Exhibit 1
EXECUTION COPY
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
PROXIM CORPORATION
AND
THE PURCHASERS NAMED HEREIN
Dated as of July 22, 2003
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
1. Definitions.....................................................................................1
2. Authorization, Purchase and Sale of Notes, Preferred Stock and Warrants........................10
2.1. Authorization of Securities....................................................................10
2.2. Purchase and Sale of Notes.....................................................................10
2.3. Purchase and Sale of Preferred Stock and Issuance of Warrants..................................11
2.4. The Closings...................................................................................12
2.5. Use of Proceeds................................................................................13
3. Representations and Warranties of the Company..................................................13
3.1. Incorporation..................................................................................13
3.2. Subsidiaries...................................................................................13
3.3. Capitalization.................................................................................13
3.4. Authorization..................................................................................14
3.5. Valid Issuance.................................................................................14
3.6. Financial Statements...........................................................................15
3.7. Absence of Certain Changes.....................................................................15
3.8. Absence of Litigation..........................................................................15
3.9. Intellectual Property..........................................................................16
3.10. Disclosure Documents...........................................................................16
3.11. Books and Records..............................................................................16
3.12. Consents.......................................................................................17
3.13. No Conflict....................................................................................17
3.14. Brokers or Finders.............................................................................17
3.15. Nasdaq National Market.........................................................................17
3.16. No Manipulation of Stock.......................................................................17
3.17. Company Not an "Investment Company"............................................................18
3.18. Title to Property and Assets...................................................................18
3.19. Labor Relations................................................................................18
3.20. Employee Benefits..............................................................................18
3.21. Environmental Matters..........................................................................19
3.22. Taxes..........................................................................................20
3.23. Insurance......................................................................................20
3.24. General Solicitation; No Integration...........................................................20
3.25. Accounting Controls............................................................................21
3.26. By-Laws........................................................................................21
3.27. CSFB Documents.................................................................................21
3.28. Opinion of the Financial Advisor...............................................................21
4. Representations and Warranties of Each Purchaser...............................................21
4.1. Organization...................................................................................21
-i-
Page
4.2. Authorization..................................................................................21
4.3. Purchase Entirely for Own Account Etc..........................................................22
4.4. Investor Status; Etc...........................................................................22
4.5. Securities Not Registered......................................................................22
4.6. No Conflict....................................................................................22
4.7. Brokers........................................................................................22
4.8. Consents.......................................................................................22
4.9. No Manipulation of Stock.......................................................................23
5. Covenants......................................................................................23
5.1. HSR Act Filings................................................................................23
5.2. Other Governmental Approvals...................................................................23
5.3. Further Assurances.............................................................................23
5.4. Board Designees................................................................................23
5.5. Series B Preferred Certificate of Designations.................................................25
5.6. Covenant Pending Each Closing..................................................................25
5.7. Proxy Statement................................................................................25
5.8. Subscription Right.............................................................................26
5.9. Standstill.....................................................................................27
5.10. Agreement to Vote..............................................................................27
5.11. Affirmative Covenants in Connection with the Sale of the Notes.................................27
5.12. Negative Covenants in Connection with the Sale of the Notes....................................29
6. Conditions Precedent...........................................................................32
6.1. Conditions to the Obligation of the Purchasers to Consummate the Initial Closing...............32
6.2. Conditions to the Obligation of the Company to Consummate the Initial Closing..................33
6.3. Conditions to the Obligation of the Purchasers to Consummate the Second Closing................33
6.4. Conditions to the Obligation of the Company to Consummate the Second Closing...................34
6.5. Conditions to the Obligations of the Purchasers to consummate each Subsequent Closing..........34
7. Registration of the Securities; Compliance with the Securities Act.............................35
7.1. Securities Law Transfer Restrictions...........................................................35
7.2. Legends........................................................................................36
7.3. Registration Procedures and Other Matters......................................................36
7.4. Transfer of Securities; Suspension.............................................................37
7.5. Company Registration...........................................................................39
7.6. Indemnification................................................................................40
7.7. Termination of Conditions and Obligations......................................................43
7.8. Information Available..........................................................................43
-ii-
Page
7.9. Delay of Registration..........................................................................44
8. Termination....................................................................................44
8.1. Conditions of Termination......................................................................44
8.2. Effect of Termination..........................................................................44
9. Miscellaneous Provisions.......................................................................44
9.1. Public Statements or Releases..................................................................44
9.2. Rights Cumulative..............................................................................44
9.3. Pronouns.......................................................................................44
9.4. Notices........................................................................................45
9.5. Captions.......................................................................................45
9.6. Severability...................................................................................45
9.7. Governing Law; Injunctive Relief...............................................................45
9.8. Waiver.........................................................................................46
9.9. Expenses.......................................................................................46
9.10. Assignment.....................................................................................46
9.11. Counterparts...................................................................................46
9.12. 2002 Purchase Agreement........................................................................46
9.13. Entire Agreement...............................................................................46
-iii-
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
the 22nd day of July 2003 by and among Proxim Corporation, a Delaware
corporation with its principal office at 000 Xxxxxxx Xxxxx, Xxxxxxxxx, XX 00000
(the "Company"), and each of the purchasers named in EXHIBIT A hereto (each, a
"Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company has authorized the issuance of (i) up to 400,000
shares of its Series B Convertible Preferred Stock, par value $.01 per share
(the "Preferred Stock"), which shares are, or will be, upon issuance,
convertible into authorized but unissued shares of class A common stock, $.01
par value per share, of the Company (the "Common Stock") and (ii) the Warrants
(as defined below);
WHEREAS, the Company seeks financing for general corporate purposes;
and
WHEREAS, the Company desires to issue and sell to each Purchaser
pursuant to this Agreement, and each Purchaser, severally, desires to purchase
from the Company (i) the aggregate principal amount of the Notes (as defined
below) as is set forth opposite its respective name on EXHIBIT A hereto; (ii)
the total number of shares of Preferred Stock issuable upon exchange of the
Notes at the Second Closing (as defined below); and (iii) the Warrants to
purchase the number of shares of Common Stock as is set forth opposite its
respective name in EXHIBIT A hereto; and
WHEREAS, if the Company determines that additional equity capital is
required for the operation of its business, the Company shall have the right,
subject to the conditions to set forth, to require each Purchaser to purchase
the total number of shares of Preferred Stock from time to time, as is set forth
opposite its respective name on EXHIBIT A hereto under the heading "Maximum
Commitment Under the Call Right."
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1. "Adjustment Value" means an amount equal to the average
closing price of the Common Stock for the fifteen (15) Business Days subsequent
to, but not including, the Announcement Date; subject to adjustment for any
stock split, stock dividend or reclassification.
1.2. "Affiliate" means, with respect to any Person, any other
Person controlling, controlled by or under direct or indirect common control
with such Person. For the purposes of this definition "control," when used with
respect to any specified Person, shall mean the power to direct the management
and policies of such Person, directly or indirectly, whether through ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
1.3. "Agreement" has the meaning set forth in the first paragraph
herein.
1.4. "Announcement Date" means July 22, 2003.
1.5. "Beneficially Owns" or "Beneficially Owned" has the meaning
set forth in Rules 13d-3 and 13d-5 of the Exchange Act, but without taking into
account any contractual restrictions or limitations on voting or other rights.
1.6. "Board Designee" has the meaning set forth in Section 5.4(a)
herein.
1.7. "Board Observer" has the meaning set forth in Section 5.4(b)
herein.
1.8. "Board of Directors" has the meaning set forth in Section 3.4
herein.
1.9. "Broadview" means Broadview Capital Partners, L.P., Broadview
Capital Partners Qualified Purchaser Fund L.P. and Broadview Capital Partners
Affiliates Fund L.L.C.
1.10. "Business Day" means any day except a Saturday or Sunday or
day on which banking institutions are legally authorized to close in the City of
New York.
1.11. "Call Right" has the meaning set forth in Section 2.3(b)
herein.
1.12. "Class B Common Stock" has the meaning set forth in Section
3.3(a) herein.
1.13. "Closing" and "Closings" have the meanings set forth in
Section 2.4(d) herein.
1.14. "Code" means the Internal Revenue Code of 1986, as amended.
1.15. "Collateral Agent" means Warburg.
1.16. "Commitment" has the meaning set forth in Section 3.7 herein.
1.17. "Common Stock" has the meaning set forth in the Recitals
herein.
1.18. "Company" has the meaning set forth in the first paragraph
herein.
1.19. "Confidential Information" has the meaning set forth in
Section 5.11 herein.
1.20. "Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract or credit arrangement,
as trustee or executor, or otherwise.
1.21. "Conversion Price" has the meaning set forth in the Series B
Preferred Certificate of Designations.
1.22. "Credit Suisse First Boston" means CSFB.
-2-
1.23. "CSFB Collateral" has the meaning given to the term
"Collateral" in the CSFB Documents.
1.24. "CSFB Documents" means (i) the Security Agreement, dated
November 1, 1999, by and between the Company and CSFB, (ii) the Intellectual
Property Security Agreement, dated November 1, 1999, between the Company and
CSFB and (iii) any other agreement, document or instrument pursuant to which the
Company grants, or confirms a grant of, a Lien on or security interest in any of
its assets, properties or rights, interests as security for the its CSFB Secured
Obligations.
1.25. "CSFB Liens" has the meaning given to the term "Liens" in the
CSFB Documents.
1.26. "CSFB Secured Obligations" has the meaning given to the term
"Secured Obligations" in the CSFB Documents.
1.27. "Disclosure Documents" means the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2002, filed by the Company on
March 31, 2003; the Company's Schedule 14A Proxy Statement for its Annual
Meeting of Stockholders, dated April 29, 2003; the Company's Quarterly Report on
Form 10-Q for the quarter ended March 28, 2003; and any Current Reports on Form
8-K filed by the Company on or after March 28, 2003, together in each case with
any documents incorporated by reference therein or exhibits thereto.
1.28. "Disclosure Schedule" has the meaning set forth in Section 3
herein.
1.29. "Disclosing Party" has the meaning set forth in Section
5.11(i) herein.
1.30. "Employees" has the meaning set forth in Section 3.19 herein.
1.31. "Environmental Laws" has the meaning set forth in Section
3.21(b) herein.
1.32. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.33. "ERISA Affiliate" has the meaning set forth in Section 3.20(a)
herein.
1.34. "Event of Default" has the meaning ascribed to it in Section 7
of the Notes.
1.35. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations promulgated thereunder.
1.36. "Existing Warrants" means the warrants issued to the
Purchasers pursuant to the 2002 Purchase Agreement.
1.37. "Financial Statements" has the meaning set forth in Section
3.6 herein.
1.38. "Foreign Plans" has the meaning set forth in Section 3.20(h)
herein.
-3-
1.39. "Former Employees" means individuals other than Employees who
at any time prior to the date of this Agreement performed services as an
Employee primarily for the Company.
1.40. "GAAP" has the meaning set forth in Section 3.6 herein.
1.41. "Hazardous Material" has the meaning set forth in Section
3.21(a) herein.
1.42. "HLHZ" means Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial Advisors,
Inc.
1.43. "Holders" has the meaning set forth in Section 7.4(a) herein.
1.44. "HSR Act" has the meaning set forth in Section 3.12 herein.
1.45. "Incremental Interest" has the meaning given to it in the
Notes.
1.46. "Independent Directors" means members of the Board of
Directors who are: (i) not officers, directors or affiliates of the Company;
(ii) independent as defined under applicable requirements of federal law, state
law and Nasdaq; and (iii) unaffiliated with any Purchaser.
1.47. "Initial Closing" has the meaning set forth in Section 2.4(a)
herein.
1.48. "Initial Closing Date" has the meaning set forth in Section
2.4(a) herein.
1.49. "Intellectual Property" has the meaning set forth in Section
3.9 herein.
1.50. "Intercreditor Agreement" means the Intercreditor Agreement by
and among SVB and the Collateral Agent substantially in the form attached hereto
as Exhibit F.
1.51. "Investment Company Act" has the meaning set forth in Section
3.17 herein.
1.52. "Irreparable Breach" has the meaning set forth in Section
9.7(b) herein.
1.53. "Liability" means any liability or obligation whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether matured or unmatured, whether liquidated or
unliquidated, whether incurred or consequential and whether due or to become
due, including, without limitation, any obligation created, issued, incurred or
assumed by the Company for borrowed money or arising out of any credit facility
or for the deferred purchase price of property or services (such as any
obligation of the Company under any conditional sale or other title retention
agreement; any guaranty by the Company of liabilities or indebtedness of any
other party; the capitalized amount under any capital lease by the Company as
lessee or which is the substantial equivalent of a financing of the property so
leased; and any reimbursement or similar obligation in respect of any letter of
credit or other financial accommodation).
-4-
1.54. "Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing).
1.55. "Loan Documents" means this Agreement, the Notes, the Pledge
and Security Agreement, the Intercreditor Agreement and any other agreement,
document or instrument pursuant to which the Company grants, or confirms a grant
of, a Lien on or security interest in any of its assets, properties or rights,
interests as security for the Obligations.
1.56. "Material Adverse Change" means any change, event or
occurrence which, individually or in the aggregate, has had a material adverse
effect on, or a material adverse change in, (i) the business, operations,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, that had the effect of reducing revenues or net
income of the Company and its subsidiaries, taken as a whole, by more than $15
million in any quarter compared to published financial statements (if publicly
announced) or consensus analysts estimates (in the case of a quarter for which
financial results have not yet been publicly announced) and that was not
disclosed in any Disclosure Document filed on or prior to the date hereof (and
excluding, in all cases, the effects of any restructuring charges already taken
or otherwise publicly announced, and the effects of terminating the Company's
000 Xxxxxx Xxx lease obligation, as publicly disclosed by the Company) or (ii)
the ability of the Company to perform its obligations under this Agreement, in
each case other than any change, event or occurrence (a) resulting from
conditions in the United States or foreign economies or securities markets in
general or any change in the Company's stock price, (b) resulting from
conditions in the industry in which the Company operates in general, except to
the extent that the Company is disproportionately affected thereby, (c)
resulting from the public announcement of the transactions contemplated by this
Agreement or (d) arising out of or resulting from actions of the Purchasers in
connection with this Agreement.
1.57. "Material Adverse Effect" means, collectively, a material
adverse effect on, or a material adverse change in, or group of such effects on
or changes in, (i) the business, operations, financial condition, results of
operations, assets or liabilities of the Company and its subsidiaries, taken as
a whole or (ii) the ability of the Company to perform its obligations under any
of the Loan Documents, in each case other than any change, event or occurrence
(a) resulting from conditions in the United States or foreign economies or
securities markets in general or any change in the Company's stock price, (b)
resulting from conditions in the industry in which the Company operates in
general, except to the extent that the Company is disproportionately affected
thereby, (c) resulting from the public announcement of the transactions
contemplated by this Agreement, or (d) arising out of or resulting from actions
of the Purchasers in connection with this Agreement.
1.58. "Nasdaq" has the meaning set forth in Section 3.15 herein.
1.59. "Note" means one or more secured promissory note(s) containing
the same terms and conditions, and with the same exchange features and
definition of Incremental Interest, as set forth in the form of note attached
hereto as EXHIBIT B.
-5-
1.60. "Permitted Lien" means any of the following Liens:
(a) Liens for Taxes or assessments and similar charges, which are
either (i) not delinquent or (ii) being contested diligently and in good faith
by appropriate proceedings and as to which the Company has set aside adequate
reserves on its books;
(b) statutory Liens, such as mechanic's, materialman's,
warehouseman's, carriers or other like Liens, incurred in the ordinary course of
business, which are to be paid in the ordinary course of business or which are
being contested diligently and in good faith by appropriate proceedings and as
to which the Company has set aside adequate reserves on its books;
(c) encumbrances consisting of zoning restrictions, easements,
licenses, reservations, covenants, conditions, waivers, restrictions on the use
of property or minor irregularities of title that do not materially impair the
use of any property which is material in the operation of the Company's
business;
(d) Liens securing purchase money equipment lease (or similar)
obligations, but only in the property which is the subject of such obligations
and only to the extent such obligations are permitted pursuant to the terms
hereof;
(e) Liens arising under or pursuant to the Loan Documents;
(f) Liens in respect of judgments or awards with respect to which
the Company, in good faith, is prosecuting an appeal or proceeding for review
and in respect of which a stay of execution upon such appeal or proceeding for
review shall have been secured, and as to which judgments or awards the Company
shall have established adequate reserves on its books;
(g) pledges or deposits made in the ordinary course of the
Company's business consistent with past practice to secure payment of workers'
compensation or to participate in any fund in connection with workers'
compensation, unemployment insurance, pensions or other social security
programs;
(h) Liens existing on the date hereof, including the Liens granted
to SVB under the SVB Agreements;
(i) Nonexclusive licenses and sublicenses granted by the Company
in the ordinary course of its business;
(j) leases or subleases granted in the ordinary course of the
Company's business, including in connection with Company's leased premises or
leased property;
(k) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), contracts for the purchase of property, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case incurred in the ordinary course of
business and not representing an obligation for borrowed money, provided the
total amount of all such outstanding deposits under this clause (k) does not
exceed $250,000 at any time outstanding;
-6-
(l) Liens arising by virtue of any contractual, statutory or
common law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution;
(m) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(n) Liens on insurance proceeds securing the payment of financed
insurance premiums; and
(o) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (d), (e) and (h), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase and
maturity may not decrease.
1.61. "Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association or joint venture.
1.62. "Plans" means employee benefit plans as defined in Section
3(3) of ERISA and all other employee benefit practices or arrangements,
including, without limitation, any such practices or arrangements providing
severance pay, sick leave, vacation pay, salary continuation for disability,
retirement benefits, deferred compensation, bonus pay, incentive pay, stock
options or other stock-based compensation, hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements, maintained by
the Company or any of its subsidiaries or to which the Company or any of its
subsidiaries is obligated to contribute for Employees or Former Employees.
1.63. "Pledge and Security Agreement" means the Pledge and Security
Agreement by and between the Company and the Collateral Agent, in substantially
the form attached hereto as EXHIBIT E.
1.64. "Preferred Stock" has the meaning set forth in the Recitals
herein.
1.65. "Proposed Securities" has the meaning set forth in Section
5.8(a) herein.
1.66. "Prospectus" has the meaning set forth in Section 7.3(c)
herein.
1.67. "Purchase Price" means the total aggregate principal amount of
the Notes to be purchased at the Initial Closing and the total principal amount
paid by the Purchasers at each Subsequent Closing upon the Company's exercise of
its Call Right.
1.68. "Purchaser" has the meaning set forth in the first paragraph
herein.
1.69. "Purchaser Group" has the meaning set forth in Section 5.9
herein.
-7-
1.70. "Recipient" has the meaning set forth in Section 5.11 herein.
1.71. "Registration Statement" has the meaning set forth in Section
7.3(a) herein.
1.72. "SEC" means the Securities and Exchange Commission.
1.73. "Second Closing" has the meaning set forth in Section 2.4(b)
herein.
1.74. "Second Closing Date" has the meaning set forth in Section
2.4(b) herein.
1.75. "Securities" means the Notes, the Warrants, the shares of
Preferred Stock issuable upon exchange of the Notes and the Company's exercise
of its Call Right and the shares of Common Stock issuable upon conversion of the
shares of Preferred Stock and exercise of the Warrants; provided, that for
purposes of Section 7 (other than Section 7.1 and 7.2), "Securities" shall not
include the Notes, the Warrants or the Preferred Stock; provided, further, that
for purposes of Section 7.3, "Securities" shall include the shares of Common
Stock issuable upon conversion of the Series A Preferred and exercise of the
Existing Warrants.
1.76. "Securities Act" means the Securities Act of 1933, as amended,
and all of the rules and regulations promulgated thereunder.
1.77. "Series A Preferred" means the Series A Convertible Preferred
Stock of the Company, par value $0.01 per share.
1.78. "Series A Preferred Certificate of Designations" means the
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock of the Company, which was filed with the Secretary of State of
the State of Delaware on August 2, 2002, pursuant to the 2002 Purchase
Agreement.
1.79. "Series B Preferred Certificate of Designations" means the
Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock of the Company, which will have been filed on or before the
Second Closing Date with the Secretary of State of the State of Delaware which
shall contain the same terms and conditions set forth in the copy attached
hereto as EXHIBIT C. The initial Conversion Price of the Preferred Stock shall
be $1.15. Prior to filing the Series B Preferred Certificate of Designations,
the initial Conversion Price shall be revised as follows: (i) in the event the
Adjustment Value is greater than $2.00, then the Conversion Price shall be
increased by an amount equal to the difference of the Adjustment Value less
$2.00; provided, however, that in no event shall the Conversion Price be
increased by more than fifteen cents ($0.15); and (ii) in the event one hundred
thirty percent (130%) of the Adjustment Value is less than $1.15, then the
Conversion Price shall be decreased to such amount; provided, however, that in
no event shall the Conversion Price be decreased by more than fifteen cents
($0.15).
1.80. "Soquel Letter Agreement" means the binding letter of intent,
dated July 21, 2003, between the Company and the Xxxxx Family Revocable Living
Trust relating to the settlement of a landlord-tenant dispute relating to the
premises located at 000 Xxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx 00000, pursuant to
which the Company has agreed to (i) pay rents owing through completion of the
lease in a single lump-sum payment of $6 million, plus expenses, (ii) assume the
mortgage on the premises for approximately $3.2 million and (iii) pay certain
reasonable costs related thereto.
-8-
1.81. "Special Meeting" has the meaning set forth in Section 2.4(b)
herein.
1.82. "Special Meeting Proposals" means the issuance of (i) shares
of Preferred Stock upon (x) exchange of the Notes in accordance with the terms
of this Agreement and (y) the Company's exercise of its Call Right (as defined
below), (ii) the Warrants as contemplated by this Agreement and (iii) the Common
Stock initially issuable upon conversion of the Preferred Stock and exercise of
the Warrants.
1.83. "Stockholder Approval" has the meaning set forth in Section
2.3(b).
1.84. "Subsequent Closing Date" has the meaning set forth in Section
2.4(c) herein.
1.85. "SVB" means Silicon Valley Bank.
1.86. "SVB Agreements" means collectively the SVB A/R Financing
Agreement and the SVB Overadvance Agreement.
1.87. "SVB A/R Financing Agreement" means collectively the (a) Loan
and Security Agreement, dated as of December 27, 2002 and as amended on Xxxxx
00, 0000, xxxxxxx XXX xxx xxx Xxxxxxx, (x) the Intellectual Property Security
Agreement, dated as of December 27, 2002, between SVB and the Company, (c) the
Letter Agreement, dated June 13, 2003, between SVB and the Company and (d) the
Accounts Receivable Financing Agreement, dated as of June 13, 2003, between SVB
and the Company and all schedules, exhibits and annexes attached thereto.
1.88. "SVB Overadvance Agreement" means the Temporary Overadvance
Agreement, dated as of June 23, 2003, between SVB and the Company.
1.89. "Tax Returns" means returns, reports, information statements
and other documentation (including any additional or supporting material) filed
or maintained, or required to be filed or maintained, in connection with the
calculation, determination, assessment or collection of any Tax and shall
include any amended returns required as a result of examination adjustments made
by the Internal Revenue Service or other Tax authority.
1.90. "Taxes" means any and all federal, state, local, foreign and
other taxes, levies, fees, imposts, duties and charges of whatever kind
(including any interest, penalties or additions to the tax imposed in connection
therewith or with respect thereto), whether or not imposed on the Company,
including, without limitation, taxes imposed on, or measured by, income,
franchise, profits or gross receipts, and also ad valorem, value added, sales,
use, service, real or personal property, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premium, windfall profits, transfer and gains taxes and customs duties.
-9-
1.91. "Transaction Documents" means this Agreement , the Notes, the
Warrants, the Pledge and Security Agreement, the Intercreditor Agreement and the
Certificate of Designations.
1.92. "Transferee" has the meaning set forth in Section 7.4(a)
herein.
1.93. "UCC" means the Uniform Commercial Code (or similar statute)
of any applicable jurisdiction.
1.94. "2002 Purchase Agreement" means that certain Securities
Purchase Agreement, dated as of June 16, 2002 and as amended, by and among the
Company and the purchasers named therein.
1.95. "Warburg" means Warburg Pincus Private Equity VIII, L.P. and
its Affiliates.
1.96. "Warrants" means warrants to purchase 18,000,000 shares of
Common Stock which shall contain the same terms and conditions and the same
exercise features as the form attached hereto as EXHIBIT D. The exercise price
of the warrant shall be equal to $1.46.
2. Authorization, Purchase and Sale of Notes, Preferred Stock and
Warrants.
2.1. Authorization of Securities. The Company has, or on or before
the Initial Closing Date will have, (i) authorized the Notes, (ii) authorized a
series of its preferred stock consisting of 400,000 shares of Preferred Stock
designated as its "Series B Convertible Preferred Stock," (iii) authorized the
Warrants, (iv) authorized the issuance of the shares of Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants and (v)
authorized the issuance of the shares of Preferred Stock issuable upon exchange
of the Notes and upon exercise of the Company's Call Right. The terms,
limitations and relative rights and preferences of the Preferred Stock are set
forth in the Series B Certificate of Designations.
2.2. Purchase and Sale of Notes.
(a) Subject to and upon the terms and conditions set forth in this
Agreement, at the Initial Closing, the Company shall issue and sell to each
Purchaser, and each Purchaser, severally, shall purchase from the Company the
aggregate principal amount of Notes set forth opposite the name of such
Purchaser under the heading "Principal Amount of Notes to be Purchased" on
EXHIBIT A hereto at a purchase price equal to the principal amount of Notes
purchased.
(b) Exchange of Notes.
(i) On the Second Closing Date, all outstanding principal and all
accrued but unpaid interest then outstanding on the Notes shall immediately and
automatically be exchanged for such number of shares of Preferred Stock as shall
be equal to the quotient obtained by dividing the aggregate outstanding
principal balance plus any accrued but unpaid interest then outstanding on the
Notes on the Second Closing Date by $100.00.
-10-
(ii) If at the time of exchange of the Notes for shares of
Preferred Stock there are insufficient authorized shares of Preferred Stock to
permit exchange of the Notes in full, then the Company shall take all corporate
action necessary to authorize a sufficient number of shares of Preferred Stock
to permit such exchange in full. No fractional shares of the Preferred Stock
will be issued upon exchange of the Notes. In lieu of any fractional share to
which the Purchaser would otherwise be entitled, the Company will pay to the
Purchasers in cash the amount of the unexchanged principal balance plus accrued
but unpaid interest then outstanding on the Notes that would otherwise be
exchanged for such fractional share. Upon exchange of the Notes, the Purchasers
shall surrender the Notes, duly endorsed, at the principal offices of the
Company or any transfer agent of the Company. At its expense, the Company will,
as soon as practicable thereafter, issue and deliver to such Purchasers, at such
principal office, a certificate or certificates for the number of shares to
which each such Purchaser is entitled upon such exchange, together with other
securities and property to which such Purchaser is entitled upon such exchange
under the terms of its Note, including a check payable to such Purchaser for any
cash amounts payable as described herein. Upon exchange of the Notes and payment
for fractional shares as provided above, the Company will be forever released
from all of its payment obligations and liabilities under the Notes with regard
to that portion of the principal and accrued but unpaid interest being
exchanged.
2.3. Purchase and Sale of Preferred Stock and Issuance of Warrants.
(a) Subject to the terms and conditions set forth in this
Agreement, at the Second Closing, the Company hereby agrees to issue to each
Purchaser, as part of its inducement to purchase the Notes being purchased by
such Purchaser and upon delivery by each Purchaser to the Company of the Notes
held by such Purchaser for cancellation (i) the shares of Preferred Stock that
are issuable upon exchange of the Notes and (ii) a Warrant entitling it to
purchase the number of shares of Common Stock as set forth opposite its name
under the heading "Warrant Coverage Issuable at the Second Closing" on EXHIBIT A
hereto.
(b) Call Right.
(i) Subject to the terms and conditions set forth in this
Agreement, in the event that following the receipt of stockholder approval of
the Special Meeting Proposals ("Stockholder Approval"), the Company determines
that additional equity capital is required for the operation of its business,
the Company shall have the right, at any time and from time to time until the
date that is 180 days from the Announcement Date, to exercise the right to
require the Purchasers to purchase up to one hundred thousand (100,000) shares
of Preferred Stock, in one or two tranches, at a cash purchase price of $100.00
per share, each individual tranche having an aggregate purchase price of not
less than five million dollars ($5,000,000) and all such tranches having an
aggregate purchase price not to exceed ten million dollars ($10,000,000)
(collectively, the "Call Right").
(ii) The Company shall exercise its Call Right by providing written
notice to the Purchasers, which notice shall set forth the number of shares of
Preferred Stock the Company desires to sell to the Purchasers and the proposed
date of the Closing of the sale (each, a "Subsequent Closing"), which date shall
be no more than sixty (60) days nor less than ten (10) Business Days after the
date of the giving of such notice. At each Subsequent Closing, the aggregate
number of shares to be purchased by each Purchaser shall be in the same
proportion as the total aggregate principal amount of the Notes being purchased
by such Purchaser bears to $30,000,000.
-11-
2.4. The Closings.
(a) The initial closing (the "Initial Closing") shall take place
at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation,
000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX on the second Business Day following
satisfaction or waiver of the conditions specified in Sections 6.1 and 6.2
herein or such other date mutually agreed to by the Company and the Purchasers
(the "Initial Closing Date"). At the Initial Closing, the Company shall deliver
to each Purchaser one or more Note(s) in the principal amount as set forth
opposite such Purchaser's name on EXHIBIT A hereto, against payment to the
Company of the purchase price therefor set forth opposite the name of such
Purchaser on EXHIBIT A hereto under the caption "Purchase Price Payable at the
Initial Closing" by wire transfer to the Company of immediately available funds.
The Company and the Purchasers shall also deliver all Transaction Documents
applicable to such Initial Closing.
(b) The second closing (the "Second Closing") shall take place at
the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, XX on the first Business Day following the date of
the special meeting of stockholders of the Company (the "Special Meeting"), if
at the Special Meeting the Special Meeting Proposals are approved by a majority
of the votes cast (the "Second Closing Date"). At the Second Closing, the
Company shall deliver to each Purchaser upon delivery by each Purchaser to the
Company of the Notes held by such Purchaser for cancellation (i) a certificate
for the number of shares of Preferred Stock issuable upon exchange of the Notes
held by such Purchaser, or its Affiliates if so designated, and (ii) a Warrant
registered in the name of such Purchaser, or its Affiliates if so designated,
representing the right to purchase the number of shares of Common Stock as set
forth opposite its name under the heading "Warrant Coverage Issuable at the
Second Closing" on EXHIBIT A hereto. Upon compliance by the Company with the
preceding sentence, the Company shall be forever released from all of its
obligations and liabilities under the Notes. If at the Special Meeting,
Stockholder Approval is not obtained, then no Second Closing shall occur, and
the Notes shall remain outstanding in accordance with their terms and the
Company will not be permitted to exercise the Call Right. The Company and the
Purchasers shall also deliver all Transaction Documents applicable to such
Second Closing.
(c) Each Subsequent Closing shall take place at the offices of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx,
Xxxx Xxxx, XX on the day set forth in the Company's notice to the Purchasers
pursuant to Section 2.3(b)(ii) herein or such other date mutually agreed to by
the Company and the Purchasers (the "Subsequent Closing Date"). At each
Subsequent Closing, the Company shall deliver to each Purchaser a certificate
for the number of shares of Preferred Stock being purchased by it, registered in
the name of such Purchaser or its Affiliates if so designated, and each
Purchaser shall pay to the Company the purchase price therefor by wire transfer
to the Company of immediately available funds. The Company and the Purchasers
shall also deliver all Transaction Documents, as applicable to such Subsequent
Closing(s).
-12-
(d) The Initial Closing, the Second Closing and each Subsequent
Closing are each individually referred to as a "Closing" where the context
requires and collectively referred to as the "Closings." If at the Special
Meeting, Stockholder Approval is not obtained, then no Subsequent Closing shall
occur and the provisions set forth in Section 2.3 herein shall have no further
force or effect.
2.5. Use of Proceeds. The Company will apply the net proceeds from
the sale of the Notes and the shares of Preferred Stock issuable upon the
Company's exercise of the Call Right, if any, for general corporate purposes.
3. Representations and Warranties of the Company. Except as set
forth in any Disclosure Document filed prior to the date hereof or in a
corresponding numbered section of the disclosure schedule delivered to each
Purchaser prior to the execution of this Agreement (the "Disclosure Schedule"),
the Company hereby represents and warrants to each of the Purchasers as follows:
3.1. Incorporation. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business in each jurisdiction in which the character of
its properties or the nature of its business requires such qualification, except
where the failure to so qualify would not have a Material Adverse Effect. The
Company has all requisite corporate power and authority to carry on its business
as now conducted.
3.2. Subsidiaries. The Company has no material subsidiaries and no
material interests or investments in any partnership, trust or other entity or
organization. Each subsidiary of the Company that is a corporation has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its formation, has the corporate power and authority
to own its properties and to conduct its business and is duly registered,
qualified and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such registration, qualification or authorization, except
where such failure to so qualify or register would not be reasonably likely to
have a Material Adverse Effect. All of the issued and outstanding capital stock
of each subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable, and is owned by the Company free and clear of any Lien other
than any of the foregoing encumbered pursuant to the SVB Agreements.
3.3. Capitalization.
(a) As of the date of this Agreement, the authorized capital stock
of the Company consists of 390,000,000 shares of Common Stock, 10,000,000 shares
of class B common stock, par value $.01 per share (the "Class B Common Stock"),
3,000,000 shares of Series A Preferred, and 22,000,000 shares of undesignated
preferred stock, par value $.01 per share. As of the date of this Agreement,
there are no shares of Class B Common Stock outstanding and 3,000,000 shares of
Series A Preferred are outstanding. The number of outstanding shares of Common
Stock as of July 21, 2003 was 121,800,330 and the total number of shares of
Common Stock issuable pursuant to stock options outstanding at July 21, 2003 was
28,578,503. All such shares of Common Stock and Series A Preferred have been
duly authorized, and all such issued and outstanding shares of Common Stock and
Series A Preferred have been validly issued, are fully paid and nonassessable.
No such outstanding shares of Common Stock or Series A Preferred were issued in
violation of any preemptive rights, "poison pill" provisions, rights of first
offer or refusal or similar rights.
-13-
(b) Except for the issuance of shares of Common Stock pursuant to
the exercise of outstanding options granted pursuant to the Company's option
plans or pursuant to the exercise of warrants to purchase shares of Common
Stock, including any such options granted after March 31, 2003, the Company has
not issued any capital stock since March 31, 2003, except as contemplated by
this Agreement. Except as set forth in or contemplated by the Disclosure
Documents, this Agreement or the 2002 Purchase Agreement, and except for the
issuance of options to purchase shares of the Company's Common Stock pursuant to
the Company's option plans, there are no existing options, warrants, calls,
preemptive (or similar) rights, subscriptions or other rights, agreements,
arrangements or commitments of any character obligating the Company to issue,
transfer or sell, or cause to be issued, transferred or sold, any shares of the
capital stock of the Company or other equity interests in the Company or any
securities convertible into or exchangeable for such shares of capital stock or
other equity interests, and there are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of its capital
stock or other equity interests.
3.4. Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization of the Securities and the filing of the Series B Preferred
Certificate of Designations, the authorization, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein has been taken, other than the approvals contemplated at the
Special Meeting. When executed and delivered by the Company, this Agreement,
each other Loan Document and each Transaction Document shall constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as rights to indemnity and
contribution may be limited by state or federal securities laws or the public
policy underlying such laws, and except as may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally
and by general equitable principles. The Company has all requisite corporate
power to enter into this Agreement, each other Loan Document and each
Transaction Document and to carry out and perform its obligations hereunder and
thereunder. The Board of Directors of the Company (the "Board of Directors") has
taken all action necessary to render inapplicable, as it relates to Warburg and
Broadview, the provisions of Section 203 of the General Corporation Law of the
State of Delaware. At or prior to the Initial Closing, the Company will have
reserved for issuance (i) the shares of Common Stock initially issuable upon
conversion of the Preferred Stock and upon exercise of the Warrants and (ii) the
shares of Preferred Stock issuable upon exchange of the Notes and upon exercise
of the Company's Call Right.
3.5. Valid Issuance.
(a) Upon their issuance in accordance with the terms of the
Preferred Stock or Warrants, as the case may be, the shares of Common Stock
issued upon conversion of the shares of the Preferred Stock or exercise of the
Warrants, as the case may be, will be duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock, free of all preemptive or
similar rights. Upon their issuance in accordance with the terms of the Notes,
the shares of Preferred Stock issued upon exchange of the Notes will be duly
authorized, validly issued, fully paid and non-assessable shares of Preferred
Stock, free of all preemptive or similar rights. Upon their issuance in
accordance with the terms of this Agreement, the shares of Preferred stock
issued upon the Company's exercise of the Call Right pursuant to the terms
hereof and upon payment therefor will be duly authorized and validly issued,
fully paid and non-assessable shares of Preferred Stock, free of preemptive or
similar rights.
-14-
(b) Subject to the accuracy of the representations made by the
Purchasers in Section 4 herein, the Securities will be issued to the Purchasers
in compliance with applicable exemptions from (i) the registration and
prospectus delivery requirements of the Securities Act and (ii) the registration
and qualification requirements of all applicable securities laws of the states
of the United States. The Company is current in its filings with the SEC under
Section 13(a) of the Exchange Act.
3.6. Financial Statements. The financial statements of the Company
included in the Disclosure Documents (collectively, the "Financial Statements")
fairly present the consolidated financial position of the Company and its
subsidiaries as of the dates indicated, and the results of its operations and
cash flows for the periods therein specified. The Financial Statements fairly
present the consolidated financial position of the Company at the dates thereof
and the consolidated results of operations for the periods then ended in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP") throughout the period therein specified (except in the case of
quarterly financial statements for the absence of footnote disclosure and
subject, in the case of interim periods, to normal year-end adjustments which,
individually, and in the aggregate are not expected to be material).
3.7. Absence of Certain Changes. Since December 31, 2002, the
Company and its subsidiaries have conducted their business only in the ordinary
course of such business consistent with past practice and there has not been (i)
any Material Adverse Effect, (ii) any material commitment, contractual
obligation, borrowing, capital expenditure or transaction (each, a "Commitment")
entered into by the Company or any of its subsidiaries, other than (a)
Commitments in the ordinary course of business, (b) this Agreement and (c) the
SVB Agreements, (iii) any action taken which, if taken after the date hereof,
would constitute a material breach of any provision or covenant herein, or (iv)
any material change in the Company's accounting principles, practices or methods
other than as required by concurrent changes in GAAP.
3.8. Absence of Litigation. There is no action, suit, proceeding,
arbitration, claim, investigation or inquiry pending or, to the Company's
knowledge, threatened by or before any governmental body against the Company in
which an unfavorable outcome, ruling or finding in any said matter, or for all
such matters taken as a whole, would reasonably be expected to have a Material
Adverse Effect. The foregoing includes, without limitation, any such action,
suit, proceeding or investigation that questions this Agreement or seeks to
delay or prevent the consummation of the transactions contemplated hereunder or
the right of the Company to execute, deliver and perform under same. The Company
is not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. No
action, suit, proceeding, claim, investigation or inquiry by the Company or any
subsidiary is currently pending nor does the Company intend to initiate any
action, suit, proceeding, claim, investigation or inquiry, in each case, that if
resolved in a manner adverse to the Company, is reasonably likely to have a
Material Adverse Effect.
-15-
3.9. Intellectual Property. (i) The Company owns or possesses
sufficient rights to use all (A) material patents (and any renewals and
extensions thereof), patent rights (and any applications therefor), rights of
priority and other rights in inventions; (B) trademarks, service marks, trade
names and trade dress, and all registrations and applications therefor and all
legal or common-law equivalents of any of the foregoing; (C) copyrights and
rights in mask works (and any applications or registrations for the foregoing,
and all renewals and extensions thereof), common-law copyrights and rights of
authorship including all rights to exploit any of the foregoing in any media and
by any manner and means now known or hereafter devised; (D) industrial design
rights, and all registrations and applications therefor; (E) rights in data,
collections of data and databases, and all legal or common-law equivalents
thereof; (F) rights in domain names and domain name reservations; (G) rights in
trade secrets, proprietary information and know-how (collectively with all
licenses and other agreements providing the Company with the right to use any
item of the type referred to in clauses (A) through (G), "Intellectual
Property") that are necessary for the conduct of its business as now conducted
except where the failure to currently own or possess would not have a Material
Adverse Effect; (ii) the Intellectual Property is valid, subsisting, in proper
form and enforceable and all renewal fees and other maintenance fees have been
paid; (iii) the Company is in material compliance with all contractual
obligations relating to the use and protection of such of the Intellectual
Property as is used pursuant to license or other agreement; (iv) to the
knowledge of the Company there is no present or former employee, officer or
director of the Company or agent or outside contractor that holds or claims any
material right, title or interest, directly or indirectly, in or to any
Intellectual Property; and (v) to the Company's knowledge, the present business
activities and products of the Company have not and do not infringe any known
Intellectual Property or other proprietary rights of any third party, the
Company is not making unauthorized use of any confidential information or trade
secrets of any third party, the Company has not received any notice of any
asserted infringement (nor is the Company aware of any reasonable basis for any
third party asserting an infringement) by the Company of, any rights of a third
party with respect to any Intellectual Property that, individually or in the
aggregate, would have a Material Adverse Effect.
3.10. Disclosure Documents. The information contained or
incorporated by reference in the Disclosure Documents was true and correct in
all material respects as of the respective dates of the filing thereof with the
SEC; and, as of such respective dates, none of the Disclosure Documents
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, except
to the extent updated or superseded by any report subsequently filed by the
Company with the SEC. The Company is not party to any material contract,
agreement or other arrangement that was required to have been filed as an
exhibit to any Disclosure Document that was not so filed, other than any of the
Loan Documents.
3.11. Books and Records. The minute books and other records of the
Company and its subsidiaries contain in all material respects accurate records
of all Company board, committee and stockholders' meetings and accurately
reflect in all material respects all other corporate action of the stockholders
and directors and any committees thereof of the Company and its subsidiaries and
all actions of the directors of the Company's subsidiaries, in each case since
January 1, 2002.
-16-
3.12. Consents. All consents, approvals, orders and authorizations
required on the part of the Company in connection with the execution, delivery
or performance of this Agreement and the consummation of the transactions
contemplated herein, other than (i) in connection with the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the
regulations promulgated thereunder, (ii) the filing of the Series B Certificate
of Designations and (iii) such filings required to be made after the Initial
Closing under applicable federal and state securities laws, have been obtained
and will be effective as of the Initial Closing Date other than those with
respect to which the failure to make or obtain will not have a Material Adverse
Effect. Except for the approvals contemplated at the Special Meeting or required
by Nasdaq, the execution, delivery or performance of this Agreement, the Loan
Documents and the Transaction Documents and the consummation of the transactions
contemplated herein and therein do not require the approval of the Company's
stockholders.
3.13. No Conflict. The execution and delivery of the Loan Documents
by the Company and the consummation of the transactions contemplated thereby
will not conflict with or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) any provision of the Certificate of Incorporation or By-laws
of the Company or (ii) any agreement or instrument, permit, franchise, license,
judgment, order, statute, law, ordinance, rule or regulations, applicable to the
Company or its properties or assets, except, in the case of clause (ii), as
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect.
3.14. Brokers or Finders. Other than with respect to CSFB and HLHZ,
the fees of which will be borne by the Company, the Company has not incurred,
and shall not incur, directly or indirectly, any liability for any brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement, the other Loan Documents, Transaction Documents or any
transaction contemplated hereby.
3.15. Nasdaq National Market. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act and is listed on the Nasdaq
National Market ("Nasdaq"), and, except as contemplated by this Agreement, the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from Nasdaq, nor has the Company received any
notification that the SEC or the NASD, Inc. is contemplating terminating such
registration or listing.
3.16. No Manipulation of Stock. The Company has not taken, in
violation of applicable law, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the transactions contemplated hereby or the sale or
resale of the shares of Common Stock.
-17-
3.17. Company Not an "Investment Company". The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The Company is not, and immediately
after receipt of payment for any of the Securities will not be, an "investment
company" or an entity "controlled" by an "investment company" within the meaning
of the Investment Company Act.
3.18. Title to Property and Assets. The Company and each of its
subsidiaries owns or possesses the necessary right to use or title to all
properties, assets, licenses, permits and the like required to operate its
business as currently operated, except for such properties, assets, licenses,
permits and the like, the absence of which would not result in a Material
Adverse Effect. The properties and assets of the Company and each of its
subsidiaries owned by them are owned free and clear of all Liens, except for
Permitted Liens. With respect to the property and assets it leases, the Company
and each of its subsidiaries are in compliance with such leases in all material
respects.
3.19. Labor Relations. Neither the Company nor its subsidiaries is
party to any collective bargaining agreement covering any individual who
performs services as an employee primarily for the Company or any of its
subsidiaries (including such persons who are on an approved leave of absence,
vacation, short-term disability or otherwise treated as an active employee of
the Company or any of its subsidiaries, "Employees"), and there are no
controversies or unfair labor practice proceedings pending or, to the Company's
knowledge, threatened between the Company or any of its subsidiaries and any of
their current or former Employees or any labor or other collective bargaining
unit representing any current or former Employee of the Company or any of its
subsidiaries that would reasonably be expected to result in a labor strike,
dispute, slow-down or work stoppage or otherwise have a Material Adverse Effect.
To the Company's knowledge, no organizational effort is presently being made or,
to the Company's knowledge, threatened by or on behalf of any labor union.
3.20. Employee Benefits.
(a) Neither the Company nor any trade or business (whether or not
incorporated) which has been under common control or treated as a single
employer with the Company under Section 414(b), (c) or (m) of the Code (an
"ERISA Affiliate") has incurred, or is reasonably likely to incur, any liability
under Title IV of ERISA or Section 412 of the Code and none of the Plans is a
Multiemployer Plan, as defined in Section 3(37) of ERISA. Neither the Company
nor any ERISA Affiliate has incurred any liability resulting from a complete or
partial withdrawal from any Multiemployer Plan, and none of them has incurred,
or is reasonably likely to incur, any liability due to the termination or
reorganization of a Multiemployer Plan which has not been satisfied in full, and
to the Company's knowledge, no event has occurred that would subject the Company
or any ERISA Affiliate to any such liability.
(b) Each Plan has been administered in material compliance with
its terms, and other applicable laws, rules and regulations including, without
limitation, the provisions of ERISA and the Code, and there are no material
pending or, to Company's knowledge, threatened claims by, on behalf of or
involving any plan administrator or any plan trustee (other than routine claims
for benefits).
-18-
(c) No "prohibited transaction" within the meaning of Section 4975
of the Code has occurred with respect to any Plan.
(d) Each Plan that is intended to qualify under Section 401(a) of
the Code does so qualify.
(e) Except as set forth on Schedule 3.20(e) of the Disclosure
Schedule or as may be required under Section 4980B of the Code, or Section 601
of ERISA, neither the Company nor any of its subsidiaries has any liability for
post-retirement medical or life insurance benefits or coverage for any Employee
or Former Employee or any dependent of any such Employee or Former Employee.
(f) The consummation of the transactions contemplated hereby will
not result in any increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any compensation or benefits
payable by the Company to or in respect of any Employee or Former Employee or
the beneficiary or dependent of any such Employee or Former Employee under any
Plan.
(g) Except as set forth on Schedule 3.20(g) of the Disclosure
Schedule, no amount payable by the Company or any of its subsidiaries to any
Employee or Former Employee will fail to be deductible for Federal income tax
purposes by reason of Section 162(m) or 280G of the Code.
(h) All employee benefits practices or arrangements which are
maintained by the Company or any of its subsidiaries for the benefit of their
non-United States Employees or United States Employees located in a foreign
jurisdiction (collectively, the "Foreign Plans") have been maintained in all
material respects in accordance with the applicable laws of such foreign
jurisdiction, and all Foreign Plans required to be registered with any
governmental agency have been registered and have been maintained in good
standing with such governmental agency.
3.21. Environmental Matters.
(a) Except as would not reasonably be likely to result in a
material liability to the Company, no underground storage tanks and no amount of
any substance that has been designated by any governmental agency or by
applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, but
excluding routine quantities of office and janitorial supplies (a "Hazardous
Material"), are present as a result of the actions of the Company, or, to the
Company's knowledge, as a result of the actions of a third party, in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that the Company or any of its subsidiaries currently
owns, operates, occupies or leases, or to the Company's knowledge, has at any
time owned, operated, occupied or leased.
-19-
(b) Except as would not reasonably be likely to result in a
material liability to the Company (in any individual case or in the aggregate),
neither the Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of or arranged for the disposal of, released or exposed
its employees or others to Hazardous Materials in violation of any federal,
state or local law, rule, regulation, treaty or statute in effect before the
Initial Closing Date related to protection of human health, safety, and the
environment, including natural resources (collectively, "Environmental Laws"),
or in a manner that would likely result in any material liability to the
Company.
(c) Except as would not reasonably be likely to result in a
material liability to the Company, the Company and its subsidiaries currently
hold and are in compliance with all approvals, permits, licenses, clearances and
consents required under Environmental Laws for the conduct of the Company's and
its subsidiaries' businesses as currently being conducted.
(d) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or to the Company's knowledge,
threatened alleging that the Company and its subsidiaries are in violation of or
liable under any Environmental Law.
(e) To the Company's knowledge, there are no material expenditures
required to maintain or achieve compliance with all applicable Environmental
Laws.
3.22. Taxes.
(a) Except as otherwise disclosed in Schedule 3.22(a), (i) the
Company has filed (or joined in the filing of) when due all Tax Returns required
by applicable law to be filed with respect to the Company and all Taxes shown to
be due on such Tax Returns have been paid; (ii) all such Tax Returns were true,
correct and complete in all material respects as of the time of such filing; or
(iii) any Liability of the Company for Taxes not yet due and payable, or which
are being contested in good faith, in each case as of December 31, 2002, has
been accrued or reserved for on the financial statements of the Company in
accordance with GAAP. Since December 31, 2002, the Company has not incurred any
material Taxes other than in the ordinary course of business.
(b) No current or former subsidiary of the Company has ever been a
member of any "affiliated group" (within the meaning of Section 1504(a) of the
Code) included in any consolidated federal income Tax Return filed with the
Internal Revenue Service other than an affiliated group of which the Company is
the common parent.
3.23. Insurance. All insurance policies carried by, or covering the
Company's properties are in full force and effect, and no notice of cancellation
has been given with respect to any such policy. All premiums due on such
policies have been paid in a timely manner and the Company has complied in all
material respects with the terms and provisions of such policies. The insurance
coverage provided by such policies is provided by insurers that, to the
knowledge of the Company, are solvent and is in such amount and types of
coverage which are adequate and customary for the industries in which the
Company operates.
3.24. General Solicitation; No Integration. Neither the Company nor
any other person or entity authorized by the Company to act on its behalf has
engaged in a general solicitation or general advertising (within the meaning of
Regulation D of the Securities Act) of investors with respect to offers or sales
of the Securities. The Company has not, directly or indirectly, sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which, to its knowledge, is or will
be integrated with the Securities sold pursuant to this Agreement.
-20-
3.25. Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and to maintain
assets accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.26. By-Laws. The Company's By-Laws provide that all matters
submitted to a meeting of stockholders, including the vote relating to the
Special Proposals at the Special Meeting, shall require the affirmative vote of
a majority of the total number of votes cast, present in person or by proxy and
a valid quorum.
3.27. CSFB Documents. As of the date hereof, (a) the Company has (i)
repaid all amounts outstanding under the CSFB Documents and the CSFB Documents
have been terminated and (ii) satisfied all of its CSFB Secured Obligations, and
(b) the CSFB Collateral has been released from the CSFB Liens created thereby.
3.28. Opinion of the Financial Advisor. The Company has received an
opinion of HLHZ, a copy of which has been delivered to a Special Committee of
the Board of Directors and to the Purchasers, as to the fairness of the
transactions contemplated hereby.
3.29. Soquel Letter Agreement. The Soquel Letter Agreement has been
executed by each party thereto and constitutes a valid and legally binding
obligation of the Company.
4. Representations and Warranties of Each Purchaser. Each
Purchaser, severally for itself and not jointly with the other Purchasers,
represents and warrants to the Company as follows:
4.1. Organization. Each Purchaser, if it is a legal entity, is duly
and validly existing under the jurisdiction of its organization.
4.2. Authorization. All action on the part of such Purchaser
necessary for the authorization, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein has been
taken. This Agreement constitutes the legal, valid and binding obligation of
such Purchaser, enforceable against such Purchaser in accordance with its terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally and by general equitable principles.
Such Purchaser has all requisite power to enter into this Agreement and to carry
out and perform its obligations under the terms of this Agreement.
-21-
4.3. Purchase Entirely for Own Account Etc. Such Purchaser is
acquiring the Securities for its own account, and not with a view to, or for
sale in connection with, any distribution of the Securities in violation of the
Securities Act. Except as contemplated by this Agreement, such Purchaser has no
present agreement, undertaking, arrangement, obligation or commitment providing
for the disposition of the Securities. Such Purchaser, if it is a legal entity,
has not been organized, reorganized or recapitalized specifically for the
purpose of investing in the Securities.
4.4. Investor Status; Etc. Such Purchaser certifies and represents
to the Company that at the time such Purchaser acquires any of the Securities,
such Purchaser will be an "accredited investor" as defined in Rule 501 of
Regulation D promulgated under the Securities Act. Such Purchaser's financial
condition is such that it is able to bear the risk of holding the Securities for
an indefinite period of time and the risk of loss of its entire investment. Such
Purchaser has been afforded the opportunity to ask questions of and receive
answers from the management of the Company concerning this investment and has
sufficient knowledge and experience in investing in companies similar to the
Company in terms of the Company's stage of development so as to be able to
evaluate the risks and merits of its investment in the Company.
4.5. Securities Not Registered. Such Purchaser understands that the
Securities have not been registered under the Securities Act, by reason of their
issuance by the Company in a transaction exempt from the registration
requirements of the Securities Act, and that the Securities must continue to be
held by such Purchaser unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration. Such Purchaser
understands that the exemptions from registration afforded by Rule 144 (the
provisions of which are known to it) promulgated under the Securities Act depend
on the satisfaction of various conditions, and that, if applicable, Rule 144 may
afford the basis for sales only in limited amounts.
4.6. No Conflict. The execution and delivery of this Agreement by
such Purchaser and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of or default by such Purchaser
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to a
loss of a material benefit under (i) any provision of the organizational
documents of such Purchaser or (ii) any agreement or instrument, permit,
franchise, license, judgment, order, statute, law, ordinance, rule or
regulations, applicable to such Purchaser or its respective properties or
assets.
4.7. Brokers. Such Purchaser has not retained, utilized or been
represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
4.8. Consents. Except in connection with the HSR Act, all consents,
approvals, orders and authorizations required on the part of such Purchaser in
connection with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated herein have been obtained and will
be effective as of the Initial Closing Date.
-22-
4.9. No Manipulation of Stock. The Purchasers have not taken, in
violation of applicable law, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the transactions contemplated hereby or the sale or
resale of the shares of Common Stock.
5. Covenants.
5.1. HSR Act Filings. The Company and each Purchaser shall file
with the proper authorities all forms and other documents necessary to be filed
pursuant to the HSR Act, and the regulations promulgated thereunder, as promptly
as possible and shall cooperate with the each other in promptly producing such
additional information as those authorities may reasonably require to allow
early termination of the notice period provided by the HSR Act or as otherwise
necessary to comply with statutory requirements of the Federal Trade Commission
or the Department of Justice. The Company and each Purchaser shall pay the
filing fee associated with its respective filing of the HSR Act notification.
5.2. Other Governmental Approvals. As soon as practicable after the
execution of this Agreement, the Company and each Purchaser shall file all
applications and reports and take such other action (in addition to filings
required under the HSR Act) which is reasonably required to be taken or filed
with any governmental authority in connection with the transactions contemplated
by this Agreement. The Company and each Purchaser shall give all additional
notices to third parties and take other action reasonably required to be or
taken by it under any authorization, lease, note, mortgage, indenture, agreement
or other instrument or any law, rule, regulation, demand or court or
administrative order in connection with the transactions contemplated by this
Agreement.
5.3. Further Assurances. Each party agrees to cooperate with each
other and their respective officers, employees, attorneys, accountants and other
agents, and, generally, do such other acts and things in good faith as may be
reasonable or appropriate to timely effectuate the intents and purposes of this
Agreement and the consummation of the transactions contemplated hereby,
including, but not limited to, taking any action to facilitate the filing any
document or the taking of any action to assist the other parties hereto in
complying with the terms of Sections 5.1 and 5.2 herein.
5.4. Board Designees.
(a) In addition to the rights granted to Warburg pursuant to the
2002 Purchase Agreement and Section 9(e) of the Series A Preferred Certificate
of Designations, and as shall be provided for in Section 9(e) of the Series B
Preferred Certificate of Designations, so long as (i) the Notes are outstanding
or (ii) each of Warburg and Broadview Beneficially Own at least 25% of the
shares of the Preferred Stock issued to each Purchaser pursuant to this
Agreement (including as owned and outstanding for this purpose shares of Common
Stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants issued hereunder but excluding the shares of Preferred Stock issuable
upon the Company's Call Right), Warburg and Broadview shall each have the
exclusive right to appoint one (1) director (each, a "Board Designee") to the
Board of Directors. The Board Designees shall be duly appointed in accordance
with the Company's By-laws, Certificate of Incorporation and the General
Corporation Law of Delaware. The Warburg Board Designee and the Broadview Board
Designee so elected shall serve as a Class III Director and Class II Director,
respectively (each as designated in the Company's Certificate of Incorporation),
and until their respective successor is elected and qualified. For so long as
such membership does not conflict with any applicable law or regulation or
listing requirement of the Nasdaq National Market (as determined in good faith
by the Board of Directors of the Company), the Board Designees shall serve as a
member of the Audit Committee, Compensation Committee and each other principal
committee of the Board of Directors. Any vacancy in the position of the Board
Designee appointed by Warburg and the Board Designee appointed by Broadview may
be filled only by Warburg and Broadview, respectively. Each of the Board
Designee appointed by Warburg and the Board Designee appointed by Broadview may,
during his or her term of office, be removed at any time, with or without cause,
by and only by Warburg and Broadview, respectively, at a special meeting called
for such purpose or by written consent of Warburg and Broadview, respectively.
Any vacancy created by such removal may also be filled at such meeting or by
such consent.
-23-
(b) In addition to the Board Designee, each party hereby agrees
that following the Initial Closing, Warburg shall have the right to have one
observer (the "Board Observer") attend the meetings of the Board of Directors as
provided in Section 5.4(b) of the 2002 Purchase Agreement.
(c) Warburg hereby designates Xxxxxxx X. Xxxxxx as its initial
Board Designee to commence his term in accordance with Section 5.4(a) herein.
Broadview hereby designates Xxxxxx Xxxxxx as its initial Board Designee to
commence his term in accordance with Section 5.4(a) hereof.
(d) For so long as Warburg and Broadview have the right to
designate a Board Designee pursuant to Section 5.4(a) herein, each Board
Designee and the Board Observer shall receive a copy of all materials
distributed to the Board of Directors, whether provided to the Board of
Directors in advance of, during or after any meeting of the Board of Directors,
regardless of whether such Board Designee or Board Observer shall be in
attendance at any such meeting, provided, however; that the Company has the
right to withhold any information from the Board Observer and to exclude the
Board Observer from any meeting or portion thereof if access to such information
or attendance at such meeting could:
(i) in the reasonable judgment of the Company's outside counsel,
adversely affect the attorney client privilege between the Company and its
counsel;
(ii) cause the Board of Directors to breach its fiduciary duties;
or
(iii) result in a conflict between the interests of the Company, on
the one hand, and those of the Board Observer or any of its affiliates, on the
other hand.
The Company will use its reasonable best efforts to ensure that any withholding
of information or any restriction on attendance is strictly limited only to the
extent necessary set forth in the preceding sentence.
(e) Each Board Designee and the Board Observer shall be reimbursed
for out-of-pocket expenses incurred in connection with participation as a member
or observer, as the case may be, of the Board of Directors in a manner
consistent with the Company's policies for reimbursing other outside members of
the Board of Directors. In addition, each Board Designee shall be entitled to
the same compensation paid to other outside members of the Board of Directors in
his or her capacity as a director, which compensation shall be assignable to
Warburg and Broadview.
-24-
(f) For so long as Warburg and Broadview have the rights to
appoint the Board Designees pursuant to (i) Section 5.4(a) herein and Section
9(e) of the Series B Preferred Certificate of Designations or (ii) Section
5.4(a) of the 2002 Purchase Agreement and Section 9(e) of the Series A Preferred
Certificate of Designations, there shall be no greater than nine (9) members on
the Board of Directors at all times. The size of the Board of Directors shall
not be increased by any election by Warburg and Broadview to appoint their
respective Board Designees pursuant to Section 5.4(a) herein or Section 5.4(a)
of the 2002 Purchase Agreement and Section 9(e) of the Series A Preferred
Certificate of Designations.
5.5. Series B Preferred Certificate of Designations. The Company
shall file the Series B Preferred Certificate of Designations with the Secretary
of State of the State of Delaware, and satisfactory evidence of such filing
shall be delivered to the Purchasers within one Business Day following receipt
of Stockholder Approval at the Special Meeting.
5.6. Covenant Pending Each Closing. Between the date of this
Agreement and the date of each Closing, the Company will promptly advise each
Purchaser of any action or event of which it becomes aware which has the effect
of making incorrect, in any material respect, any of the Company's
representations or warranties or which has the effect of rendering any of the
Company's covenants incapable of performance.
5.7. Proxy Statement. The Company shall use its reasonable best
efforts to prepare and file with the SEC, as promptly as practicable after the
date hereof but in no event later than sixteen (16) Business Days after the
Initial Closing, preliminary proxy materials with respect to a meeting of the
stockholders for the purpose of approving the Special Meeting Proposals.
Thereafter, the Company shall as promptly as possible file with the SEC the
definitive proxy statement and acting through its Board of Directors, (i) call a
Special Meeting to be held at the earliest practicable date but in no event
later than forty-five (45) days after the earlier of (x) receiving notification
that the SEC is not reviewing the preliminary proxy materials and (y) the
conclusion of any SEC review of the preliminary proxy materials, for the sole
purpose of voting upon the Special Meeting Proposals and (ii) include in the
proxy statement the recommendation of its Board of Directors that holders of the
Common Stock approve the Special Meeting Proposals; provided, however, that the
Board of Directors may withdraw or adversely modify their recommendation of the
Special Meeting Proposals if the Board of Directors determines in good faith
(after consultation with its financial advisors and legal counsel) that from a
financial point of view to the stockholders of the Company, based solely on
facts or conditions arising after the date hereof, that the issuances referred
to in clause (i) above are not in the best interests of the Company's
stockholders. In the event that the Board of Directors withdraws or adversely
modifies its recommendation of the Special Meeting Proposals, the Company shall
pay to the Purchasers, based upon their pro rata percentage of the aggregate
Purchase Price and in immediately available funds, the Incremental Interest as
liquidated damages, payable within two (2) Business Days of such withdrawal or
modification, as set forth in Section 7(b) of the Notes. Neither prior to nor at
the Special Meeting shall the Company put forth any matter, other than the
Special Meeting Proposals, to the holders of Common Stock for their approval
without the prior written consent of the Purchasers.
-25-
5.8. Subscription Right.
(a) If at any time after the date hereof, and for so long as a
Purchaser Beneficially Owns at least twenty-five percent (25%) of the shares of
Common Stock issuable to such Purchaser pursuant to this Agreement and the 2002
Purchase Agreement (including upon conversion of the shares of the Preferred
Stock and the Series A Preferred and upon exercise of the Warrants and Existing
Warrants but excluding the shares of Preferred Stock issuable upon the Company's
Call Right), the Company proposes to issue equity securities of any kind (the
term "equity securities" shall include for these purposes any warrants, options
or other rights to acquire equity securities and debt securities convertible
into equity securities) of the Company, other than (i) shares of Common Stock
issuable upon conversion of the shares of the Preferred Stock or Series A
Preferred or exercise of the Warrants or the Existing Warrants, (ii) shares of
Preferred Stock issuable upon exchange of the Notes, (iii) the Warrants, (iv)
shares of Common Stock issued to the public in a firm commitment underwriting
pursuant to a registration statement filed under the Securities Act with
anticipated gross proceeds to the Company of at least $20 million, (v) shares of
Common Stock issued in connection with bona fide acquisitions, mergers, joint
venture or similar transactions, the terms of which are approved by the Board of
Directors, (vi) shares of Common Stock issued pursuant to any stock option,
stock purchase or similar plan or arrangement for the benefit of the employees
of the Company or its subsidiaries, duly adopted by the Board of Directors, or
(vii) pursuant to the terms of this Agreement, then, as to each Purchaser, the
Company shall:
(i) give written notice to such Purchaser (no less than ten (10)
Business Days prior to the closing of such issuance) setting forth in reasonable
detail (A) the designation and all of the terms and provisions of the securities
proposed to be issued (the "Proposed Securities"), including, where applicable,
the voting powers, preferences and relative participating, optional or other
special rights, and the qualification, limitations or restrictions thereof and
interest rate and maturity; (B) the price and other terms of the proposed sale
of such securities; (C) the amount of the Proposed Securities; and (D) such
other information as such Purchaser may reasonably request in order to evaluate
the proposed issuance; and
(ii) offer to issue and sell to such Purchaser, on such terms as
the Proposed Securities are issued and upon full payment by such Purchaser, a
portion of the Proposed Securities equal to a percentage determined by dividing
(A) the number of shares of Common Stock Beneficially Owned by such Purchaser by
(B) the total number of shares of Common Stock then outstanding, including for
purposes of this calculation all shares of Common Stock issuable upon conversion
or exercise in full of any convertible or exercisable securities (other than
employee stock options) then outstanding.
(b) Each Purchaser must exercise its purchase rights hereunder
within ten (10) Business Days after receipt of such notice from the Company. To
the extent that the Company offers two or more securities in units, each
Purchaser must purchase such units as a whole and will not be given the
opportunity to purchase only one of the securities making up such unit. The
closing of the exercise of such subscription right shall take place
simultaneously with the closing of the sale of the Proposed Securities giving
rise to such subscription right.
-26-
(c) Upon the expiration of the 10-Business Day offering period
described above, the Company will be free to sell such Proposed Securities that
the Purchasers have not elected to purchase during the ninety (90) days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to the Purchasers. Any Proposed Securities
offered or sold by the Company after such 90 day period must be reoffered to the
Purchasers pursuant to this Section 5.8.
(d) The election by any Purchaser not to exercise its subscription
rights under this Section 5.8 in any one instance shall not affect its right
(other than in respect of a reduction in its percentage holdings) as to any
subsequent proposed issuance. Any sale of such securities by the Company without
first giving each Purchaser the rights described in this Section 5.8 shall be
void and of no force and effect.
(e) Each of the Company, Warburg and Broadview hereby agree that,
effective as of the date hereof, Section 5.7 of the 2002 Purchase Agreement
shall be null and void and of no further force and effect and that the rights of
the parties thereunder shall be governed by the provisions set forth in this
Section 5.8.
5.9. Standstill. In the event that at any time following the date
hereof until July 22, 0000, Xxxxxxx and any of its Affiliates own more than 45%
of the issued and outstanding voting securities of the Company (the "Voting
Stock"), Warburg agrees that (i) it shall be entitled to vote (or take action by
written consent in respect of) not more than 45% of the issued and outstanding
shares of Voting Stock and (ii) it will abstain from voting any shares in excess
of 45% of the Voting Stock. Warburg further agrees that until July 22, 2007,
except among Warburg and any of its Affiliates, it shall not form, join or in
any way participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to the Voting Stock.
5.10. Nominating Committee; Agreement to Vote. For so long as a
Purchaser is subject to Section 5.9 herein, such Purchaser and such Purchaser's
designees on the Board of Directors shall vote (i) in favor of the establishment
of a nominating committee of the Board of Directors consisting entirely of
Independent Directors and (ii) if necessary to comply with applicable
requirements of federal law, state law, or Nasdaq relating to the Board of
Directors, in favor of an increase in the number of authorized members of the
Board of Directors such that a majority of the members of the Board of Directors
are Independent Directors. At or with respect to any election of one or more
directors (including to fill any vacancy on the Board of Directors), for so long
as a Purchaser is subject to Section 5.9 herein, such Purchaser shall vote all
of its shares of Common Stock and/or shares of Series A Preferred and/or shares
of Preferred Stock in favor of the election of any nominee to the Board of
Directors whose nomination was approved by the unanimous consent of the Board of
Directors.
5.11. Affirmative Covenants in Connection with the Sale of the
Notes. The Company agrees that, until the earlier of (i) the Second Closing Date
or (ii) the date upon which all Obligations are satisfied in full, the Company
will perform and observe all of the provisions contained in this Section 5.11.
-27-
(a) Notice. The Company shall notify the Purchasers promptly, but
in any event within two (2) Business Days of its discovery thereof, (i) whenever
any Event of Default occurs, (ii) whenever any action, suit or proceeding is
commenced by or against the Company which, if adversely determined, would, or
would be reasonably likely to, result in a Material Adverse Effect and (iii)
whenever any Material Adverse Effect occurs.
(b) Continued Existence; Compliance with Law. The Company shall
comply in all respects with its Certificate of Incorporation. The Company shall
preserve, renew and keep in full force and effect its existence as a corporation
and its material rights, licenses, certificates, and permits and shall comply in
all material respects with all laws, rules, regulations, ordinances, orders and
judgments applicable to it. The Company will obtain, renew and extend all of the
foregoing rights, certificates, permits, licenses, certificates of compliance
and the like which may be necessary for the continuation of the operation of its
business as currently conducted and will give prompt written notice to the
Purchasers of (i) any citation or order relating thereto, (ii) any lapse,
suspension, revocation, rescission or other termination thereof, (iii) any
alleged breach or violation thereof by the Company or any other Person, (iv) any
proceeding relating thereto or (v) any refusal of any Person to grant or extend
the same.
(c) Maintenance of Property. The Company shall at all times
maintain and preserve its property in good working order, condition and repair,
normal wear and tear excepted, and shall pay and discharge, or cause to be paid
and discharged when due, the cost of repairs to or maintenance of the same.
(d) Title to Property. All property, whether real or personal,
owned by the Company shall be held in the name of the Company.
(e) Information and Inspection. The Company shall furnish to the
Purchasers from time to time, upon request, financial statements of the Company
and information pertaining to any covenant, provision or condition hereof. At
all reasonable times and as often as the Purchasers may reasonably request, upon
reasonable notice, the Company shall permit any authorized representative
designated by the Purchasers to visit and inspect any of the properties of the
Company and to take extracts therefrom and to discuss the Company's affairs,
finances and accounts with the management of the Company and the Company's
independent auditors.
(f) Insurance. The Company will maintain or cause to be maintained
on all insurable properties now or hereafter owned by the Company insurance
against loss or damage by fire or other casualty to the extent customary with
respect to like properties of companies conducting similar businesses, and will
maintain or cause to be maintained public liability and workers' compensation
insurance insuring the Company to the extent customary with respect to companies
conducting similar businesses and, upon request, will furnish to the Purchasers
satisfactory evidence of the same. The Company shall also maintain such other
insurance as may be reasonably requested by the Purchasers.
-28-
(g) Payment of Taxes. The Company will pay and discharge promptly
as they become due and payable all Taxes, assessments and other governmental
charges or levies imposed upon it or its income or any of its property or
assets, or any part thereof, as well as all lawful claims of any kind (including
claims for labor, materials and supplies) which, if unpaid, might by law become
a Lien upon its property; provided that the Company shall not be required to pay
any Taxes, assessments, charges, levies or claims if the amount, applicability
or validity thereof shall currently be contested in good faith by appropriate
proceedings or other appropriate actions promptly initiated and diligently
conducted and if the Company shall have set aside on its books such reserves, if
any, with respect thereto as are required by GAAP and deemed appropriate by the
Company and its independent accountants.
(h) Payment of Other Indebtedness, Etc. Except as to matters being
contested in good faith and by appropriate proceedings or other appropriate
action, the Company will pay promptly when due, or in conformance with the
Company's customary practices, all other material indebtedness, liabilities and
obligations incident to the conduct of its business.
(i) Confidentiality. Except as and to the extent required by law,
each party (the "Recipient") shall not disclose or use, and shall direct its
representatives not to disclose or use to the detriment of the other parties
hereto (the "Disclosing Party"), any Confidential Information furnished, or to
be furnished, by the Disclosing Party or its representatives to the Recipient or
its representatives at any time or in any manner other than in connection with
the Proposed Transaction. For purposes of this paragraph, "Confidential
Information" means any non-public, proprietary or confidential information with
respect to a Disclosing Party, unless (a) such information is already known to
the Recipient or its representatives or to others not bound by a duty of
confidentiality or such other information becomes publicly available through no
fault of the Recipient or its representatives, (b) the use of such information
is necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Proposed Transaction and the other
parties hereto have consented to such disclosure, (c) the information is
disclosed to an affiliate of the Recipient in connection with the consummation
of the Proposed Transaction or (d) the furnishing of the information is legally
required in connection with legal proceedings or by any governmental agency;
provided, however, that the party seeking to disclose such information must
first provide to the other parties the content of the proposed disclosure, the
reasons that such disclosure is required, and the time and places that the
disclosure will be made. Upon the written request of the Disclosing Party, the
Recipient will promptly return to the Disclosing Party or destroy any
Confidential Information in its possession and certify in writing to the
Disclosing Party that it has done so.
5.12. Negative Covenants in Connection with the Sale of the Notes.
The Company agrees that, until the earlier of (i) the Second Closing Date or
(ii) the date upon which all Obligations are satisfied in full, the Company
shall not, directly or indirectly, take any of the actions set out in this
Section 5.12; provided, however, that nothing contained in this Section 5.12
shall prohibit the Company's Board of Directors from engaging in any action in
connection with or directed toward a merger, acquisition or strategic financing
transaction, subject to the Company's obligations under Section 6(b) of the
Note.
-29-
(a) Liabilities. The Company shall not incur, create, assume or
permit to exist any Liabilities, except: (i) Liabilities existing on the date
hereof; (ii) Liabilities arising hereunder or any other Liabilities owed to the
Purchasers under the Loan Documents; (iii) trade accounts payable and other
unsecured Liabilities incurred and payable in the ordinary course of business;
(iv) Liabilities for Taxes, assessments, franchise fees, governmental charges,
Liens or similar claims to the extent that payment thereof shall not be required
to be made by the provisions hereof; (v) purchase money Liabilities relating to
the purchase price of equipment to be used in the business of the Company in an
aggregate outstanding amount not to exceed at any one time $250,000; (vi) any
renewals, extensions, substitutions, refinancings or replacements of any
Liability otherwise permitted hereunder so long as (1) the aggregate amount of
Liabilities represented thereby is not increased by such renewal, extension,
substitution, refinancing or replacement, (2) the average life and the date such
Liability is scheduled to mature are not shortened, (3) the new Liability shall
not be senior in right of payment to the Liability that is being extended,
renewed, substituted, refinanced or replaced and (4) the terms and conditions of
such Liability are not more onerous to the Company in any material respect than
the terms and conditions of the Liability renewed, extended, substituted,
refinanced or replaced; (vii) any Liabilities the net proceeds of which are used
to repay the Notes in their entirety; or (viii) any Liabilities arising under
the SVB Agreements; (ix) Liabilities owed by the Company to any of its
subsidiaries or owed by any of its subsidiaries to any other of its subsidiaries
or to the Company; or (x) Liabilities incurred in connection with restructuring
plans publicly disclosed by the Company, including Liabilities associated with
terminating the Company's Soquel lease obligation.
(b) Guaranties. The Company shall not pledge its credit or
property in any manner, or otherwise become responsible, for the payment or
other performance of the Liabilities or other obligations of another Person and
shall not act as a guarantor (whether of payment or of collection), surety,
co-maker or endorser for, or agree conditionally or otherwise to make any
purchase, loan or investment in order thereby to enable, another Person to
prevent or correct a default of any kind, except endorsements of negotiable
instruments for collection in the ordinary course of business.
(c) Notes, Accounts Receivable and Claims. The Company shall not
sell, discount or otherwise dispose of any material note or material account
receivable, with or without recourse, except for collection in the ordinary
course of business or in connection with the SVB Agreements or the Xxxxx Xxxx
indebtedness; fail to assert timely any material claim, cause of action or
contract right that it possesses against any third party; nor agree to settle or
compromise any such claim, cause of action or contract right except for
settlements or compromises made in the reasonable exercise of business judgment
in the ordinary course of business.
(d) Disposal of Assets. The Company shall not sell, lease,
transfer, assign or otherwise dispose of any material part of its assets to any
Person, except for sales, leases, transfers, assignments or other dispositions
made: (i) in the ordinary course of business; (ii) in connection with the
restructuring plans publicly disclosed by the Company, including the termination
of the Company's 000 Xxxxxx Xxx lease obligation; (iii) in connection with the
SVB Agreements; or (iv) in connection with the Xxxxx Xxxx indebtedness, more
fully described on Schedule 5.12(d).
-30-
(e) Amendment of Governing Documents. The Company shall not amend
or modify its Certificate of Incorporation or By-laws in any respect which would
have a material adverse effect upon the Purchasers' rights and remedies under
the Loan Documents.
(f) Reorganizations; Acquisitions. The Company shall not be a
party to any recapitalization or purchase all or a substantial part of the
capital stock, partnership interests or assets of any Person or any division or
business unit of any Person.
(g) Liens. The Company shall not suffer or permit any property or
asset now owned or hereafter acquired by it to be or become encumbered by any
Lien other than Permitted Liens.
(h) Capital Distributions. The Company shall not make any capital
distributions, or pay or declare any dividend or distribution, except (i) in
connection with a stock split or combination, (ii) in accordance with this
Agreement and/or the 2002 Purchase Agreement or (iii) for dividends or
distributions by the subsidiaries of the Company to the Company.
(i) Transactions with Affiliates. Except in connection with the
Loan Documents, the Company shall not pay any management or other fee to, or,
except in the ordinary course of business with its subsidiaries, enter into any
transaction with, any Affiliate.
(j) Amendments or Waivers. Except with respect to the SVB
Agreements, the Company shall not amend or cancel or consent to the amendment or
cancellation of any contract (or waive a right thereunder) in any manner that
might have the effect of materially and adversely (a) affecting its financial
condition, (b) affecting the rights of the Purchasers under the Loan Documents
or (c) decreasing or adversely affecting the value of the collateral securing
the Obligations.
(k) Accounting Matters. Except upon thirty (30) days' written
notice, the Company shall not change its fiscal year or accounting practices.
(l) Subsidiaries. The Company shall not form or acquire or cause
to be formed or acquired any Subsidiary, except in the ordinary course
consistent with past practice.
(m) Investments. The Company shall not make any investments other
than investments in cash equivalents, except in the ordinary course consistent
with past practice.
(i) Indirect Actions. The Company shall not permit any of its
subsidiaries to take any of the actions set forth in this Section 5.12 nor
permit any of the conditions set forth in this Section 5.12 to occur with
respect to its subsidiaries; provided, however, that with respect to Section
5.12(b), Purchasers acknowledge and consent to the secured guaranties issued by
certain of the Company's subsidiaries for the benefit of SVB, and consent to any
related arrangements for the benefit of SVB approved by the Board.
-31-
6. Conditions Precedent.
6.1. Conditions to the Obligation of the Purchasers to Consummate
the Initial Closing. The several obligations of each Purchaser to consummate the
transactions to be consummated at the Initial Closing, and to purchase and pay
for the Notes being purchased by it at such Closing pursuant to this Agreement,
are subject to the satisfaction of the conditions precedent set forth in this
Section 6.1.
(a) The representations and warranties contained herein of the
Company shall be true and correct on and as of the Initial Closing Date with the
same force and effect as though made on and as of the Initial Closing Date (it
being understood and agreed by each Purchaser that for purposes of this Section
6.1(a), in the case of any representation and warranty of the Company contained
herein (i) which is qualified by application thereto by a Material Adverse
Effect standard, such representation and warranty need be true and correct by
application thereto only of a Material Adverse Change standard, (ii) which is
not hereinabove qualified by application thereto of a materiality standard, such
representation and warranty need be true and correct only in all material
respects or (iii) which is made as of a specific date, such representation and
warranty need be true and correct only as of such specific date).
(b) The Company shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by the
Company on or prior to the Initial Closing Date.
(c) Each Purchaser shall have received a certificate, dated the
Initial Closing Date, signed by each of the President and the Chief Financial
Officer of the Company, certifying on behalf of the Company that the conditions
specified in the foregoing Sections 6.1(a) and (b) have been fulfilled.
(d) The purchase of and payment for the Notes by each Purchaser
shall not be prohibited or enjoined by any law or governmental or court order or
regulation.
(e) Each Purchaser shall have received from the Company's counsel,
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, an opinion in form and substance reasonably
satisfactory to the Purchasers.
(f) There shall not have been any Material Adverse Change since
the Announcement Date.
(g) All corporate and other proceedings to be taken by the Company
in connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchasers and the Purchasers shall have received all such counterpart originals
or certified or other copies of such documents as it may reasonably request.
(h) The Company and the Collateral Agent, on behalf of the
Purchasers, shall have entered into the Pledge and Security Agreement.
-32-
(i) The Collateral Agent, on behalf of the Purchasers, and SVB
shall have entered into the Intercreditor Agreement and all consents identified
on Schedule 6.1(i) of the Disclosure Schedule shall have been obtained,
including all consents and waivers required from SVB in connection with the
transactions contemplated in the Loan Documents.
(j) All UCC filings and filings made in the United States Patent
and Trademark Office in connection with the creation and perfection of the
security interests in and Liens on the Collateral granted pursuant to the Loan
Documents.
(k) Nasdaq shall have approved of and consented to the
transactions contemplated hereby.
6.2. Conditions to the Obligation of the Company to Consummate the
Initial Closing. The obligation of the Company to consummate the transactions to
be consummated at the Initial Closing, and to issue and sell to each Purchaser
the Notes to be purchased by it at the Initial Closing pursuant to this
Agreement, is subject to the satisfaction of the conditions precedent set forth
in this Section 6.2.
(a) The representations and warranties contained herein of such
Purchaser shall be true and correct on and as of the Initial Closing Date, with
the same force and effect as though made on and as of Initial Closing Date (it
being understood and agreed by the Company that, in the case of any
representation and warranty of such Purchaser contained herein which is not
hereinabove qualified by application thereto of a materiality standard, such
representation and warranty need be true and correct only in all material
respects).
(b) Such Purchaser shall have performed in all material respects
all obligations and conditions herein required to be performed or observed by
such Purchaser on or prior to the Initial Closing Date.
(c) The sale of the Notes by the Company shall not be prohibited
or enjoined by any law or governmental or court order or regulation.
(d) Nasdaq shall have approved of and consented to the
transactions contemplated hereby.
Each Purchaser's obligations under this Section 6.2 shall be several
and independent from the obligations of each other Purchaser; and the failure by
any Purchaser to fulfill or comply with any of the conditions set forth in this
Section 6.2 shall not affect the obligations of the Company to any other
Purchaser to consummate the transactions contemplated by this Agreement.
6.3. Conditions to the Obligation of the Purchasers to Consummate
the Second Closing. The several obligations of each Purchaser to consummate the
transactions to be consummated at the Second Closing, including without
limitation to exchange the Notes for shares of Preferred Stock of the Company
pursuant to this Agreement, are subject to the satisfaction of the conditions
precedent set forth in this Section 6.3.
-33-
(a) At the Special Meeting, all of the Special Meeting Proposals
shall have been approved by the Company's stockholders.
(b) The Series B Preferred Certificate of Designations shall have
been filed by the Company with the Secretary of State of the State of Delaware,
and satisfactory evidence of such filing shall have been delivered to the
Purchasers.
(c) To the extent required, any applicable waiting period under
the HSR Act shall have expired or notice of early termination of such waiting
period shall have been received by the Company and the Purchasers.
(d) The consents set forth on Schedule 6.3(d) shall have been
obtained.
6.4. Conditions to the Obligation of the Company to Consummate the
Second Closing. The obligations of the Company to consummate the transactions to
be consummated at the Second Closing, and to exchange for each Purchaser the
Notes for Preferred Stock of the Company pursuant to this Agreement, are subject
to the satisfaction of the conditions precedent set forth in this Section 6.4.
(a) At the Special Meeting, all of the Special Meeting Proposals
shall have been approved by the Company's stockholders.
(b) To the extent required, the waiting period under the HSR Act
shall have expired or notice of early termination of the waiting period shall
have been received by the Company and the Purchasers.
6.5. Conditions to the Obligations of the Purchasers to consummate
each Subsequent Closing. The several obligations of each Purchaser to consummate
the transactions to be consummated at each Subsequent Closing, and to purchase
and pay for the shares of Preferred Stock being purchased by it at each such
Subsequent Closing pursuant to this Agreement, are subject to the satisfaction
of the conditions precedent set forth in this Section 6.5.
(a) The representations and warranties contained herein of the
Company shall be true and correct on and as of each Subsequent Closing Date with
the same force and effect as though made on and as of each Subsequent Closing
Date (it being understood and agreed by each Purchaser that for purposes of this
Section 6.5(a), in the case of any representation and warranty of the Company
contained herein (i) which is qualified by application thereto by a Material
Adverse Effect standard, such representation and warranty need be true and
correct by application thereto only of a Material Adverse Change standard, (ii)
which is not hereinabove qualified by application thereto of a materiality
standard, such representation and warranty need be true and correct only in all
material respects or (iii) which is made as of a specific date, such
representation and warranty need be true and correct only as of such specific
date).
(b) The Company shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by the
Company on or prior to each Subsequent Closing Date.
-34-
(c) Each Purchaser shall have received a certificate, dated the
Subsequent Closing Date, signed by each of the President and the Chief Financial
Officer of the Company, certifying on behalf of the Company that the conditions
specified in the foregoing Sections 6.5(a) and (b) have been fulfilled.
(d) At the Special Meeting, the Company's stockholders shall have
approved all of the Special Meeting Proposals.
(e) To the extent required, the waiting period under the HSR Act
shall have expired or notice of early termination of the waiting period shall
have been received by the Company and the Purchasers.
(f) There shall not have been any Material Adverse Change since
the Initial Closing.
(g) The Company shall not have (i) commenced any voluntary
proceeding under any provision of Title 11 of the United States Code, as now or
hereafter amended, or any other proceeding, under any law, now or hereafter in
force, relating to bankruptcy, insolvency, reorganization, liquidation, or
otherwise to the relief of debtors or the readjustment of indebtedness; (ii)
made any assignment for the benefit of creditors or a composition or similar
arrangement with such creditors; (iii) appointed a receiver, trustee or similar
judicial officer or agent to take charge of or liquidate any of its property or
assets; and (iv) shall not have had any involuntary proceeding of the kind
described in subsections (i)-(iv) of this Section 6.5(g) commenced against it.
(h) The purchase of and payment for the Preferred Stock to be
issued as of such Subsequent Closing shall not be prohibited or enjoined by any
law, court order or government regulation.
7. Registration of the Securities; Compliance with the Securities
Act.
7.1. Securities Law Transfer Restrictions. No Purchaser shall sell,
assign, pledge, transfer or otherwise dispose or encumber any of the Securities
being purchased by it hereunder unless the transferee agrees in writing to be
bound by the terms of this Agreement and except (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to an available
exemption from registration under the Securities Act and applicable state
securities laws and, if requested by the Company, upon delivery by such
Purchaser of an opinion of counsel reasonably satisfactory to the Company to the
effect that the proposed transfer is exempt from registration under the
Securities Act and applicable state securities laws. The Company shall not
register any transfer of the Securities in violation of this Section 7.1. The
Company may, and may instruct any transfer agent for the Company to, place such
stop transfer orders as may be required on the transfer books of the Company in
order to ensure compliance with the provisions of this Section 7.1.
Notwithstanding the foregoing, the Notes shall not be transferable without the
prior written consent of the Company, except for transfers to Affiliates of the
Purchasers that agree not to further transfer the Notes.
-35-
7.2. Legends. Each certificate representing any of the Securities
shall be endorsed with the legend set forth below, and each Purchaser covenants
that, except to the extent such restrictions are waived by the Company, it shall
not transfer the shares represented by any such certificate without complying
with the restrictions on transfer described in this Agreement and the legends
endorsed on such certificate:
"THE SECURITIES REPRESENTED BY THIS [CERTIFICATE] [NOTE] [WARRANT] [AND THE
SECURITIES ISSUABLE UPON ITS [CONVERSION] [EXCHANGE] [EXERCISE]] HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT OR SUCH LAWS AND, IF
REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM THE ACT OR
SUCH LAWS."
7.3. Registration Procedures and Other Matters. The Company shall:
(a) use its reasonable best efforts, subject to receipt of
necessary information from each Purchaser for inclusion in such filing, prepare
and file with the SEC within 30 days following the filing of its annual report
on the Form 10-K with the SEC for 2003, a registration statement on Form S-1, or
if available, Form S-3 (the "Registration Statement") covering the Securities
held by each Purchaser, or the Holders (defined in Section 7.4 below), from time
to time, in compliance with the Securities Act and shall amend the Registration
Statement upon the exercise by the Company of the Call Right in accordance with
the terms set forth herein;
(b) use its reasonable best efforts to cause the Registration
Statement to become effective as promptly as practicable after filing, such
efforts to include, without limiting the generality of the foregoing, preparing
and filing with the SEC any financial statements that are required to be filed
prior to the effectiveness of such Registration Statement;
(c) use its reasonable best efforts to prepare and file with the
SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith (the "Prospectus") as may be necessary
to keep the Registration Statement continuously effective and free from any
material misstatement or omission to state a material fact for a period not
exceeding, with respect to each Holder's Securities, the earlier of (i) the date
on which each Holder may sell all Securities then held by such Holder without
restriction by the volume limitations of Rule 144(e) of the Securities Act or
(ii) such time as all Securities purchased by such Holder have been sold
pursuant to a registration statement or are otherwise freely tradeable;
(d) furnish to each Holder with respect to the Securities
registered under the Registration Statement such number of copies of the
Registration Statement, Prospectuses and preliminary prospectuses in conformity
with the requirements of the Securities Act and such other documents as such
Holder may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Securities by such Holder; provided, however,
that the obligation of the Company to deliver copies of Prospectuses or
Preliminary Prospectuses to such Holder shall be subject to the receipt by the
Company of reasonable assurances from such Holder that such Holder will comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with any use of
such Prospectuses or Preliminary Prospectuses;
-36-
(e) file documents required of the Company for normal blue sky
clearance in states specified in writing by each Holder and use its reasonable
best efforts to maintain such blue sky qualifications during the period the
Company is required to maintain the effectiveness of the Registration Statement
pursuant to Section 7.3(c); provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in this
Section 7.3 and the registration of the Securities pursuant to the Registration
Statement (provided, that the Holders shall bear the cost of all underwriting
discounts and selling commissions and similar fees applicable to the sale of
Securities and all fees and expenses of legal counsel for any Holder and all
transfer Taxes);
(g) advise each Holder promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and promptly use its reasonable
best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and
(h) use its reasonable best efforts to cause the Common Stock
underlying the shares of Preferred Stock and the Warrants to be listed on the
Nasdaq National Market in connection with the filing of the Registration
Statement.
Notwithstanding anything to the contrary herein, the Registration
Statement shall cover only the Securities.
7.4. Transfer of Securities; Suspension.
(a) Each Purchaser agrees that in case of any disposition of its
Securities not made pursuant to the Registration Statement to (i) a third party
who agrees to be bound by the provisions of this Section 7 and makes the
representations to the Company contained in Section 4 herein or (ii) its
partners as part of a distribution of all or part of the Securities (in each
case the "Transferee", and together with the Purchasers, the "Holders"), such
Purchaser will promptly notify the Company of any changes in the information set
forth in the Registration Statement regarding the Holders or their plans of
distribution. The Company agrees, in case of such sale, transfer or distribution
(to the extent made in accordance with Section 7.1), to promptly file one or
more post-effective amendments to the Registration Statement or a supplement to
the related Prospectus, naming each Transferee as a Selling Shareholder in
accordance with the provisions of the Securities Act.
-37-
(b) Except in the event that paragraph (c) below applies, the
Company shall (i) prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that, as thereafter delivered
to the purchasers of Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; (ii)
provide each Holder copies of any documents filed pursuant to Section 7.4(b)(i);
and (iii) inform each Holder that the Company has complied with its obligations
in Section 7.4(b)(i) (or that, if the Company has filed a post-effective
amendment to the Registration Statement which has not yet been declared
effective, the Company will notify each Holder to that effect, will use its
reasonable best efforts to secure the effectiveness of such post-effective
amendment as promptly as possible and will promptly notify each Holder pursuant
to Section 7.4(b)(i) herein when the amendment has become effective).
(c) Subject to paragraph (d) below, in the event (i) of any
request by the SEC or any other federal or state governmental authority during
the period of effectiveness of the Registration Statement for amendments or
supplements to a Registration Statement or related Prospectus or for additional
information; (ii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) of any event or circumstance which, upon the
advice of its counsel, necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or (v) the Company determines in good faith that
offers and sales pursuant to the Registration Statement should not be made by
reason of the presence of material undisclosed circumstances or developments
with respect to which the disclosure that would be required in such a
Registration Statement or related Prospectus is premature, would have an adverse
effect on the Company or is otherwise inadvisable, then the Company shall
deliver a certificate in writing to each Holder (the "Suspension Notice") to the
effect of the foregoing and, upon receipt of such Suspension Notice, such Holder
will refrain from selling any Securities pursuant to the Registration Statement
(a "Suspension") until such Holder's receipt of copies of a supplemented or
amended Prospectus prepared and filed by the Company, or until it is advised in
writing by the Company that the current Prospectus may be used, and has received
copies of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. In the event of any
Suspension, the Company will use its reasonable best efforts to cause the use of
the Prospectus so suspended to be resumed as soon as reasonably practicable
after the delivery of a Suspension Notice to each Holder. In addition to and
without limiting any other remedies (including, without limitation, at law or at
equity) available to such Holder, such Holder shall be entitled to specific
performance in the event that the Company fails to comply with the provisions of
this Section 7.4(c).
-38-
(d) Notwithstanding the foregoing paragraphs of this Section 7.4,
no Holder shall be prohibited from selling Securities under the Registration
Statement as a result of Suspensions on more than three occasions of not more
than 30 days each in any twelve month period unless, in the good faith judgment
of the Board of Directors, upon the written opinion of counsel, the sale of
Securities under the Registration Statement in reliance on this paragraph 7.4(d)
would be reasonably likely to cause a violation of the Securities Act or the
Exchange Act and result in liability to the Company.
(e) Provided that a Suspension is not then in effect, each Holder
may sell Securities under the Registration Statement, provided that it arranges
for delivery of a current Prospectus to the transferee of such Securities. Upon
receipt of a request therefor, the Company will provide an adequate number of
current Prospectuses to such Holder and to supply copies to any other parties
requiring such Prospectuses.
(f) Each Holder acknowledges and agrees that the Securities sold
pursuant to the Registration Statement are not transferable on the books of the
Company unless the stock certificate submitted to the transfer agent evidencing
such Securities is accompanied by a certificate reasonably satisfactory to the
Company to the effect that (i) the Securities have been sold in accordance with
such Registration Statement and (ii) the requirement of delivering a current
Prospectus has been satisfied.
(g) In the event of a sale of Securities by any Holder pursuant to
the Registration Statement, such Holder shall deliver to the Company's transfer
agent an appropriate notification of the sale, so that the Securities may be
properly transferred.
7.5. Company Registration.
(a) If the Company shall determine to register any of its equity
securities either for its own account or for the account of other stockholders
at any time prior to the effectiveness of the Registration Statement, other than
(i) a registration relating solely to employee benefit plans, (ii) a
registration relating solely to a SEC Rule 145 transaction or (iii) a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Securities, the
Company will:
(i) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) if so requested by the Holders of at least 51% or more of the
Securities (on an as-converted, as exercised basis), include in such
registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the Securities
specified in a written request or requests made by the Holders within fifteen
(15) days after receipt of the written notice from the Company described in
clause (i) above, except as set forth in Section 7.5(b) below. Such written
request may specify all or a part of the Holders' Securities. In the event any
Holder requests inclusion in a registration pursuant to this Section 7.5 in
connection with a distribution of Securities to its partners, the registration
shall provide for the resale by such partners, if requested by such Holder.
-39-
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 7.5(a)(i) herein. In such event, the right of each of
the Holders to registration pursuant to this Section 7.5 shall be conditioned
upon such Holders' participation in such underwriting and the inclusion of such
Holders' Securities in the underwriting to the extent provided herein. The
Holders whose shares are to be included in such registration shall (together
with the Company and the other stockholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
underwriting by the Company. Notwithstanding any other provision of this Section
7.5, if the representative determines that marketing factors require a
limitation on the number of shares to be underwritten, the representative may
limit the number of Securities to be included in the registration and
underwriting. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner: The securities, including the Securities, of the Company held
by stockholders of the Company (other than securities held by holders who by
contractual right demanded such registration and securities to be offered by the
Company) shall be excluded from such registration and underwriting to the extent
required by such limitation, and, if a limitation on the number of shares
permits additional shares to be included in the registration and underwriting,
each of the Holders and other holders requesting to have their shares included
in such registration will have the right to include such shares in such
registration (allocated pro rata among such Holders and holders on the basis of
the relative number of shares requested to be registered by such Holders and
holders up to the permitted amount). If any of the Holders or any officer,
director or other stockholder disapproves of the terms of any such underwriting,
he may elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. Notwithstanding the
foregoing, if at any time after giving written notice referred to above, and
prior to the effective date of the applicable registration statement filed in
connection therewith, the Company determines for any reason not to proceed with
the proposed registration statement, the Company may, at its election, give
written notice of such determination to the Holders that have elected to have
their Securities included in such registration and thereupon will be relieved of
its obligations to register such Securities in connection with such
registration.
7.6. Indemnification.
(a) For the purpose of this Section 7.6:
(i) the term "Selling Stockholder" shall include each Holder and
any Affiliate of such Holder; and
(ii) the term "Registration Statement" shall include the Prospectus
in the form first filed with the SEC pursuant to Rule 424(b) of the Securities
Act or filed as part of the Registration Statement at the time of effectiveness
if no Rule 424(b) filing is required, exhibit, supplement or amendment included
in or relating to the Registration Statement referred to in Section 7.1.
-40-
(b) The Company agrees to indemnify and hold harmless each Selling
Stockholder and its officers, directors, partners, employees and agents and each
underwriter of Securities, if any, and each Person who controls any such
underwriter from and against any losses, claims, damages or liabilities to which
such Person may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon (i) any untrue statement of a
material fact contained in the Registration Statement as amended at the time of
effectiveness or any omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (ii) any failure
by the Company to fulfill any undertaking included in the Registration Statement
as amended at the time of effectiveness, and the Company will reimburse such
Selling Stockholder for any reasonable legal or other out-of-pocket expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim, or preparing to defend any such action, proceeding
or claim, provided, however, that the Company shall not be liable in any such
case to the extent that such loss, claim, damage or liability arises out of, or
is based upon, an untrue statement made in such Registration Statement or any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Selling
Stockholder specifically for use in preparation of the Registration Statement or
the failure of such Selling Stockholder to comply with its covenants and
agreements contained in Section 7.4 herein respecting sale of the Securities or
any statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Selling Stockholder prior to the pertinent
sale or sales by the Selling Stockholder. The Company shall reimburse each
Selling Stockholder for the amounts provided for herein on demand as such
expenses are incurred.
(c) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless the Company (and each Person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, each of its officers, directors, employees and agents from
and against any losses, claims, damages or liabilities to which the Company (or
any such officer, director, employee, agent or controlling Person) may become
subject (under the Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, (i) any failure by a Selling Stockholder to comply with
the covenants and agreements contained in Section 7.4 herein respecting the sale
of the Securities, or (ii) any untrue statement of a material fact contained in
the Registration Statement or any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading if and
to the extent that such untrue statement or omission was made in reliance upon
and in conformity with written information furnished by or on behalf of any
Selling Stockholder specifically for use in preparation of the Registration
Statement, and each Selling Stockholder, severally and not jointly, will
reimburse the Company (or such officer, director, employee, agent or controlling
Person), as the case may be, for any legal or other out-of-pocket expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that the obligation of each
Selling Stockholder to indemnify the Company (or such officer, director,
employee, agent or controlling Person) shall be limited to the net amount
received by such Selling Stockholder from the sale of its Securities.
-41-
(d) Promptly after receipt by any indemnified Person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying Person pursuant to this Section 7.6, such
indemnified Person shall notify the indemnifying Person in writing of such claim
or of the commencement of such action, but the omission to so notify the
indemnifying Person will not relieve it from any liability which it may have to
any indemnified Person under this Section 7.6 (except to the extent that such
omission materially and adversely affects the indemnifying Person's ability to
defend such action) or from any liability otherwise than under this Section 7.6.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified Person, the indemnifying Person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified Person promptly after receiving the aforesaid
notice from such indemnified Person, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified Person. After
notice from the indemnifying Person to such indemnified Person of its election
to assume the defense thereof, such indemnifying Person shall not be liable to
such indemnified Person for any legal expenses subsequently incurred by such
indemnified Person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified Person, for the same
counsel to represent both the indemnified Person and such indemnifying Person or
any affiliate or associate thereof, the indemnified Person shall be entitled to
retain its own counsel at the expense of such indemnifying Person; provided,
further, however, that no indemnifying Person shall be responsible for the fees
and expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying Person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying Person shall have approved the terms of such settlement; provided,
however, that such consent shall not be unreasonably withheld. No indemnifying
Person shall, without the prior written consent of the indemnified Person,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified Person is or could have been a party and indemnification
could have been sought hereunder by such indemnified Person, unless such
settlement includes an unconditional release of such indemnified Person from all
liability on claims that are the subject matter of such proceeding.
(e) If the indemnification provided for in this Section 7.6 is
unavailable to or insufficient to hold harmless an indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying Person shall contribute to the amount paid or payable by
such indemnified Person as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and any Purchaser,
as well as any other Selling Shareholders under such registration statement on
the other in connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, in the case of an
untrue statement, whether the untrue statement relates to information supplied
by the Company on the one hand or any Purchaser or other Selling Shareholder on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement. The Company and each
Purchaser agree that it would not be just and equitable if contribution pursuant
to this subsection (e) were determined by pro rata allocation (even if the
Purchasers and other Selling Shareholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified Person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified Person in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Selling Stockholder shall be required to contribute any
amount in excess of the amount by which the net amount received by such Selling
Stockholder from the sale of the Securities to which such loss relates exceeds
the amount of any damages which such Selling Stockholder has otherwise been
required to pay by reason of such untrue statement (except in the event of fraud
by such Selling Stockholder). No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The Selling Stockholder's obligations in this subsection to
contribute shall be in proportion to the respective sale of Securities of such
Selling Stockholder and shall not be joint with any other Selling Shareholders.
-42-
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 7.6, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 7.6
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement as required by the Securities Act and the Exchange
Act. The parties are advised that federal or state public policy as interpreted
by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 7.6, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 7.6 and further agree not to attempt to assert any
such defense.
7.7. Termination of Conditions and Obligations. The conditions
precedent imposed by this Section 7 upon the transferability of the Securities
shall cease and terminate as to any particular number of the Securities when
such Securities shall have been effectively registered under the Securities Act
and sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering such Securities or
at such time as an opinion of counsel reasonably satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.
7.8. Information Available. So long as the Registration Statement
is effective covering the resale of Securities owned by each Holder, the Company
will furnish to each Holder, upon the reasonable request of such Holder, an
adequate number of copies of the Prospectuses to supply to any other party
requiring such Prospectuses; and upon the reasonable request of any Purchaser,
the President or the Chief Financial Officer of the Company (or an appropriate
designee thereof) will meet with such Purchaser or a representative thereof at
the Company's headquarters to discuss all information relevant for disclosure in
the Registration Statement covering the Securities and will otherwise cooperate
with any Holder's conducting an investigation for the purpose of reducing or
eliminating such Holder exposure to liability under the Securities Act,
including the reasonable production of information at the Company's
headquarters; provided, that the Company shall not be required to disclose any
confidential information to any holder or meet at its headquarters with any
Purchaser until and unless such Holder or Purchaser shall have entered into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company with the Company with respect thereto.
-43-
7.9. Delay of Registration. The Holders shall have no right to take
any action to restrain, enjoin or otherwise delay any registration pursuant to
this Section 7 as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.
8. Termination.
8.1. Conditions of Termination. Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated at any time (a) by
mutual consent of the Company and the Purchasers, or (b) before the Initial
Closing by either party hereto if the Initial Closing shall not have occurred on
or prior to August 10, 2003.
8.2. Effect of Termination. In the event of termination pursuant to
Section 8.1 herein, this Agreement shall become null and void and have no
effect, with no liability on the part of the Company or the Purchasers, or their
directors, officers, agents or stockholders, with respect to this Agreement,
except for the (i) liability of a party for expenses pursuant to Section 9.9
herein and (ii) liability for any breach of this Agreement or the Loan
Documents.
9. Miscellaneous Provisions.
9.1. Public Statements or Releases. Neither the Company nor any
Purchaser shall make any public announcement with respect to the existence or
terms of this Agreement or the transactions provided for herein without the
prior approval of the other parties, which shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, nothing in this Section 9.1 shall
prevent any party from making any public announcement it considers necessary in
order to satisfy its obligations under the law or the rules of any national
securities exchange, provided such party, to the extent practicable, provides
the other parties with an opportunity to review and comment on any proposed
public announcement before it is made.
9.2. Rights Cumulative. Each and all of the various rights, powers
and remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
9.3. Pronouns. All pronouns or any variation thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
-44-
9.4. Notices.
(a) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be given
hereunder shall be sent by postage prepaid first class mail, courier or
facsimile or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder. The date of giving any notice shall
be the date of its actual receipt.
(b) All correspondence to the Company shall be addressed as
follows:
Proxim Corporation
000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
(c) All correspondence to any Purchaser shall be sent to such
Purchaser at the address set forth in EXHIBIT A.
(d) Any Person may change the address to which correspondence to
it is to be addressed by notification as provided for herein.
9.5. Captions. The captions and paragraph headings of this
Agreement are solely for the convenience of reference and shall not affect its
interpretation.
9.6. Severability. Should any part or provision of this Agreement
be held unenforceable or in conflict with the applicable laws or regulations of
any jurisdiction, the invalid or unenforceable part or provisions shall be
replaced with a provision which accomplishes, to the extent possible, the
original business purpose of such part or provision in a valid and enforceable
manner, and the remainder of this Agreement shall remain binding upon the
parties hereto.
9.7. Governing Law; Injunctive Relief.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) Each of the parties hereto acknowledges and agrees that
damages will not be an adequate remedy for any material breach or violation of
this Agreement if such material breach or violation would cause immediate and
irreparable harm (an "Irreparable Breach"). Accordingly, in the event of a
threatened or ongoing Irreparable Breach, each party hereto shall be entitled to
seek, in any state or federal court in the State of New York, equitable relief
of a kind appropriate in light of the nature of the ongoing or threatened
Irreparable Breach, which relief may include, without limitation, specific
performance or injunctive relief; provided, however, that if the party bringing
such action is unsuccessful in obtaining the relief sought, the moving party
shall pay the non-moving party's reasonable costs, including attorney's fees,
incurred in connection with defending such action. Such remedies shall not be
the parties' exclusive remedies, but shall be in addition to all other remedies
provided in this Agreement.
-45-
9.8. Waiver. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or be construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
9.9. Expenses. The Company shall pay the documented fees and
expenses incurred by the Purchasers in connection with the transactions
contemplated hereby including, without limitation, legal, consulting and
accounting fees ("Transaction Fees"). Payments due pursuant to this Section 9.9
will be made at each Closing for all documented fees and expenses incurred but
unpaid as of such Closing; provided, that in the event each applicable Closing
occurs, or if a Closing does not occur then upon termination of this Agreement,
and in any event, any remaining payments will be made not later than 30 days
after a xxxx for such fees and expenses has been sent by the Purchasers to the
Company.
9.10. Assignment. The rights and obligations of the parties hereto
shall inure to the benefit of and shall be binding upon the authorized
successors and permitted assigns of each party. None of the parties may assign
its rights or obligations under this Agreement or designate another Person (i)
to perform all or part of its obligations under this Agreement or (ii) to have
all or part of its rights and benefits under this Agreement, in each case
without the prior written consent of the other parties, provided, however, that
the Purchasers shall have the right to assign and transfer all or a portion of
its rights and obligations under this Agreement to one or more of their
respective Affiliates. In the event of any assignment in accordance with the
terms of this Agreement, the assignee shall specifically assume and be bound by
the provisions of the Agreement by executing and agreeing to an assumption
agreement reasonably acceptable to the Company.
9.11. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument
9.12. 2002 Purchase Agreement. Except as expressly set forth herein,
each party acknowledges and agrees that the 2002 Purchase Agreement shall remain
in full force and effect.
9.13. Entire Agreement. This Agreement, the Notes and the other Loan
Documents constitute the entire agreement between the parties hereto respecting
the subject matter hereof and supersedes all prior agreements, negotiations,
understandings, representations and statements respecting the subject matter
hereof, whether written or oral. No modification, alteration, waiver or change
in any of the terms of this Agreement shall be valid or binding upon the parties
hereto unless made in writing and duly executed by the Company and Purchasers
holding in the aggregate at least a majority of the aggregate principal amount
of the Notes or least a majority of the shares of Preferred Stock issued or to
be issued pursuant to this Agreement.
-46-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written.
PROXIM Corporation
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President & CEO
PURCHASERS:
WARBURG PINCUS PRIVATE EQUITY VIII, L.P.
By: WARBURG, XXXXXX & CO.,
its General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Partner
BROADVIEW CAPITAL PARTNERS L.P.
By: Broadview Capital Partners Management LLC
its General Partner
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
BROADVIEW CAPITAL PARTNERS QUALIFIED
PURCHASER FUND L.P.
By: Broadview Capital Partners Management LLC
its General Partner
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
BROADVIEW CAPITAL PARTNERS AFFILIATES
FUND LLC
By: Broadview Capital LLC
its Manger
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
[Signature Page to Securities Purchase Agreement]
EXHIBIT A
PURCHASERS
Purchaser Principal Amount Warrant Coverage Issuable at the Maximum Commitment Under the
Name and Address of Notes to be Purchased Second Closing Call Right
------------------------------------------------------------------------------------------------
Warburg Pincus Private Equity $26,000,000 15,600,000 $8,666,667
VIII, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Fax No. 000-000-0000
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
Broadview Capital $484,000 290,400 $161,333
Partners L.P.
Broadview Capital $3,502,800 2,101,680 $1,167,600
Partners Qualified Purchaser
Fund L.P.
Broadview Capital Partners Affiliates Fund LLC $13,200 7,920 $4,400
------- ----- ------
TOTAL $30,000,000.00 18,000,000.00 $10,000,000.00
-----
