EXHIBIT 2
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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
Novatel Wireless, Inc.
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
The undersigned (the "Investor"), hereby confirms its agreement with you as
follows:
1. This Preferred Stock and Warrant Purchase Agreement (the "Agreement") is made
as of the date set forth below between Novatel Wireless, Inc., a Delaware
corporation (the "Company"), and the Investor.
2. The Company has authorized the sale and issuance of up to 30,000 shares (the
"Shares") of Series A Convertible Preferred Stock of the Company, $.001 par
value per share (the "Preferred Stock") convertible into shares of the Company's
common stock, par value $.001 per share (the "Common Stock") as provided in the
form of Series A Certificate of Designation attached as Exhibit D, and Common
Stock Purchase Warrants (the "Investor Warrants") exercisable for shares of
Common Stock (the "Warrant Shares") to certain investors in a private placement
(the "Offering").
3. The Company and the Investor agree that the Investor will purchase from the
Company and the Company will issue and sell to the Investor 3,000 Shares, and
Investor Warrants initially exercisable for 1,168,830 Warrant Shares, at a
purchase price of $1,000.00 per Share, or an aggregate purchase price of
$3,000,000, pursuant to the Terms and Conditions for Purchase of Shares and
Investor Warrants attached hereto as Annex I and incorporated herein by this
reference as if fully set forth herein. Unless otherwise requested by the
Investor in Exhibit A, certificates representing the Shares and Investor
Warrants purchased by the Investor will be registered in the Investor's name and
address as set forth below.
4. The Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three years with
the Company or its affiliates, (b) neither it, nor any group of which it is a
member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any National Association of Securities
Dealers, Inc. ("NASD") member. Exceptions:
--------------------------------------------------------------------------------
(If no exceptions, write "none." If left blank, response will be
deemed to be "none.")
Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
Dated as of: December 21, 2001
Cornerstone Equity Investors IV, L.P.
-------------------------------------
"INVESTOR"
By: /s/ Xxxxxx Xxxx
Name: Xxxxxx Xxxx
Title: Managing Director
Address: Cornerstone Equity Investors IV, LP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
AGREED AND ACCEPTED:
NOVATEL WIRELESS, INC.
By:
-------------------------------------
Name: /s/ Xxxxxx X. Xxxxxxx
Title: Senior Vice President, Finance,
Chief Financial Officer and
Secretary
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ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES AND INVESTOR WARRANTS
1. Agreement to Sell and Purchase the Shares and Investor Warrants;
Subscription Date.
1.1 Purchase and Sale. At the Closing (as defined in Section 2), the
Company will sell to the Investor, and the Investor will purchase from the
Company, upon the terms and conditions hereinafter set forth, the number of
Shares and Investor Warrants (together, the "Securities") set forth in paragraph
3 of the Agreement to which these Terms and Conditions for Purchase of Shares
and Investor Warrants are attached as Annex I (this "Annex") at the purchase
price set forth in such paragraph 3.
1.2 Other Investors. As part of the Offering, the Company proposes to
enter into this same form of Preferred Stock and Warrant Purchase Agreement with
certain other investors (the "Other Investors"), and the Company expects to
complete sales of Securities to them. (The Investor and the Other Investors are
hereinafter sometimes collectively referred to as the "Investors," and the
Agreement and the Preferred Stock and Warrant Purchase Agreements executed by
the Other Investors are hereinafter sometimes collectively referred to as the
"Agreements"). The Company will accept executed Agreements from Investors for
the purchase of Securities until the date (the "Subscription Date") on which the
Company has notified U.S. Bancorp Xxxxx Xxxxxxx Inc. (in its capacity as
Placement Agent for the Securities, the "Placement Agent") in writing that it is
no longer accepting Agreements for the purchase of Securities in the Offering.
1.3 Placement Agent Fee. Investor acknowledges that the Company intends
to pay the Placement Agent a fee in respect of the sale of Securities to the
Investor.
2. Delivery of the Securities at Closing. The completion of the purchase
and sale of the Securities (the "Closing") shall occur on December 21, 2001 (the
"Closing Date") at a place and time to be specified by the Company and the
Placement Agent, and of which the Investors will be notified in advance by the
Placement Agent, or such other date as the Company and the Placement Agent may
determine. The Company will not be required to accept any subscriptions or issue
any Securities after the Closing Date. However, in the event that the Company
receives subscriptions for Securities following the Closing Date, the Company
and the holders of not less than one third of the then outstanding shares of
Preferred Stock may, in their sole and absolute discretion, accept such
subscriptions in whole or in part, and may set one or more additional closing
dates on or before, but not after, January 15, 2002 (each an "Additional Closing
Date") for the closing of the purchase and sale of Securities (each an
"Additional Closing") to additional Investors. References herein to the "Closing
Date" include any Additional Closing Dates. The Company shall not be subject to
a maximum number of shares of Preferred Stock that it may issue. The closing of
the purchase and sale of any such additional subscriptions accepted by the
Company after the Initial Closing Date shall be held on an Additional Closing
Date at the place and time determined by the Company. At the Closing, the
Company shall deliver to the Investor one or more stock certificates
representing the number of Shares, together with the Investor Warrants, set
forth in paragraph 3 of the Agreement to which this Annex is attached, each such
certificate to be registered in the name of the Investor or, if so indicated on
the Stock Certificate Questionnaire attached hereto as Exhibit A, in the name of
a nominee designated by the Investor, provided that, if requested by the
Investor, stock certificates representing such Shares, together with the
Investor Warrants, shall be delivered in escrow to such Investor's agent prior
to the Closing, to be held until the completion of the Closing. In addition, on
or prior to the Closing Date, the Company shall cause counsel to the Company to
deliver to the Investors the legal opinion substantially in the form attached
hereto as Exhibit F.
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The Company's obligation to issue and sell the Securities to the
Investor shall be subject to the following conditions, any one or more of which
may be waived by the Company: (a) receipt by the Company of the purchase price
for the Securities being purchased hereunder as set forth in paragraph 3 of the
Agreement to which this Annex is attached; (b) completion of purchases and sales
under the Agreements with the Other Investors; (c) the accuracy of the
representations and warranties made by the Investors and the fulfillment prior
to the Closing of the undertakings of the Investors; and (d) on or before the
Closing, the filing by the Company with the Secretary of State of the State of
Delaware of a Series A Preferred Stock Certificate of Designation (the "Series A
Certificate") substantially in the form attached hereto as Exhibit D.
The Investor's obligation to purchase the Securities shall be subject
to the following conditions, any one or more of which may be waived by the
Investor: (a) the Company's agreement to issue and sell, and the Investors'
agreement to purchase, on the Closing Date, not less than seventeen thousand
five hundred (17,500) shares of Preferred Stock; (b) the delivery to the
Investor by counsel to the Company of the legal opinion substantially in the
form attached hereto as Exhibit F; (c) The representations and warranties of the
Company contained in Section 3 hereof being true and correct on and as of such
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing; (d) the absence of any order,
writ, injunction, judgment or decree that questions the validity of the
Agreements or the right of the Company to enter into such agreements or to
consummate the transactions contemplated hereby and thereby; (e) the delivery to
the Investor by the Secretary or an Assistant Secretary of the Company of a
certificate stating that the conditions specified in parts (c), (d) and (f) of
this paragraph have been fulfilled; and (f) on or before the Closing, the filing
by the Company with the Secretary of State of the State of Delaware of the
Series A Certificate.
3. Representations, Warranties and Covenants of the Company. The
Company and each of its Subsidiaries (as defined in Section 3.3 below) hereby
jointly and severally represent and warrant to each of the Investors as follows,
each such representation and warranty being deemed to have been made to the
Investor on the date hereof and at the time of the Closing:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization or formation. The Company and each Subsidiary has the corporate
power and authority to own and lease its respective properties, to carry on its
business as presently conducted and to carry out the transactions contemplated
hereby. The Company and each Subsidiary is duly qualified as a foreign
corporation and is in good standing in all such other jurisdictions in which the
conduct of its business or its ownership or leasing of property requires such
qualification and in which the failure so to qualify or to be in good standing
would have a Material Adverse Effect on the operations or financial condition of
the Company and its Subsidiaries, taken as a whole.
As used herein, the term "Material Adverse Effect" shall mean any
event or circumstance which involves or results in an actual cost or loss of
$50,000 or more, or could reasonably be expected to result in a cost or loss of
$50,000 or more.
The Company's Annual Report on Form 10-K for the year ended December
31, 2000, the Company's Proxy Statement for its 2001 Annual Meeting of
Stockholders, and the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2001, June 30, 2001 and September 30, 2001 and any of the
Company's Current Reports on Form 8-K filed since January 1, 2001 (in each case
together with any amendments thereto filed prior to the date hereof,
collectively, the "SEC Reports") do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements and information contained therein in light of
the circumstances under which they were made not misleading.
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3.2 Capitalization. The capitalization of the Company as of September
30, 2001 is as described in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001. The Company has not issued any capital stock
since September 30, 2001 other than pursuant to the exercise of employee stock
options under the stock option plans. The outstanding shares of capital stock of
the Company have been duly and validly issued and are fully paid and
nonassessable, have been issued in compliance with the registration requirements
of federal and state securities laws, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase securities.
Except for options issued under the Company's stock option plans, warrants to
purchase 10,804,593 shares of Common Stock (which are subject to adjustment upon
dilutive issuances of the Company's securities, including the Securities) and
the Securities, there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any unissued shares of capital stock or other equity
interest in the Company or any of its Subsidiaries, or any contract, commitment,
agreement, understanding or arrangement of any kind, in either case to which the
Company or any of its Subsidiaries is a party and providing for the issuance or
sale of any capital stock of the Company or any of its Subsidiaries, any such
convertible or exchangeable securities or any such rights, warrants or options
(except as may be issued to Sanmina Corporation in connection with the
settlement of claims, as contemplated by Section 3(c)(i)(1)(e) of the Series A
Certificate). Without limiting the foregoing, no preemptive right, co-sale
right, right of first refusal or other similar right exists with respect to the
issuance and sale of the Securities, except as provided in the Transaction
Agreements (as defined in Section 3.4 below). There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party.
3.3 Equity Investments. The Company owns of record all of the issued
and outstanding capital stock of Novatel Wireless Solutions, Inc., a Delaware
corporation ("NWS"), and all of the issued and outstanding capital stock of
Novatel Wireless Technologies, Ltd., an Alberta corporation ("NWT" and together
with NWS, the "Subsidiaries"). Other than NWS and NWT, and except as set forth
on the SEC Reports, the Company has no Subsidiaries nor does it currently own
any capital stock or other proprietary interest, directly or indirectly, in any
corporation, association, trust, partnership, joint venture or other entity.
3.4 Authorization of the Agreement. The execution, delivery and
performance by the Company of the Agreement and the Investor Warrants (all of
the foregoing agreements being referred to hereinafter collectively as the
"Transaction Agreements") have been duly authorized by all requisite corporate
action of the Company. The Transaction Agreements have been duly executed and
delivered on behalf of the Company and constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) to the extent that the indemnification provisions
contained herein may be limited by applicable laws. Assuming the Series A
Certificate is filed with the Delaware Secretary of State, the execution,
delivery and performance of the Transaction Agreements, the issuance, sale and
delivery of the Securities, and compliance with the provisions hereof and
thereof, by the Company, do not and will not, with or without the passage of
time or the giving of notice or both, (a) violate any provision of law, statute,
rule or regulation or any ruling, writ, injunction, order, judgment or decree of
any court, administrative agency or other governmental body, which violation
would have a Material Adverse Effect on the Company and its Subsidiaries, taken
as a whole, (b) violate the certificate of incorporation, bylaws or other
organization documents of the Company or its Subsidiaries, or (c) conflict with
or result in any breach of any of the terms, conditions or provisions of, or
constitute a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of
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the Company or the Subsidiaries under, its certificate of incorporation or
bylaws or any note, debenture, indenture, mortgage, lease, contract, purchase
order or other instrument, document or agreement to which the Company or such
Subsidiary is a party or by which it or any of its property is bound or
affected, which conflict, breach, default or other occurrence described in this
clause (c) would have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
3.5 Authorization of Preferred Stock. The issuance, sale and delivery
of the shares of Preferred Stock hereunder and the shares of Common Stock
issuable by the Company upon conversion of the Preferred Stock have been duly
authorized by all requisite corporate and, subject to approval by the holders of
a majority of the shares of the Company's outstanding Common Stock as required
by Rule 4350(i)(1)(D)(ii) of The Nasdaq Stock Market, stockholder action of the
Company, and when so issued, sold and delivered in accordance with the terms of
the Agreement for the consideration expressed herein, the shares of Preferred
Stock will be validly issued and outstanding, fully paid and nonassessable, and
the shares of Common Stock issuable upon conversion of the Preferred Stock have
been duly reserved for issuance and delivery upon conversion of the Preferred
Stock and at such time of conversion such shares of Common Stock will be validly
issued and outstanding fully paid and nonassessable, and each such class of
security will not be subject to preemptive or any other similar rights of the
stockholders of the Company or others.
3.6 Authorization of Investor Warrants. The issuance, sale and delivery
of the Investor Warrants and the Warrant Shares issuable upon exercise of the
Investor Warrants by the Company have been duly authorized by all requisite
corporate and, subject to approval by the holders of a majority of the shares of
the Company's outstanding Common Stock as required by Rule 4350(i)(1)(D)(ii) of
The Nasdaq Stock Market, stockholder action of the Company, the Warrant Shares
have been duly reserved for issuance and delivery upon exercise of the Investor
Warrants and, at such time the Investor Warrants are exercised and the
consideration therefor is received by the Company, each of the Warrant Shares
issued pursuant to such exercise will be validly issued and outstanding, fully
paid and nonassessable, and not subject to preemptive or any other similar
rights of the stockholders of the Company or others.
3.7 Stockholder Approval. (a) The Company agrees to use its best
efforts to file with the Securities and Exchange Commission (the "SEC") a
preliminary proxy statement (the "Preliminary Proxy") on Schedule 14A in
connection with a special meeting of the Company's stockholders to approve the
issuance of the Securities pursuant to the Agreement, and the issuance of shares
of Common Stock upon the conversion of the Preferred Stock and upon the exercise
of the Investor Warrants (the "Stockholder Proposal") not later than 10 business
days following the Initial Closing Date. Promptly following the approval by the
SEC of the Preliminary Proxy or, if the SEC does not review the Preliminary
Proxy, the 10th calendar day after filing the Preliminary Proxy with the SEC (or
if such day is not a business day, then the next business day), the Company
shall use its best efforts to commence distribution of a definitive proxy
statement related to the Stockholder Proposal to the Company's stockholders of
record established by the Company's board of directors for such purpose. The
Company agrees to use its best efforts to obtain stockholder approval of the
Stockholder Proposal. Promptly following the special meeting of the
stockholders, the Company shall notify the Investor in writing of the results of
the vote of the stockholders on the Stockholder Proposal and, if approved by the
requisite number of shares of Common Stock, that the limitations on conversion
of the Shares pursuant to Section 3(m) of the Series A Certificate, on exercise
of the Investor Warrant pursuant to Section 1.06 of the Investor Warrant and on
the number of votes entitled to be cast by holders of the Shares pursuant to
Section 4(c) of the Series A Certificate, are terminated. The Company agrees
that the definitive proxy statement distributed pursuant to this Section 3.7(a)
will as of its mailing and as of the date of the special meeting of the
stockholders (i) comply as to form with the requirements of Schedule 14A under
the Securities and Exchange Act of 1934, as amended (the "Exchange Act") and
(ii) comply with Rule 14a-9
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of the Exchange Act. Notwithstanding the foregoing, if the Company is able to
obtain a waiver from The Nasdaq Stock Market of the requirement to obtain
stockholder approval for the issuance of the Securities, the Company's
obligations pursuant to this Section 3.7 shall lapse.
(b) Based on telephone conversations with representatives of The
Nasdaq Stock Market, Investors who were holders of shares of the Company's
Common Stock prior to the issuance of the Securities, and who own such shares of
Common Stock as of the stockholder record date established in connection with
the stockholder approval for the issuance of the Securities, are entitled to
vote such shares of Common Stock in connection with such stockholder approval.
3.8 Financial Statements. The consolidated financial statements of the
Company (the "Financial Statements") and the related notes contained in the SEC
Reports present fairly, in accordance with generally accepted accounting
principles, the consolidated financial position of the Company and its
Subsidiaries as of the dates indicated, and the results of their operations,
cash flows and the changes in stockholders' equity for the periods therein
specified, subject, in the case of unaudited financial statements for interim
periods, to normal year-end audit adjustments. Such consolidated financial
statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified, except that unaudited financial
statements may not contain all footnotes required by generally accepted
accounting principles. Since September 30, 2001, there has not been (a) any
change in the assets, liabilities, financial condition or operating results of
the Company from that reflected in the Financial Statements, except changes in
the ordinary course of business which have not been, in the aggregate,
materially adverse to the Company; (b) any damage, destruction or loss, whether
or not covered by insurance, materially and adversely affecting the assets,
properties, financial condition, operating results or business of the Company
(as such business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a material debt owed to
it; (d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted); or (e) any other
event or condition of any character which has a significant possibility of
materially and adversely affecting the assets, properties, financial condition,
operating results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted).
3.9 Title to Properties. Except as set forth in Schedule 3.9 hereto,
the Company and each Subsidiary has good and marketable title to its assets,
real, personal, or mixed, tangible or intangible, and none of such assets is
subject to any mortgage, pledge, lien, claim, encumbrance, charge, security
interest or title retention or other security arrangement except for liens for
the payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties, and except for mortgages, pledges and
liens, which would not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
3.10 Intellectual Property Rights. Except as set forth in Schedule 3.10
hereto:
(a) the Company and each Subsidiary owns all right, title and
interest in and to or has the valid and enforceable right to use all
Intellectual Property Rights (as hereinafter defined) necessary or required for
the conduct of its business as presently conducted or as proposed to be
conducted, free and clear of liens or other encumbrances;
(b) no royalties or other amounts are payable by the Company or
either Subsidiary to other persons by reason of their ownership or use of the
Intellectual Property Rights, except
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for such amounts as are paid in the ordinary course of business which are not
individually material to the Company and its Subsidiaries, taken as a whole;
(c) to the knowledge of the Company and each Subsidiary, no product
or service marketed, provided or sold or proposed to be marketed, provided or
sold by the Company or its Subsidiaries violates or will violate any license or
infringes or misappropriates or will infringe or misappropriate any Intellectual
Property Rights of another, nor has the Company or either Subsidiary received
any notice that any of the Intellectual Property Rights of the Company's
Subsidiaries or the operation or proposed operation of its business conflicts,
or will conflict, with the rights of others, including, without limitation, any
demand or request that the Company or any of its Subsidiaries license any
Intellectual Property Rights from any third party, and to the knowledge of the
Company and each Subsidiary, there are no grounds for the same;
(d) to the best knowledge of the Company and the Subsidiaries, no
third person or entity is marketing or selling any product or service that
violates or infringes the Intellectual Property Rights of the Company or any
Subsidiary, which violation could have a Material Adverse Effect on the Company
and its Subsidiary;
(e) to the knowledge of the Company and the Subsidiaries, there
exists no claim by any third party contesting the validity, enforceability, use
or ownership of any of the Intellectual Property Rights owned or used by the
Company or any of its Subsidiaries; and
(f) the Company or each Subsidiary, as applicable, have taken all
necessary and desirable action to maintain and protect the material Intellectual
Property Rights owned or used by the Company or its Subsidiaries.
As used herein, the term "Intellectual Property Rights" means all (i)
patents, patent applications and patent disclosures; (ii) trademarks, service
marks, trade dress, trade names, Internet domain names, slogans, logos and
corporate names and registrations and applications thereof together with all the
goodwill associated therewith; (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for the registration
thereof; (iv) computer software, data, databases and documentation thereof; (v)
trade secrets and other confidential information, including, ideas, inventions
(whether or not patentable and whether or not reduced to practice), know-how,
research information, drawings, specifications, designs, plans, proposals,
financial and marketing plans, customer and supplier lists and related
information and marketing materials; (vi) other intellectual property rights and
(vii) copies and tangible embodiments thereof (in whatever form or medium).
3.11 Contracts. Except for matters which are not reasonably likely to
have a Material Adverse Effect, the contracts listed as exhibits to the SEC
Reports, other than those contracts that are substantially or fully performed or
expired by their terms, are in full force and effect on the date hereof, and
none of the Company, its Subsidiaries nor, to the Company's knowledge, except as
disclosed in the SEC Reports, any other party to such contracts is in breach of
or default under any of such contracts.
3.12 Compliance. The Company and each Subsidiary has complied in all
material respects with all federal, state, provincial, local or, to the
Company's knowledge, foreign laws applicable to its business. The Company and
each Subsidiary has, or will procure when required, all federal, state, local
and foreign governmental licenses, registrations and permits material to or
necessary for the conduct of its business, and such licenses, registrations and
permits are, or will be when required, in full force and effect and there have
been no violations in any material respect of any such licenses, registrations
or permits.
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3.13 Nasdaq Compliance. The Company's Common Stock is registered
pursuant to Section 12(g) of the Exchange Act, and is listed on The Nasdaq Stock
Market, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act or delisting the Common Stock from The
Nasdaq Stock Market.
3.14 Litigation. Except as disclosed in the Company's Quarterly Report
on Form 10-Q for the period ended June 30, 2001 and the period ended September
30, 2001, and in the Company's other SEC Reports, there is no action, suit,
claim, or, to the best knowledge of the Company and each Subsidiary, no
proceeding or investigation, at law, in equity or otherwise, by or before any
governmental instrumentality or other agency, now pending, or, to the best
knowledge of the Company and each Subsidiary, threatened against the Company or
such Subsidiary the outcome of which, if determined adversely to the Company,
could reasonably be expected to have a Material Adverse Effect.
3.15 No Defaults. Except as disclosed in the SEC Reports and elsewhere
in the Agreement (including this Annex), none of the Company nor any Subsidiary
is in violation or breach of, or in default under, any provision of (a) its
certificate of incorporation or bylaws or (b) any note, debenture, indenture,
mortgage, lease, contract, purchase order or other instrument, document or
agreement to which the Company or such Subsidiary is a party or by which it or
such Subsidiary or any of its property or that of such Subsidiary is bound, or
any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body, in each case which violation,
breach or default could have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. To the best knowledge of the Company and the
Subsidiaries, there exists no condition, event or act which after notice, lapse
of time, or both, would constitute such a violation or breach of, or default
under, any of the foregoing.
3.16 No Governmental Consent or Approval Required. No authorization,
consent, approval or other order of, declaration to, or filing with, any
governmental agency or body is required to be made or obtained by the Company or
the Subsidiaries for the performance by the Company of its obligations under the
Transaction Agreements, except (a) such as have been already obtained or such
exemptive filings as are required to be made under applicable securities laws,
(b) the filing of the Series A Certificate with the Secretary of State of
Delaware, (c) with respect to a registration statement to be filed with the SEC
pursuant Section 6 hereof, (d) with respect to the Preliminary Proxy and the
definitive proxy statement as contemplated by Section 3.7 hereof and (e) such
other filings as may be required following the Closing Date under the Exchange
Act and the Delaware General Corporation Law.
3.17 Insurance. The insurance maintained by the Company and each
Subsidiary on its properties, assets, business and personnel is in amounts
deemed adequate by the Company or such Subsidiary, as applicable, is in
accordance with the standards of the industry in which the Company operates, and
is under policies currently in effect and issued by insurers of recognized
responsibility.
3.18 Related Transactions. Except as disclosed in the SEC Reports, no
director, officer or employee of the Company or either Subsidiary, nor any
"associate" (as defined in the rules and regulations promulgated under the
Exchange Act) of any such person is indebted to the Company or such Subsidiary,
nor is the Company or such Subsidiary indebted (or committed to make loans or
extend or guarantee credit) to any such person, nor is any such person a party
to any transaction with the Company or such Subsidiary providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring cash payments to, any such person, in each case in excess of
$60,000 other than (a) for payment of salary or consulting fees for services
rendered, (b) reimbursement for expenses incurred on behalf of the Company and
(c) for other employee benefits, including stock option agreements under any
stock option plan of the Company.
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3.19 Registration Rights. Except as contemplated by the Amended and
Restated Registration Rights Agreement dated as of June 15, 1999, the Amended
and Restated Investors' Rights Agreement dated as of June 30, 2000, as amended
to date, the Registration Rights Agreement dated as of November 29, 2001,
between Silicon Valley Bank and the Company, and the Agreement, no person has
any right to cause the Company to effect the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of any securities of the
Company.
3.20 Exemptions from Securities Laws. Subject to the accuracy of the
representations and warranties of the Investor set forth in Section 4 hereof,
the offer, issuance, sale and delivery of shares of the Securities are, and the
issuance of the Common Stock and Warrant Shares will be, exempt from the
provisions of Section 5 of the Securities Act, and no consent, approval,
qualification or registration or filing under any state securities laws is
required in connection therewith, except such exemptive filings as are required
to be made under applicable securities laws and shall be made on a timely basis.
3.21 Tax Matters. Except for matters which are not reasonably expected
to have a Material Adverse Effect, the Company has filed all necessary federal,
state and foreign income and franchise tax returns and has paid or accrued all
taxes shown as due thereon, and the Company has no knowledge of a tax deficiency
which has been asserted or threatened against the Company.
3.22 Governmental Permits, Etc. Each of the Company and its
Subsidiaries has all necessary franchises, licenses, certificates and other
authorizations from any federal, state or local government or governmental
agency, department or body that are currently necessary for the operation of the
business of the Company and its Subsidiaries as currently conducted, except
where the failure to currently possess such franchises, licenses, certificates
and other authorizations is not reasonably expected to have a Material Adverse
Effect on the Company and the Subsidiaries, taken as a whole.
3.23 Reporting Status. The Company has timely made all filings required
under the Exchange Act during the 12 months preceding the date of the Agreement,
and all of those documents complied in all material respects with the SEC's
requirements as of their respective filing dates, and the information contained
therein as of the respective dates thereof did 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. The Company is
currently eligible to register the resale of Common Stock in a secondary
offering on a registration statement on Form S-3 under the Securities Act.
3.24 No Manipulation of Stock. The Company has not taken and will not,
in violation of applicable law, take any action outside the ordinary course of
business designed to or that might reasonably be expected to cause or result in
unlawful manipulation of the price of the Common Stock to facilitate the sale or
resale of the Preferred Stock.
3.25 Accountants. Xxxxxx Xxxxxxxx LLP, who expressed their opinion with
respect to the consolidated financial statements to be incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
2000 into the Registration Statement (as defined below) and the prospectus which
forms a part thereof (the "Prospectus"), have advised that Company that they
are, and to the best knowledge of the Company they are, independent accountants
as required by the Securities Act and the rules and regulations promulgated
thereunder.
3.26 Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Preferred
10
Stock hereunder will be, or will have been, fully paid or provided for by the
Company and the Company will have complied with all laws imposing such taxes.
3.27 Investment Company. The Company is not an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
3.28 Offering Materials. The Company has not in the past nor will it
hereafter take any action to sell, offer for sale or solicit offers to buy any
securities of the Company which would bring the offer or sale of the Preferred
Stock as contemplated by the Agreement within the provisions of Section 5 of the
Securities Act.
3.29 Books and Records. The books, records and accounts of the Company
and the Subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the operations of, the
Company and the Subsidiaries. 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 generally accepted
accounting principles and to maintain asset 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.
4. Representations, Warranties and Covenants of the Investor.
4.1 Investor Knowledge and Status. The Investor represents and warrants
to, and covenants with, the Company that: (i) the Investor is an "accredited
investor" as defined in Regulation D under the Securities Act and has requested,
received, reviewed and considered all information it deemed relevant in making
an informed decision to purchase the Securities; (ii) the Investor understands
that the Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is acquiring
the number of Shares and Investor Warrants set forth in paragraph 3 of the
Agreement to which this Annex is attached in the ordinary course of its business
and for its own account for investment only, has no present intention of
distributing any of such Securities and has no arrangement or understanding with
any other persons regarding the distribution of such Securities (this
representation and warranty not limiting the Investor's right to sell the Common
Stock pursuant to the Registration Statement or otherwise, or other than with
respect to any claim arising out of a breach of this representation and
warranty, the Investor's right to indemnification under Section 6.3); (iii) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Securities except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; (iv) the Investor has answered all questions
in paragraph 3 of the Agreement to which this Annex is attached and the Investor
Questionnaire attached hereto as Exhibit B for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (v) the
Investor will notify the Company immediately of any change in any of such
information until such time as the Investor has sold all of its Shares, Common
Stock and Warrant Shares or until the Company is no longer required to keep the
Registration Statement effective; and (vi) the Investor has, in connection with
its decision to purchase the number of Shares and Investor Warrants set forth on
the signature page to the Agreement to which this Annex is attached, relied only
upon the representations and warranties of the Company contained herein and the
information contained in the SEC Reports. The Investor understands that the
issuance of the Securities to the Investor has not been registered under the
Securities Act, or registered or qualified under
11
any state securities law in reliance on specific exemptions therefrom, which
exemptions may depend upon, among other things, the bona fide nature of the
Investor's investment intent as expressed herein. The Placement Agent is not
authorized to make any representation or use any information in connection with
the placement, purchase and sale of the Securities, and no person is authorized
to provide any representation which is inconsistent or in addition to those in
the SEC Reports. The Investor acknowledges that it has not received or relied on
any such representations.
4.2 International Actions. The Investor acknowledges, represents and
agrees that no action has been or will be taken in any jurisdiction outside the
United States by the Company or the Placement Agent that would permit an
offering of the Securities, or possession or distribution of offering materials
in connection with the issue of the Securities, in any jurisdiction outside the
United States. If the Investor is located outside the United States, it has or
will take all actions necessary for the sale of the Securities to comply with
all applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Securities or has in its possession or
distributes any offering material, in all cases at its own expense.
4.3 Registration Required. The Investor hereby covenants with the
Company not to make any sale of the Shares, Common Stock and Warrant Shares
without complying with the provisions hereof, including Section 6.2 hereof, and
without effectively causing the prospectus delivery requirement under the
Securities Act to be satisfied (unless the Investor is selling such Shares,
Common Stock or Warrant Shares in a transaction not subject to the prospectus
delivery requirement), and the Investor acknowledges that the certificates
evidencing the Shares will be imprinted with a legend that prohibits their
transfer except in accordance therewith. The Investor acknowledges that as set
forth in, and subject to the provisions of, Section 6.2, there may occasionally
be times when the Company, based on the advice of its counsel, determines that
it must suspend the use of the Prospectus forming a part of the Registration
Statement until such time as an amendment to the Registration Statement has been
filed by the Company and declared effective by the SEC or until the Company has
amended or supplemented such Prospectus.
4.4 Power and Authority. The Investor further represents and warrants
to, and covenants with, the Company that (i) the Investor has full right, power,
authority and capacity to enter into the Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of the Agreement, and (ii) the Agreement
constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Investors
herein may be legally unenforceable.
4.5 No Dispositions. Except with the prior written consent of the
Company, the Investor will not, and will not direct any affiliate (within the
meaning of Rule 405 under the Securities Act) of the Investor to, prior to the
earlier of (i) the effectiveness of the Registration Statement and (ii) 120 days
after the Closing Date, sell, offer to sell, solicit offers to buy, dispose of,
loan, pledge or grant any right with respect to (collectively, a "Disposition"),
the Common Stock of the Company; provided, however, that any action taken by an
affiliate of the Investor, whether in the ordinary course of such affiliate's
business or otherwise, that was not taken at the direction of the Investor shall
not be a Disposition for purposes of this Section 4.5. Since December 12, 2001,
the Investor has not engaged, and except with the prior written consent of the
Company the Investor will not, prior to the effectiveness of the Registration
Statement, engage in any hedging or other transaction which is designed to or
could reasonably be expected to lead to or result in a Disposition of Common
Stock of the Company by the
12
Investor or any other person or entity. Such prohibited hedging or other
transactions would include, without limitation, effecting any short sale or
having in effect any short position (whether or not such sale or position is
against the box and regardless of when such position was entered into) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to the Common Stock of the Company or with respect to
any security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from the Common Stock of
the Company.
4.6 No Tax or Legal Advice. The Investor understands that nothing in
the Agreement, or any other materials presented to the Investor in connection
with the purchase and sale of the Securities constitutes legal, tax or
investment advice. The Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Securities.
5. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to the Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Investor herein shall survive the execution of the
Agreement, the delivery to the Investor of the Securities being purchased and
the payment therefor.
6. Registration of the Shares; Compliance with the Securities Act.
6.1 Registration Procedures and Expenses. The Company shall:
(a) subject to receipt of necessary information from the Investors,
prepare and file with the SEC, as soon as practicable, but in no event later
than thirty (30) calendar days after the Closing Date, a registration statement
on Form S-3 (the "Registration Statement") to enable the resale of the Common
Stock issuable upon conversion of the Shares and the Warrant Shares
(collectively, the "Registrable Securities") by the Investors from time to time
through the automated quotation system of The Nasdaq Stock Market or in
privately-negotiated transactions;
(b) use its reasonable efforts, subject to receipt of necessary
information from the Investors, to cause the Registration Statement to become
effective as soon as practicable, but in no event later than ninety (90)
calendar days after the Registration Statement is filed by the Company;
(c) use its reasonable efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep the Registration Statement
current and effective for a period not exceeding, with respect to each
Investor's Registrable Securities, the earliest of (i) the second anniversary of
the Closing Date, (ii) the date on which the Investor may sell all Registrable
Securities then held by the Investor without restriction by the volume
limitations of Rule 144(e) of the Securities Act or (iii) such time as all
Securities purchased by such Investor in this Offering and all Registrable
Securities have been sold by such Investor;
(d) furnish to the Investor with respect to the Registrable
Securities registered under the Registration Statement such number of copies of
the Registration Statement, Prospectuses (including supplemental prospectuses)
and preliminary versions of the Prospectus filed with the SEC ("Preliminary
Prospectuses") in conformity with the requirements of the Securities Act and
such other documents as the Investor may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the Registrable
Securities by the Investor, provided, however, that unless waived by the Company
in writing, the obligation of the Company to deliver copies of Prospectuses or
Preliminary Prospectuses to the Investor shall be subject to the receipt by the
Company of reasonable
13
assurances from the Investor that the Investor will comply with the applicable
provisions of the Securities Act and of such other securities or blue sky laws
as may be applicable in connection with any use of such Prospectuses or
Preliminary Prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in states reasonably specified in writing by the Investor prior to the
effectiveness of the Registration Statement, 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 (other than underwriting discounts and
commissions, if any) in connection with the procedures in paragraph (a) through
(e) of this Section 6.1 and the registration of the Registrable Securities
pursuant to the Registration Statement; and
(g) advise the Investors, 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
of any proceeding for that purpose; and it will promptly use its commercially
reasonable 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.
(h) With a view to making available to the Investor the benefits of
Rule 144 (or its successor rule) and any other rule or regulation of the SEC
that may at any time permit the Investor to sell Shares to the public without
registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) such date as all of the Investor's Securities and
Registrable Securities may be resold pursuant to Rule 144(e) or any other rule
of similar effect or (B) such date as all of the Investor's Securities and
Registrable Securities shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and under the Exchange Act; and (iii) furnish to the Investor
upon request, as long as the Investor owns any Securities and Registrable
Securities, (A) a written statement by the Company that it has complied with the
reporting requirements of the Securities Act and the Exchange Act, (B) a copy of
the Company's most recent Annual Report on Form 10-K or Quarterly Report on Form
10-Q, and (C) such other information as may be reasonably requested in order to
avail the Investor of any rule or regulation of the SEC that permits the selling
of any such Securities and Registrable Securities without registration.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 6.1 that the Investor shall furnish to
the Company such information regarding itself, the Registrable Securities to be
sold by the Investor, and the intended method of disposition of such securities
as shall be required to effect the registration of the Shares.
The Company understands that the Investor disclaims being an
underwriter, but the Investor being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has hereunder.
6.2 Transfer of Securities After Registration; Suspension.
(a) The Investor agrees that it will not effect any Disposition of
the Securities or Registrable Securities or its right to purchase the Securities
or Registrable Securities that would constitute a sale within the meaning of the
Securities Act, other than transactions exempt from the registration
requirements of the Securities Act, except as contemplated in the Registration
Statement referred to in Section 6.1 and as described below, and that it will
promptly notify the Company of any
14
changes in the information set forth in the Registration Statement regarding the
Investor or its plan of distribution.
(b) Except in the event that paragraph (c) below applies, the
Company shall: (i) if deemed necessary by the Company, 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 purchasers of the Registrable 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 the Investor copies of any
documents filed pursuant to Section 6.2(b)(i); and (iii) upon request, inform
each Investor who so requests that the Company has complied with its obligations
in Section 6.2(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 the Investor to that effect, will use its
reasonable efforts to secure the effectiveness of such post-effective amendment
as promptly as possible and will promptly notify the Investor pursuant to
Section 6.2(b)(i) hereof 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
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose; or (iv) of any event or circumstance which
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; then the Company shall promptly deliver a certificate in writing to
the Investor (the "Suspension Notice") to the effect of the foregoing and, upon
receipt of such Suspension Notice, the Investor will refrain from selling any
Registrable Securities pursuant to the Registration Statement (a "Suspension")
until the Investor'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 efforts to cause the use of the Prospectus so suspended
to be resumed as soon as reasonably practicable within 30 days after delivery of
a Suspension Notice to the Investors. In addition to and without limiting any
other remedies (including, without limitation, at law or at equity) available to
the Investor, the Investor shall be entitled to specific performance in the
event that the Company fails to comply with the provisions of this Section
6.2(c).
(d) Notwithstanding the foregoing paragraphs of this Section 6.2,
the Investor shall not be prohibited from selling Registrable Securities under
the Registration Statement as a result of Suspensions on more than two occasions
of not more than 30 days each in any twelve month
15
period, and any such Suspension must be separated by a period of at least thirty
(30) days from a prior Suspension.
(e) Provided that a Suspension is not then in effect the Investor
may sell Registrable Securities under the Registration Statement, provided that
it arranges for delivery of a current Prospectus to the transferee of such
Registrable Securities. Upon receipt of a request therefor, the Company will
provide an adequate number of current Prospectuses to the Investor and to any
other parties requiring such Prospectuses.
(f) In the event of a sale of Registrable Securities by the
Investor, unless such requirement is waived by the Company in writing, the
Investor must also deliver to the Company's transfer agent, with a copy to the
Company, a Certificate of Subsequent Sale substantially in the form attached
hereto as Exhibit C, so that the shares may be properly transferred.
6.3 Indemnification. For the purpose of this Section 6.3
(a) the term "Selling Stockholder" shall include the Investor and
each person, if any, who controls the Investor within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act;
(b) the term "Registration Statement" shall include any final
Prospectus, exhibit, supplement or amendment included in or relating to, and any
document incorporated by reference in, the Registration Statement (or deemed to
be a part thereof) referred to in Section 6.1; and
(c) the term "untrue statement" shall include any untrue statement
or alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement 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.
(i) The Company agrees to indemnify and hold harmless each
Selling Stockholder from and against any losses, claims, damages or liabilities
to which such Selling Stockholder 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 (ii)
any inaccuracy in the representations and warranties of the Company contained in
the Agreement (including this Annex) or the failure of the Company to perform
its obligations hereunder, or (iii) any failure by the Company to fulfill any
undertaking included in the Registration Statement, and the Company will
reimburse such Selling Stockholder for any reasonable legal or other expenses
reasonably incurred in investigating, defending 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 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 Sections
4.1, 4.2, 4.3 or 6.2(a) hereof or any statement or omission in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to the
Investor at least one business day prior to the pertinent sale or sales by the
Investor.
(ii) The Investor 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, each officer of the Company who signs the
Registration Statement and each director of the Company) from and against any
losses, claims, damages or liabilities to which the Company (or any such
16
officer, director 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 to comply with the covenants and agreements
contained in Section 4.1, 4.2, 4.3 or 6.2(a) hereof, or (ii) any untrue
statement of a material fact contained in the Registration Statement if such
untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Investor specifically for use in
preparation of the Registration Statement, and the Investor will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim. The obligation to
indemnify shall be limited to the net amount of the proceeds received by the
Investor from the sale of the Registrable Securities pursuant to the
Registration Statement.
(iii) 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 6.3,
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 party will not relieve it from any liability which it may have to
any indemnified party under this Section 6.3 (except to the extent that such
omission materially and adversely affects the indemnifying party's ability to
defend such action) or from any liability otherwise than under this Section 6.3.
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 party promptly after receiving the aforesaid notice
from such indemnified party, 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 (unless it has failed to assume the defense thereof
and appoint counsel reasonably satisfactory to the indemnified party), 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 reasonable 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, 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 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
reasonably 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.
(iv) If the indemnification provided for in this Section 6.3 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (i) or (ii) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party 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 the Investors
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
17
the case of an untrue statement, whether the untrue statement relates to
information supplied by the Company on the one hand or an Investor on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement. The Company and the
Investors agree that it would not be just and equitable if contribution pursuant
to this subsection (iv) were determined by pro rata allocation (even if the
Investors 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 (iv). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (iv) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (iv), no Investor
shall be required to contribute any amount in excess of the amount by which the
net amount received by the Investor from the sale of the Registrable Securities
to which such loss relates exceeds the amount of any damages which such Investor
has otherwise been required to pay by reason of such untrue statement. 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 Investors' obligations in
this subsection to contribute are several in proportion to their sales of
Registrable Securities to which such loss relates and not joint.
(v) The parties to the 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 6.3, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 6.3
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.
6.4 Termination of Conditions and Obligations. The conditions precedent
imposed by Section 4 or this Section 6 upon the transferability of the
Registrable Securities shall cease and terminate as to any particular number of
the Registrable Securities when such Registrable 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 Registrable Securities or at such time as
an opinion of counsel 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.
6.5 Information Available. So long as the Registration Statement is
effective covering the resale of Registrable Securities owned by the Investor,
the Company will furnish to the Investor:
(a) as soon as practicable after it is available, one copy of (i)
its Annual Report to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a national firm of certified public accountants) and (ii) if not included in
substance in the Annual Report to Stockholders, its Annual Report on Form 10-K
(the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of the Investor, all exhibits
excluded by the parenthetical to subparagraph (a)(ii) of this Section 6.5 as
filed with the SEC and all other information that is made available to
stockholders; and
(c) upon the reasonable request of the Investor, an adequate number
of copies of the Prospectuses to supply to any other party requiring such
Prospectuses; and the Company,
18
upon the reasonable request of the Investor, will meet with the Investor or a
representative thereof at the Company's headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Registrable
Securities and will otherwise cooperate with the Investor conducting an
investigation for the purpose of reducing or eliminating the Investor's 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 or meet at its
headquarters with the Investor until and unless the Investor shall have entered
into a confidentiality agreement in form and substance reasonably satisfactory
to the Company with the Company with respect thereto.
6.6 Public Statements. The Company will not issue any public statement,
press release or any other public disclosure listing Investor as one of the
purchasers of the Securities without Investor's prior written consent, except as
may be required by applicable law or rules of any exchange on which the
Company's securities are listed.
7. Right of First Offer. Subject to the terms and conditions specified
in this Section 7, the Company hereby grants to each Investor who holds Shares
of Preferred Stock a right of first offer with respect to future issuances by
the Company of its Equity Securities (as hereinafter defined).
7.1 Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Equity Securities"), the Company shall first make an offering of
such Equity Securities to the Investor in accordance with the following
provisions:
(a) The Company shall deliver a notice by certified mail (a
"Notice") to the Investor stating (i) its bona fide intention to offer such
Equity Securities, (ii) the number of such Equity Securities to be offered, and
(iii) the price and terms, if any, upon which it proposes to offer such Equity
Securities.
(b) Within 15 calendar days after delivery of the Notice, the
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Equity Securities which
equals the proportion that the sum of the number of shares of Common Stock plus
the number of shares of Common Stock issuable upon conversion of Preferred Stock
and upon the exercise of the Investor Warrants, in each case then held, by such
Investor bears to the total number of shares of Common Stock then outstanding
(assuming full conversion and exercise of all convertible or exercisable
securities).
(c) The Company may, during the 60-day period following the
expiration of the period provided in subsection 7.1(b) hereof, offer the
remaining unsubscribed portion of the Equity Securities to any person or persons
at a price not less than, and upon terms no more favorable to the offeree than
those specified in the Notice. If the Company does not enter into an agreement
for the sale of the Equity Securities within such period, or if such agreement
is not consummated within 90 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Equity Securities shall not be
offered unless first reoffered to the Investors in accordance herewith.
(d) The right of first offer in this Section 7 shall not be
applicable (i) to the issuance or sale by the Company of any of its capital
stock pursuant to any benefit, option, restricted stock, stock purchase or
similar plans or arrangements, including pursuant to or upon the exercise of
option rights, warrants or other securities or agreements, (ii) any underwritten
public offering or any other public offering by the Company in which shares are
offered at market price, (iii) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities, (iv) to the
19
issuance of securities in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise, (v) to the issuance of securities to financial
institutions or lessors in connection with commercial credit arrangements,
equipment financings, or similar transactions, (vi) to the issuance or sale of
the Preferred Stock, (vii) to any issuance in connection with a stock split,
reverse stock split, reclassification, recapitalization, consolidation, merger
or similar event, (viii) to the issuance of securities that, with unanimous
approval of the Board of Directors of the Company, are not offered to any
existing stockholder of the Company or (ix) any securities issued to Sanmina
Corporation as contemplated by Section 3(c)(i)(1)(e) of the Series A
Certificate.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed (A) if within domestic United
States by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if delivered
from outside the United States, by International Federal Express (or comparable
service) or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail domestic, three business days after so mailed, (ii)
if delivered by nationally recognized overnight carrier, one (1) business day
after so mailed, (iii) if delivered by International Federal Express (or
comparable service), two (2) business days after so mailed, (iv) if delivered by
facsimile, upon electric confirmation of receipt and shall be delivered as
addressed as follows:
(a) if to the Company, to:
Novatel Wireless, Inc.
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxx Xxxxx
Chief Executive Officer
Phone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy mailed to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: J. Xxxxx Xxxxxxxx, Esq.
Phone: (000) 000-0000
Telecopy: (000) 000-0000
(b) if to the Investor, at its address on the Signature Page hereto, or
at such other address or addresses as may have been furnished to the Company in
writing.
9. Changes. The Agreement may not be modified or amended except pursuant
to an instrument in writing signed by the Company and the Investor.
10. Headings. The headings of the various sections of the Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of the Agreement.
11. Severability. In case any provision contained in the Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
20
12. Governing Law. The Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, without giving
effect to the principles of conflicts of law.
13. Counterparts. The Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
14. Confidential Disclosure Agreement. Notwithstanding any provision of
the Agreement to the contrary, any confidential disclosure agreement previously
executed by the Company and the Investor in connection with the transactions
contemplated by the Agreement shall remain in full force and effect in
accordance with its terms following the execution of the Agreement and the
consummation of the transactions contemplated hereby.
21
EXHIBIT A
NOVATEL WIRELESS, INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be registered in ______________
(this is the name that will appear on your stock
certificate(s)). You may use a nominee name if appropriate:
2. The relationship between the Investor and the registered ______________
holder listed in response to item 1 above:
3. The mailing address of the registered holder listed in ______________
response to item 1 above:
4. The Social Security Number or Tax Identification Number of ______________
the registered holder listed in the response to item 1
above:
A-1
EXHIBIT B
NOVATEL WIRELESS, INC.
INVESTOR QUESTIONNAIRE
(all information will be treated confidentially)
To: Novatel Wireless, Inc.,
This Investor Questionnaire ("Questionnaire") must be completed by each
potential investor in connection with the offer and sale of the shares of the
series A convertible preferred stock, par value $.001 per share and warrants to
purchase common stock, par value $.001 per share (collectively, the
"Securities"), of Novatel Wireless, Inc. (the "Company"). The Securities are
being offered and sold by the Company without registration under the Securities
Act of 1933, as amended (the "Securities Act"), and the securities laws of
certain states, in reliance on the exemptions contained in Section 4 of the
Securities Act and on Regulation D promulgated thereunder and in reliance on
similar exemptions under applicable state laws. The Company must determine that
a potential investor meets certain suitability requirements before offering or
selling Securities to such investor. The purpose of this Questionnaire is to
assure the Company that each investor will meet the applicable suitability
requirements. The information supplied by you will be used in determining
whether you meet such criteria, and reliance upon the private offering exemption
from registration is based in part on the information herein supplied.
This Questionnaire does not constitute an offer to sell or a
solicitation of an offer to buy any security. Your answers will be kept strictly
confidential. However, by signing this Questionnaire you will be authorizing the
Company to provide a completed copy of this Questionnaire to such parties as the
Company deems appropriate in order to ensure that the offer and sale of the
Shares will not result in a violation of the Securities Act or the securities
laws of any state and that you otherwise satisfy the suitability standards
applicable to purchasers of the Securities. All potential investors must answer
all applicable questions and complete, date and sign this Questionnaire. Please
print or type your responses and attach additional sheets of paper if necessary
to complete your answers to any item.
A. BACKGROUND INFORMATION
Name:
--------------------------------------------------------------------------------------------------------------
Business Address:
--------------------------------------------------------------------------------------------------
(Number and Street)
-------------------------------------------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number: ( )
-------------------------------------------------------------------------------------
Residence Address:
-------------------------------------------------------------------------------------------------
(Number and Street)
-------------------------------------------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number: ( )
-------------------------------------------------------------------------------------
If an individual:
Age:______ Citizenship:__________ Where registered to vote:
------------------------
If a corporation, partnership, limited liability company, trust or other entity:
B-1
Type of entity:
----------------------------------------------------------------------------------------------------
State of formation:______________ Date of formation:
-------------------------------
Social Security or Taxpayer Identification No.
---------------------------------------------------------------------
Send all correspondence to (check one): ____ Residence Address ____ Business Address
B. STATUS AS ACCREDITED INVESTOR
The undersigned is an "accredited investor" as such term is defined in
Regulation D under the Securities Act, as at the time of the sale of the
Securities the undersigned falls within one or more of the following categories
(Please initial one or more, as applicable):(1)
_____(1) a bank as defined in Section 3(a)(2) of the Securities Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance company as defined in Section 2(13) of the
Securities Act; an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that act; a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with the investment decisions made
solely by persons that are accredited investors;1
_____(2) a private business development company as defined in Section 202(a)(22)
of the Investment Adviser Act of 1940;
_____(3) an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the Shares
offered, with total assets in excess of $5,000,000;
_____(4) a natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of such person's purchase of the Shares
exceeds $1,000,000;
_____(5) a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
_____(6) a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares offered, whose purchase is directed by
a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D; and
--------
1 As used in this Questionnaire, the term "net worth" means the excess of total
assets over total liabilities. In computing net worth for the purpose of
subsection (4), the principal residence of the investor must be valued at cost,
including cost of improvements, or at recently appraised value by an
institutional lender making a secured loan, net of encumbrances. In determining
income, the investor should add to the investor's adjusted gross income any
amounts attributable to tax exempt income received, losses claimed as a limited
partner in any limited partnership, deductions claimed for depreciation,
contributions to an XXX or XXXXX retirement plan, alimony payments, and any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.
B-2
_____(7) an entity in which all of the equity owners are accredited investors
(as defined above).
C. REPRESENTATIONS
The undersigned hereby represents and warrants to the Company as follows:
1. Any purchase of the Securities would be solely for the account of
the undersigned and not for the account of any other person or with a view to
any resale, fractionalization, division, or distribution thereof.
2. The information contained herein is complete and accurate and may be
relied upon by the Company, and the undersigned will notify the Company
immediately of any material change in any of such information occurring prior to
the closing, if any, with respect to the purchase of Securities by the
undersigned or any co-purchaser.
3. There are no suits, pending litigation, or claims against the
undersigned that could materially affect the net worth of the undersigned as
reported in this Questionnaire.
4. The undersigned acknowledges that there may occasionally be times
when the Company, based on the advice of its counsel, determines that it must
suspend the use of the Prospectus forming a part of the Registration Statement
(as such terms are defined in the Agreement to which this Questionnaire is
attached) until such time as an amendment to the Registration Statement has been
filed by the Company and declared effective by the Securities and Exchange
Commission or until the Company has amended or supplemented such Prospectus. The
undersigned is aware that, in such event, the Securities will not be subject to
ready liquidation, and that any Shares purchased by the undersigned would have
to be held during such suspension. The overall commitment of the undersigned to
investments which are not readily marketable is not excessive in view of the
undersigned's net worth and financial circumstances, and any purchase of the
Securities will not cause such commitment to become excessive. The undersigned
is able to bear the economic risk of an investment in the Securities.
5. The undersigned has carefully considered the potential risks
relating to the Company and a purchase of the Securities, and fully understands
that the Securities are speculative investments which involve a high degree of
risk of loss of the undersigned's entire investment. Among others, the
undersigned has carefully considered each of the risks described under the
headings "Risk Factors" in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000 and the Company's Current Report on Form 10-Q filed on
September 30, 2001.
B-3
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire this __ day
of December, 2001, and declares under oath that it is truthful and correct.
Print Name
By:
---------------------------------------
Signature
Title:
------------------------------------
(required for any purchaser that is a
corporation, partnership,
trust or other entity)
B-4
EXHIBIT C
FORM OF WARRANT
THE WARRANT EVIDENCED HEREBY, AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER,
HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE APPLICABLE SECURITIES LAWS OF ANY STATE. SUCH
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION
OR RESALE, AND SHALL NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
THE PROPOSED DISPOSITION IS THE SUBJECT OF A CURRENTLY EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT AND SUCH STATE SECURITIES LAWS IN CONNECTION WITH SUCH
DISPOSITION.
NOVATEL WIRELESS, INC.
COMMON STOCK PURCHASE WARRANT
Void After December 21, 2005
This Stock Purchase Warrant is Issued to
[Insert Investor Information]
(hereinafter called the "initial registered holder" or the "registered holder,"
which term shall include its successors and assigns) by Novatel Wireless, Inc.,
a Delaware corporation (hereinafter referred to as the "Company"). The holder of
this Warrant is entitled to certain of the benefits conferred by that certain
Series A Convertible Preferred Stock and Warrant Purchase Agreement dated as of
December 21, 2001 (the "Purchase Agreement"), a copy of which is on file at the
office of the Company at the address specified below. This Warrant may be
transferred by the registered holder only in accordance with the provisions of
Sections 1.04 and 5 hereof. A copy of the Purchase Agreement will be furnished
to any subsequent registered holder hereof upon written request. The Purchase
Agreement contains an undertaking by the Company under certain circumstances to
effect registration and qualification under federal and state securities laws
of, or to take other action with respect to, the shares of Common Stock, par
value $.001, of the Company ("Common Stock") issuable on exercise of this
Warrant. Unless otherwise defined herein, defined terms in this Warrant shall
have the meanings ascribed thereto in the Purchase Agreement.
C-1
Section 1. The Warrant.
-----------
1.01. For value received and subject to the terms and conditions
hereinafter set forth, the registered holder is entitled, upon surrender of this
Warrant at any time on or prior to December 21, 2005, subject to Section 1.07
herein, (with the subscription form annexed hereto duly executed) at the office
of the Company at 0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, XX 00000, or
such other office of which the Company shall notify the registered holder hereof
in writing, to purchase from the Company [_____] fully paid and non-assessable
shares ("Initial Exercisable Shares" and, as adjusted from time to time as
hereinafter provided, "Exercisable Shares") of Common Stock for an initial
exercise price of $1.20 per share, as adjusted from time to time as provided
below (the "Warrant Exercise Price"). This Warrant may be exercised in full or
in part from time to time, subject to the limitations set forth in Section 1.06
hereof. Within 5 business days after surrender of this Warrant and receipt of
payment of the Warrant Exercise Price, the Company shall issue and deliver to
the registered holder a certificate or certificates for shares of Common Stock,
in certificates of such denominations and in such names as the registered holder
may specify, together with any other stock, securities or property to which such
holder may be entitled to receive pursuant to Sections 1.05(B), 1.05(C) or
1.05(D) hereof. In the case of the purchase of less than all the shares
purchasable under this Warrant, the Company shall cancel this Warrant upon the
surrender hereof and shall execute and deliver a substitute Warrant of like
tenor for the balance of the shares purchasable hereunder. This Warrant shall
expire at 8:00 P.M. (Eastern Standard Time) on December 21, 2005 and shall be
void thereafter.
1.02. During the period within which the rights represented by this
Warrant may be exercised, the Company shall at all times have authorized and
reserved for the purpose of issue upon exercise of the rights evidenced hereby,
a sufficient number of shares of its Common Stock to provide for the exercise of
such rights. Upon surrender for exercise, this Warrant shall be canceled and
shall not be reissued; provided, however, that upon the partial exercise hereof
a substitute Warrant representing the rights to subscribe for and purchase any
such unexercised portion hereof shall be issued.
1.03. Subject to compliance with applicable securities laws, this Warrant
may be subdivided into one or more Stock Purchase Warrants entitling the
registered holder to purchase shares of Common Stock in multiples of one or more
whole shares, upon surrender of this Warrant by the registered holder for such
purpose at the office of the Company.
1.04. The Company shall maintain at its office (or at such other office or
agency of the Company as it may from time to time designate in writing to the
registered holder hereof), a register containing the names and addresses of the
holders of all Stock Purchase Warrants. The registered holder of such a Warrant
shall be the person in whose name such Warrant is originally issued and
registered, unless a subsequent holder shall have presented to the Company such
Warrant, duly assigned to him, for inspection and a written notice of his
acquisition of such Warrant and designating in writing the address of such
holder, in which case such subsequent holder of the Warrant shall become a
subsequent registered holder. Any registered holder of this Warrant may change
his address as shown on such register by written notice to the Company
requesting such change. Any written notice required or permitted to be given to
the registered holder of this Warrant shall be mailed, by registered or
certified mail, to such registered holder at his address as shown on such
register.
1.05. The rights of the registered holder shall be subject to the
following terms and conditions:
(A) Adjustments to the Warrant Exercise Price.
(i) Special Definitions. For purposes of this Warrant, the following
-------------------
definitions shall apply:
C-2
(1) "Original Issue Date" shall mean the date on which this Warrant
-------------------
was issued.
(2) "Stock Purchase Warrants" shall mean the Warrants sold by the
-----------------------
Company pursuant to the Purchase Agreement.
(3) "Additional Shares of Common Stock" shall mean all shares of
---------------------------------
Common Stock issued by the Company after the Original Issue Date by reason of
stock dividends, distributions payable in common stock, stock splits, reverse
stock splits, recapitalizations, reclassifications, combinations or exchanges of
shares, separations, reorganizations, liquidations or other similar event, other
than:
(a) securities issued or issuable as a dividend or
distribution on the Series A Preferred Stock;
(b) any securities issued or issuable as a result of an
adjustment of the Warrant Exercise Price made pursuant to Subsection
1.05(A);
(c) any shares of capital stock of the Company, not to
exceed one-half of one percent of the total issued and outstanding
capital stock of the Company on an "as converted to Common Stock"
basis, the issuance of which is approved by vote of a majority of
the Board of Directors of the Company, including the affirmative
vote of a majority of the directors designated for election by the
holders of the Series A Preferred Stock;
(d) not more than ten shares of capital stock of the
Company on an "as converted to Common Stock" basis, the issuance of
which resulted from mathematical or other error or inadvertence,
provided that the transaction in which such shares were issued was
approved at the time by vote of a majority of the Board of Directors
of the Company, including the affirmative vote of a majority of the
directors designated for election by the holders of the Series A
Preferred Stock; and
(e) any issuance of Common Stock to Sanmina Corporation
that does not exceed 10% of the common stock outstanding immediately
prior to the Original Issue Date.
(ii) Adjustment of the Warrant Exercise Price and Number of Shares of
----------------------------------------------------------------
Common Stock for Dividends, Distributions, Subdivisions, Combinations or
------------------------------------------------------------------------
Consolidations of Common Stock.
------------------------------
(1) Stock Dividends, Distributions or Subdivisions. In the event the
Company shall be deemed to have issued Additional Shares of Common Stock in a
stock dividend, stock distribution or subdivision, the Warrant Exercise Price
and the number of shares of Common Stock issuable upon exercise of this Warrant
in effect immediately prior to such deemed issuance shall, concurrently with the
effectiveness of such deemed issuance, be proportionately decreased or
increased, as appropriate.
(2) Combinations or Consolidations. In the event the outstanding
shares of Common Stock shall be combined, consolidated or otherwise changed, by
recapitalizations, reclassifications, stock splits, reverse stock splits,
exchanges of shares, separations, reorganizations, liquidations or otherwise,
the Warrant Exercise Price and the
C-3
number of shares of Common Stock issuable upon exercise of this Warrant in
effect immediately prior to any such combination, consolidation or other event
shall, concurrently with the effectiveness of such event, be proportionately
decreased or increased, as appropriate.
(B) Adjustments for Certain Dividends and Distributions. In the event
---------------------------------------------------
that at any time or from time to time after the Original Issue Date the Company
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock, then and in each
such event provision shall be made so that the holders of Stock Purchase
Warrants shall receive upon exercise thereof in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities of the Company
that they would have received had their Stock Purchase Warrants been exercised
for Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the exercise date, retained
such securities receivable by them as aforesaid during such period, giving
application during such period to all adjustments called for herein.
(C) Adjustment for Reclassification, Exchange, or Substitution. In the
----------------------------------------------------------
event that at any time or from time to time after the Original Issue Date, the
Common Stock issuable upon the exercise of this Warrant shall be changed into
the same or a different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend provided for above, or a
merger, consolidation, or sale of assets provided for below), then and in each
such event the registered holder of this Warrant shall have the right thereafter
to exercise this Warrant for the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
such Warrant might have been exercisable for immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(D) Adjustment for Merger, Consolidation or Sale of Assets. In the
------------------------------------------------------
event that at any time or from time to time after the Original Issue Date, the
Company shall sell all or substantially all of its assets or merge or
consolidate with or into another entity, this Warrant shall thereafter be
exercisable for the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Company deliverable upon exercise of this Warrant would have been entitled to
receive upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 1.05 with respect to the
rights and interest thereafter of the registered holders of the Stock Purchase
Warrants, to the end that the provisions set forth in this Section 1.05
(including provisions with respect to changes in and other adjustments of the
Warrant Exercise Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the exercise of this Warrant.
(E) No Impairment. The Company shall not, by amendment of its
-------------
Certificate of Incorporation or Bylaws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, including, without limitation, voluntary bankruptcy
proceedings, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company but shall at all
times in good faith assist in the carrying out of all the provisions of this
Section 1.05 and in the taking of all such action as may be necessary or
appropriate on order to protect the rights of the registered holder of this
Warrant against impairment.
(F) Notice of Adjustment of the Warrant Exercise Price or Number of
---------------------------------------------------------------
Exercisable Shares. Upon the occurrence of each adjustment, readjustment or
------------------
other change relating to the Warrant Exercise Price or in the number of
Exercisable Shares, then, and in each such case, the Company at its
C-4
expense shall give written notice thereof, by first class mail, postage prepaid,
addressed to the registered holder at the address of such registered holder as
shown on the books of the Company, which notice shall state the Warrant Exercise
Price resulting from such adjustment and the increase or decrease in the number
of Exercisable Shares (or other denominations of securities) purchasable at the
Warrant Exercise Price upon the exercise of this Warrant setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(G) Notice. In case at any time: (1) the Company shall pay any dividend
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or make any distribution (other than regular cash dividends from earnings or
earned surplus paid at an established rate) to the holders of its Common Stock;
(2) the Company shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or other rights; (3)
there shall be any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with or sale of
all or substantially all of its assets to another corporation; or (4) there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company; then, in any one or more of such cases, the Company shall give
written notice, by first class mail, postage prepaid, addressed to the
registered holder at the address of such registered holder as shown on the books
of the Company of the date on which (a) the books of the Company shall close or
a record date shall be fixed for determining the shareholders entitled to such
dividend, distribution or subscription rights, or (b) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also provide
reasonable details of the proposed transaction and specify the date as of which
the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
(H) Voting Rights. This Warrant shall not entitle the registered holder
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to any voting rights or any other rights as a stockholder of the Company but
upon presentation of this Warrant with the subscription form annexed duly
executed and the tender of payment of the Warrant Exercise Price at the office
of the Company pursuant to the provisions of this Warrant the registered holder
shall forthwith be deemed a stockholder of the Company in respect of the shares
of Common Stock so subscribed and paid for.
(I) No Change Necessary. The form of this Warrant need not be changed
-------------------
because of any adjustment in the Warrant Exercise Price or in the number of
shares of Common Stock issuable upon its exercise. A Warrant issued after any
adjustment on any partial exercise or upon replacement may continue to express
the same Warrant Exercise Price and the same number of shares of Common Stock
(appropriately reduced in the case of partial exercise) as are stated on this
Warrant as initially issued, and that Warrant Exercise Price and that number of
shares shall be considered to have been so changed as of the close of business
on the date of adjustment.
1.06. Notwithstanding any other provision of this Warrant, the Company
shall not be obligated to issue, in the aggregate, more than 10,868,831 shares
of Common Stock as constituted as of the date hereof (the "Nasdaq Cap") upon (1)
conversion of the Series A Preferred and (2) exercise of the Stock Purchase
Warrants if issuance of a larger number of shares would constitute a breach of
the Company's obligations under its agreements with The Nasdaq Stock Market.
C-5
1.07. The rights of the registered holder shall be subject to mandatory
exercise at the option of the Company as described below:
(A) Mandatory Exercise of the Warrant.
---------------------------------
(i) On or at any time following the Registration Effective Date (as
defined below), the Company may, on at least 10 days' notice, elect to require
to have the registered holder of this Warrant exercise any and all remaining
Exercisable Shares at the Warrant Exercise Price, as adjusted, prior to the
Exercise Expiration Date (as defined below) (such election by the Company, the
"Mandatory Exercise Election"); provided, that the Company may not exercise such
right unless: (i) the Registration Statement (as defined below) is effective,
(ii) the average of the closing prices of the Common Stock as reported by The
Nasdaq Stock Market over the twenty consecutive trading-day period ending not
more than five business days prior to the date of the Company Notice (as defined
below) is greater than or equal to the product of (x) the Warrant Exercise Price
in effect on the last day of such twenty consecutive trading-day period and (y)
2.00, and (iii) during the period beginning on the date of the Company Notice
(as defined below) and ending on the Exercise Expiration Date (as defined below)
(1) the Company shall not have received any request from the SEC or any other
federal or state governmental authority for amendments or supplements to the
Registration Statement or related prospectus or for additional information; (2)
no stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose shall have been issued by the SEC
or any other federal or state governmental authority; (3) the Company shall not
have received any notification with respect to the suspension of the
qualification or exemption from qualification of the Common Stock for sale in
any jurisdiction or the initiation of any proceeding for such purpose; and (4)
there shall not have occurred any event or circumstance which would necessitate
the making of any changes in the Registration Statement or related 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 related 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.
(ii) The Company shall provide written notice (the "Company Notice")
by first class mail, postage prepaid, to the registered holder of the Warrant
subject to the Mandatory Exercise Election at the address last shown on the
records of this Company for such holder, notifying such holder of the Mandatory
Exercise Election, specifying the date by which the Warrant must be exercised
(the "Exercise Expiration Date"); provided that such Exercise Expiration Date
shall not be less than 10 days from the date of the Company Notice, the place at
which the subscription form annexed hereto duly executed and payment in an
amount equal to the Warrant Exercise Price may be made to the Company and
calling upon such holder to surrender to the Company, in the manner and at the
place designated, the Warrant subject to the Mandatory Exercise Election.
Notwithstanding anything to the contrary contained in this Warrant, the
registered holder shall not be entitled to exercise the Warrant unless the
Company receives both the subscription form annexed hereto duly executed and
payment in an amount equal to the Warrant Exercise Price, as adjusted, in the
form of (i) a certified or cashier's check payable to the order of the
Corporation, (ii) a wire transfer to the account of the Company, or (iii) any
combination of (i) and (ii) above. In the event that the Warrant is not
exercised prior to 5:00 p.m., Los Angeles time, on the Exercise Expiration Date,
the Warrant (and the right to exercise the Warrant) shall lapse and terminate
and be void thereafter.
C-6
(B) Definitions: For purposes of this Section 1.07, the following
-----------
definitions shall apply:
(i) "Registration Effective Date" shall mean the first date on which
---------------------------
the Registration Statement has been declared effective.
(ii) "Registration Statement" shall mean the Company's registration
----------------------
statement on Form S-3 under the Securities Act of 1933, as amended, covering the
registration of (a) the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock and (b) the shares of Common Stock issuable upon
exercise of the Warrants.
Section 2. Covenant of the Company. All shares of Common Stock which may
-----------------------
be issued upon the exercise of the rights represented by this Warrant, shall,
upon issuance, be duly authorized, validly issued, fully paid and non-assessable
and free from all taxes, liens and charges with respect to the issue thereof.
Section 3. Fractional Shares. No fractional shares or scrip representing
-----------------
fractional shares shall be issued upon exercise of this Warrant. If, upon
exercise of this Warrant as an entirety, the registered holder would, except for
the provisions of this Section 3, be entitled to receive a fractional share of
Common Stock, then the Company shall pay in cash to such registered holder an
amount equal to such fractional share multiplied by the fair market value of one
share of Common Stock (as reasonably determined by the Board of Directors of the
Company) on the date of such exercise.
Section 4. Substitution. In case this Warrant shall be mutilated, lost,
------------
stolen or destroyed, the Company will issue a new Warrant of like tenor and
denomination and deliver the same (a) in exchange and substitution for and upon
surrender and cancellation of any mutilated Warrant, or (b) in lieu of any
Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the
Company of the loss, theft, or destruction of such Warrant (including a
reasonably detailed affidavit with respect to the circumstances of any loss,
theft or destruction), and of indemnity (or, in the case of the initial holder
or any other institutional holder, an indemnity agreement) satisfactory to the
Company.
Section 5. Transfer Restrictions. This Warrant and the shares of Common
---------------------
Stock into which this Warrant is exercisable shall not be sold, transferred,
pledged or hypothecated unless the proposed disposition is the subject of a
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or unless the Company has received an opinion of
counsel reasonably satisfactory in form and scope to the Company that such
registration is not required except that such restrictions shall not apply to
any transfer of this Warrant or the shares of Common Stock into which this
Warrant is exercisable: (i) to a partner or other affiliate of the registered
holder, including any entity of which the registered holder or a related entity
is a General Partner; (ii) by gift or bequest or through inheritance to, or for
the benefit of, any member or members of the registered holder's immediate
family; (iii) by a registered holder to a trust (a) in respect of which the
registered holder serves as trustee, provided that the trust instrument
governing such trust shall provide that the registered holder, as trustee, shall
retain sole and exclusive control over the voting and disposition of such
Warrant until the termination of this Warrant or (b) for the benefit solely of
any member or members of the registered holder's immediate family; and (iv)
pursuant to any underwritten public offering of Common Stock pursuant to an
effective registration statement under the Securities Act.
Section 6. Taxes. The Company shall pay any taxes or other charges that
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may be imposed in respect of the issuance and delivery of the Warrant or any
shares of Common Stock or other property upon exercise hereof.
C-7
Section 7. Governing Law. This Warrant shall be deemed a contract made
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under the laws of the State of New York and its provisions and the rights and
obligations of the parties hereunder shall be governed by, and construed and
enforced in accordance with, the substantive laws of the State of New York,
without regard to its principles of conflicts of laws.
Section 8. Miscellaneous. This Warrant and any term hereof may be changed,
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waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
******
C-8
IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase
Warrant to be signed by its Chief Executive Officer thereunto duly authorized
and attested by its Secretary this 21st day of December, 2001.
ATTEST: NOVATEL WIRELESS, INC.
By:______________________ By:___________________________
Name: Xxxxxx X. Xxxxxxx Name: Xxxx Xxxxx
Its: Secretary Its: Chief Executive Officer
C-9
SUBSCRIPTION FORM
The undersigned, the registered holder of the within Common Stock
Purchase Warrant, hereby irrevocably elects to exercise the purchase right
represented by such Warrant for, and to purchase thereunder, ________ shares of
Common Stock of Novatel Wireless, Inc., and herewith makes payment of
$___________ therefor and requests that the certificates representing such
shares be issued in the name of and delivered to:
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and if such shares shall not include all of the shares issuable under this
Warrant, that a new Warrant of like tenor and date be delivered to the
undersigned for the shares not issued.
Dated:___________________ ____________________________
Signature
C-10
FORM OF ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto
_________________________________ whose address is ___________________________
_____________________________________________________________________________,
the attached Common Stock Purchase Warrant with respect to ____________ shares
purchasable thereby, and does hereby irrevocably constitute and appoint
_____________________________________ attorney to transfer such Warrant on the
books of the within named corporation with full power of substitution in the
premises.
Dated:_________________________________
In the presence of:
------------------------ --------------------------
Signature
C-11
