be, at its address (or facsimile
number) set forth below, or such other address (or facsimile number) as shall have been furnished
to the party giving or making such notice, demand or delivery:
18
If to the Company, to it at the following address:
Palm, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
with a copy to (which shall not constitute notice):
Xxxxx Xxxx & Xxxxxxxx
0000 Xx Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxx
If to the Holder:
Elevation Partners, L.P.
00 Xxxx 00
xx Xxxxxx, 00 Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
with copies (which shall not constitute notice) to:
Elevation Partners
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxx
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxxx Xxxxxx, Esq.
Each such notice, demand or delivery shall be deemed received on the date of receipt by the
recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business
Day. Otherwise, any such notice, demand or delivery shall be deemed not to have been received
until the next succeeding Business Day.
12. Rights of the Holder; Transfer Books. Prior to any exercise of this Warrant, the Holder
shall not, by virtue hereof, be entitled to any rights of a shareholder of the
19
Company, including, without limitation, the right to vote, to receive dividends or other
distributions, to exercise any preemptive right or to receive any notice of meetings of
Stockholders or any notice of any proceedings of the Company except as may be specifically provided
for herein. The Company will at no time close its stock transfer books against transfer of this
Warrant in any manner which interferes with the timely exercise of this Warrant.
13. GOVERNING LAW. THIS WARRANT AND ALL RIGHTS ARISING HEREUNDER SHALL BE CONSTRUED AND
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AND THE PERFORMANCE
THEREOF SHALL BE GOVERNED AND ENFORCED IN ACCORDANCE WITH SUCH LAWS.
14. Binding Effect. This Warrant shall be binding upon any successors or assigns of the
Company.
15. Amendments; Waivers. Any provision of this Warrant may be amended or waived if, and only
if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Holder
and the Company, or in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
16. Entire Agreement. This Warrant and the forms attached hereto, the Securities Purchase
Agreement and the Amended and Restated Stockholders’ Agreement (and the other documents referenced
therein), contain the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangement or undertakings with respect
thereto.
[Remainder of Page Intentionally Left Blank]
20
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed by its duly
authorized officer and to be dated as of [•].
|
|
|
|
|
|
|
|
|
PALM, INC. |
|
|
|
|
|
|
|
|
|
|
|
By: |
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
Title: |
|
|
Acknowledged and Agreed:
|
|
|
|
|
ELEVATION PARTNERS, L.P. |
|
|
|
|
|
|
|
By:
|
|
Elevation Associates, L.P., as general partner |
|
|
|
|
|
|
|
By:
|
|
Elevation Associates, LLC, as general partner |
|
|
|
|
|
|
|
By: |
|
|
|
|
|
|
Name:
|
|
|
|
|
Title: |
|
|
WARRANT EXERCISE NOTICE FORM
To: Palm, Inc.
The
undersigned irrevocably exercises the Warrant for the purchase of shares (the
“Warrant Shares”) of Common Stock, par value $0.001 per share, of Palm, Inc. (the
“Company”) at $ per Share (the Exercise Price currently in effect pursuant to the
Warrant) and herewith makes payment of $ (such payment being made as specified below),
all on the terms and conditions specified within the Warrant, surrenders the Warrant and all right,
title and interest therein to the Company and directs that the Warrant Shares and replacement
Warrant, if applicable, deliverable upon the exercise of this Warrant or portion of this Warrant be
registered or placed in the name and at the address specified below and delivered thereto.
Date:
|
|
|
|
|
|
|
(Signature of Holder)
|
|
|
|
|
|
|
|
|
|
(Street Address)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(City) (State) (Zip Code) |
|
|
|
|
|
|
|
Payment:
|
|
o
|
|
$ wire transfer |
|
|
|
|
|
|
|
o
|
|
$ check |
|
|
|
|
|
|
|
o
|
|
Reduction in number of Warrant Shares that would otherwise be |
|
|
issued upon exercise pursuant to paragraph 2(d) of the Warrant |
Securities
and/or check to be issued
to:
Please
insert social security or identifying
number:
City,
State and Zip
Code:
Any unexercised portion of the Warrant evidenced by the within Warrant to be issued to:
Please
insert social security or identifying
number:
City,
State and Zip
Code:
WARRANT ASSIGNMENT FORM
Dated , _____
FOR VALUE RECEIVED,
hereby sells,
assigns and transfers unto (the “Assignee”),
(please type or print in block letters)
(insert address)
its right to purchase up to [ ] shares of Common Stock represented by this Warrant and does
hereby irrevocably constitute and appoint Attorney, to transfer the same on
the books of the Company, with full power of substitution in the premises.
EXHIBIT
C
PALM, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
Dated as of [___]
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page |
|
ARTICLE I DEFINITIONS |
|
|
2 |
|
|
|
|
|
|
SECTION 1.1. Certain Defined Terms |
|
|
2 |
|
SECTION 1.2. Other Capitalized Terms |
|
|
2 |
|
SECTION 1.3. Effectiveness of this Agreement |
|
|
2 |
|
|
|
|
|
|
ARTICLE II REGISTRATION RIGHTS |
|
|
2 |
|
|
|
|
|
|
SECTION 2.1. Piggyback Registrations |
|
|
2 |
|
SECTION 2.2. Demand Registration |
|
|
4 |
|
SECTION 2.3. Exceptions to the Company’s Obligations |
|
|
6 |
|
SECTION 2.4. Registration Procedures |
|
|
9 |
|
SECTION 2.5. Information Supplied |
|
|
13 |
|
SECTION 2.6. Expenses |
|
|
13 |
|
SECTION 2.7. Restrictions on Disposition |
|
|
13 |
|
SECTION 2.8. Indemnification |
|
|
13 |
|
SECTION 2.9. Required Reports |
|
|
16 |
|
SECTION 2.10. Selection of Counsel |
|
|
17 |
|
SECTION 2.11. Market Standoff Agreement |
|
|
17 |
|
SECTION 2.12. No Inconsistent Agreements; No Free Writing Prospectuses |
|
|
17 |
|
SECTION 2.13. Termination of Registration Rights |
|
|
17 |
|
|
|
|
|
|
ARTICLE III MISCELLANEOUS |
|
|
18 |
|
|
|
|
|
|
SECTION 3.1. Expenses |
|
|
18 |
|
SECTION 3.2. Successors and Assigns; Assignment |
|
|
18 |
|
SECTION 3.3. No Third Party Beneficiaries |
|
|
18 |
|
SECTION 3.4. Entire Agreement |
|
|
18 |
|
SECTION 3.5. Severability |
|
|
18 |
|
SECTION 3.6. Amendment and Waiver |
|
|
18 |
|
SECTION 3.7. Delays or Omissions |
|
|
19 |
|
SECTION 3.8. Notices |
|
|
19 |
|
SECTION 3.9. Interpretation |
|
|
19 |
|
SECTION 3.10. Governing Law; Jurisdiction; Waiver of Jury Trial |
|
|
20 |
|
SECTION 3.11. No Special Damages |
|
|
20 |
|
SECTION 3.12. Counterparts |
|
|
21 |
|
-i-
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “
Agreement”) is entered
as of [___], among Palm, Inc. a Delaware corporation (together with any other issuer
of Registrable Securities, the “
Company”),
Elevation Partners, L.P., a Delaware limited
partnership (“
Elevation”), and Elevation Employee Side Fund, LLC, a Delaware limited
liability company (together with Elevation and their respective Permitted Transferees, the
“
Investor Stockholders”).
RECITALS
WHEREAS, the Company and Elevation entered into a Preferred Stock Purchase Agreement and
Agreement and Plan of Merger, dated as of June 1, 2007, pursuant to which the Investor Stockholders
purchased an aggregate of 325,000 shares (the “Series B Purchased Shares”) of the Company’s
Series B Preferred Stock (as defined below) for an aggregate purchase price of $325 million on
October 24, 2007;
WHEREAS, in connection with the sale and issuance of the Series B Preferred Stock, the Company
and the Investor Stockholders entered into a Registration Rights Agreement (the “Original
Agreement”) dated as of October 24, 2007, whereby the Company granted Investor Stockholders
certain registration rights with respect to the Series B Conversion Shares (as defined below);
WHEREAS, the Company and Elevation have entered into a Securities Purchase Agreement, dated as
of December 22, 2008 (as amended from time to time in accordance with the provisions thereof, the
“Securities Purchase Agreement”), pursuant to which the Investor Stockholders have agreed,
on the terms and subject to the conditions set forth in such Securities Purchase Agreement, to
purchase an aggregate of 100,000 shares (the “Series C Purchased Shares,” and together with
the Series B Purchased Shares, the “Purchased Shares”) of the Company’s Series C Preferred
Stock (as defined below) and Warrants (as defined below) exercisable for 7,000,000 Warrant Shares
(as defined below) for an aggregate purchase price of $100 million in accordance with the terms of
the Securities Purchase Agreement; and
WHEREAS, the parties hereto desire to enter into this Agreement in order to (i) amend and
restate the Original Agreement in its entirety as set forth herein and (ii) enter into certain
arrangements relating to the Company, the Purchased Shares, the Conversion Shares (as defined
below) and the Warrants.
NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. Certain terms used herein shall have the meanings given to them in Exhibit A.
SECTION 1.2. Other Capitalized Terms. Capitalized terms used but not defined herein or in Exhibit A shall have the
meanings given to them in the Securities Purchase Agreement.
SECTION 1.3. Effectiveness of this Agreement. This Agreement amends and restates certain provisions of the Original Agreement and
restates the terms of the Original Agreement in their entirety. All amendments to the Original
Agreement effected by this Agreement, and all other covenants, agreements, terms and provisions of
this Agreement shall have effect as of the Closing unless expressly stated otherwise.
Notwithstanding any other provision to the contrary in this Agreement, this Agreement shall not
take effect until the Closing, and in the event the Securities Purchase Agreement is terminated,
this Agreement shall be void ab initio and the Original Agreement shall remain in full force and
effect.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Piggyback Registrations. If the Company proposes to register Equity Securities under the Securities Act (other than
a registration on Form S-4 or Form S-8, or any successor or other forms promulgated for similar
purposes, and other than demand registrations pursuant to Section 2.2) involving the offering of
such Equity Securities at any time on or after the last day of the Restricted Period (the
“Restricted Period Termination Date”), whether or not for sale for its own account, in a
manner which would permit registration of Registrable Securities of the same class of such Equity
Securities for sale to the public under the Securities Act, it will, at each such time, give prompt
written or telephonic notice (a “Piggyback Offering Notice”) to the Holders of: its
intention to do so, the form on which the Company expects to effect such registration (e.g. Form
X-0, Xxxx X-0, Form S-3ASR), the anticipated filing date with the SEC of such registration
statement, the anticipated date that the registration statement will be declared or otherwise
become effective, whether the offering is to be underwritten, in the case of Form S-3 or Form
S-3ASR, the anticipated date and time that the offering will be made. The registration rights
provided for in this Section 2.1 are in addition to, and not in lieu of, registrations made upon
the demand of any Holder in accordance with Section 2.2.
(a) Form S-1. If the Company indicates in the Piggyback Offering Notice that it
intends to effect a registration pursuant to Form S-1, upon the written request of any Holder
(which request shall specify the Registrable Securities intended to be registered by such Holder),
made within ten (10) days after the receipt of any such notice but in no event later than two (2)
Business Days prior to the date the Form S-1 is filed with the SEC, the Company will, subject to
the conditions set forth in Section 2.3 and the provision of the information specified in Section
2.5, use
-2-
reasonable best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by the Holders thereof.
(b) Form S-3. If the Company indicates in the Piggyback Offering Notice that it
intends to effect a registration pursuant to Form S-3, upon the written request of any Holder
(which request shall specify the Registrable Securities intended to be registered by such Holder),
made within ten (10) days after the receipt of any such notice but in no event later than two (2)
Business Days prior to the effectiveness of the registration statement as indicated in such notice,
notifying the Company whether any Holders intend to include within the Form S-3 or any Prospectus
included therein Registrable Securities, the Company will, subject to the conditions set forth in
Section 2.3 and the provision of the information specified in Section 2.5, use reasonable best
efforts to effect the registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holders thereof.
(c) Form S-3ASR. If the Company indicates in the Piggyback Offering Notice that it
intends to effect a registration pursuant to Form S-3ASR, upon the written request of any Holder
(which request shall specify the Registrable Securities intended to be registered by such Holder),
made within ten (10) days after the receipt of any such notice but in no event later than two (2)
Business Days (six (6) business hours in the case that the Company’s notice specifies that the
offering is expected to occur within one (1) Business Day following the date of the notice, or one
(1) Business Day in the case that the Company’s notice specifies that the offering is expected to
occur within two (2) Business Days) prior the date and time of the offering as specified in the
Company’s notice, notifying the Company whether any Holders intend to include within such Form
S-3ASR or any Prospectus included therein Registrable Securities, the Company will, subject to the
conditions set forth in Section 2.3 and the provision of the information specified in Section 2.5,
use reasonable best efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holders thereof.
(d) Right to Withdraw. If a registration pursuant to this Section 2.1 involves an
underwritten offering, any Holder requesting to be included in such registration may elect, in
writing prior to the effective date of the registration statement filed in connection with such
registration, not to register all or any part of such Holder’s Registrable Securities in connection
with such registration.
(e) Conversion into Registrable Securities. Nothing in this Section 2.1 shall limit
the right of any Holder to request the registration of the Registrable Securities issuable upon (i)
conversion of the Series B Preferred Stock or the Series C Preferred Stock by such Holder (subject
to such conversion occurring prior to the completion of the sale of the underlying Registrable
Securities prior to such registration) or (ii) exercise of the Warrants by such Holder
(subject to such exercise occurring prior to the completion of the sale of the underlying
Registrable Securities prior to such registration), notwithstanding the fact that at the time of
the request such Holder holds Series B Preferred Stock, Series C Preferred Stock or Warrants, as
the case may be, and not Registrable Securities.
-3-
SECTION 2.2. Demand Registration.
(a) General.
(i) Subject to the provisions of this Section 2.2(a), upon the written request (a “Demand
Notice”) of holders holding at least 40% of the aggregate Registrable Securities then held by
the Holders (collectively the “Demand Party”) (assuming conversion of all outstanding
shares of Series B Preferred Stock and Series C Preferred Stock into Conversion Shares and exercise
of all outstanding Warrants into Warrant Shares (as defined below)) requesting that the Company
effect the registration under the Securities Act of all or part of such Demand Party’s Registrable
Securities, which Registrable Securities will be offered for sale on or after the Restricted Period
Termination Date, and specifying the amount and intended method of disposition thereof, including
pursuant to a shelf registration statement utilizing Rule 415 of the Securities Act (or its
successor provision) (a “Shelf Registration”), thereupon the Company will promptly give
written notice of such requested registration to each of the other Holders and thereupon will, as
expeditiously as reasonably practicable (and in any event no later than 45 days after the date of
the Demand Notice in the case of a Demand Notice dated on or after the Restricted Period
Termination Date), file and use its reasonable best efforts to cause to be declared effective under
the Securities Act a registration statement to effect the registration under the Securities Act of
the following, provided that, notwithstanding the foregoing: (x) to the extent a Demand
Notice is delivered not less than 45 days prior to the Restricted Period Termination Date
requesting a Shelf Registration, the Company shall use its reasonable best efforts to cause such
registration statement to become effective no later than the Restricted Period Termination Date,
and (y) under no circumstances under this Section 2.2(a) (including the foregoing clause (x)) shall
the Company be required to file any registration statement prior to the date that is 45 days prior
to the Restricted Period Termination Date:
(1) such Registrable Securities which the Company has been so requested to register by
the Demand Party under the Demand Notice; and
(2) the Registrable Securities of Holders which the Company has been requested to
register by written request to the Company by the Holders within ten (10) days after the
giving of such written notice by the Company to the Holders (which request shall specify the
amount and intended method of disposition of such securities).
all to the extent necessary to permit the disposition (in accordance with the intended method
thereof as aforesaid) of the Registrable Securities and such other securities so to be registered.
(ii) Nothing in this Section 2.2 shall limit the right of any Holder to request the
registration of the Registrable Securities issuable upon (i) conversion of the Series B Preferred
Stock or the Series C Preferred Stock by such Holder (subject to such conversion occurring prior to
the completion of the sale of the underlying Registrable Securities prior to such registration) or
(ii) exercise of the Warrants by such Holder (subject to such exercise occurring prior to the
completion of the sale of the underlying Registrable Securities prior to such registration),
notwithstanding the fact that at the time of the request such Holder holds Series B Preferred
Stock, Series C Preferred Stock or Warrants, as the case may be, and not Registrable Securities.
-4-
(b) Shelf Take-Downs. Any of the Holders whose Registrable Securities have been
registered pursuant to a Shelf Registration may initiate an offering or sale of Registrable
Securities pursuant to such Shelf Registration (each, a “Shelf Take-Down”) and, except as
set forth in this Section 2.2(b) with respect to Marketed Underwritten Offerings (as defined below
in Section 2.4(q)), such Holder shall not be required to permit the offer and sale of Registrable
Securities by other Holders in connection with such Shelf Take-Down. If the initiating Holders so
elect by written request to the Company, a Shelf Take-Down may be in the form of an underwritten
offering (an “Underwritten Shelf Take-Down”), and the Company shall, if so requested, file
and effect an amendment or supplement of the Shelf Registration for such purpose as soon as
practicable. Only the Demand Party shall have the right to initiate an Underwritten Shelf
Take-Down that is a Marketed Underwritten Offering, and any such Underwritten Shelf Take-Down that
is a Marketed Underwritten Offering shall be deemed to be a registration pursuant to Section
2.2(a), and the Company shall provide notice to the other Holders of such registration in
accordance with the provisions of Section 2.2(a).
(c) Effective Registration Statement. A registration requested pursuant to this
Section 2.2 will not be deemed to have been effected unless: (i) it has been declared effective by
the SEC or has otherwise become effective under the Securities Act, or (ii) it has been filed with
the SEC but abandoned or withdrawn at the request of the Demand Party prior to effectiveness, other
than an abandonment or withdrawal requested because of: (A) the stock price of the Company’s Common
Stock falling 15% or more since the delivery of a request for registration pursuant to this Section
2.2 (provided that such registration shall be deemed to have been effected, unless (x) the
Holders participating in the registration reimburse the Company for Registration Expenses incurred
or payable by the Company up until the receipt of notice of an abandonment or withdrawal pursuant
to this clause (A) and for the withdrawal of the registration statement, and (y) a Demand Party has
not previously requested abandonment or withdrawal of a registration pursuant to this clause (A)
(it being understood that an abandonment or withdrawal pursuant to this clause (A) may be made only
once)), (B) the delivery of a postponement notice pursuant to Section 2.3(b)(iv), (C) a material
adverse change in the Company’s and its Subsidiaries’ prospects, business, operations, properties,
assets, liabilities, financial condition or results of operations, taken as a whole, which became
known to the Holders or the public after the delivery of a request for registration pursuant to
this Section 2.2, or (D) the discovery of materially adverse, non-public information concerning the
Company and its Subsidiaries, taken as a whole.
(d) Selection of Underwriters. If a requested registration pursuant to this Section
2.2 involves an underwritten offering, the investment bankers, underwriters and managers for such
registration shall be selected by the Holders of a majority of the Registrable Securities which the
Company has been requested to register; provided, however, that such selection of
investment bankers, underwriters and managers shall be subject to the reasonable approval by the
Company.
(e) Priority in Demand Registrations; Right to Abandon or Withdraw. If a requested
registration pursuant to this Section 2.2 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of Equity Securities
(including Registrable Securities) to be included in such registration as contemplated by
-5-
the
Holders and the Company would be likely to exceed the largest number of Equity Securities that can
be sold without having an adverse effect on the success of such offering, including any impact on
the selling price or the number of Equity Securities that can be sold (the “Maximum Offering
Size”), then the Company shall include in such registration (i) first, 100% of the
Registrable Securities requested to be included in such registration by the Demand Party and other
Holders of Registrable Securities who have requested that their Registrable Securities be included
up to the Maximum Offering Size (such Registrable Securities allocated, if necessary for the
offering not to exceed the Maximum Offering Size, pro rata among the Demand Party and the other
Holders of Registrable Securities so requested to be included in such registration by each) and
(ii) second, to the extent the managing underwriter believes additional securities can be
sold in the offering without exceeding the Maximum Offering Size, the securities the Company
proposes to sell up to the number of securities that, in the opinion of such managing underwriter,
can be sold without exceeding the Maximum Offering Size. Notwithstanding the foregoing, if the
managing underwriter of any underwritten offering shall advise the Holders participating in a
registration pursuant to this Section 2.2 that the Registrable Securities covered by the
registration statement cannot be sold in such offering within a price range acceptable to the
Demand Party or that all of the Registrable Securities requested to be included in a registration
by a Demand Party pursuant to this Section 2.2 cannot be sold in the manner requested, then the
Demand Party shall have the right to notify the Company that it has determined that the
registration statement be abandoned or withdrawn, in which event the Company shall abandon or
withdraw such registration statement; it being understood that in the event
the Demand Party exercises its right set forth in this sentence, the Company shall remain liable
for any Registration Expenses pursuant to Section 2.6 and that the abandonment or withdrawal of the
registration statement shall nevertheless constitute a registration for purposes of Section
2.3(b)(i) unless the Demand Party elects to pay (or reimburse the Company for) such Registration
Expenses, in which case such registration statement shall not constitute a registration for
purposes of Section 2.3(b)(i).
(f) Notification of Sales. Prior to the sale of any Registrable Securities pursuant
to a Shelf Registration, the Holders shall give reasonable prior written notice of such sale to the
Company under the particular circumstances, but in any event at least two (2) Business Days prior
notice, which notice may contemplate possible sales by the Holder over a period of time not to
exceed one (1) week but need not specify the number of Registrable Securities to be sold, the
method of distribution or proposed purchaser or underwriter. Delivery of such notice shall not
obligate the Holders to consummate such sale. Any underwritten sale pursuant to a Shelf
Registration pursuant to this Section 2.2 must be for a number of Registrable Securities
which, based on the good faith determination of the Holders, will result in gross proceeds of at
least $50 million in the case of any Marketed Underwritten Offering or $20 million in the case of
any other underwritten offering.
SECTION 2.3. Exceptions to the Company’s Obligations.
(a) Notwithstanding anything in Section 2.1 to the contrary:
-6-
(i) if, at any time after giving a Piggyback Offering Notice, the Company shall determine for
any reason not to proceed with the proposed registration of the securities to be sold by it, the
Company may, at its election, give written notice of such determination to the Holders and,
thereupon, shall be relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration Expenses in connection
therewith); and
(ii) if a registration pursuant to Section 2.1 involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its opinion, the number of Equity
Securities (including Registrable Securities requested to be included in such registration) to be
included in such registration as contemplated by the Company and the Holders would be likely to
exceed the Maximum Offering Size, then the Company shall include in such registration
(a) first, 100% of the securities the Company proposes to sell, and (b) second, to
the extent of the amount of Registrable Securities requested to be included in such registration
which, in the opinion of such managing underwriter can be sold without exceeding the Maximum
Offering Size, the amount of Registrable Securities which the Holders have requested to be included
in such registration, such amount to be allocated pro rata among all requesting Holders and all
other Persons entitled to registration rights, on the basis of the relative amount of Registrable
Securities then held by each such Person (provided that any such amount thereby allocated
to any such Person that exceeds such Person’s request shall be reallocated among the remaining
requesting Persons in a like manner to the extent practicable).
(b) Notwithstanding anything in Section 2.2 to the contrary:
(i) in no event shall the Company be required to effect more than (x) four (4) registrations
pursuant to Section 2.2(a) or (y) four (4) Marketed Underwritten Offerings;
(ii) in no event shall the Company be obligated to prepare and file (x) any such registration
statement or (y) any prospectus supplement thereto relating to a Marketed Underwritten Offering, in
each case with respect to Registrable Securities with a market value (based on then current trading
prices) of less than $50 million;
(iii) the Company shall not be obligated to (x) file a registration statement under Section
2.2(a) within a period of 270 days after the effective date of any other registration statement,
(1) for which the Holders exercised their rights pursuant Section 2.1 to include Registrable
Securities, provided that the Company and the underwriters did not limit in its entirety
the number of Registrable Securities that such Holder was permitted to include in such
registration statement or (2) which the Company filed or effected pursuant to Section 2.2(a) or (y)
effect more than one Marketed Underwritten Offering pursuant to Section 2.2 in any 180-day period;
(iv) if the Company receives a request for registration pursuant to Section 2.2, at a time
when (A) the Company has commenced, or has a bona fide intention to commence, a public or Rule 144A
securities offering transaction, (B) registration of the Registrable Securities would, in the good
faith judgment of the executive officers of the Company (after consultation with counsel), impede,
delay or otherwise interfere with any pending or contemplated material
-7-
acquisition, corporate
reorganization or similar material transaction, or (C) non-public material information not
otherwise then required by Law to be publicly disclosed regarding the Company exists, the immediate
disclosure of which would in the good faith judgment of the Chief Executive Officer, Chief
Financial Officer or General Counsel of the Company be disadvantageous in any material respect to
the Company (clauses (A), B) and (C), a “Material Pending Event”), then the Company may
postpone the filing (but not the preparation) of a registration statement requested pursuant to
Section 2.2 for a period not to exceed 90 consecutive calendar days from the date of a Demand
Notice upon providing the Demand Party with written notice of such postponement (which notice need
not include a statement of the reason for such postponement); provided that the Company
shall at all times in good faith use reasonable best efforts to cause any registration statement
required by Section 2.2 to be filed as soon as reasonably practicable thereafter; provided,
further, that the Company shall postpone the filing of a registration statement pursuant to
this Section 2.3(b)(iv) for no more than 180 days in the aggregate in any twelve-month period in
respect of all requested registrations; and provided further that the Company shall
make prompt and adequate disclosure of any material information required to be disclosed from time
to time in accordance with Law and Nasdaq rules. Each Holder shall keep confidential any
communications received by it from the Company regarding the postponement pursuant to this Section
2.3(b)(iv) (including the fact of the postponement), except as required by Law. In the event that
the Company gives the Holders the notice specified in this Section 2.3(b)(i), the Demand Party
shall have the right, within 15 days after receipt thereof, to withdraw its request under Section
2.2, in which case such request shall not be counted as a demand for purposes of Section 2.2 or for
purposes of the limitations set forth in Section 2.3(b)(i);
(v) if the Company receives a request for registration pursuant to Section 2.2, at a time when
there is a Material Pending Event, then the Company may suspend sales under a shelf registration
statement, or a registration statement pursuant to which Registrable Securities are not immediately
sold after the effectiveness thereof, for a period not to exceed 60 days in any 90-day period upon
providing the Holders with written notice of such suspension (which notice shall include a
statement of the reason for such suspension); provided, that the Company shall suspend the
filing of a registration statement pursuant to this Section 2.3(b)(v) for no more than 180 days in
the aggregate in any twelve-month period and three (3) times in any twelve-month period respect of
all requested registrations; and provided further that the Company shall make prompt and
adequate disclosure of any material information required to be disclosed from time to time in
accordance with Law and Nasdaq rules. Upon receipt of a notice from the Company in accordance with
the terms of this Section 2.3(b)(v), each Holder agrees not to sell or offer to sell any
Registrable Securities
pursuant to such shelf registration statement until the Company notifies such Holder that the
shelf registration statement may be used (which notice the Company shall promptly provide following
the termination of the event or circumstance giving rise to such suspension). Each Holder shall
keep confidential any communications received by it from the Company regarding the suspension of
sales pursuant to this Section 2.3(b)(v) (including the fact of the suspension), except as required
by Law; and
(vi) in no event shall the Company be obligated to prepare and file in connection with any
Shelf Take-Down any post-effective amendment to a Shelf Registration or any
-8-
prospectus supplement
with respect to such Shelf Take-Down unless the Holders requesting such filing expect in good faith
to sell Registrable Securities in connection therewith for an aggregate gross sales price of at
least $17.5 million ($20 million with respect to an Underwritten Shelf Take-Down).
(c) Notwithstanding anything in Section 2.1 or Section 2.2 to the contrary:
(i) if all of the Registrable Securities held by a Holder (together with those of its
Affiliates) constitute less than 5% of the outstanding Common Stock and can be sold without
restriction under Rule 144(k) under the Securities Act, the Company shall not be required to effect
any registrations, Shelf Take-Downs or Underwritten Shelf Take-Downs of any kind for such Holder
pursuant to Section 2.1 or Section 2.2 (but the Company shall be required to maintain the
effectiveness of any shelf registration statement as required by Section 2.4(b));
(ii) if all of the Registrable Securities held by a Holder (together with those of its
Affiliates) constitute less than 5% of the outstanding Common Stock and can be sold within any
three (3) month period without restriction under Rule 144 because the number of Registrable
Securities held by such Holder does not exceed the volume limitations imposed by Rule 144(e) of the
Securities Act, the Company shall not be required to effect any registrations, Shelf Take-Downs or
Underwritten Shelf Take-Downs of any kind for such Holder pursuant to Section 2.1 or Section 2.2;
and
(iii) if any registration involves an underwritten offering, all Holders requesting to
participate in any registration in connection with an underwritten offering hereunder must sell its
Registrable Securities on the basis provided in any underwriting arrangements approved by the
Persons entitled to approve such arrangements (with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate in combined primary and
secondary offerings) and completes and executes all reasonable questionnaires, powers of attorney,
underwriting agreements, hold-back agreement letters and other documents customarily required under
the terms of such underwriting arrangements; provided, however, that to the extent
such Holder is obligated under the terms of the underwriting arrangements to (i) make
representations and warranties other than generally as to his, her or its respective (A) execution,
delivery and performance of such underwriting agreement and the agreements contemplated thereby,
(B) individual ownership of the Registrable Securities being sold pursuant to such underwriting
agreement and (C) information provided by such Holder in writing specifically for inclusion in the
Prospectus and (ii) agree to provide indemnification for any liability arising out of a breach of
any
such representations or warranties of such Holder that would exceed the total proceeds
received by such Holder for the sale of such Registrable Securities pursuant to such underwriting
agreement, then such Holder, to the extent he, she or it determined not to enter into such
underwriting agreement, shall not be obligated to enter into a lock-up agreement contemplated by
Section 2.11.
SECTION 2.4. Registration Procedures. If and whenever the Company is required to effect a registration of any Registrable
Securities as provided in this Agreement, subject to the limitations set forth in Section 2.3, the
Company will:
-9-
(a) promptly prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use reasonable best efforts to cause a registration statement with
respect to a demand registration pursuant to Section 2.2 to be filed (in the case of a registration
pursuant to Form S-3ASR), or become effective (in the case of any registration other than pursuant
to Form S-3ASR) as promptly as practicable;
(b) prepare and file with the SEC such amendments and supplements to such registration
statement (including Exchange Act documents incorporated by reference into the registration
statement) and the Prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period not in excess of 90 days (or such longer period as
may be requested by the Holders in the event of a shelf registration statement) and to comply with
the provisions of the Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in such registration
statement; provided that before filing a registration statement or prospectus or any
amendments or supplements thereto in accordance with Section 2.4(a) or this Section 2.4(b) to the
extent that doing so will not materially interfere with the timing of the offering: (i) the
Company will furnish to counsel selected pursuant to Section 2.10 copies of all documents proposed
to be filed, and (ii) such documents will be subject to the review of such counsel reasonably in
advance of any filing to permit a reasonable opportunity to review and comment in light of the
circumstances;
(c) use reasonable best efforts to comply with all applicable securities laws in the United
States and register or qualify such Registrable Securities covered by such registration in such
jurisdictions in the United States as each seller shall reasonably request, and do any and all
other acts and things which may be reasonably necessary to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such seller, except that
the Company shall not for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction where, but for the requirements of this Section 2.4(c), it
would not be obligated to, subject itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction;
(d) promptly furnish to each seller of such Registrable Securities such number of copies of
such registration statement and of each amendment and supplement thereto (in each case including
all exhibits filed therewith, including any documents incorporated by reference), such
number of copies of the Prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the requirements of the
Securities Act, and such other similar documents as such seller may reasonably request necessary to
facilitate the disposition of the Registrable Securities by such seller;
(e) notify each seller of any such Registrable Securities covered by such registration
statement promptly if the Company becomes aware that the Prospectus included in such registration
statement, as then in effect, or the registration statement includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances then existing and, prepare
and
-10-
furnish to such seller a reasonable number of copies of an amended or supplemental prospectus
as may be necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus shall not include 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 in the light of the circumstances then existing;
(f) otherwise use reasonable best efforts to comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as reasonably practicable (but not
more than 18 months) after the effective date of the registration statement, an earnings statement
which shall satisfy the provisions of Section 11(a) of the Securities Act;
(g) (i) use reasonable best efforts to list such Registrable Securities on the Exchange on
which the Common Stock is then listed (if such Registrable Securities are not already so listed and
if such listing is then permitted under the rules of such Exchange) to the extent required; and
(ii) use reasonable best efforts to provide for a transfer agent and registrar for such Registrable
Securities covered by such registration statement not later than the effective date of such
registration statement;
(h) in connection with an underwritten offering pursuant to a demand registration pursuant to
Section 2.2, promptly enter into an underwriting agreement in customary form, which may include
indemnification provisions in favor of underwriters and other Persons in addition to, or in
substitution for, the provisions of Section 2.8, and take such other actions as the managing
underwriters reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(i) in connection with an underwritten offering pursuant to a demand registration pursuant to
Section 2.2, promptly obtain a “cold comfort” letter or letters from the Company’s independent
public accounts in customary form and covering matters of the type customarily covered by “cold
comfort” letters provided to sellers of securities as the seller or sellers of a majority of shares
of such Registrable Securities shall reasonably request;
(j) promptly make available for inspection by any seller of such Registrable Securities
covered by such registration statement, by any underwriter participating in any disposition to be
effected pursuant to such registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of the Company’s
officers, directors and employees to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with the “due diligence” of such
seller or such underwriter with respect to such registration statement, subject to the execution of
a mutually acceptable confidentiality agreement;
(k) promptly notify counsel (selected pursuant to Section 2.10) for the Holders of Registrable
Securities included in such registration statement and the managing underwriter or agent and
confirm such notice in writing (i) when the registration statement, or any post-effective amendment
to the registration statement, shall have become effective, or any supplement to the
-11-
Prospectus and
any amendments to the Prospectus shall have been filed (other than in the case of a registration
pursuant to Form S-3ASR), (ii) of the receipt of any comments from the SEC, (iii) of any request by
the SEC to amend the registration statement or amend or supplement the Prospectus or for additional
information, and (iv) of the issuance by the SEC of any stop order suspending the effectiveness of
the registration statement or of any order preventing or suspending the use of any Prospectus, or
of the suspension of the qualification of the registration statement for offering or sale in any
jurisdiction, or of the institution or threatening of any proceedings for any of such purposes;
(l) use reasonable best efforts to prevent the issuance of any stop order suspending the
effectiveness of the registration statement or of any order preventing or suspending the use of any
Prospectus and, if any such order is issued, to obtain the withdrawal of any such order as soon as
practicable;
(m) (i) if requested by the managing underwriter or agent or any Holder of Registrable
Securities covered by the registration statement, promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriter or agent or such Holder
reasonably requests to be included therein, including, with respect to the number of Registrable
Securities being sold by such Holder to such underwriter or agent, the purchase price being paid
therefor by such underwriter or agent; and (ii) make all required filings of such prospectus
supplement or post-effective amendment as soon as practicable after being notified of the matters
incorporated in such prospectus supplement or post-effective amendment;
(n) cooperate with the Holders of Registrable Securities covered by the registration statement
and the managing underwriter or agent, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities to be sold under the
registration statement, and enable such securities to be in such denominations and registered in
such names as the managing underwriter or agent, if any, or such Holders may reasonably request;
(o) in connection with an underwritten offering pursuant to a demand registration pursuant to
Section 2.2, promptly obtain for delivery to the Holders of Registrable Securities being registered
and to the underwriter or agent an opinion or opinions from counsel for the Company in customary
form and scope for sellers of securities;
(p) cooperate with each seller of Registrable Securities and each underwriter or agent
participating in the disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD;
(q) use reasonable best efforts to make available certain of the executive officers of the
Company (which in any event shall include the Company’s chief executive officer) for a five (5)
Business Day period to participate and to cooperate with the Holders of Registrable Securities and
any underwriters in any “road shows” or other selling efforts, in each case in the United States,
that may be reasonably be requested upon reasonable notice thereof by the Holders in connection
with a firm commitment
underwritten offering for the Registrable Securities with a minimum sales
price of $50 million with respect to a registration statement effected pursuant to Section 2.2 (an
-12-
underwritten offering contemplated by this Section 2.4(q), a “Marketed Underwritten
Offering”); provided that to the extent the initial such Marketed Underwritten Offering is for
Registrable Securities having a minimum sales price of not less than $100 million, such five (5)
Business Day period may be extended to eight (8) Business Days, solely in the case of such an
initial Marketed Underwritten Offering, upon reasonable request of the Holders of such Registrable
Securities.
SECTION 2.5. Information Supplied. It shall be a condition precedent to the obligations of the Company to take any action to
register the Registrable Securities held by any Holder as to which any registration is being
effected that such Holder shall furnish the Company with such information regarding such Holder
that is pertinent to the disclosure requirements relating to the registration and the distribution
of such securities as the Company may from time to time reasonably request. Each Holder agrees to
promptly furnish to the Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not misleading.
SECTION 2.6. Expenses. Except as provided herein, the Company will pay all Registration Expenses in connection
with registrations of Registrable Securities requested pursuant to Section 2.1 or Section 2.2;
provided, however, that the Company shall not be obligated to pay the Registration
Expenses in more than seven (7) Underwritten Offerings (which shall in no event include more than
four (4) Marketed Underwritten Offerings). To the extent the Holders engage in more than seven (7)
Underwritten Offerings, the Holders shall pay all Registration Expenses with respect to such
Underwritten Offerings and the Company will have no obligation to pay any such Registration
Expenses. Each Holder shall pay all underwriting discounts and commissions, broker fees and
commissions, and transfer taxes, if any, relating to the sale or disposition of such Holder’s
Registrable Securities pursuant to any registration statement.
SECTION 2.7. Restrictions on Disposition. Each Holder agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 2.4(e), Section 2.4(k)(iii) or Section 2.4(k)(iv), such
Holder will forthwith discontinue disposition of Registrable Securities pursuant to the
registration
statement covering such Registrable Securities until such Holder’s receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 2.4(e) or written notice from the
Company that the registration statement is again effective and no amendment or supplement is
needed. In the event that the Company shall give any such notice, the period referred to in
Section 2.4(b) shall be extended by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 2.4(e) and to and including the date when
each seller of Registrable Securities covered by such registration statement shall have receive the
copies of the supplemented and amended Prospectus contemplated by Section 2.4(e).
SECTION 2.8. Indemnification.
(a) Indemnification by the Company. In the event of any registration of any
securities of the Company under the Securities Act pursuant to Section 2.1 or Section 2.2, to the
fullest extent permitted by law, the Company will indemnify and hold harmless each Holder, each
Affiliate of such Holder and their respective directors and officers, members or general and
limited
-13-
partners (and the directors, officers, employees, affiliates and each Person who controls
such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) (hereinafter referred to as a “Controlling Person”) of any of the foregoing), and each
underwriter, if any, and each person who controls within the meaning of Section 15 of the
Securities Act any underwriter (collectively, the “Seller Indemnified Parties”), against
all claims, losses, damages and liabilities, joint or several, actions or proceedings (whether
commenced or threatened in writing) in respect thereof (“Claims”) and expenses arising out
of or based on: (i) any untrue statement or alleged untrue statement of a material fact contained
in a registration statement (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or any omission or alleged omission therefrom of a material
fact, in each case, necessary in order to make the statements therein not misleading, in light of
the circumstances under which they were made, (ii) any untrue statement or alleged untrue statement
of a material fact contained in a Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or any omission or alleged omission therefrom of a
material fact, in each case, necessary in order to make the statements therein not misleading, in
light of the circumstances under which they were made, or (iii) any untrue statement or alleged
untrue statement of a material fact contained in any Issuer Free Writing Prospectus prepared by it
or authorized by it in writing for use by such Holder (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or any omission or alleged omission
therefrom of a material fact, in each case, necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, and the Company will
reimburse each such Seller Indemnified Party for any reasonable fees and disbursements of counsel
and any other reasonable out-of-pocket expenses incurred in connection with investigating and
defending or settling any such Claim; provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability, or action arises out of or is
based on any untrue statement or alleged untrue statement or omission or alleged omission by such
Holder or underwriter but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission is made in such registration statement,
Prospectus, or Issuer Free Writing Prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder and stated to be specifically
for use therein; and provided, further that, the indemnity agreement contained in
this Section 2.8(a) shall not apply to amounts paid in settlement of any such Claim if such
settlement is effected without the consent of the Company (which consent shall not be unreasonably
withheld or delayed); and provided, further that the Company will not be liable to
any Seller Indemnified Parties pursuant to this Section 2.8(a) to the extent that any Claims for
which such Seller Indemnified Party seeking indemnification relates to a sale of Registrable
Securities in violation of Section 2.3(b)(v).
(b) Indemnification by the Holders. To the fullest extent permitted by law, each
Holder will, if Registrable Securities held by such Holder are included in the registration
statement or Prospectus, indemnify and hold harmless the Company, all other Holders or any
prospective underwriter, as the case may be, and any of their respective Affiliates, directors,
officers and Controlling Persons (collectively, the “Company Indemnified Parties”), against
all Claims and expenses arising out of or based on: (i) any untrue statement or alleged untrue
statement of a material fact contained in a registration statement (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or any omission
or alleged
omission
-14-
therefrom of a material fact, in each case, necessary in order to make the statements
therein not misleading, in light of the circumstances under which they were made, (ii) any untrue
statement or alleged untrue statement of a material fact contained in a Prospectus (or any
amendment or supplement thereto), including all documents incorporated therein by reference, or any
omission or alleged omission therefrom of a material fact, in each case, necessary in order to make
the statements therein not misleading, in light of the circumstances under which they were made,
or (iii) any untrue statement or alleged untrue statement of a material fact contained in any
Issuer Free Writing Prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or any omission or alleged omission therefrom of a material
fact, in each case, necessary in order to make the statements therein not misleading, in light of
the circumstances under which they were made, and the Holder will reimburse each such Company
Indemnified Party for any reasonable fees and disbursements of counsel and any other reasonable
expenses incurred in connection with investigating and defending or settling any such Claim, in
each case to the extent, but only to the extent that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration statement, Prospectus, or
Issuer Free Writing Prospectus in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Holder and stated to be specifically for use
therein; and provided that the indemnity agreement contained in this Section 2.8(b) shall
not apply to amounts paid in settlement of any such Claim if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld or delayed); and
provided, further, that in the absence of fraud by such Holder, the liability of
each selling Holder of Registrable Securities hereunder shall be limited to the net proceeds
received by such selling Holder from the sale of Registrable Securities covered by such
registration statement.
(c) Notification of Claims. Promptly after receipt by a Person entitled to
indemnification pursuant to Section 2.8 (an “Indemnified Party”) hereunder of written
notice of the commencement of any action or proceeding with respect to which a claim for
indemnification may
be made pursuant to this Section 2.8, such Indemnified Party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding; provided that the failure of the Indemnified
Party to give notice as provided herein shall not relieve the indemnifying party of its obligations
under this Section 2.8, except to the extent that the indemnifying party is prejudiced in any
material respect by such failure to give notice. In case any such action or proceeding is brought
against an Indemnified Party, unless in such Indemnified Party’s reasonable judgment, based upon
advice of counsel, a conflict of interest between such indemnified and indemnifying parties may
exist in respect of such action or proceeding (in which case the Indemnified Party shall have the
right to assume or continue its own defense and the indemnifying party shall be liable for any
reasonable expenses therefor (but in no event will bear the expenses for more than one firm of
counsel for all Indemnified Parties in each jurisdiction who shall, with respect to Seller
Indemnified Parties, be approved by the majority of the participating Holders in the registration
in respect of which such indemnification is sought), the
-15-
indemnifying party will be entitled to
participate in and to assume the defense thereof (at its expense), jointly with any other
indemnifying party similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the indemnifying party will not
be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of investigation and
shall have no liability for any settlement made by the Indemnified Party without the consent of the
indemnifying party, such consent not to be unreasonably withheld. No indemnifying party will
settle any action or proceeding or consent to the entry of any judgment without the prior written
consent of the Indemnified Party, unless such settlement or judgment (i) includes as an
unconditional term thereof the giving by the claimant or plaintiff of a release to such Indemnified
Party from all liability in respect of such action or proceeding and (ii) does not involve the
imposition of equitable remedies or the imposition of any obligations on such Indemnified Party and
does not otherwise adversely affect such Indemnified Party, other than as a result of the
imposition of financial obligations for which such Indemnified Party will be indemnified hereunder.
An Indemnified Party may not settle any action or proceeding or the entry of any judgment without
the prior written consent of the indemnifying party.
(d) Contribution. (i) If the indemnification provided for in this Section 2.8 from
the indemnifying party is unavailable to an Indemnified Party hereunder in respect of any Claim or
expenses referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such
Claim or expenses in such proportion as is appropriate to reflect the relative fault of the
indemnifying party and Indemnified Party in connection with the actions which resulted in such
Claim or expenses, as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party under this Section 2.8(d) as a result of the Claim
and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any action or proceeding; and (ii) the parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 2.8(d) were determined by
pro rata allocation or by any other method of allocation which does not take account of the
equitable considerations referred to in Section 2.8(d)(i). 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.
(e) Non-Exclusive Remedy. The obligations of the parties under this Section 2.8 shall
be in addition to any liability which any party may otherwise have to any other party.
SECTION 2.9. Required Reports. The Company covenants that it will use reasonable best efforts to file the reports required
to be filed by it under the Securities Act and the Exchange Act, and it will take such further
action as any Holder may reasonably request, all to the extent required from time to time to enable
such Holder to sell shares of Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (i) Rule 144, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of
-16-
any Holder, the Company will deliver
to such Holder a written statement as to whether it has complied with such requirements.
SECTION 2.10. Selection of Counsel. In connection with any registration of Registrable Securities pursuant to Section 2.1 and
Section 2.2, the Holders of a majority of the Registrable Securities covered by any such
registration may select one counsel to represent all Holders of Registrable Securities covered by
such registration; provided, however, that in the event that the counsel selected
as provided above is also acting as counsel to the Company in connection with such registration, a
majority of the remaining Holders shall be entitled to select one additional counsel to represent
all such remaining Holders.
SECTION 2.11. Market Standoff Agreement. Subject to the proviso in Section 2.3(c)(iii), in connection with any underwritten public
offering, each Holder who was offered the opportunity to include Registrable Securities in such
offering pursuant to Section 2.1 or Section 2.2 will agree upon the request of the managing
underwriter with respect to such offering not to effect any public sale or distribution, including
any sale pursuant to Rule 144 under the Securities Act, of any Equity Security of the Company
during the 14-day period prior to, and for the 90 days after (plus any Booster Period), the
effective date of the registration statement for such offering (or such lesser period as the
managing underwriters may require or permit), except for such Equity Securities to be included in
such offering; provided that all of the Company’s executive officers and all of the members
of the Company’s Board (other than the Series B Directors, Series C Directors or Investor
Directors, as each term is defined in the Amended and Restated Stockholders’ Agreement) are
restricted in the same manner and for the same duration; and provided further that
the obligations set forth in this Section 2.11 shall not apply to any Holder who was substantially
limited in the number of Registrable Securities that such Holder could sell in
the offering pursuant to Section 2.2(e) or Section 2.3(a)(ii) and did not otherwise sell
Registrable Securities in such offering.
SECTION 2.12. No Inconsistent Agreements; No Free Writing Prospectuses. The Company represents and warrants that it is not a party to a Contract which conflicts
with or limits or prohibits the exercise of the rights granted to the Holders of Registrable
Securities in this ARTICLE II. Each Holder agrees that, unless it obtains the prior consent of the
Company and any such underwriter, it will not make any offer relating to the Securities that would
constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a “free writing
prospectus,” as defined in Rule 405, required to be filed with the SEC.
SECTION 2.13. Termination of Registration Rights. The rights of any Holder under this ARTICLE II shall terminate (other than Section 2.6,
Section 2.8 and Section 2.13) at such time as (a) such Holder ceases to hold any Registrable
Securities or (b) either (i) the Company is no longer required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act and has ceased to file reports under the Exchange Act, or (ii) a
Form 15 (or any successor form) has been filed under the Exchange Act with respect to the Common
Stock, unless, in the case of clause (b), such situation or filing is due to the occurrence of any
merger, consolidation or other transaction upon consummation of which the issuer of the Common
Stock is an entity other than the Company, in which event such
-17-
rights of the Holders shall not
terminate at such time pursuant to such clause (b) and this Agreement shall be assumed by the
Survivor as provided in Section 3.2.
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Expenses. Except as otherwise provided herein (and except as provided in the Securities Purchase
Agreement), all expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
SECTION 3.2. Successors and Assigns; Assignment. Except as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and
administrators of the parties hereto. This Agreement may not be assigned without the prior written
consent of the other parties, except that this Agreement (i) may be assigned by a Holder so long as
the Person to whom it is being assigned agrees to be bound under this Agreement as a Holder
hereunder and delivers a counterpart signature page to this Agreement to the Company and (ii) shall
be assigned by the Company in the event of any merger, consolidation or other transaction upon
consummation of which the issuer of the Common Stock is an entity other than the Company (such
entity, the “Survivor”) to such Survivor, and the Company shall not enter into any
such transaction unless and until the Survivor assumes all rights and obligations of the Company
hereunder pursuant to a written agreement for the benefit of the Holders (it being understood that
if the Survivor is the issuer of the Common Stock and such assumption of the rights and obligations
of the Company hereunder occurs by operation of law, that such Survivor shall not be required to
execute a written agreement for the benefit of the Holders).
SECTION 3.3. No Third Party Beneficiaries. Except as specifically provided in Section 2.8 (with respect to which the Indemnified
Parties named therein shall be express, intended third party beneficiaries of such provision), this
Agreement is not intended, and shall not be deemed, to confer any rights or remedies upon any
Person other than the parties hereto or otherwise create any third-party beneficiary hereto.
SECTION 3.4. Entire Agreement. This Agreement and the other agreements or documents referred to herein, constitute the
full and entire understanding and agreement among the parties with respect to the subject matter
hereof and supersede any prior understandings, agreements or representations by or among the
parties, written or oral, that may have related to the subject matter hereof in any way.
SECTION 3.5. Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 3.6. Amendment and Waiver. No amendment, waiver or other modification of, or consent under, any provision of this
Agreement shall be effective against the Company, unless it is approved in writing by the Company,
and no amendment, waiver or other modification of, or
-18-
consent under, any provision of this
Agreement shall be effective against any Holder, unless it is approved in writing by Holders
holding a majority of the Registrable Securities. No waiver of any breach of any agreement or
provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof
nor of any other agreement or provision herein contained.
SECTION 3.7. Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to
any party, upon any breach, default or noncompliance by another party under this Agreement, shall
impair any such right, power or remedy, nor shall it be construed to be a waiver of any such
breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any waiver, permit,
consent or approval of any kind or character on an Holder’s part of any breach, default or
noncompliance under this
Agreement or any waiver on such party’s part of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise afforded to any
party, shall be cumulative and not alternative.
SECTION 3.8. Notices. Except as otherwise provided herein, all notices required or permitted hereunder shall be
in writing and shall be deemed effectively given and received: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed facsimile or e-mail if sent during normal business
hours of the recipient, if not, then on the next business day; or (c) one (1) business day after
deposit with a nationally recognized overnight courier, specifying next day delivery, with written
verification of receipt. All notices to a Holder shall be delivered to the address of such Holder
set forth on the signature page of such Holder hereto (or such other address as such Holder may
designate by like notice to the Company hereunder). All notices to the Company shall be delivered
to:
Palm, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxx Xxxx & Xxxxxxxx
0000 Xx Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 3.9. Interpretation. The words “hereof”, “herein” and “hereunder” and words of like import used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement. When reference is made in this Agreement to an Article or a Section, such reference
shall be to an Article or Section of this Agreement, unless otherwise
-19-
indicated. The table of
contents, table of defined terms and headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of this Agreement.
The language used in this Agreement shall be deemed to be the language chosen by the parties hereto
to express their mutual intent, and no rule of strict construction shall be applied against any
party. Whenever the context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural, and vice versa. Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise, and shall include all amendments of the same and any
successor or
replacement statutes and regulations as of the Closing Date. All references to agreements
shall mean such agreement as may be amended or otherwise modified from time to time. Whenever the
words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation.”
SECTION 3.10. Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed in all respects by the Laws of the State of New York. Any
disagreement, issue, dispute, claim, demand or controversy arising out of or relating to this
Agreement (each, a “Dispute”) shall be brought in the United States District Court for the
Southern District of New York in New York, New York or any New York State court sitting in New
York, New York, so long as one of such courts shall have subject matter jurisdiction over such
Dispute. Each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such Dispute and irrevocably waives, to the
fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of
the venue of any such Dispute in any such court and that any such Dispute which is brought in any
such court has been brought in an inconvenient forum. Process in any such Dispute may be served on
any party anywhere in the world, whether within or without the jurisdiction of any such court.
Without limiting the foregoing, each party agrees that service of process on such party as provided
in Section 3.8 shall be deemed effective service of process on such party.
(b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 3.11. No Special Damages. The parties hereto agree that the obligations imposed on them in this Agreement are
special, unique and of an extraordinary character, and that, in the event of breach by any party,
damages would not be an adequate remedy and each of the other parties shall be entitled to specific
performance and injunctive and other equitable relief in addition to any other remedy to which it
may be entitled, at law or in equity; and the parties hereto further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any such injunctive or
other equitable relief; provided, however, that no Holder shall be entitled to specific
performance, injunctive or other equitable relief unless such Holder together with other Holders
that collectively hold at least 40% of the aggregate Registrable Securities then held by
-20-
the
Holders join in the action seeking similar such specific performance, injunctive or other equitable
relief, as the case may be, on their own behalf. Each party agrees that there shall be no special,
exemplary, punitive or multiple damages connected with or resulting from any breach of this
Agreement, or actions undertaken in connection with or related hereto, including any such damages
which are based upon breach of contract, tort, breach of warranty, strict liability, statute,
operation of law or any other theory of recovery, except to the extent such damages are actually
paid by a party hereunder to a third party,
and hereby waives any rights to claim such damages. For purposes of clarity, the foregoing
does not exclude consequential, indirect or incidental damages.
SECTION 3.12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
[Remainder of Page Intentionally Left Blank.]
-21-
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of
the date first set forth above.
|
|
|
|
|
|
PALM, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
ELEVATION PARTNERS, L.P.
|
|
|
By: |
Elevation Associates, L.P.,
|
|
|
|
As General Partner |
|
|
|
|
|
|
By: |
Elevation Associates, LLC,
|
|
|
|
As General Partner |
|
|
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
ELEVATION EMPLOYEE SIDE FUND, LLC
|
|
|
By: |
Elevation Management, LLC,
|
|
|
|
its manager |
|
|
|
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
By executing this Registration Rights Agreement, the undersigned is agreeing to the rights and
obligations of a “Holder” hereunder.
|
|
|
|
|
|
|
|
|
|
|
HOLDER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Holder: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Address:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT A
“Affiliate” means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is under common
control with, such specified Person, for so long as such Person remains so associated to the
specified Person.
“Amended and Restated Stockholders’ Agreement” means the Amended and Restated
Stockholders’ Agreement, dated as of [___] among the Company and the Investor
Stockholders, as may be amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof.
“Booster Period” means such additional period as may be requested by the Company or an
underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of
research reports and (ii) analyst recommendations and opinions, including the restrictions
contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments
thereto.
“Business Day” means any day that is not a Saturday, a Sunday or other day on which
banks are required or authorized by law to be closed in New York.
“Capital Stock” means any and all shares of capital stock of the Company, including
without limitation, any and all shares of Common Stock and Preferred Stock.
“Common Stock” means the Common Stock, par value $0.001 per share, of the Company and
any securities issued in respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any reclassification, recapitalization, merger, consolidation,
exchange or other similar reorganization.
“control” or “controlled by” have the meaning set forth in Rule 12b-2 of the
Exchange Act.
“Conversion Shares” means the Series B Conversion Shares and the Series C Conversion
Shares.
“Equity Securities” means any and all shares of Capital Stock of the Company,
securities of the Company convertible into, or exchangeable or exercisable for, such shares, and
options, warrants or other rights to acquire such shares (including the shares of Series B
Preferred Stock, Series C Preferred Stock, the Conversion Shares, Warrants and the Warrant Shares).
“Exchange” means Nasdaq or the New York Stock Exchange, as the case may be.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
“Form S-1” means a registration statement on Form S-1 under the Securities Act, or any
successor form thereto.
“Form S-3” means a registration statement on Form S-3 (other than on Form S-3ASR)
under the Securities Act, or any successor form thereto.
“Form S-3ASR” means an “automatic shelf” registration statement on Form S-3 filed by a
Well-Known Seasoned Issuer.
“Form S-4” means a registration statement on Form S-4 under the Securities Act, or any
successor form thereto.
“Form S-8” means a registration statement on Form S-8 under the Securities Act, or any
successor form thereto.
“Holder” means any Investor Stockholder that beneficially owns any Registrable
Securities and any of their respective assignees pursuant to the terms hereof.
“incur” means, directly or indirectly, to incur, refinance, create, assume, guarantee
or otherwise become liable.
“Issuer Free Writing Prospectus” shall have the meaning set forth in Rule 433 of the
Securities Act.
“Nasdaq” means The NASDAQ Stock Market, or any successor thereto.
“NASD” means the National Association of Securities Dealers, Inc.
“Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, governmental authority or other entity.
“Preferred Stock” means the shares of preferred stock, par value $0.001 per share, of
the Company and any securities issued in respect thereof, or in substitution therefor, in
connection with any stock split, dividend or combination, or any reclassification,
recapitalization, merger, consolidation, exchange or other similar reorganization.
“Prospectus” means the prospectus included in any registration statement, including
any preliminary prospectus, any final prospectus and any such prospectus as amended or supplemented
by any prospectus supplement, including any such prospectus supplement with respect to the terms of
the offering of any portion of the Registrable Securities covered by a registration statement, and
by all other amendments and supplements to a prospectus, including post-effective amendments, and
in each case including all materials incorporated by reference therein.
“Registrable Securities” means (i) the Conversion Shares held by any Holder or
issuable upon the conversion of Series B Preferred Stock or Series C Preferred Stock held by the
Holders, (ii) the Warrant Shares held by any Holder or issuable upon the exercise of Warrants held
by the Holders, and (iii) any Common Stock or other securities which may be issued, converted,
exchanged or distributed in respect thereof, or in substitution therefor, in connection with any
stock split,
dividend or combination, or any recapitalization, reclassification, merger, consolidation,
exchange or other similar reorganization with respect to the Conversion Shares or the Warrant
Shares, as the case may be. As to any particular Registrable Securities, once issued, such
Registrable Securities shall cease to be Registrable Securities when (i) a registration statement
with respect to the sale by the Holder of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance with such registration
statement, (ii) such securities shall have been distributed to the public pursuant to Rule 144, or
(iii) such securities shall have ceased to be outstanding. For purposes of this Agreement, any
required calculation of the amount of, or percentage of, Registrable Securities shall be based on
the number of shares of Common Stock which are Registrable Securities, including shares issuable
upon the conversion, exchange or exercise of any security convertible, exchangeable or exercisable
into Common Stock (including the Series B Preferred Stock, the Series C Preferred Stock and the
Warrants).
“Registration Expenses” means any and all expenses incident to performance of or
compliance with ARTICLE II, including (i) all SEC and securities exchange or NASD registration and
filing fees (including, if applicable, the fees and expenses of any “qualified independent
underwriter,” as such term is defined in Section 2720 of the bylaws of the NASD, and of its
counsel), (ii) all fees and expenses of complying with securities or blue sky laws (including fees
and disbursements of counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities and any escrow fees), (iii) all printing, messenger and delivery expenses,
(iv) all fees and expenses incurred in connection with the listing of the Registrable Securities on
any securities exchange, (v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits and/or “cold comfort”
letters required by or incident to such performance and compliance, (vi) the reasonable fees and
disbursements of counsel selected pursuant to Section 2.10 not to exceed $50,000 in connection with
any registration statement, (vii) any fees and disbursements of underwriters customarily paid by
the issuers, including liability insurance if the Company so desires, and (viii) the reasonable
expenses incurred by the Company or any underwriters in connection with any “road show” undertaken
pursuant to Section 2.1 or Section 2.4(q).
“Restricted Period” shall mean the period of time from the Closing Date to the earlier
of (i) the Restricted Period Termination Date (as defined in the Amended and Restated Stockholders’
Agreement) and (ii) the consummation of a Fundamental Event (as defined in the Amended and Restated
Stockholders’ Agreement).
“Rule 144” means Rule 144 under the Securities Act (or any successor rule).
“SEC” means the U.S. Securities and Exchange Commission or any other federal agency
then administering the Securities Act or the Exchange Act and other federal securities laws.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Series B Certificate of Designation” means the Certificate of Designation with
respect to the Series B Preferred Stock, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
“Series B Conversion Shares” means the shares of Common Stock that may be issued upon
the conversion of the Series B Preferred Stock as provided for in the Series B Certificate of
Designation.
“Series B Preferred Stock” means the Preferred Stock of the Company that is designated
as Series B Convertible Preferred Stock and any securities issued in respect thereof, or in
substitution therefor, in connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization
(other than the Series B Conversion Shares upon conversion thereof as contemplated by the Series B
Certificate of Designation).
“Series C Certificate of Designation” means the Certificate of Designation with
respect to the Series C Preferred Stock, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
“Series C Conversion Shares” means the shares of Common Stock that may be issued upon
the conversion of the Series C Preferred Stock as provided for in the Series C Certificate of
Designation.
“Series C Preferred Stock” means the Preferred Stock of the Company that is designated
as Series C Convertible Preferred Stock and any securities issued in respect thereof, or in
substitution therefor, in connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization
(other than the Series C Conversion Shares upon conversion thereof as contemplated by the Series C
Certificate of Designation).
“Transfer” means, directly or indirectly, to sell, transfer, assign, pledge, encumber,
hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any
contract, option or other arrangement or understanding with respect to the sale, transfer,
assignment, pledge, encumbrance, hypothecation or similar disposition of, any shares of Equity
Securities beneficially owned by a Person or any interest in any shares of Equity Securities
Beneficially Owned by a Person. For purposes of clarity, a conversion of the shares of Series B
Preferred Stock or Series C Preferred Stock into Conversion Shares is not a Transfer.
“Underwritten Offering” means any Marketed Underwritten Offering, Underwritten Shelf
Take-Down or other underwritten offering pursuant to Section 2.2.
“Warrants” means the warrants issued by the Company pursuant to the Securities
Purchase Agreement and any securities issued in respect thereof, or in substitution therefor, in
connection with any stock split, dividend or combination, or any reclassification,
recapitalization, merger,
consolidation, exchange or other similar reorganization (other than the Warrant Shares upon
exercise thereof).
“Warrant Shares” means the shares of Common Stock that may be issued upon the exercise
of the Warrants.
“Well-Known Seasoned Issuer” has the meaning set forth in Rule 405 under the
Securities Act.
EXHIBIT D
PALM, INC.
AMENDED AND RESTATED STOCKHOLDERS’ AGREEMENT
Dated
as of [__]
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page |
|
ARTICLE 1 |
|
|
|
|
Definitions |
|
|
|
|
|
|
|
|
|
Section 1.1. Certain Defined Terms |
|
|
1 |
|
Section 1.2. Other Capitalized Terms |
|
|
2 |
|
Section 1.3. Effectiveness of This Agreement |
|
|
2 |
|
|
|
|
|
|
ARTICLE 2 |
|
|
|
|
Corporate Governance And Information Rights |
|
|
|
|
|
|
|
|
|
Section 2.1. Board Representations |
|
|
2 |
|
Section 2.2. Board Committees |
|
|
6 |
|
Section 2.3. Information Rights |
|
|
7 |
|
Section 2.4. Confidentiality |
|
|
8 |
|
Section 2.5. Investor Director Expenses |
|
|
9 |
|
Section 2.6. D&O Insurance |
|
|
9 |
|
Section 2.7. Election of Directors; Quorum |
|
|
9 |
|
Section 2.8. Notices Regarding Ownership and Investor Director Entitlement |
|
|
9 |
|
Section 2.9. VCOC Investor Stockholders |
|
|
11 |
|
|
|
|
|
|
ARTICLE 3 |
|
|
|
|
Transfers |
|
|
|
|
|
|
|
|
|
Section 3.1. Transfer Restrictions |
|
|
12 |
|
Section 3.2. Legends; Securities Act Compliance |
|
|
15 |
|
|
|
|
|
|
ARTICLE 4 |
|
|
|
|
Certain Covenants |
|
|
|
|
|
|
|
|
|
Section 4.1. Right to Maintain |
|
|
16 |
|
Section 4.2. Standstill |
|
|
17 |
|
Section 4.3. Indemnification |
|
|
20 |
|
Section 4.4. Regulatory Matters |
|
|
21 |
|
Section 4.5. Company Rights Agreement |
|
|
21 |
|
Section 4.6. Section 16 Matters |
|
|
23 |
|
|
|
|
|
|
ARTICLE 5 |
|
|
|
|
Miscellaneous |
|
|
|
|
|
|
|
|
|
Section 5.1. Termination |
|
|
24 |
|
|
|
|
|
|
|
|
Page |
|
Section 5.2. Expenses |
|
|
24 |
|
Section 5.3. Successors and Assigns; Assignment |
|
|
24 |
|
Section 5.4. No Third Party Beneficiaries |
|
|
24 |
|
Section 5.5. Entire Agreement |
|
|
25 |
|
Section 5.6. Severability |
|
|
25 |
|
Section 5.7. Amendment and Waiver |
|
|
25 |
|
Section 5.8. Delays or Omissions |
|
|
25 |
|
Section 5.9. Notices |
|
|
26 |
|
Section 5.10. Interpretation |
|
|
26 |
|
Section 5.11. Governing Law; Jurisdiction; Waiver of Jury Trial |
|
|
27 |
|
Section 5.12. Specific Performance; No Special Damages |
|
|
27 |
|
Section 5.13. Counterparts |
|
|
28 |
|
|
|
|
|
|
EXHIBIT A — Defined Terms |
|
|
|
|
ii
AMENDED AND RESTATED STOCKHOLDERS’ AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS’ AGREEMENT (this “Agreement”) is entered into
as of [___] among Palm, Inc., a Delaware corporation (the “Company”),
Elevation Partners, L.P., a Delaware limited partnership (“Elevation”), and Elevation
Employee Side Fund, LLC, a Delaware limited liability company (“Side Fund” and, together
with Elevation and their respective Permitted Transferees, the “Investor Stockholders”).
RECITALS
WHEREAS, the Company and Elevation entered into a Preferred Stock Purchase Agreement and
Agreement and Plan of Merger, dated as of June 1, 2007 (the “Series B Purchase Agreement”),
pursuant to which the Investor Stockholders purchased an aggregate of 325,000 shares (the
“Series B Purchased Shares”) of the Company’s Series B Preferred Stock (as defined below)
for an aggregate purchase price of $325 million on October 24, 2007;
WHEREAS, the Company and Elevation entered into a Securities Purchase Agreement, dated as of
December 22, 2008 (as amended from time to time in accordance with the provisions thereof, the
“Series C Purchase Agreement”), pursuant to which the Investor Stockholders have agreed, on
the terms and subject to the conditions set forth in such Series C Purchase Agreement, to purchase
100,000 shares (the “Series C Purchased Shares,” and together with the Series B Purchased
Shares, the “Purchased Shares”) of the Company’s Series C Preferred Stock (as defined
below) and warrants (the “Warrants”) exercisable for 7,000,000 Warrant Shares (as defined
below) for an aggregate purchase price of $100 million;
WHEREAS, the parties hereto entered into a Stockholders’ Agreement, dated as of October 24,
2007 (the “Series B Stockholders’ Agreement”), with respect to certain arrangements
relating to the Company, the Series B Purchased Shares and the Series B Conversion Shares (as
defined below);
WHEREAS, the parties hereto desire to amend and restate the Series B Stockholders’ Agreement
to change certain arrangements relating to the Series B Purchased Shares and provide for certain
arrangements relating to the Company, the Series C Purchased Shares, the Series C Conversion
Shares, the Warrants and the Warrant Shares.
NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises
hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1. Certain Defined Terms. Certain terms used herein shall have the meanings given
to them in Exhibit A.
1
Section 1.2. Other Capitalized Terms. Capitalized terms used but not defined herein or in
Exhibit A shall have the meanings given to them in the Series C Purchase Agreement.
Section 1.3. Effectiveness of This Agreement. This Agreement amends and restates the terms
of the Series B Stockholders’ Agreement in their entirety. Such amendment and restatement of the
Series B Stockholders’ Agreement shall have effect as of the Closing unless expressly stated
otherwise. Notwithstanding any other provision to the contrary in this Agreement, this Agreement
shall not take effect until the Closing and in the event that the Series C Purchase Agreement is
terminated, this Agreement shall be void ab initio and the Series B Stockholders’ Agreement shall
remain in full force and effect.
ARTICLE 2
Corporate Governance And Information Rights
Section 2.1. Board Representations.
(a) Immediately Following the Effective Time. Effective as of the time immediately
following the Closing and for so long as the Board Representation Entitlement is greater than
zero (0) (the “Director Entitlement Period”), (i) the Investor Stockholders shall have the
right to designate or appoint that number of Directors (each, an “Appointed Director”)
equal to the Board Representation Entitlement, and (ii) upon a designation of any Additional
Directors (as defined below) that satisfy the specifications set forth in clauses (A) and (B) of
Section 2.1(d)(ii), the Company agrees to take all necessary actions to effectuate the election of
such Additional Directors to the Board as soon as reasonably practicable and in any event by the
later of (x) January 15, 2009 and (y) five (5) business days upon receipt of such designation. The
Investor Stockholders agree and acknowledge that Xxxx Xxxxxxxx and Xxxxx XxXxxxx will continue to
serve on the Board as Appointed Directors, and the Company agrees and acknowledges that each such
designee meets the specifications set forth in clauses (B) and (C) of Section 2.1(d)(i).
(b) During the Director Entitlement Period. During the Director Entitlement Period,
each Appointed Director designated, nominated or appointed by the Investor Stockholders or any of
their Affiliates shall be subject to the limitations set forth in Section 2.1(d) and Section
2.1(f). In addition, upon the occurrence of an increase in the authorized number of directors then
constituting the Board that results in an increase in the Board Representation Entitlement to a
number greater than the number of Appointed Directors then serving on the Board, the Investor
Stockholders shall have the right to designate or appoint that number of additional Appointed
Directors such that the total number of Appointed Directors (after giving effect to such
designation or appointment) shall be equal to the Board Representation Entitlement at such time.
(c) After the Director Entitlement Periods. After the Director Entitlement Period
(and subject in each case to the limitations set forth in Section 2.1(d):
2
(i) Right of Nomination. The Investor Stockholders shall have the right,
subject to the limitations in this Section 2.1(c), at each annual or special meeting of
stockholders of the Company at which Directors are to be elected, to designate a number of
Investor Directors, and the Company shall nominate and recommend for election at such
meeting, a number of Investor Directors such that if such Investor Directors are elected by
the stockholders of the Company at such meeting, the number of Investor Directors on the
Board shall be equal to the Investor Director Entitlement. The Company agrees to use the
same efforts to cause the Investor Director designees of the Investor Stockholders to be
elected to the Board as it uses to cause other nominees of the Company or the Board to be
elected.
(ii) Uncured Share Ownership Reduction; Board Size Decrease. Upon the
occurrence of an Uncured Share Ownership Reduction, the Investor Stockholders at the
expiration of the applicable Share Ownership Reduction Cure Period shall cause one or more
Investor Directors, as applicable, to immediately resign from the Board such that following
such resignation(s), the number of Investor Directors on the Board shall be equal to the
Investor Director Entitlement as of the time immediately following the Share Ownership
Reduction Cure Period. In addition, upon a Board Size Decrease, the Investor Stockholders
shall cause one or more Investor Directors, as applicable, to immediately resign from the
Board such that following such resignation(s), the number of Investor Directors on the Board
shall be equal to the Investor Director Entitlement as of the time immediately following the
occurrence of the Board Size Decrease, provided that if the Board Size Decrease goes
into effect during a Share Ownership Reduction Cure Period, then such resignation
requirement shall not take effect until the expiration of such Share Ownership Reduction
Cure Period, provided that upon such expiration, the Investor Director Entitlement
is less than the number of Investor Directors then serving on the Board. Upon the reduction
of the Investor Director Entitlement to zero (0) pursuant to clause (A) of the definition
thereof, the Investor Stockholders will promptly cause all Investor Directors to resign from
the Board, unless otherwise requested in writing by or on behalf of the Board.
(iii) Vacancy. In the event that a vacancy is created at any time with respect
to a Board seat held by an Investor Director by reason of the death, disability, retirement,
resignation or removal (with or without cause) of such Investor Director, the Investor
Stockholders may designate or nominate, as applicable, another individual to be elected to
fill the vacancy created thereby, and the Company shall use its reasonable best efforts to
take at any time and from time to time, all actions necessary to accomplish the same, but in
any case, only to the extent required to maintain the then applicable Investor Director
Entitlement. For the avoidance of doubt, this Section 2.1(c)(iii) does not apply to any
vacancy arising as a result of failure of an Investor Director who has been nominated and
recommended in accordance with this Section 2.1(c) to be elected, but any such failure to
be elected shall in no way affect the right of the Investor Stockholders to designate,
nominate or appoint another individual in replacement thereof as a nominee for Investor
Director with respect to the next election. In addition, upon the occurrence
3
of an increase in the authorized number of directors then constituting the Board that
results in an increase in the Investor Director Entitlement to a number greater than the
number of Investor Directors then serving on the Board, the Investor Stockholders shall have
the right to designate, and subject to this Section 2.1(c), the Board shall appoint, that
number of additional individuals to serve as Investor Directors such that the total number
of Investor Directors (after giving effect to such designation) shall be equal to the
Investor Director Entitlement at such time;
provided, that if after the Closing there is a change in the applicable rules of the
Exchange on which the Common Stock is listed at the time such change becomes effective that would
cause the Common Stock to be delisted by such Exchange as a result of the terms of this clause (c),
the voting rights of the holders of the Series B Preferred Stock and Series C Preferred Stock set
forth in this clause (c) shall thereafter be limited to the extent required by such changed rules
for the Common Stock to continue to be listed on such Exchange.
(d) Limitations on Appointed Directors.
(i) Except as provided in Section 2(d)(ii), each Appointed Director shall, at all times
during which such Person serves as a Director, (A) be a present or former full-time general
partner, managing director or principal of Elevation Management, LLC, (B) not be (or be a
representative of or otherwise affiliated with) a direct competitor of the Company as
determined in good faith by the Board, and (C) otherwise be reasonably acceptable (in terms
of suitability) to the Company’s Nominating and Governance Committee as determined in good
faith in the discharge of its fiduciary duties. The Investor Stockholders shall not
nominate or appoint any such Appointed Director who does not meet the specifications set
forth in this Section 2.1(d)(i) and shall cause any such Appointed Director to immediately
resign if such director fails to meet either of the requirements set forth in clauses (i)(A)
or (i)(B) above.
(ii) If and to the extent the number of Appointed Directors is more than two (any such
Appointed Director in excess of two, an “Additional Director”), each Additional
Director may be a Person employed by, or be a present or former full-time general partner,
managing director or principal of, Elevation or any of its Affiliates (an “Elevation
Person”) so long as such Elevation Person has relevant operating, industry or other
expertise; provided, however, that unless otherwise agreed in writing by the
Company, Elevation shall use commercially reasonable efforts to replace each Additional
Director who is an Elevation Person as soon as reasonably practicable with a designee that
shall (x) not be an Elevation Person and (y) have relevant operating, industry or other
expertise. Each Additional Director shall, at all times during which such Person serves as
a Director, (A) not be (or be a representative of or otherwise affiliated with) a direct
competitor of the Company as determined in good faith by the Board and (B) otherwise be
reasonably acceptable (in terms of suitability) to the Company’s Nominating and Governance
Committee as determined in good faith in the discharge of its fiduciary duties. The
Investor Stockholders shall not nominate or appoint any such Additional
4
Director who does not meet the specifications set forth in this Section 2.1(d)(ii) and
shall cause any such Additional Director to immediately resign if such director fails to
meet the requirement set forth in clause (ii)(A) above.
(e) Limitations on Other Investor Directors. Any Investor Director who is not an
Appointed Director shall, at all times during which such Person serves as a Director, meet the
specifications set forth in either Section 2.1(d)(i) for Appointed Directors or Section
2.1(d)(ii) for Additional Directors. The Investor Stockholders shall not nominate or appoint any
Investor Director who does not meet the specifications set forth in either Section 2.1(d)(i) for
Appointed Directors or Section 2.1(d)(ii) for Additional Directors and shall cause any such
Investor Director to immediately resign if such Investor Director fails to meet the requirement set
forth in either clause (B) of Section 2.1(d)(i) or clause (A) of Section 2.1(d)(ii).
(f) Notification Regarding Directors. The Investor Stockholders shall notify the
Company in writing of each proposed Appointed Director a reasonable time in advance of any action
taken for the purpose of electing or appointing such Appointed Director, to fill a vacancy and of
the mailing of any proxy statement, information statement or registration statement in which any
Board nominee or Board member of the Company would be named (which in the event of any proxy
statement relating to an annual meeting of stockholders of the Company shall be no later than 30
days prior to the first anniversary of the mailing of the proxy statement related to the previous
year’s annual meeting of stockholders), together with all information concerning such nominee
reasonably requested by the Company, so that the Company may determine whether such nominee
complies with the above qualifications and so that the Company can comply with applicable
disclosure rules; provided that in the absence of such notice, the Investor Stockholders
shall be deemed to have designated or nominated the same Investor Directors as set forth in the
most recent notice delivered to the Company pursuant to this Section 2.1(f).
(g) Fundamental Change. The rights granted to the Investor Stockholders under this
Section 2.1 shall survive a Fundamental Change to the extent that the Investor Stockholders
continue to Beneficially Own in the aggregate, excluding Shared Beneficial Ownership, no less than
7.5% of the Total Current Voting Power of the Survivor of a Fundamental Change, provided
that for all purposes of this Section 2.1, the board of directors of the Survivor of a Fundamental
Change shall be substituted for the Board. The Investor Stockholders shall cause all Appointed
Directors and/or Investor Directors to resign from the Board effective upon the occurrence of a
Fundamental Change to the extent that either (i) the Investor Stockholders are no longer entitled
to designate or nominate such directors as a result of this Section 2.1(g) or (ii) the Company is
not the Survivor of such Fundamental Change. To the extent that the Company is not the Survivor of
a Fundamental Change and the Investor Stockholders would be entitled to nominate or designate a
member to the board of directors or similar governing body of the Survivor of a Fundamental Change
pursuant to Section 2.1(c)(i) (substituting the Survivor of a Fundamental Change for the Company
therein) and this Section 2.1(g), such Survivor of a Fundamental Change shall cause one (1)
designee of the Investor Stockholders to be elected or appointed to the board of directors or
equivalent governing body of the Survivor of a
5
Fundamental Change promptly following the Fundamental Change. In the event the Investor
Stockholders at any time cease to Beneficially Own in the aggregate, excluding Shared Beneficial
Ownership, at least 7.5% of the Total Current Voting Power of the Survivor of a Fundamental Change,
all rights granted under this Section 2.1 shall cease and the Investor Stockholders shall cause
all Appointed Directors and/or Investor Directors to promptly resign from the board of directors or
equivalent governing body of the Survivor of a Fundamental Change.
(h) Advance Resignation Letters. The Company and any Survivor of a Fundamental Change
may implement the resignation provisions of this Section 2.1 by requiring, prior to or after
becoming a member of the Board (with respect to the Company) or the board of directors or similar
governing body (with respect to the Survivor of a Fundamental Change), each Appointed Director
and/or Investor Director to execute and deliver an undated resignation letter to the Secretary of
the Company or the Survivor of a Fundamental Change, as the case may be, which the Company and/or
the Survivor of a Fundamental Change agrees shall not be dated or become effective until such time
as an Investor Director’s and/or Appointed Director’s resignation is required pursuant to this
Section 2.1.
(i) Exercise of Rights. Unless otherwise agreed in writing by the Investor
Stockholders (which agreement shall be delivered to the Company as a condition to its
effectiveness), the Board designation and nomination rights pursuant to this Section 2.1 will be
exercised by Elevation.
Section 2.2. Board Committees. Subject to the requirements of applicable Law, the Exchange
on which the Company’s securities are then traded and Committee Qualification Requirements, for as
long as there is an Appointed Director or the Investor Director Entitlement is not zero, the
Investor Stockholders shall be entitled to designate or nominate at least one (1) Appointed
Director or Investor Director (as the case may be) and the Board shall appoint such director, to
serve on each standing committee of the Board, except that where the requirements of applicable
Law, the rules of the Exchange on which the Company’s securities are then traded or Committee
Qualification Requirements prescribe certain qualifications for such service on a standing
committee of the Board and such Appointed Director or Investor Director, as applicable, does not
meet such qualifications (excluding, for this purpose, the “exceptional and limited circumstances”
exception under the Marketplace Rules of Nasdaq), the Investor Stockholders shall be entitled to
have at least one (1) Appointed Director or Investor Director be an observer to such Board
committee who will not be a member, voting or otherwise, of such Board committee. Notwithstanding
any such observer status, any Board committee may hold executive sessions at which the observer is
not permitted to be present and may withhold information from the observer in order to avoid any
conflict of interest or in light of corporate governance concerns, or to comply with applicable
Laws, and rules of the Exchange on which the Company’s securities are then traded, in each case as
reasonably determined in good faith by such Board committee.
6
Section 2.3. Information Rights.
(a) Subject to Section 2.3(b) and Section 2.4, during the Information Rights Period, the
Company will deliver to the Investor Stockholders or an Investor Director the following
information:
(i) on an annual basis and promptly after it has been made available (but no later than
30 days before the beginning of each fiscal year), (A) an annual budget of the Company, (B)
a business plan of the Company, and (C) financial forecasts for the next fiscal year of the
Company, in each case, solely to the extent and in such manner and form prepared by or for
the Company’s Board;
(ii) on an annual basis and promptly after it has been made available (but no later
than 60 days after the end of each fiscal year), annual unaudited financial and operating
reports of the Company, solely to the extent and in such manner and form prepared by or for
the Board;
(iii) on a quarterly basis and promptly after it has been made available (but in no
event later than 35 days after the end of each quarter), unaudited quarterly financial and
operating reports of the Company, solely to the extent and in such manner and form prepared
by or for the Board;
(iv) final drafts of monthly management and operating reports of the Company as
reasonably requested by the Investor Stockholders solely to the extent and in such manner
and form prepared by or for the Company’s chief executive officer and/or provided to the
Board; and
(v) such other financial, management and operating reports reasonably requested by the
Investor Stockholders solely to the extent and in such manner and form prepared for the
Board.
(b) If during the Information Rights Period the Company is no longer obligated to file an
annual report on Form 10-K or quarterly report on Form 10-Q with the SEC, the Company shall deliver
the following to the Investor Stockholders or an Investor Director in such manner and form as
customarily provided to the Board:
(i) as soon as practicable after the end of each fiscal year of the Company, and in any
event within ninety (90) days thereafter (to the extent practicable), (A) a consolidated
balance sheet of the Company and its Subsidiaries as of the end of such fiscal year and
consolidated statements of income and cash flows of the Company and its Subsidiaries for
such year, prepared in accordance with GAAP and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail and followed
promptly thereafter (to the extent it shall be available) with the opinion of the
independent registered public accounting firm selected by the Company’s Audit Committee with
respect to such financial statements; and
7
(ii) in lieu of providing the information required under Section 2.3(a)(iii), as soon
as practicable after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days thereafter (to
the extent practicable), an unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of each such quarterly period, and unaudited consolidated
statements of income and cash flows of the Company and its Subsidiaries for such period and
for the current fiscal year to date, prepared in accordance with GAAP and setting forth in
comparative form the figures for the corresponding periods of the previous fiscal year,
subject to changes resulting from normal year-end audit adjustments, all in reasonable
detail, except that such financial statements need not contain the notes required by GAAP.
Section 2.4. Confidentiality. The Investor Stockholders agree to and shall cause each of
their Affiliates to (i) keep confidential (x) all proprietary and non-public information regarding
the Company and its Subsidiaries received pursuant to Section 2.3 or otherwise hereunder, whether
through an Appointed Director, an Investor Director or otherwise, and (y) all “Confidential
Information” (as defined in the Confidentiality Agreement) provided to the Investor
Stockholders or their Affiliates or representatives under the Confidentiality Agreement prior to
the termination of such Confidentiality Agreement on October 24, 2007 pursuant to the terms of the
Series B Purchase Agreement (clauses (x) and (y) collectively, “Confidential Information”),
and in each case not to disclose or reveal any such information to any Person without the prior
written consent of the Company other than those of its directors, general partner and officers,
attorneys, accountants and financial advisors (“Permitted Representatives”) who need to
know such information for the purpose of evaluating, monitoring or taking any other action with
respect to the investment by the Investor Stockholders in the Series B Preferred Stock, the
Series C Preferred Stock or Common Stock and to cause those Permitted Representatives to observe
the terms of this Section 2.4 and agree for the benefit of the Company to do so and (ii) not to
use such proprietary and non-public information for any purpose other than in connection with
evaluating, monitoring or taking any other action with respect to the investment by the Investor
Stockholders in the Series B Preferred Stock, Series C Preferred Stock or Common Stock (it being
understood that none of the Investor Stockholders or any Affiliate shall contravene applicable Laws
with respect to xxxxxxx xxxxxxx; provided that nothing herein shall prevent the Investor
Stockholders or any Affiliate from disclosing any such information that (1) is or becomes generally
available to the public in accordance with Law other than as a result of a disclosure by the
Investor Stockholders, any Affiliate, Permitted Representatives, Affiliates or subsidiaries of
Investor Stockholders or in violation of this Section 2.4 or any other confidentiality agreement
between the Company and such Person or any other legal duty, fiduciary duty, or other duty of trust
and confidence, of such Person, (2) was within the Investor Stockholders’ or an Affiliate’s
possession or developed by it prior to being furnished with such information (provided that
the source of such information was not bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to or other duty of trust and
confidence to, the Company with respect to such information), (3) becomes available to the Investor
Stockholders or an Affiliate on a non-confidential basis from a source other than the Company
(provided that such source is not bound
8
by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of
confidentiality to or other duty of trust and confidence to, the Company with respect to such
information), or (4) is required to be disclosed by Law or Order (provided that prior to
such disclosure, the Investor Stockholders or such Affiliate shall, unless prohibited by Law or
Order, promptly notify the Company of any such disclosure, use reasonable efforts to limit the
disclosure requirements of such Law or Order, and maintain the confidentiality of such information
to the maximum extent permitted by Law or Order).
Section 2.5. Investor Director Expenses. The Company shall reimburse each Appointed
Director and each Investor Director for their reasonable out of pocket expenses incurred for the
purpose of attending meetings of the Board or committees thereof, in accordance with the Company’s
reimbursement policy in effect from time to time.
Section 2.6. D&O Insurance. During the period that an Appointed Director or Investor
Director is a Director, such Director shall be entitled to benefits under any director and officer
insurance policy maintained by the Company to the same extent as any similarly situated Directors.
Section 2.7. Election of Directors; Quorum.
(a) During the Standstill Period, at every meeting (or action by written consent, if
applicable) of the stockholders of the Company called, and at every postponement or adjournment
thereof, each Investor Stockholder agrees to, and agrees to cause each Permitted Transferee to, in
each case subject to the Company’s compliance with Section 2.1 in connection with such meeting (or
action by written consent) and vote any and all shares of Common Stock Beneficially Owned by it or
them (subject to the Maximum Voting Percentage), or to cause any such shares to be voted (in each
case to the extent such Common Stock Beneficially Owned by it or them is eligible to so vote), at
the election of each Investor Stockholder, in its sole discretion, in connection with any election
or removal of Directors in (i) the manner recommended by the Board with respect to the election or
removal of each Director, or (ii) the same proportion as the votes of all stockholders of the
Company other than Elevation and its Affiliates present in person or by proxy at the meeting with
respect to the election or removal of each Director.
(b) During the Standstill Period, at every meeting (or action by written consent, if
applicable) of the stockholders of the Company called, and at every postponement or adjournment
thereof, each Investor Stockholder agrees to, and agrees to cause each Permitted Transferee to,
cause any and all shares of Common Stock Beneficially Owned by it or them and entitled to be voted
thereat to be present in person or represented by proxy at the meeting so that all such shares
shall be counted as present for determining the presence of a quorum at such meeting.
Section 2.8. Notices Regarding Ownership and Investor Director Entitlement.
(a) Until such time as the Investor Director Entitlement is zero (0), the Investor
Stockholders shall provide prompt written notice to the Company reasonably prior to, if
9
practicable, but in any event within two (2) days after, any Transfer by the Investor
Stockholders of any Purchased Shares, Conversion Shares, Warrants or Warrant Shares and shall state
in such notice the material terms of such Transfer and an accurate accounting of the resulting
Beneficial Ownership (including what portion thereof is Shared Beneficial Ownership) of the
Investor Stockholders immediately following such Transfer. In addition, the Investor Stockholders
will comply with the requirements set forth in Section 3.1(g). If the Investor Stockholders
Transfer (other than pursuant to a bona fide pledge, but not a foreclosure thereon and other than
to one or more Permitted Transferees) and/or convert into Common Stock a majority of the Purchased
Shares, or if the Investor Stockholders Transfer (other than pursuant to a bona fide pledge, but
not a foreclosure thereon and other than to one or more Permitted Transferees) and/or exercise for
Common Stock a majority of the Warrants, the Investor Stockholders shall promptly (and in any event
within two (2) days) notify the Company in writing. If the Company reasonably believes that the
Investor Stockholders have Transferred (other than pursuant to a bona fide pledge, but not a
foreclosure thereon, and other than to one or more Permitted Transferees) and/or converted a
majority of the Purchased Shares, or have Transferred (other than pursuant to a bona fide pledge,
but not a foreclosure thereon, and other than to one or more Permitted Transferees) and/or
exercised a majority of the Warrants, it shall provide written notice, and the Investor
Stockholders shall promptly confirm in writing whether or not they have so Transferred and/or
converted a majority of the Purchased Shares or Transferred and/or exercised a majority of the
Warrants.
(b) If the Company believes in good faith that there has been a reduction in the Investor
Director Entitlement or the Board Representation Entitlement due to either (i) a Share Ownership
Reduction or (ii) a Board Size Decrease, it shall provide written notice (the “Company
Notice”) to the Investor Stockholders setting forth the Company’s calculation in reasonable
detail of the Elevation Beneficial Ownership Percentage, and based on such Elevation Beneficial
Ownership Percentage, the then applicable Investor Director Entitlement or Board Representation
Entitlement, as the case may be. If in response to the Company Notice, the Investor Stockholders
determine to acquire Beneficial Ownership of additional shares of Common Stock during the Share
Ownership Reduction Cure Period, then within the Share Ownership Reduction Cure Period, the
Investor Stockholders shall provide additional written notice (the “Additional Notice”) to
the Company informing the Company of (i) whether or not they acquired Beneficial Ownership of a
sufficient number of shares of Common Stock within the Share Ownership Reduction Cure Period to
allow them to retain the Investor Director Entitlement or Board Representation Entitlement, as the
case may be, as of immediately prior to the reduction of the Investor Director Entitlement or Board
Representation Entitlement, as the case may be, that would otherwise occur (the result of such
acquisitions, a “Beneficial Ownership Cure”), and (ii) the Elevation Beneficial Ownership
of the date of the Additional Notice. Failure by the Investor Stockholders to provide the
Additional Notice within the Share Ownership Reduction Cure Period shall be deemed confirmation
that there has been the reduction in Investor Director Entitlement or Board Representation
Entitlement, as the case may be, set forth in the Company Notice. Nothing in this Section 2.8 is
intended to modify the restrictions set forth in Section 4.2 or the Standstill Limit.
10
Section 2.9. VCOC Investor Stockholders.
(a) With respect to each Investor Stockholder that is an Elevation Entity or a Controlled
Affiliate of an Elevation Entity (for so long as they are Controlled Affiliates thereof), in each
case that is intended to qualify as a “venture capital operating company” as defined in the Plan
Asset Regulations, that holds Series B Preferred Stock, Series C Preferred Stock or Conversion
Shares (each, a “VCOC Investor Stockholder”), at the written request of such VCOC Investor
Stockholder, the Company shall, with respect to each such VCOC Investor Stockholder:
(i) provide such VCOC Investor Stockholder or its designated representative with the
following: (1) the right to visit and inspect any of the offices and properties of the
Company and its Subsidiaries and inspect and copy the books and records of the Company and
its Subsidiaries, as the VCOC Investor Stockholder shall reasonably request; (2) copies of
the information set forth in Section 2.3(a); and (3) copies of all materials provided to
the Board; and
(ii) make appropriate officers and members of the Board available periodically and at
such times as reasonably requested by such VCOC Investor Stockholder for consultation with
such VCOC Investor Stockholder or its designated representative with respect to matters
relating to the business and affairs of the Company and its Subsidiaries, including
significant changes in management personnel and compensation of employees, introduction of
new products or new lines of business, important acquisitions or dispositions of plants and
equipment, significant research and development programs, the purchasing or selling of
important trademarks, licenses or concessions or the proposed commencement or compromise of
significant litigation;
The Company reserves the right to withhold any information and restrict access pursuant to
clauses (i) and (ii) above (A) to the extent such information or access could adversely affect the
attorney-client privilege between the Company and its counsel, (B) to any VCOC Investor Stockholder
that is not a party to this Agreement, unless such VCOC Investor Stockholder agrees to be bound by,
but not benefit from, the obligations under this Agreement as an Investor Stockholder, or (C) to
any VCOC Investor Stockholder that is a direct competitor of the Company.
(b) The Company agrees to consider, in good faith, the recommendations of each VCOC Investor
Stockholder or its designated representative in connection with the matters on which it is
consulted as described above, recognizing that the ultimate discretion with respect to all such
matters shall be retained by the Company.
11
ARTICLE 3
Transfers
Section 3.1. Transfer Restrictions.
(a) No Investor Stockholder shall Transfer any shares of Series B Preferred Stock or Series C
Preferred Stock, Conversion Shares, Warrants or Warrant Shares other than as expressly permitted
by, and in compliance with, the other provisions of this Section 3.1. Notwithstanding anything
herein to the contrary, the restrictions set forth in this Section 3.1 shall terminate upon the
consummation of a Fundamental Change.
(b) Subject to Section 3.1(d), prior to the six (6) month anniversary of the Closing Date
(the “Restricted Period Termination Date”), no Investor Stockholder shall Transfer any
shares of Series B Preferred Stock or Series C Preferred Stock, Conversion Shares, Warrants or
Warrant Shares, other than as expressly permitted by, and in compliance with, the following
provisions of this Section 3.1(b):
(i) An Investor Stockholder may Transfer any or all of its shares of Series B Preferred
Stock or Series C Preferred Stock, Conversion Shares, Warrants or Warrant Shares (A) to the
Company or any of its Subsidiaries or (B) pursuant to any tender offer, exchange offer,
merger, reclassification, reorganization, recapitalization or other similar transaction in
which stockholders of the Company are offered, permitted or required to participate as
holders of any of the Company’s Capital Stock, provided that such transaction is an
Approved Transaction which, to the extent of any Transfer of Series B Preferred Stock or
Series C Preferred Stock, provides for such Series B Preferred Stock or Series C Preferred
Stock to receive consideration no greater than the higher of (x) the consideration on a per
share as-converted basis deliverable with respect to the Common Stock and (y) the Regular
Liquidation Preference.
(ii) An Investor Stockholder may Transfer any or all of its shares of Series B
Preferred Stock or Series C Preferred Stock, Conversion Shares, Warrants or Warrant Shares
to any Permitted Transferee of such Investor Stockholder; provided that such
Permitted Transferee (A) agrees to be bound hereunder as an Investor Stockholder, (B) agrees
that the representations, covenants and other agreements made by the assignor herein shall
be deemed to have been made by such Transferee, (C) shall execute a counterpart to this
Agreement, the execution of which shall constitute such Transferee’s agreement to the terms
of this Section 3.1(b)(ii), and (D) agrees that all notices hereunder to it may be
delivered to Elevation on its behalf. Upon such a Transfer, the Permitted Transferee shall
be deemed an Investor Stockholder hereunder and shall be entitled to the rights, and subject
to the obligations and restrictions, contained herein.
(iii) The Investor Stockholders may, solely for the purpose of securing bona fide
indebtedness for borrowed money (a “Secured Loan”) from any bank or financial
institution (“Lenders”), make a bona fide pledge of any or all of the Purchased
Shares, Conversion Shares, Warrants or Warrant Shares and such Lenders may execute a bona
12
fide foreclosure upon such Purchased Shares, Conversion Shares, Warrants or Warrant
Shares upon the terms and subject to the conditions set forth in any such Secured Loan,
provided that any pledge or other contractual encumbrance or foreclosure resulting
from a Secured Loan (including an obligation to repay such Secured Loan with the proceeds of
any Transfer of, or dividend or distribution on, any shares of Series B Preferred Stock or
Series C Preferred Stock, Conversion Shares, Warrants or Warrant Shares) shall not be deemed
to be a Transfer associated with such shares of Series B Preferred Stock or Series C
Preferred Stock, Conversion Shares, Warrants or Warrant Shares; provided,
however, that the aggregate principal amount of all outstanding Secured Loans of the
Investor Stockholders may not exceed 30% of the aggregate fair market value, on the date of
the incurrence of any such Secured Loan, of all of the Purchased Shares, Conversion Shares,
Warrants and/or Warrant Shares pledged to secure such indebtedness.
(iv) The Investor Stockholders shall Transfer shares of Series C Preferred Stock and
Warrants to the extent required pursuant to, and in accordance with, Section 2.3 of the
Series C Purchase Agreement.
As used herein, “Approved Transaction” means any tender offer, exchange offer, merger, sale of
the Company, reclassification, reorganization, recapitalization or other transaction that either
(x) has been approved or recommended by the Board (and which at the time of Transfer continues to
be approved or recommended by the Board) or (y) has not been effectively precluded by operation of
the Company Rights Agreement because either (1) the Board has taken action such that the acquiring
person in such transaction would not be an “Acquiring Person” (as defined in the Company Rights
Agreement or its comparable term/provision under any successor or substitute shareholder rights
plan) or such that the “Distribution Date” (as defined in the Company Rights Agreement or its
comparable term/provision under any successor or substitute shareholder rights plan) would not
occur in connection with such transaction or the Rights will otherwise not effectively preclude
such transaction or (2) an Order has been issued invalidating or enjoining operation of the Company
Rights Agreement in respect of such transaction. To the extent that any tender offer is
effectively precluded by operation of the Company Rights Agreement, the Company will take such
actions under its control as are reasonably requested by the Investor Stockholders so as to enable
the Investor Stockholders to timely tender into such offer prior to expiration thereof (including
any extensions thereto), shares of Common Stock that would be received upon conversion of the
Series B Preferred Stock or Series C Preferred Stock or exercise of the Warrants, in each case in
the event the tender offer is no longer effectively precluded, without requiring conversion of the
Series B Preferred Stock or Series C Preferred Stock or exercise of the Warrants, in each case
until after such time as such tender offer is no longer effectively precluded.
(c) After the Restricted Period Termination Date, the Investor Stockholders shall have the
right to Transfer any shares of Series B Preferred Stock or Series C Preferred Stock, Conversion
Shares, Warrants or Warrant Shares without restriction hereunder, subject to the provisions of
Section 2.8, Section 3.1(d), Section 3.1(e), Section 3.1(f), Section 3.1(g) and Section 3.2,
provided that in the case of any Transfer to a Permitted Transferee, such
13
Permitted Transferee (i) agrees to be bound hereunder as an Investor Stockholder, (ii) agrees that the
representations, covenants and other agreements made by the assignor herein shall be deemed to have
been made by such Transferee, (iii) shall execute a counterpart to this Agreement, the execution of
which shall constitute such Transferee’s agreement to the terms of this Section 3.1(c), and (iv)
agrees that all notices hereunder to it may be delivered to Elevation on its behalf. Upon such a
Transfer, the Permitted Transferee shall be deemed an Investor Stockholder hereunder and shall be
entitled to the rights, and subject to the obligations and restrictions, contained herein.
(d) No Investor Stockholder may, together with its Affiliates, in any single transaction or
series of related transactions, whether on, before or after the Restricted Period Termination Date,
Transfer to any Person or group of related Persons (other than Permitted Transferees) shares of
Series B Preferred Stock or Series C Preferred Stock, Conversion Shares, Warrants or Warrant Shares
to the extent such Person or group of related Persons would, to the knowledge of such Investor
Stockholder after due inquiry (it being understood that due inquiry shall not be required in
circumstances where the purchaser in a sale transaction is not reasonably identifiable, such as in
a “brokers’ transaction” as defined in Rule 144 under the Securities Act), upon completion of the
Transfer of such Conversion Shares Beneficially Own more than ten percent (10%) of the outstanding
Common Stock, unless such Transfer (i) has been approved by, or is in connection with a transaction
approved or recommended by, the Board, (ii) is made pursuant to a tender offer, exchange offer,
merger, consolidation or similar transaction that is an Approved Transaction, or (iii) is to an
underwriter or placement agent in a Public Offering, provided that such underwriter or
placement agent implements reasonable protections to the extent practicable so that such offering
will not be made to, and would not reasonably facilitate the acquisition of Common Stock by, a
Person or group of related Persons who after such offering would Beneficially Own more than 10% of
the Common Stock. To the extent that any tender offer is not an Approved Transaction, the Company
will take such actions under its control as are reasonably requested on a non-public basis and in
compliance with Section 4.2 by the Investor Stockholders so as to enable the Investor Stockholders
to timely tender into such offer prior to expiration thereof (including any extensions thereto),
shares of Common Stock that would be received upon conversion of the Series B Preferred Stock or
Series C Preferred Stock or upon exercise of the Warrants, in the event the tender offer becomes an
Approved Transaction, without requiring conversion of the Series B Preferred Stock or Series C
Preferred Stock or exercise of the Warrants until after such time as such tender offer is an
Approved Transaction.
(e) Any Transfer not made in accordance with this Section 3.1 shall be null and void and of
no force or effect regardless of whether the proposed Transferee had actual or constructive
knowledge of the Transfer restrictions set forth herein, and no such proposed Transfer will be
recorded on the stock transfer books of the Company.
(f) (i) Subject to applicable Law, the Investor Stockholders (other than the Appointed
Directors and the Investor Directors with respect to any Equity Securities held directly by such
Persons, or indirectly by such Persons through family trusts, or similar arrangements or held
directly by family members sharing the same household as the Appointed Director or Investor
14
Director) will not be subject to the Company’s trading policies requiring pre-clearance or
limiting trading to specified dates (it being understood that this is not intended to modify the
rights or obligations set forth in the Amended and Restated Registration Rights Agreement), and
(ii) the Investor Stockholders acknowledge their obligation hereunder not to Transfer shares of
Series B Preferred Stock or Series C Preferred Stock, Conversion Shares, Warrants or Warrant Shares
in contravention of applicable Law, including each of Section 10(b) and Rule 10b-5 of the Exchange
Act.
(g) The Investor Stockholders will comply with the Transfer notice provisions of Section 2.8.
In addition, during the Information Rights Period, the Investor Stockholders will provide the
Company with at least 24 hours advance notice (which notice must be delivered on a Business Day) of
any Transfer (other than a Transfer to a Permitted Transferee) to be made during a period when the
Company’s directors and executive offices are prohibited by Company policies from effecting any
Transfer.
(h) The Investor Stockholders shall not be subject to any restrictions on Transfer other than
as set forth in this Agreement, applicable Law and to the extent applicable, the Amended and
Restated Registration Rights Agreement.
Section 3.2. Legends; Securities Act Compliance.
(a) Each certificate representing Conversion Shares and each certificate representing Warrant
Shares will bear a legend conspicuously thereon to the following effect:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED
OR EXEMPT FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS. IN ADDITION, THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A STOCKHOLDERS’ AGREEMENT AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT.”
(b) In addition to the restrictions set forth in Section 3.1, the Investor Stockholders and
each Permitted Transferee shall not offer, sell or legally transfer any shares of Series B
Preferred Stock or Series C Preferred Stock, the Conversion Shares, the Warrants or the Warrant
Shares except pursuant to: (i) an effective registration statement under the Securities Act; (ii)
an opinion of legal counsel reasonably acceptable to the Company that such Transfer is exempt from
the registration requirements of Section 5 of the Securities Act; (iii) pursuant to Rule 144; or
(iv) a “no action” letter from the staff of the SEC addressed to the Investor Stockholders or a
Permitted Transferee to the effect that the Transfer without registration would not result in a
recommendation by the staff to the SEC that action be taken with respect thereto.
(c) In the event that any Conversion Shares or Warrant Shares are Transferred in a Public
Offering, the Company shall promptly, upon request, but in any event not later than is
15
necessary in order to consummate the sale of such securities pursuant to such Public Offering,
remove the legend set forth above in connection with such Transfer. In the event that any
Conversion Shares or Warrant Shares are Transferred pursuant to Rule 144, the Company shall upon
request, upon receipt of documentation reasonably required by the Company to confirm such Investor
Stockholder’s eligibility to sell such Conversion Shares or Warrant Shares pursuant to Rule 144,
promptly but in any event not later than is necessary in order to consummate the sale of such
securities pursuant to Rule 144 (subject to receipt of such documentation a reasonable period of
time prior to such sale), remove the second sentence of the legend set forth above in connection
with such Transfer.
(d) In the event that any shares of Series B Preferred Stock or Series C Preferred Stock,
Conversion Shares, Warrants or Warrant Shares are Transferred in compliance with Section
3.1(b)(i), the Company shall promptly, upon request, but in any event not later than is necessary
in order to consummate such Transfer, remove the second sentence of the legend set forth above in
connection with such Transfer.
(e) In the event that any Conversion Shares or Warrant Shares become transferable pursuant to
Rule 144(k) under the Securities Act and the terms of this Section 3.2 no longer restrict the
Transfer of such Conversion Shares or Warrant Shares by the holder thereof, the Company shall
promptly upon request remove the legends set forth above from the certificates representing such
Conversion Shares or Warrant Shares.
(f) Upon the termination of the restrictions set forth in Section 3.1, the Company shall
promptly, upon request, deliver a replacement certificate not containing the second sentence of the
legend set forth above.
ARTICLE 4
Certain Covenants
Section 4.1. Right to Maintain. During the Right to Maintain Period:
(a) The Company shall provide the Investor Stockholders the opportunity to purchase in any
Offering of the type described in clause (ii) of the definition of “Offering” (which is not also of
the type described in clause (i) of the definition of “Offering”), and shall use its reasonable
best efforts to provide the Investor Stockholders the opportunity to purchase in any Offering of
the type described in clause (i) of the definition of “Offering”, up to their respective Pro Rata
Shares; provided, however, in no event shall the Investor Stockholders be entitled
to purchase an amount of Equity Securities in any such Offering that would cause Section 4.2 to be
violated.
(b) The Company shall send a written or electronic notice (the “Offering Notice”) in a
manner it deems reasonably appropriate under the circumstances (which notice may or may not be in
the same manner contemplated by Section 5.9) to Elevation on behalf of the Investor
16
Stockholders at the latest address or e-mail address known to the Company, indicating (i) the
number of Equity Securities expected to be offered and the material terms of such Equity
Securities, (ii) the expected price at which it proposes to offer such Equity Securities, or the
expected formula for determining such price, (iii) the expected timing of the Offering, and (iv)
the name, telephone and facsimile number or e-mail address of the Person at the Company to whom the
Investor Stockholders should deliver a Response Notice (as defined below). To the extent that the
Company in good faith determines that the process for the Investor Stockholders’ exercise of their
rights pursuant to this Section 4.1 delays or impairs the Company’s ability to access the public
markets at will, the Company shall notify the Investor Stockholders, and the Company and the
Investor Stockholders will negotiate in good faith to modify such process to the extent practicable
so that it no longer causes such delay or impediment (it being understood that no such negotiation
shall impair or delay any impending Offering and any Offering may be consummated during such
negotiations without giving the Investor Stockholders the right to participate).
(c) As promptly as practicable after its receipt of the Offering Notice, the Investor
Stockholders shall provide the Company with written notice indicating its desire to purchase Equity
Securities in the Offering, and indicating the name, telephone number, facsimile number or e-mail
address of the Person or Persons that the underwriter(s) of the Offering should call to coordinate
with respect to any sales to such purchaser (the “Response Notice”). If the Investor
Stockholders or a Permitted Transferee shall fail to provide the Company with a Response Notice
prior to the earlier to occur of (i) six hours before the pricing of the Offering, and (ii) one
Business Day prior to the date of the expected Offering as set forth in the Offering Notice, then
the Investor Stockholders shall not be given the opportunity to purchase Equity Securities in the
Offering. In any event, it shall be a condition to the Investor Stockholders’ or a Permitted
Transferee’s opportunity to purchase Equity Securities in an Offering that it comply with the
reasonable requests of the underwriter(s) necessary for it to purchase shares in the Offering
(e.g., establishing an account with an underwriter in the Offering). The rights of the Investor
Stockholders under this Section 4.1 shall not modify the restrictions set forth in Section 4.2
with respect to the then applicable Standstill Limit.
(d) Without limiting the generality of the foregoing, with respect to an Offering of the type
described in clause (i) of the definition of “Offering”, the Company and the Investor Stockholders
will comply with the provisions of the Amended and Restated Registration Rights Agreement to the
extent the provisions of such Amended and Restated Registration Rights Agreement are then
applicable.
Section 4.2. Standstill.
(a) During the Standstill Period, except as required in connection with the execution,
delivery or performance of this Agreement and the consummation of the transactions pursuant to the
Series C Purchase Agreement, the Investor Stockholders shall not, and the Investor Stockholders
shall ensure that none of the Elevation Entities or their respective Affiliates shall, nor shall
any of the foregoing Persons act in concert with any other Person to:
17
(i) except (x) as a result of the Beneficial Ownership of or exercise of any Rights,
(y) for the receipt of any Capital Stock, rights or other securities from the Company
pursuant to the terms of the Series B Preferred Stock, Series C Preferred Stock or Warrants
(or the exercise or conversion of any such Capital Stock rights or other securities),
including any increase in the number of shares of Common Stock issuable upon conversion or
exercise of the Series B Preferred Stock, Series C Preferred Stock or Warrants as a result
of any anti-dilution or other terms thereof or the exercise of rights pursuant to Section
4.1 hereof and (z) Equity Securities issued to Appointed Directors or Investor Directors in
their capacities as such, if any, (A) acquire any Economic Right or Beneficial Ownership of
Equity Securities or (B) authorize or make a tender offer, exchange offer or other offer or
proposal, whether oral or written, to acquire Equity Securities, in each case, if the effect
of such acquisition would be that the Common Stock Beneficially Owned in the aggregate by
the Investor Stockholders and their Affiliates (including, without limitation, any 13D Group
of which any Investor Stockholder or any Affiliate thereof is a member) would exceed the
Standstill Limit, provided that for purposes of calculating the number of shares of
Common Stock Beneficially Owned by the Investor Stockholders and their Affiliates, there
shall be excluded from such calculation shares of Common Stock Beneficially Owned by
Affiliates of the Investor Stockholders that are not also Beneficially Owned by the Investor
Stockholders, up to a maximum number of shares of Common Stock that will be excluded
pursuant to this clause equal to one percent (1%) of the Diluted Common Shares Outstanding;
(ii) (A) solicit or participate in any solicitation of proxies with respect to any
Voting Stock, or (B) seek to advise or influence any Person with respect to the voting of
any Voting Stock (other than (x) the Investor Stockholders or any Affiliate or (y) other
than in accordance with and consistent with the recommendation of the Board);
provided, that the limitation contained in this clause (ii) shall not apply to any
proposal recommended by the Board relating to a Change in Control of the Company to be voted
on by the Company’s stockholders that is not instituted or proposed by any Investor
Stockholder or any Affiliate of any Investor Stockholder or any 13D Group of which any
Investor Stockholder or any Affiliate of an Investor Stockholder is a member;
(iii) deposit any Voting Stock in a voting trust or, except as otherwise provided or
contemplated herein, subject any Voting Stock to any arrangement or agreement with any
Person with respect to the voting of such Voting Stock;
(iv) join a 13D Group (other than a group comprising solely of the Investor
Stockholders and their Permitted Transferees) or other group, or otherwise act in concert
with any third Person for the purpose of acquiring, holding, voting or disposing of Voting
Stock or Non-Voting Convertible Securities;
(v) effect or seek, offer or propose (whether publicly or otherwise) to effect any
Change in Control of the Company;
18
(vi) effect or seek, offer or propose (whether publicly or otherwise) to effect any
recapitalization (other than the Merger), restructuring, liquidation, dissolution or other
transaction with respect to the Company or any of its Subsidiaries;
(vii) authorize or take any action to permit any Affiliate of Elevation to be named as
a director candidate on a proxy or ballot of any other Person other than the proxy or ballot
of the Company with the recommendation of the Board;
(viii) otherwise act, alone or in concert with others, to effect or seek, offer or
propose (whether publicly or otherwise) to effect control of the management, Board or
policies of the Company or to seek a waiver of any provision of this Agreement or the voting
and conversion limits set forth in the Series B Certificate of Designation and Series C
Certificate of Designation; provided, however, that no action by an
Appointed Director or Investor Director (solely in their capacities as such) shall be deemed
to violate this Section 4.2(a)(viii);
(ix) take any action that results in the Investor Stockholders having to file or amend
a Schedule 13D indicating an intention, plan or proposal to do any of the foregoing; or
(x) otherwise take any action that would or could reasonably be expected to compel the
Company to make a public announcement regarding any of the matters set forth in this
Section 4.2.
(b) If, at any time during the Standstill Period, (i) the Company has entered into a
definitive agreement, the consummation of which would result in a Fundamental Change, or (ii) any
Person shall have commenced and not withdrawn a bona fide public tender or exchange offer which if
consummated would result in a Fundamental Change and the Board has not recommended that its
stockholders reject such offer within the time period contemplated by Rule 14d-9, for so long as
such condition continues to apply, the limitation on the actions described in clauses (a)(ii),
(a)(iii), (a)(iv) (and any related acquisition of Beneficial Ownership solely by being part of a
group shall be exempt from (a)(i)), (a)(v), (a)(vi), (a)(ix) and (a)(x) above shall not be
applicable to the Investor Stockholders (but all other provisions of this Agreement will, subject
to Section 4.2(c), continue to apply).
(c) Anything in this Section 4.2 to the contrary notwithstanding, this Section 4.2 shall not
prohibit or restrict any actions taken by the Investor Stockholders’ designee or designees on the
Board in their capacities as a member of the Board and in compliance with and subject to his or her
fiduciary duties as a member of the Board.
(d) The Investor Stockholders agree that during the Standstill Period they will not directly
or indirectly propose, effect or agree to any transaction which if consummated would result in a
Change of Control of the Company in which the acquiring counterparty is (i) an Investor Stockholder
or an Affiliate of an Investor Stockholder or (ii) a member of a 13D Group of which an Investor
Stockholder or an Affiliate of an Investor Stockholder is also a member, in
19
each case unless such transaction is approved by (or in the case of a tender or exchange
offer, is conditioned on the receipt of tenders from), the holders of a majority of the outstanding
shares of Common Stock not Beneficially Owned by the Investor Stockholders or any of their
affiliates (as defined in Section 12b-2 of the Exchange Act).
Section 4.3. Indemnification.
(a) The Company shall defend, indemnify and hold harmless the Investor Stockholders and each
Investor Stockholder Controlling Person and their respective directors, officers, employees and
agents, in their respective capacities as such (the “Indemnitees”) against any
out-of-pocket: costs, penalties, judgments, awards, disbursements, amounts paid in settlement or
compromise and expenses (including reasonable attorneys’ fees and expenses) (collectively
“Damages”) arising out of or resulting from any governmental or third party allegations or
claim commenced or made on or after October 24, 2007 against such Indemnitee relating to any act or
omission (or alleged act or omission) by the Company or any of its Subsidiaries (each such claim, a
“Vicarious Claim”), including any Damages arising out of or relating to any federal, state
or other securities law arising out of or relating to any offer or sale of securities by the
Company or its Subsidiaries, provided that the Company will not be liable for any such
Damages to the extent that such Damages are judicially determined to have resulted primarily from
an Indemnitee’s express acts or omissions that are in bad faith or constitute willful misconduct,
and upon such a judicial determination the Investor Stockholders will, and will cause each other
Indemnitee to, promptly reimburse the Company for any amounts previously paid by the Company for
which the Company is not liable pursuant to the terms of this Section 4.3. At the Company’s
request, the Investor Stockholders and the other Indemnitees shall consent to the entry of a
judgment or enter into any settlement with respect to any Vicarious Claim to which they are parties
provided that such judgment or settlement includes an unconditional release of each Indemnitee with
respect to such Vicarious Claim without imposing any obligations or liabilities on any Indemnitee.
The Investor Stockholders and the other Indemnitees shall not consent to the entry of a judgment or
enter into any settlement of claims against them in any Vicarious Claim without the written consent
of the Company, not to be unreasonably withheld. Notwithstanding anything in this Section 4.3 to
the contrary, the Damages shall not include any lost profits based on the potential appreciation of
or hypothetical investment returns on the Series B Preferred Stock, Series C Preferred Stock,
Conversion Shares, Warrants or Warrant Shares.
(b) The rights of any Indemnitee to indemnification hereunder will be in addition to any other
rights any such Person may have under any other agreement or instrument to which such Indemnitee is
or becomes a party or is or otherwise becomes a beneficiary or under law or regulation or under the
certificate of incorporation or bylaws of the Company or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary contained in this Agreement, for purposes of this
Section 4.3, the term “Indemnitees” shall not include any Person who is an officer, director or
employee of the Company or any of the Company’s Subsidiaries in such capacity as an officer,
director or employee.
20
Section 4.4. Regulatory Matters. If necessary, at the request of an Investor Stockholder,
the Company shall promptly make any and all filings which it is required to make under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the “HSR Act”), for the
conversion of the Purchased Shares into the Conversion Shares, the exercise of the Warrants for the
Warrant Shares and the exercise of the rights pursuant to Section 4.1, and the Company agrees to
furnish the Investor Stockholders with such necessary information and reasonable assistance as the
Investor Stockholders may reasonably request, in connection with its preparation of any necessary
filings or submissions to the Federal Trade Commission or the Antitrust Division of the U.S.
Department of Justice, including, without limitation, any filings or notices necessary under the
HSR Act. The Company shall pay or reimburse all expenses and fees payable to governmental
authorities in connection with filings made pursuant to this Section 4.4.
Section 4.5. Company Rights Agreement. During the Standstill Period, the Company agrees
that it shall not take any action to amend, modify or supplement the Company Rights Agreement (as
amended by the Rights Agreement Amendment), or adopt, propose or implement any other shareholder
rights plan, in each case such that (a) the Rights become exercisable, (b) a Distribution Date (as
defined in the Company Rights Agreement or its comparable term/provision under any successor or
substitute shareholder rights plan) occurs, or (c) the Investor Stockholders or any of their
Affiliates becomes an Acquiring Person (as defined in the Company Rights Agreement or its
comparable term/provision under any successor or substitute shareholder rights plan), in each case
due to the Beneficial Ownership by the Investor Stockholders and their Affiliates of the Purchased
Shares, Conversion Shares, Warrants, Warrant Shares and any other Equity Securities, so long as
none of the Investor Stockholders, the Elevation Entities or any of their respective Affiliates, or
any of the foregoing Persons acting in concert with any other Person, shall acquire any Economic
Rights or Beneficial Ownership of Equity Securities if the effect of such acquisition would be that
the Common Stock Beneficially Owned in the aggregate by the Investor Stockholders and their
Affiliates (including, without limitation, any 13D Group of which any Investor Stockholder or any
Affiliate thereof is a member) would exceed the Standstill Limit as may be in effect from time to
time (regardless of the termination of the Standstill Period or any other provision of this
Agreement), except (x) as a result of the Beneficial Ownership of or exercise of any Rights, (y)
the receipt of any Capital Stock, rights or other securities from the Company pursuant to the terms
of the Series B Preferred Stock, the Series C Preferred Stock or the Warrants (or the exercise or
conversion of any such Capital Stock rights or other securities) and (z) Equity Securities issued
to Appointed Directors or Investor Directors in their capacities as such, if any, provided
that for purposes of calculating the number of shares of Common Stock Beneficially Owned by the
Investor Stockholders and their Affiliates, there shall be excluded from such calculation shares of
Common Stock Beneficially Owned by Affiliates of the Investor Stockholders that are not also
Beneficially Owned by the Investor Stockholders up to the maximum number of shares of Common Stock
that will be excluded pursuant to this clause equal one percent (1%) of the Diluted Common Shares
Outstanding. It is agreed that for purposes of the Company Rights Agreement, if and to the extent
that a Person is deemed not to be considered an Affiliate of an Investor Stockholder under the
definition of “Affiliate” in Exhibit A hereto, such Person shall
21
not be considered an “Affiliate” or “Associate” of an Investor Stockholder under the Company
Rights Agreement (i.e., definitions of “Acquiring Person” and “Beneficial Owner”, respectively), or
any successor or substitute therefor. It is agreed that to the extent that any Person (a
“Contracting Party”) who is not an Investor Stockholder, Elevation Entity or Affiliate thereof, and
who is not a member of any 13D Group of which any Investor Stockholder, Elevation Entity or
Affiliate thereof is a member, enters into an agreement, arrangement or understanding with an
Investor Stockholder, Elevation Entity or Affiliate thereof with respect to the purchase or sale
from or to such Contracting Party of any Series B Preferred Stock, Series C Preferred Stock,
Conversion Shares, Warrants, Warrant Shares or other Equity Securities (the securities that are the
subject of such purchase/sale arrangement, “Subject Securities”), which agreement,
arrangement or understanding is not in violation of the provisions of Section 4.2(a) (without
regard to Section 4.2(b)) (to the extent directly relating to such purchase/sale, an
“Unrelated Contract”), then (i) such Contracting Party and its affiliates and associates
shall not be deemed to beneficially own (as defined in the Company Rights Agreement or its
comparable term/provision under any successor or substitute shareholder rights plan) by virtue of
such Unrelated Contract any Series B Preferred Stock, Series C Preferred Stock, Conversion Shares,
Warrants, Warrant Shares or other Equity Securities held by any Investor Stockholder, Elevation
Entity or Affiliate thereof, other than the Subject Securities, and (ii) no Investor Stockholder,
Elevation Entity or Affiliate thereof shall be deemed to beneficially own (as defined in the
Company Rights Agreement or its comparable term/provision under any successor or substitute
shareholder rights plan) by virtue of such Unrelated Contract any Series B Preferred Stock,
Series C Preferred Stock, Conversion Shares, Warrants, Warrant Shares or other Equity Securities
held by the Contracting Party or its associates and affiliates, other than any Subject Securities
(it being understood, for the purposes of clarity, that this sentence shall not in any way exclude
from operation of the Company Rights Agreement (or its comparable term/provision under any
successor or substitute shareholder rights plan) the effects of (A) any other agreement,
arrangement or understanding with respect to the acquisition, disposition, holding or voting of any
Equity Securities other than the purchase or sale, as applicable, of the Subject Securities and/or
(B) any acting in concert by any Persons with respect to the acquisition, disposition, holding or
voting of any Equity Securities other than the purchase or sale, as applicable, of the Subject
Securities. To the extent that any Series B Preferred Stock, Series C Preferred Stock, Conversion
Shares, Warrants, Warrant Shares or other Equity Securities held by any Investor Stockholder,
Elevation Entity or Affiliate thereof are subject to any bona fide pledge (but not a foreclosure
thereon) or contractual encumbrance (collectively, “Encumbrances”) resulting from a bona
fide incurrence of indebtedness for money borrowed that is not entered into with the intent or
purpose of effecting any action that would otherwise be prohibited by Section 4.2(a) or Article 3
(“Loans”) from any bank or financial institution (a “Loan Party”) (such securities,
“Pledged Securities”), (x) no Loan Party or any of its associates or affiliates shall be
deemed to beneficially own (as defined in the Company Rights Agreement or its comparable
term/provision under any successor or substitute shareholder rights plan) by virtue of any such
Encumbrances or agreements (to the extent directly relating to such Loans) any such Pledged
Securities except any Equity Securities acquired by such Lender as a result of the foreclosure on
such Pledged Securities and (y) no Investor Stockholder, Elevation Entity or Affiliate thereof
shall be deemed to beneficially own (as defined in the Company Rights Agreement or its comparable
22
term/provision under any successor or substitute shareholder rights plan) any Series B
Preferred Stock, Series C Preferred Stock, Conversion Shares, Warrants, Warrant Shares or other
Equity Securities held by any Loan Party or any of its associates or affiliates by virtue of any
such Encumbrances, or such agreements (to the extent directly relating to such Loans). In
furtherance of the foregoing, during the Standstill Period, the Company shall in connection with
any amendment, modification or supplement to this Agreement (the terms or provisions so amended,
modified or supplemented, the “Amended Terms”), take such action as necessary to amend,
modify or supplement the Company Rights Agreement (as amended from time to time), or any other
shareholder rights plan then in effect, in each case to give effect to such Amended Terms (to the
extent applicable) in the Company Rights Agreement, as may be amended or otherwise modified or
supplemented from time to time, or any other shareholder rights plan then in effect,
contemporaneously with such amendment, modification or supplement to this Agreement.
Section 4.6. Section 16 Matters.
(a) During the period commencing on the Closing Date and ending on the day after the later of
(i) the six-month anniversary of the Closing Date and (ii) the six-month anniversary of any
Transfer of shares of Series C Preferred Stock and Warrants required pursuant to, and in accordance
with, Section 2.3 of the Series C Purchase Agreement, the Company agrees that it will not take any
action that would result in an actual or deemed disposition or, if there has been any Transfer of
shares of Series C Preferred Stock and Warrants required pursuant to, and in accordance with,
Section 2.3 of the Series C Purchase Agreement, acquisition of Series B Preferred Stock, Series C
Preferred Stock, Conversion Shares, Warrants, Warrant Shares or other Equity Securities held by any
Investor Stockholder or Elevation Entity subject to the disgorgement of profits pursuant to the
requirements of Section 16(b) of the Exchange Act (assuming in all cases that such Persons would
tender into any transaction described in Section 4.2(b)(ii) or approved by the Board), including
without limitation (x) taking any action to permit, facilitate, exempt or exclude (by amendment,
modification or supplement or otherwise) any Fundamental Change or any tender offer from operation
of the Company Rights Agreement or (y) calling a stockholders meeting to approve or otherwise
consummate any Fundamental Change or any other transaction that would result in such a disposition.
Notwithstanding anything herein to the contrary, the Company shall be permitted to cause the
Transfer of shares of Series C Preferred Stock and Warrants pursuant to, and in accordance with,
Section 2.3 of the Series C Purchase Agreement.
(b) In addition, for the purpose of seeking an exemption under Rule 16b-3 promulgated under
the Exchange Act (“Rule 16b-3), the Company shall, upon receiving reasonable prior notice
from any Investor Stockholder or Elevation Entity, request that the Board or the applicable
committee of the Board approve, in accordance with Rule 16b-3 and SEC no-action letters thereunder,
any acquisitions from, or dispositions to, the Company of Series B Preferred Stock, Series C
Preferred Stock, Conversion Shares, Warrants, Warrant Shares or other Equity Securities, to the
extent made by any Investor Stockholder, Elevation Entity or Affiliate thereof who is or will
become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to
the Company.
23
ARTICLE 5
Miscellaneous
Section 5.1. Termination. This Agreement shall terminate, except for this Article 5 and
Section 4.2 and Section 4.3 which shall survive such termination, as follows: (i) with respect to
a particular Investor Stockholder, on the date that such Investor Stockholder no longer
beneficially owns, and has no contractual or other right to acquire, any shares of Series B
Preferred Stock or Series C Preferred Stock, Conversion Shares, Warrants or Warrant Shares and (ii)
upon the written consent of the parties hereto in such number and manner required for amendments
hereto as provided in Section 5.7.
Section 5.2. Expenses. Except as otherwise provided herein (and except as provided in the
Series C Purchase Agreement), all expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such expenses;
provided, however, that the Company shall reimburse each Investor Stockholder and
its Affiliates for reasonable out-of-pocket expenses incurred in connection with (i) monitoring
their investment in the Purchased Shares and the Conversion Shares, provided that without
the prior written consent of the Company, such reimbursement shall not exceed $50,000 in the
aggregate in any year and (ii) the provision of services to the Company by an Investor Stockholder
or any of its Affiliates as agreed to in writing for such services, from time to time, of the
Company or any of its Subsidiaries.
Section 5.3. Successors and Assigns; Assignment.
(a) Except as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and
administrators of the parties hereto. This Agreement may not be assigned by an Investor
Stockholder or a Permitted Transferee without the prior written consent of the Company, except that
Investor Stockholders and Permitted Transferees may assign their respective rights and obligations
without such consent if a Transfer is made in accordance with Section 3.1(b)(ii).
(b) Notwithstanding anything to the contrary herein, to the extent that the Company is not the
Survivor of a Fundamental Change, the Company shall cause such Survivor of a Fundamental Change to
become a party hereto and bound upon consummation of such Fundamental Change to the provisions of
(i) Section 2.1(c)(i) (substituting the Survivor of a Fundamental Change for the Company) and (ii)
to the extent that any VCOC Investor Stockholder directly or indirectly continues to hold any
Purchased Shares or Conversion Shares, Section 2.9 (substituting the Survivor of a Fundamental
Change for the Company).
Section 5.4. No Third Party Beneficiaries. Except as specifically provided in Section 2.6
(with respect to which the Appointed Directors, Investor Directors and Indemnitees named therein
shall be third party beneficiaries of such provisions), Section 2.9 (with respect to which an
affiliated entity provided therein shall be third party beneficiaries of such provisions), Section
4.3 (with respect to which all Indemnitees shall be third party beneficiaries) and the last
sentence of Section 5.7 (with respect to which holders of Common Stock who are not Investor
24
Stockholders or Affiliates thereof shall be third party beneficiaries), this Agreement is not
intended, and shall not be deemed, to confer any rights or remedies upon any Person other than the
parties hereto or otherwise create any third-party beneficiary hereto.
Section 5.5. Entire Agreement. This Agreement and the other agreements or documents
referred to herein, constitutes the full and entire understanding and agreement among the parties
with respect to the subject matter hereof and supersede any prior understandings, agreements or
representations by or among the parties, written or oral, that may have related to the subject
matter hereof in any way.
Section 5.6. Severability. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
Section 5.7. Amendment and Waiver. No amendment, waiver or other modification of, or
consent under, any provision of this Agreement shall be effective against the Company, unless it is
approved in writing by the Company and no amendment, waiver or other modification of, or consent
under, any provision of this Agreement shall be effective against the Investor Stockholders or a
Permitted Transferee, unless it is approved in writing by Elevation or the Investor Stockholders
Beneficially Owning a majority in interest of the Series B Preferred Stock, Series C Preferred
Stock and Conversion Shares; provided that if any amendment or waiver operates in a manner
that purports by its terms to treat any Investor Stockholder different from other Investor
Stockholders in a manner adverse to such Investor Stockholder, the consent of such Investor
Stockholder shall also be required for such amendment or waiver to be binding on such adversely
affected Investor Stockholder; provided further that the Investor Stockholders or any Permitted
Transferee may waive any rights or provide consent with respect to itself; provided
further that notwithstanding the foregoing, the addition of a Permitted Transferee as a
party hereto in accordance with the terms of Section 3.1(b)(ii) shall not constitute an amendment
hereto and need be signed only by such Permitted Transferee. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding
breach thereof nor of any other agreement or provision herein contained. The Company shall not
amend or waive Section 4.2(d) without the approval of the holders of a majority of the Voting
Stock not Beneficially Owned by the Investor Stockholders or Affiliates thereof.
Section 5.8. Delays or Omissions. It is agreed that no delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach, default or noncompliance by another
party under this Agreement, shall impair any such right, power or remedy, nor shall it be construed
to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or
in any similar breach, default or noncompliance thereafter occurring. It is further agreed that
any waiver, permit, consent or approval of any kind or character on any Investor Stockholder’s or
any Permitted Transferee’s part of any breach, default or noncompliance under this Agreement or any
waiver on such party’s part of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent
25
specifically set forth in such writing. All remedies, either under this Agreement, by law, or
otherwise afforded to any party, shall be cumulative and not alternative.
Section 5.9. Notices. Except as otherwise provided herein, all notices required or
permitted hereunder shall be in writing and shall be deemed effectively given and received: (a)
upon personal delivery to the party to be notified; (b) when sent by confirmed facsimile or e-mail
if sent during normal business hours of the recipient, if not, then on the next business day; or
(c) one (1) business day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications shall be sent, with
respect to the Company, the Investor Stockholders and any Permitted Transferee, to their respective
addresses specified in the Series C Purchase Agreement (or at such other address as any such party
may specify by like notice). The Investor Stockholders will promptly provide the Company with
written notice if at any time an Investor Stockholder or other Permitted Transferee no longer
satisfies the criteria of a Permitted Transferee. Notwithstanding the foregoing, for so long as
the Investor Director Entitlement or Director Representation Entitlement is greater than zero (0),
(i) the Company shall be entitled to deliver all notices required hereunder to Elevation or one
designee designated by Elevation in writing on behalf of all other Investor Stockholders, and (ii)
Elevation or one designee designated in writing by Elevation shall be entitled to act on behalf of
all Investor Stockholders, including for the avoidance of doubt, any Permitted Transferee, with
respect to any action or consent to be taken by an Investor Stockholder hereunder.
Section 5.10. Interpretation. The words “hereof”, “herein” and “hereunder” and words of
like import used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. When reference is made in this Agreement to an Article or
a Section, such reference shall be to an Article or Section of this Agreement, unless otherwise
indicated. The table of contents, table of defined terms and headings contained in this Agreement
are for convenience of reference only and shall not affect in any way the meaning or interpretation
of this Agreement. The language used in this Agreement shall be deemed to be the language chosen
by the parties hereto to express their mutual intent, and no rule of strict construction shall be
applied against any party. Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns
and pronouns shall include the plural, and vice versa. Any reference to any federal, state, local
or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise, and shall include all amendments of the same and
any successor or replacement statutes and regulations as of the Closing Date. All references to
agreements shall mean such agreement as may be amended or otherwise modified from time to time.
Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be
deemed to be followed by the words “without limitation.”
26
Section 5.11. Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed in all respects by the Laws of the State of Delaware.
Any disagreement, issue, dispute, claim, demand or controversy arising out of or relating to this
Agreement (each, a “Dispute”) shall be brought in the Chancery Court of Delaware, so long
as such court shall have subject matter jurisdiction over such Dispute, or if it does not have
subject matter jurisdiction over such Dispute, the United States District Court or other state
court in Delaware having jurisdiction of the Dispute. Each of the parties hereby irrevocably
consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in
any such Dispute and irrevocably waives, to the fullest extent permitted by Law, any objection that
it may now or hereafter have to the laying of the venue of any such Dispute in any such court and
that any such Dispute which is brought in any such court has been brought in an inconvenient forum.
Process in any such Dispute may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 5.9 shall be deemed effective service of
process on such party.
(b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 5.12. Specific Performance; No Special Damages.
(a) The parties hereto agree that the obligations imposed on them in this Agreement are
special, unique and of an extraordinary character, and that, in the event of breach by any party,
damages would not be an adequate remedy and each of the other parties shall be entitled to specific
performance and injunctive and other equitable relief in addition to any other remedy to which it
may be entitled, at law or in equity; and the parties hereto further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any such injunctive or
other equitable relief.
(b) Each party agrees that there shall be no special, exemplary, punitive or multiple damages
connected with or resulting from any breach of this Agreement, or actions undertaken in connection
with or related hereto, including any such damages which are based upon breach of contract, tort,
breach of warranty, strict liability, statute, operation of law or any other theory of recovery,
except to the extent such damages are actually incurred by a party hereunder to a third party, and
hereby waives any rights to claim such damages. For purposes of clarity, the foregoing does not
exclude consequential, indirect or incidental damages. Notwithstanding anything to the contrary in
the foregoing, no damages (including lost profits) based on potential appreciation of the value of
the Common Stock, Series B Preferred Stock, Series C Preferred Stock or Warrants of hypothetical
investment returns or of potential alternative investments shall be taken into account in
determining the amount of damages.
27
Section 5.13. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute one instrument.
[Remainder of Page Intentionally Left Blank.]
28
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders’ Agreement as of the
date first set forth above.
|
|
|
|
|
|
PALM, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
|
|
|
|
|
ELEVATION PARTNERS, L.P.
|
|
|
By: |
Elevation Associates, L.P.,
|
|
|
|
as General Partner |
|
|
|
|
|
|
By: |
Elevation Associates, LLC,
|
|
|
|
as General Partner |
|
|
|
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
|
|
|
|
|
ELEVATION EMPLOYEE SIDE FUND, LLC
|
|
|
By: |
Elevation Management, LLC,
|
|
|
|
its manager |
|
|
|
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
[Stockholders’ Agreement]
EXHIBIT A
Defined Terms
“Affiliate” means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is under common
control with, such specified Person, for so long as such Person remains so associated to the
specified Person. Notwithstanding the foregoing, (i) the Company, its Subsidiaries and its other
controlled Affiliates shall not be considered Affiliates of any Investor Stockholder or their
Permitted Transferees, (ii) the portfolio companies in which the Investor Stockholders, any other
Elevation Entities or any other Elevation Partners investment fund that is Controlled by, or under
common control with, an Elevation Entity have directly or indirectly made a debt or equity
investment shall not be considered Affiliates of the Investor Stockholders or their Permitted
Transferees if the Investor Stockholders, alone, or together with their Permitted Transferees, (x)
in the aggregate Beneficially Own securities that would comprise (upon conversion, exchange or
exercise of any rights, options, warrants or similar securities, if applicable) less than 50% of
the Total Current Voting Power of such portfolio company and (y) do not constitute, nor do they
have the contractual or other legal right to elect, a majority of the members of the board or other
governing body of such portfolio company, unless such portfolio company has received Confidential
Information, directly or indirectly, or has been provided assistance with respect to the
acquisition, holding, voting or disposition of Capital Stock from an Investor Stockholder or any of
its Affiliates or has otherwise acted in concert with an Investor Stockholder or any of its
Affiliates with respect to the acquisition, holding, voting or disposition of Capital Stock and
(iii) a corporation or other entity (a “Specified Entity”) with respect to which (x) none
of the Investor Stockholders or Elevation Entities has directly or indirectly made a debt or equity
investment and (y) none of the Investor Stockholders, alone or together with their Permitted
Transferees, constitute, or have the contractual or other legal right to elect, a majority of the
members of the board or other governing body of such Specified Entity (and which otherwise is not
controlled by an Elevation Entity), but which is an Affiliate of an individual who would be
considered a controlling Affiliate of an Elevation Entity, will not be considered an Affiliate of
the Investor Stockholders or their Permitted Transferees unless such Specified Entity has received
Confidential Information, directly or indirectly or has been provided assistance with respect to
the acquisition, holding, voting or disposition of Capital Stock from an Investor Stockholder or
any of its Affiliates or has otherwise acted in concert with an Investor Stockholder or any of its
Affiliates with respect to the acquisition, holding, voting or disposition of Capital Stock. For
the avoidance of doubt, Permitted Transferees shall be considered Affiliates of the Investor
Stockholders.
“as converted” means, with respect to any Equity Securities owned by any Investor
Stockholder and its Permitted Transferees that are convertible into, or exchangeable or exercisable
for Common Stock, such Equity Securities on an as converted, exchanged or exercised basis.
“Below Market” means (i) the issuance of Common Stock at a price per share less than
95% of the closing sale price of Common Stock on the trading day immediately prior to the date
of a definitive agreement pursuant to which the sale of Common Stock is to occur or (ii) the
issuance of any security convertible into or, exchangeable or exercisable for, Common Stock for a
conversion, exchange or exercise price per share less than 95% of the closing sale price of Common
Stock on the trading day immediately prior to the date of a definitive agreement pursuant to which
the sale of such securities is to occur.
“Beneficial Owner”, “Beneficially Own” and “Beneficial Ownership” have the meaning
given such term in Rule 13d-3 under the Exchange Act, and a Person’s beneficial ownership of
securities will be calculated in accordance with the provisions of such Rule; provided,
however, that (i) a Person will be deemed to be the beneficial owner of any security which
may be acquired by such Person whether within 60 days or thereafter, upon the conversion, exchange
or exercise of any rights, options, warrants or similar securities to subscribe for, purchase or
otherwise acquire (x) capital stock of any person or (y) debt or other evidences of indebtedness,
capital stock or other securities directly or indirectly convertible into or exercisable or
exchangeable for such capital stock of such person and (ii) a Person shall be deemed to be the
beneficial owner of any securities with which a Person has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of such securities.
“Board” means the Board of Directors of the Company.
“Board Representation Entitlement” has the meaning assigned to it in the Series C
Certificate of Designation.
“Board Size Decrease” means a decrease in the authorized number of Directors then
constituting the Board that, as a result thereof results in a reduction of the (i) Board
Representation Entitlement to less than the number of Appointed Directors then serving on the Board
or (ii) Investor Director Entitlement to less than the number of Investor Directors then serving on
the Board.
“Business Day” means any day that is not a Saturday, a Sunday or other day on which
banks are required or authorized by law to be closed in New York, New York.
“Bylaws” means the Bylaws of the Company, as in effect on the Closing Date and as the
same may be amended, supplemented or otherwise modified from time to time in accordance with the
terms thereof and the terms of the Restated Certificate.
“Capital Stock” means any and all shares of capital stock of the Company, including
without limitation, any and all shares of Common Stock and Preferred Stock.
“Change in Control of the Company” means any of the following: (i) a merger,
consolidation or other business combination or transaction to which the Company is a party if the
Voting Stock of the Company immediately prior to the effective date of such merger, consolidation
or other business combination or transaction (or the securities such Voting Stock is converted or
exchanged into), represents less than 50% of the Total Current Voting Power of the
A-2
surviving entity (or its parent) following such merger, consolidation or other business
combination or transaction; (ii) an acquisition by any Person, entity or 13D Group of direct or
indirect Beneficial Ownership of Voting Stock of the Company representing 50% or more of the Total
Current Voting Power of the Company; or (iii) a sale of all or substantially all of the assets of
the Company to any Person or Persons; or (iv) a liquidation or dissolution of the Company.
“Committee Qualification Requirements” shall mean that the Investor Director shall, in
the good faith judgment of the Board, meet at all times during the Investor Director’s service on a
particular committee: (i) all independence requirements applicable to companies listed for
quotation on Nasdaq (or other Exchange if the Company’s shares are listed on another Exchange) for
members of the particular committee, (ii) be free of any relationship that, in the good faith
judgment of the Board, would interfere with the exercise of independent judgment as a member of the
particular committee, (iii) in the case of the Compensation Committee, be a “non-employee director”
(within the meaning of Rule 16b-3) and an “outside director” (within the meaning of Section 162(m)
of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), and (iv) in the
case of the Audit Committee, satisfy the requirements of NASDAQ Marketplace Rule 4350(d)(2) for
serving on the Audit Committee.
“Common Stock” means the Common Stock, par value $0.001 per share, of the Company and
any securities issued in respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any reclassification, recapitalization, merger, consolidation,
exchange or other similar reorganization.
“Company Rights Agreement” means that certain Preferred Stock Rights Agreement, dated
as of September 25, 2000, as amended, between the Company and Computershare Trust Company of New
York, as successor to Equiserve Trust Company, N.A. and Fleet National Bank.
“Confidentiality Agreement” means the agreement, dated October 6, 2006, between the
Company and Elevation Associates, L.P. with respect to confidential information.
“Control” or “Controlled by” have the meaning set forth in Rule 12b-2 of the
Exchange Act.
“Controlled Affiliate(s)” means any Affiliate(s) of Elevation directly or indirectly
Controlled by an Elevation Entity. For the avoidance of doubt, any entity that is not an Affiliate
of an Elevation Entity as a result of the operation of clause (i), (ii) or (iii) of the definition
of “Affiliate” shall not be considered a Controlled Affiliate.
“Conversion Shares” means the Series B Conversion Shares and the Series C Conversion
Shares.
“Diluted Common Shares Outstanding” means the sum of (i) the number of outstanding
shares of Common Stock plus (ii) the number of shares of Common Stock issuable upon the
A-3
conversion of outstanding shares of Series B Preferred Stock and Series C Preferred Stock
plus (iii) the number of shares of Common Stock issuable upon the exercise of the Warrants
plus (iv) the number of shares of Common Stock issuable upon the conversion, exercise,
exchange or issuance of any Equity Securities of the Company sold in any Offering described in
clause (ii) of the definition of Offering. For purposes of determining compliance with Section
4.3 in connection with any acquisition of Beneficial Ownership of shares of Common Stock, the
Investor Stockholders and their Affiliates will be entitled to rely on (and the Diluted Common
Shares Outstanding will be calculated by reference to) the information set forth in the most recent
report on Form 10-Q or 10-K filed with the SEC unless the Company has provided Elevation more
recent information regarding the components of the Diluted Common Shares Outstanding.
“Director” means any member of the Board.
“Dispute” has the meaning assigned to such term in Section 5.11(a).
“Economic Rights” means, with respect to a security, the right to the full pecuniary
interest in the security, including, without limitation, the right to receive dividends and
distributions, proceeds upon liquidation and receive the proceeds of disposition or conversion (if
applicable) of the security.
“Effective Time” means the Effective Time of the Merger (as defined in the Preferred
Stock Purchase Agreement).
“Elevation Beneficial Ownership Percentage” means, at any time, the quotient of (a)
the aggregate number of shares of Common Stock Beneficially Owned, but excluding Shared Beneficial
Ownership of Common Stock, by the Investor Stockholders divided by (b) the sum of (i) the total
number of shares of Common Stock outstanding at such time plus (ii) the number of shares of Common
Stock into which the outstanding shares of Series B Preferred Stock and Series C Preferred Stock
are entitled to convert at such time plus (iii) the number of shares of Common Stock issuable upon
the exercise of the Warrants plus (iv) the number of shares of Common Stock issuable upon the
conversion, exercise, exchange or issuance of any Equity Securities of the Company sold in any
Offering described in clause (ii) of the definition of Offering. For purposes hereof, if a Share
Ownership Reduction Cure Period shall have ever taken place (on one or more occasions), and at the
end of such Share Ownership Reduction Cure Period there is a reduction in the number of Appointed
Directors pursuant to Section 4(d)(iii) of the Series C Certificate of Designation or the number of
Investor Directors pursuant to Section 2.1(d)(ii), then the Elevation Beneficial Ownership
Percentage shall be deemed at any point in time thereafter to be no greater than the lowest
Elevation Beneficial Ownership Percentage that shall have existed at the end of any such Share
Ownership Reduction Cure Period.
“Elevation Entity” means any of: (i) Elevation, (ii) Elevation Employee Side Fund,
LLC, (iii) Elevation Associates, L.P., the sole general partner of Elevation, (iv) Elevation
Associates, LLC, the sole general partner of Elevation Associates, L.P. and of Elevation GP
Participants, LP,
A-4
(v) Elevation GP Participants, LP, a limited partner of Elevation Associates, L.P., and (vi)
Elevation Management, LLC, the sole management company to Elevation, in each case so long as, with
respect to such entity, such entity is under common control with Elevation.
“Elevation Ownership Limit” means the Elevation Beneficial Ownership Percentage at the
close of business on the Closing Date, provided that if any Investor Stockholder effects a
Transfer to any Person other than one or more Permitted Transferees, then on and after the first
day after the end of the fiscal quarter of the Company in which such Transfer occurred (the
“Transfer Quarter”) the Elevation Ownership Limit will equal the Elevation Beneficial
Ownership Percentage at the close of business on the last day of the Transfer Quarter;
provided further, however, that the Elevation Ownership Limit shall never
be higher than the Elevation Beneficial Ownership Percentage at the close of business on the
Closing Date.
“Equity Securities” means any and all shares of Capital Stock of the Company,
securities of the Company convertible into, or exchangeable or exercisable for, such shares, and
options, warrants or other rights to acquire such shares (including the shares of Series B
Preferred Stock and Series C Preferred Stock, the Conversion Shares, the Warrants and the Warrant
Stock).
“Exchange” means the Nasdaq or the New York Stock Exchange, as the case may be.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
“Fundamental Change” has the meaning assigned to it in the Series C Certificate of
Designation.
“GAAP” means generally accepted accounting principles, as in effect in the United
States of America from time to time.
“incur” means, directly or indirectly, to incur, refinance, create, assume, guarantee
or otherwise become liable.
“Information Rights Period” means the period beginning with the Closing Date and
ending when the Investor Director Entitlement is zero (0).
“Investor Director” means any Director designated or nominated for election to the
Board by Investor Stockholders pursuant to Section 2.1.
“Investor Director Entitlement” means, a number of Investor Directors (rounded to the
nearest whole number) equal to the product of (x) the total number of Directors then comprising the
full Board and (y) the lesser of the Maximum Voting Percentage and the Elevation Beneficial
Ownership Percentage; provided, that, notwithstanding the foregoing (A) subject to clause
(B) below, until such time as the Investor Stockholders shall have collectively Transferred (other
than pursuant to a bona fide pledge, but not a foreclosure thereon or to one or more Permitted
A-5
Transferees who continue to be such) more than 70.0% of the aggregate Purchased Shares
(calculated on an as-converted to Common Stock basis) and Conversion Shares to Persons other than
Permitted Transferees who continue to be such (the “70% Transfer Date”), the Investor
Director Entitlement shall in no event be less than one (1) and on and after the 70% Transfer Date,
the Investor Director Entitlement shall mean zero (0), and (B) from and after the first time the
Investor Stockholders cease to Beneficially Own, excluding Shared Beneficial Ownership, at least
7.5% of the Total Current Voting Power of the Survivor of a Fundamental Change, the Investor
Director Entitlement shall thereafter mean zero (0). For purposes of this definition, however,
“Purchased Shares” shall not include any shares of Series C Preferred Stock and Warrants
Transferred pursuant to, and in accordance with, Section 2.3 of the Series C Purchase Agreement.
“Investor Stockholder Controlling Person” shall mean each Person that Controls,
directly or indirectly, an Investor Stockholder.
“Maximum Voting Percentage” has the meaning assigned to it in the Series C Certificate
of Designation.
“Maximum Voting Power” has the meaning assigned to it in the Series C Certificate of
Designation.
“Nasdaq” means The NASDAQ Stock Market, or any successor thereto.
“Non-Constituent Issuer Fundamental Change” has the meaning assigned to it in the
Series C Certificate of Designation.
“Non-Voting Convertible Securities” means any securities which are convertible into,
exchangeable for or otherwise exercisable to acquire Voting Stock of the Company, including
convertible securities, warrants, rights or options to purchase Voting Stock, but excluding
Series B Preferred Stock and Series C Preferred Stock.
“Offering” means (i) a firm commitment underwritten public offering of shares of
Common Stock by the Company, or (ii) any offering of Common Stock or of Equity Securities
convertible into, or exchangeable or exercisable for, Common Stock by the Company (which, for the
avoidance of doubt, shall not be deemed to include any Transfer of shares of Series C Preferred
Stock and Warrants required pursuant to, and in accordance with, Section 2.3 of the Series C
Purchase Agreement) sold Below Market or for consideration per share that is less than the Series C
Conversion Price (as defined in the Series C Certificate of Designation) in effect at the time of
such offering, other than shares of Common Stock or other Equity Securities offered or issued in
strategic acquisitions, for compensatory purposes, or in any commercial or other transaction the
primary purpose of which is other than the raising of additional capital.
“Permitted Transferee” means (i) an Elevation Entity’s directors and officers, (ii)
any Elevation Entity, and (iii) any corporation, partnership or limited liability company which is
and
A-6
continues to be a Controlled Affiliate. In the event that such a corporation, partnership or
limited liability company subsequent to a Transfer hereunder ceases to be a Controlled Affiliate
(as described in clause (iii) above), or in the event that any Elevation Entity ceases to meet the
definition thereof (as described in clause (ii) above) or if an Elevation Entity’s director or
officer ceases to be such (any such event described in this sentence, a “Disqualifying Event”),
such Disqualifying Event shall be considered a Transfer and shall be subject to the terms hereof
with respect thereto, including Section 3.1. In the event of a Disqualifying Event, the Person
that shall have ceased to be a Controlled Affiliate, Elevation Entity, or director or officer shall
cease to be considered an Investor Stockholder or Permitted Transferee for any purpose hereunder or
under the Series B Certificate of Designation or Series C Certificate of Designation, but for all
purposes shall continue to be bound by the provisions of this Agreement as an Investor Stockholder.
“Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, governmental authority or other entity.
“Preferred Stock” means the shares of preferred stock, par value $0.001 per share, of
the Company and any securities issued in respect thereof, or in substitution therefor, in
connection with any stock split, dividend or combination, or any reclassification,
recapitalization, merger, consolidation, exchange or other similar reorganization.
“Pro Rata Share” means, for any Investor Stockholder, such number of Equity Securities
(of the same type as the Equity Securities being sold in the Offering) as shall equal the product
obtained by multiplying (i) the quotient obtained by dividing (A) the number of shares of Common
Stock (on an as converted basis) Beneficially Owned by such Investor Stockholder but excluding
Shared Beneficial Ownership of Common Stock (it being understood that in determining the number of
shares of Capital Stock Beneficially Owned, there shall be no double counting of such shares to the
extent there is shared voting or dispositive power among any Investor Stockholder and any Permitted
Transferee or among Permitted Transferees), by (B) the sum of (x) the number of shares of Common
Stock outstanding as of the most recent practicable date prior to the Offering, (y) the number of
shares of Common Stock into which the outstanding shares of Series B Preferred Stock and Series C
Preferred Stock are then convertible pursuant to the respective terms of the Series B Certificate
of Designation and Series C Certificate of Designation and (z) the number of shares of Common Stock
issuable upon the exercise of the Warrants by (ii) the aggregate number of such Equity Securities
being sold in the Offering.
“Public Offering” means a public offering of shares of Common Stock pursuant to an
effective registration statement (other than on Form X-0, Xxxx X-0 or their equivalent) under the
Securities Act.
“Restated Certificate” means the Amended and Restated Certificate of Incorporation
(including the Series B Certificate of Designation and Series C Certificate of Designation) of the
Company, as in effect on the Closing Date and as the same may be amended, supplemented or
A-7
otherwise modified from time to time in accordance with the terms thereof and the terms of
this Agreement.
“Rights” shall have the meaning given thereto in the Company Rights Agreement (or the
comparable right under any successor or substitute shareholder rights plan).
“Right to Maintain Period” means the period beginning on the Closing Date and ending
upon the earliest to occur of (i) the date that is seven years from the Original Issuance Date (as
defined in the Series C Certificate of Designation) of the Series C Preferred Stock, (ii) the first
date on which the Elevation Beneficial Ownership Percentage ceases to be at least 10.0%, and (iii)
a Fundamental Change.
“Right to Vote” means, with respect to a security, the right to direct the voting of a
security with respect to any matter for which the security is entitled to vote.
“SEC” means the U.S. Securities and Exchange Commission or any other federal agency
then administering the Securities Act or the Exchange Act and other federal securities laws.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Series B Certificate of Designation” means the Certificate of Designation with
respect to the Series B Preferred Stock, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
“Series B Conversion Shares” means the shares of Common Stock that may be issued upon
the conversion of the Series B Preferred Stock as provided for in the Series B Certificate of
Designation.
“Series B Preferred Stock” means the Preferred Stock of the Company that is designated
as Series B Convertible Preferred Stock and any securities issued in respect thereof, or in
substitution therefor, in connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization
(other than the Series B Conversion Shares upon conversion thereof as contemplated by the Series B
Certificate of Designation).
“Series C Certificate of Designation” means the Certificate of Designation with
respect to the Series C Preferred Stock, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
“Series C Conversion Shares” means the shares of Common Stock that may be issued upon
the conversion of the Series C Preferred Stock as provided for in the Series C Certificate of
Designation.
A-8
“Series C Preferred Stock” means the Preferred Stock of the Company that is designated
as Series C Convertible Preferred Stock and any securities issued in respect thereof, or in
substitution therefor, in connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization
(other than the Series C Conversion Shares upon conversion thereof as contemplated by the Series C
Certificate of Designation).
“Shared Beneficial Ownership” means Beneficial Ownership in which (a) voting power is
shared with another Person, except in the case of the Investor Stockholders and their Permitted
Transferees, to the extent that such shared voting power is shared only with another Investor
Stockholder or Permitted Transferee and/or (b) the Investor Stockholders and/or their Permitted
Transferees have effected a Transfer to a Person other than a Permitted Transferee,
provided that any contractual encumbrance resulting from a bona fide incurrence of
indebtedness for money borrowed (including an obligation to repay such indebtedness with the
proceeds of any Transfer of, or dividend or distribution on, any shares of Series B Preferred
Stock, Series C Preferred Stock or Common Stock) not incurred in violation of Section 3.1 shall
not be deemed to be a Transfer, loss or reduction in the Beneficial Ownership associated with such
shares of Series B Preferred Stock, Series C Preferred Stock or Common Stock.
“Share Ownership Reduction” means a reduction, for any reason, in the Elevation
Beneficial Ownership Percentage which would result in a reduction to the number of Directors the
Investor Stockholders are entitled to nominate, designate or appoint pursuant to Section 2.1.
“Share Ownership Reduction Cure Period” means the period commencing on the date the
Company provides the Company Notice and ending on the date 60 days thereafter.
“Standstill Limit” shall mean, at any time, the greater of:
(i) the product of (x) 10% and (y) the number of Diluted Common Shares Outstanding; and
(ii) the lesser of (x) the product of (A) the Elevation Ownership Limit and (B) the
number of Diluted Common Shares Outstanding and (y) the product of (A) 39.9% and (B) the
Maximum Voting Power.
“Standstill Period” means the period beginning on the Closing Date and ending on the
latest of (i) the third anniversary of the Closing Date, (ii) the time that the Investor
Stockholders no longer have the right (whether pursuant to this Agreement, the Series B Certificate
of Designation or the Series C Certificate of Designation) to nominate (or have nominated),
designate or elect an Appointed Director or an Investor Director to serve on the Board or board of
directors or similar governing body of any Survivor of a Fundamental Change, and (iii) the date
that an Elevation Affiliate no longer serves on the Board or on the board of directors or similar
governing body of any Survivor of a Fundamental Change.
A-9
“Survivor of a Fundamental Change” means (a) the issuer of the securities received by
the holders of Common Stock (in their capacities as such) upon the consummation of a Fundamental
Change, to the extent the holders of Common Stock receive other securities in exchange, conversion
or substitution of their Common Stock in the transaction that resulted in such Fundamental Change
or (b) the Company (or its successor) in all other circumstances of a Fundamental Change.
“Third-Party Takeover Proposal” means an offer or proposal by a Person other than any
Investor Stockholder, any Affiliate of any Investor Stockholder or any 13D Group of which any
Investor Stockholder or any of its Permitted Transferees is a member that has been publicly
disclosed by the Company to effect a Change in Control of the Company.
“13D Group” means any group of Persons formed for the purpose of acquiring, holding,
voting or disposing of Equity Securities which would be required under Section 13(d) of the
Exchange Act, and the rules and regulations promulgated thereunder, to file a statement on Schedule
13D (a “Schedule 13D”) pursuant to Rule 13d-1(a) of the rules and regulations promulgated under the
Exchange Act or a Schedule 13G of the rules and regulations promulgated under the Exchange Act
pursuant to Rule 13d-1(c) of the rules and regulations promulgated under the Exchange Act with the
SEC as a “person” within the meaning of Section 13(d)(3) of the Exchange Act if such group
Beneficially Owned Equity Securities representing more than 5% of any class of Equity Securities
then outstanding.
“Total Current Voting Power” means, with respect to any entity, at the time of
determination of Total Current Voting Power, the total number of votes which may be cast on a
general matter of the entity at which all classes of equity voting securities of the entity are
entitled to vote (or, in the event the entity is not a corporation, the governing members, board or
other similar body of such entity) plus, for any determination with respect to the Total Current
Voting Power following a Non-Constituent Issuer Fundamental Change, the number of votes that the
holders of Series B Preferred Stock and holders of Series C Preferred Stock would have been
entitled to vote (by virtue of the number of shares of Series B Preferred Stock and Series C
Preferred Stock outstanding immediately prior to the Fundamental Change) if they had converted to
Common Stock pursuant to the respective Series B Certificate of Designation and Series C
Certificate of Designation immediately prior to the Fundamental Change; provided that for
any determination with respect to the Total Current Voting Power of the Company, such determination
shall take into account the limitation resulting from application of the Maximum Voting Percentage
pursuant to Section 4(a) of the Series B Certificate of Designation and Section 4(a) of the Series
C Certificate of Designation.
“Transfer” means, directly or indirectly, to sell, transfer, assign, pledge (other
than a bona fide pledge not in violation of Section 3.1 (but not a foreclosure thereon)),
encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter
into any contract, option or other arrangement or understanding with respect to the sale, transfer,
assignment, pledge (other than (except for purposes of Section 3.1(b)) a bona fide pledge not in
violation of Section 3.1 (but not a foreclosure thereon)), encumbrance, hypothecation or similar
A-10
disposition of, any shares of Series B Preferred Stock or Series C Preferred Stock, Conversion
Shares, Common Stock, Warrants or Warrant Shares beneficially owned by a person or any interest
(including any Economic Rights or Voting Rights or creation of Shared Beneficial Ownership) in any
shares of Series B Preferred Stock or Series C Preferred Stock, Conversion Shares, Common Stock,
Warrants or Warrant Shares beneficially owned by a Person, provided that (except for
purposes of Section 3.1(b)) any contractual encumbrance resulting from a bona fide incurrence of
indebtedness for money borrowed (including an obligation to repay such indebtedness with the
proceeds of any Transfer of, or dividend or distribution on, any shares of Series B Preferred
Stock, Series C Preferred Stock or Common Stock) not incurred in violation of Section 3.1 shall
not be deemed to be a Transfer associated with such shares of Series B Preferred Stock or Series C
Preferred Stock, Conversion Shares, Common Stock, Warrants or Warrant Shares.
“Transferee” means any Person to whom any Investor Stockholder or any Permitted
Transferee or any Transferee thereof Transfers Equity Securities of the Company in accordance with
the terms hereof.
“Uncured Share Ownership Reduction” means a decrease, for any reason, in the Elevation
Beneficial Ownership Percentage that results in a reduction in the number of Directors that
constitutes the Investor Director Entitlement; provided, however that if, during an
applicable Share Ownership Reduction Cure Period, the Elevation Beneficial Ownership Percentage is
increased to, and maintained at, the minimum Elevation Beneficial Ownership Percentage necessary to
avoid a reduction in the number of Directors that constitutes the Investor Director Entitlement as
of immediately prior to such decrease, then, subject to the last sentence of the definition of
Elevation Beneficial Ownership Percentage in this Exhibit A, an Uncured Share Ownership Reduction
shall be deemed not to have occurred (it being understood that any subsequent decrease in Elevation
Beneficial Ownership Percentage that results in a reduction in the number of Directors that
constitutes the Investor Director Entitlement may again qualify as an Uncured Share Ownership
Reduction).
“Voting Stock” means shares of the Common Stock, Series B Preferred Stock, Series C
Preferred Stock and any other securities of the Company or its successor having the power to vote
in the election of members of the Board of the Company or its successor.
“Warrant Shares” means the shares of Common Stock that may be issued upon the exercise
of the Warrants.
A-11
EXHIBIT E
AMENDMENT NO. 4
TO
PREFERRED STOCK RIGHTS AGREEMENT
This amendment number four (this “Amendment”) to the Preferred Stock Rights Agreement
between Palm, Inc., a Delaware corporation (the “Company”) and Computershare Trust Company,
N.A., as successor to Equiserve Trust Company, N.A. and Fleet National Bank (the “Rights
Agent”), is made and entered into and effective as of December 22, 2008.
BACKGROUND
WHEREAS, the Company and the Rights Agent entered into a Preferred Stock Rights Agreement
dated as of September 25, 2000 (as amended, the “Rights Agreement”);
WHEREAS, the Company and the Rights Agent entered into an amendment to the Rights Agreement on
November 12, 2004;
WHEREAS, the Company and the Rights Agent entered into a second amendment to the Rights
Agreement on June 1, 2007 to permit the transactions contemplated by Preferred Stock Purchase
Agreement and Agreement and Plan of Merger, dated as of June 1, 2007, among Elevation Partners,
L.P. (“Elevation”), the Company and Passport Merger Corporation, without Elevation becoming
an Acquiring Person;
WHEREAS, the Company and the Rights Agent entered into a third amendment to the Rights
Agreement on October 24, 2007 to reflect the agreement between the Company, Elevation and Elevation
Employee Side Fund LLC, a Delaware limited liability company, set forth in the Stockholders’
Agreement dated October 24, 2007;
WHEREAS, Section 27 of the Rights Agreement provides that, in certain circumstances, including
prior to the occurrence of a Distribution Date, the Company may supplement or amend the Rights
Agreement without the approval of any holders of Rights;
WHEREAS, a Distribution Date has not occurred;
WHEREAS, the Company has agreed to issue and sell shares of the Company’s Series C Preferred
Stock and warrants exercisable for a number of shares of the Company’s Common Stock to Elevation
pursuant to the Series C Securities Purchase Agreement (as defined below), such that Elevation will
beneficially own (as defined in the Rights Agreement) shares of preferred stock of the Company
convertible into the Company’s Common Stock and warrants exercisable for a number of shares of the
Company’s Common Stock upon the consummation of the transactions contemplated by the Series C
Securities Purchase Agreement;
WHEREAS, on December 22, 2008, the Board of Directors of the Company resolved to amend the
Rights Agreement to permit the transactions contemplated by the Series C Securities Purchase
Agreement without Elevation becoming an Acquiring Person; and
WHEREAS, the Company desires to modify the terms of the Rights Agreement in certain respects
as set forth herein, and in connection therewith, is entering into this Amendment and directing the
Rights Agent to enter into this Amendment;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Effect of Amendment. Except as expressly provided herein, the Rights Agreement
shall be and remain in full force and effect.
2. Capitalized Terms. All capitalized, undefined terms used in this Amendment shall
have the respective meanings assigned thereto in the Rights Agreement.
3. Supplement to Definitions. The definitions contained in Section 1 of the Rights
Agreement shall be supplemented by adding the following:
“Series C Securities Purchase Agreement” shall mean the Securities Purchase Agreement, dated
as of December 22, 2008, by and between the Company and Elevation.
4. Amendment to Section 1(a). Section 1(a) of the Rights Agreement is hereby amended
by adding the following immediately after the second sentence of Section 1(a) and immediately
preceding the third sentence of Section 1(a):
“Notwithstanding anything in this Agreement to the contrary, neither Elevation nor any of its
Affiliates or Associates shall be deemed to be an Acquiring Person by virtue of (i) the execution,
delivery or performance of the Series C Securities Purchase Agreement, (ii) the announcement of the
Series C Securities Purchase Agreement or any of the transactions contemplated in the Series C
Securities Purchase Agreement, including the issuance of preferred stock and warrants by the
Company to Elevation and the conversion of such preferred stock into Common Stock and/or exercise
of such warrants for Common Stock (collectively, the “Transactions”), or (iii) the
consummation of the Transactions.”
5. Amendment to Section 1(l). Section 1(l) of the Rights Agreement is hereby amended
by adding the following sentence at the end thereof:
“Notwithstanding anything in this Agreement to the contrary, a Distribution Date shall not be
deemed to have occurred as the result of (i) the execution, delivery or
2
performance of the Series C Securities Purchase Agreement, (ii) the announcement of the Series
C Securities Purchase Agreement or any of the Transactions, or (iii) the consummation of the
Transactions.”
6. Amendment to Section 1(hh). Section 1(hh) of the Rights Agreement is hereby amended
by adding the following sentence at the end thereof:
“Notwithstanding anything in this Agreement to the contrary, a Shares Acquisition Date shall
not be deemed to have occurred as the result of (i) the execution, delivery or performance of the
Series C Securities Purchase Agreement, (ii) the announcement of the Series C Securities Purchase
Agreement or any of the Transactions, or (iii) the consummation of the Transactions.”
7. Amendment to Section 30. Section 30 of the Rights Agreement is hereby amended by
adding the following sentence at the end thereof:
“Nothing in this Agreement shall be construed to give any holder of Rights or any other Person
any legal or equitable rights, remedies or claims under this Agreement by virtue of (i) the
execution, delivery or performance of the Series C Securities Purchase Agreement, (ii) the
announcement of the Series C Securities Purchase Agreement or any of the Transactions, or (iii) the
consummation of the Transactions.”
8. Effective Date. This Amendment is effective as of the date first set forth above,
immediately prior to the execution of the Series C Securities Purchase Agreement.
9. Governing Law. This Amendment shall be governed by, construed and enforced in
accordance with the laws of the State of Delaware without reference to the conflicts or choice of
law principles thereof.
10. Counterparts. This Amendment may be executed in separate counterparts, each of
which when executed and delivered is an original but all of which taken together constitute one and
the same instrument.
11. Fax Transmission. A facsimile, telecopy or other reproduction of this Amendment
may be executed by one or more parties hereto, and an executed copy of this Amendment may be
delivered by one or more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties hereto hereby agree to execute an original of the
Amendment as well as any facsimile, telecopy or other reproduction thereof.
3
IN WITNESS WHEREOF, the Company and the Rights Agent have caused this Amendment to be duly
executed as of the day first above written.
|
|
|
|
|
|
PALM, INC.
|
|
|
By: |
|
|
|
Name: |
|
|
|
Title: |
|
|
|
|
|
|
|
|
|
COMPUTERSHARE TRUST COMPANY, N.A.
as Rights Agent
|
|
|
By: |
|
|
|
Name: |
|
|
|
Title: |
|
|
|
4