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COMMON STOCK
PURCHASE AGREEMENT
BETWEEN
METRICOM, INC.
AND
VULCAN VENTURES INCORPORATED
OCTOBER 10, 1997
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TABLE OF CONTENTS
PAGE
----
1. AUTHORIZATION........................................................... 1
2. AGREEMENT TO SELL AND PURCHASE THE SHARES............................... 1
3. DELIVERY OF THE SHARES. ............................................... 1
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 2
4.1 Organization and Qualification................................... 2
4.2 Authorized Capital Stock......................................... 2
4.3 Due Execution, Delivery and Performance of the
Agreement........................................................ 2
4.4 Approval of Purchaser as "Interested
Stockholder...................................................... 3
4.5 Issuance, Sale and Delivery of the Shares........................ 3
4.6 Additional Information........................................... 3
4.7 No Material Change............................................... 4
4.8 Los Angeles Contract............................................. 4
4.9 Compliance with Laws............................................. 4
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER............................. 4
5.1 Organization and Qualification................................... 4
5.2 Due Execution, Delivery and Performance of the
Agreement........................................................ 4
5.3 Investment Representations....................................... 4
5.4 Interested Stockholder........................................... 5
5.5 Proxy Statement.................................................. 5
6. COVENANTS OF THE COMPANY................................................ 5
6.1 Stockholders Meeting............................................. 5
6.2 Conduct of Business.............................................. 6
6.3 Additional Issuances............................................. 7
7. COVENANTS OF PURCHASER.................................................. 8
7.1 Credit Facility.................................................. 9
7.2 Restrictions on Transfer......................................... 9
7.3 Standstill Agreement............................................. 10
7.4 Acquisition of the Company by Purchaser.......................... 11
7.5 "Market Stand-off" Agreement..................................... 12
7.6 Disclosure....................................................... 13
8. ADDITIONAL COVENANTS OF THE PARTIES..................................... 13
8.1 Board Composition................................................ 13
8.2 Independent Director Action...................................... 14
8.3 Proxy Statement.................................................. 14
8.4 Regulatory Approval.............................................. 15
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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8.5 Amendment of Certificate of Incorporation or
Bylaws........................................................... 15
9. CONDITIONS TO CLOSING................................................... 15
9.1 Conditions to Purchaser's Obligations at the
Closing.......................................................... 15
(a) Representations and Warranties True;
Performance of Obligations................................ 15
(b) Consents, Permits, and Waivers............................ 16
(c) Absence of Restraint...................................... 16
(d) Statutory Requirements.................................... 16
(e) Stockholder Approval...................................... 16
(f) Seventh Amendment to Registration Rights
Agreement................................................. 16
(g) Board of Directors........................................ 16
(h) Legal Opinion............................................. 16
(i) Compliance Certificate.................................... 16
9.2 Conditions to Obligations of the Company......................... 16
(a) Representations and Warranties True;
Performance of Obligations................................ 17
(b) Consents, Permits, and Waivers............................ 17
(c) Absence of Restraint...................................... 17
(d) Stockholder Approval...................................... 17
(e) Statutory Requirements.................................... 17
(f) Seventh Amendment to Registration Rights
Agreement................................................. 17
(g) Legal Opinion............................................. 17
(h) Fairness Opinion.......................................... 17
(i) Compliance Certificate.................................... 18
10. TERMINATION AND AMENDMENT............................................... 18
10.1 Termination...................................................... 18
10.2 Effect of Termination............................................ 18
10.3 Amendment........................................................ 18
11. MISCELLANEOUS........................................................... 18
11.1 Survival of Representations, Warranties and
Agreement........................................................ 18
11.2 No Transfer of Rights............................................ 19
11.3 Restricted Securities; Legends................................... 19
11.4 Fees and Expenses................................................ 19
11.5 Notices.......................................................... 19
11.6 Headings......................................................... 20
11.7 Severability..................................................... 20
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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11.8 Governing Law.................................................... 20
11.9 Counterparts..................................................... 20
Schedule I Schedule of Exceptions
Exhibit A Seventh Amendment to Registration Rights Agreement
Exhibit B Opinion of ▇▇▇▇▇▇ Godward LLP
Exhibit C Opinion of Irell & ▇▇▇▇▇▇▇
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COMMON STOCK
PURCHASE AGREEMENT
This COMMON STOCK AGREEMENT is made as of October 10, 1997 between
METRICOM, INC. (the "Company"), a corporation organized under the laws of the
State of Delaware with its principal office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and VULCAN VENTURES INCORPORATED, a corporation organized
under the laws of the State of Washington ("Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and Purchaser agree as follows:
1. AUTHORIZATION. The Board of Directors of the Company has authorized
the issuance and sale of up to six million four thousand one hundred sixty-seven
(6,004,167) shares of its Common Stock (the "Shares"), consisting of one tranche
of four million six hundred fifty thousand (4,650,000) shares of its Common
Stock (the "Firm Shares") and one tranche of up to one million three hundred
fifty-four thousand one hundred sixty-seven (1,354,167) shares (the "Contingent
Shares").
2. AGREEMENT TO SELL AND PURCHASE THE SHARES. Subject to the terms and
conditions hereof:
(a) Purchaser agrees to purchase the Firm Shares from the
Company, and the Company agrees to sell and issue the Firm Shares to Purchaser
at a price of twelve dollars ($12.00) per share.
(b) If, by October 15, 1997, Purchaser does not own or have the
right to acquire at least three million (3,000,000) shares of Common Stock
(excluding the Shares), Purchaser agrees to purchase from the Company, and the
Company agrees to sell and issue to Purchaser, at a price of twelve dollars
($12.00) per share, a portion (or all) of the Contingent Shares equal to the
difference between (i) one million three hundred fifty-four thousand one hundred
sixty-seven (1,354,167) and (ii) the number of shares, if any, by which the
number of shares of Common Stock (excluding the Shares) which Purchaser owns or
has the right to acquire as of the Closing Date exceeds one million nine hundred
thirteen thousand two hundred forty-five (1,913,245).
(c) Notwithstanding the foregoing, the number of Shares to be
purchased by Purchaser shall not under any circumstances exceed that number
which causes Purchaser, together with its Affiliates (as hereinafter defined),
to be the beneficial owner as of the Closing Date of more than forty-nine and
nine-tenths percent (49.9%) of the outstanding Common Stock of the Company.
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3. DELIVERY OF THE SHARES. The completion of the purchase and sale of
the Shares (the "Closing") shall occur at the offices of ▇▇▇▇▇▇ Godward LLP, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, as soon as practicable
(but not more than three business days) after the satisfaction or waiver of all
of the conditions to closing set forth herein, or at such other place and time
as the Company and Purchaser may agree. At the Closing, the Company shall
deliver to Purchaser one or more stock certificates registered in the name of
Purchaser.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Purchaser as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, has all requisite corporate power and authority to conduct
its business as currently conducted and is duly qualified in each state of the
United States in which the failure to be so qualified would have a material
adverse effect on its business or properties.
4.2 AUTHORIZED CAPITAL STOCK. As of the date hereof, the
authorized capital stock of the Company consists of (a) fifty million
(50,000,000) shares of Common Stock, $.001 par value per share, of which
thirteen million six hundred eighty-three thousand seven hundred fifty-six
(13,683,756) shares were outstanding as of October 9, 1997 and (b) two million
(2,000,000) shares of undesignated Preferred Stock, $.001 par value per share,
none of which is issued and outstanding. All of the outstanding shares of Common
Stock were validly issued and are outstanding, fully paid and nonassessable.
Except for (i) four million sixty-four thousand nine hundred eighty-one
(4,064,981) shares of Common Stock subject to options granted under the
Company's 1988 Stock Option Plan, 1993 Non-Employee Directors' Stock Option
Plan, 1997 Equity Incentive Plan and 1997 Non-Officer Equity Incentive Plan (the
"Option Plans"), (ii) three hundred fifty thousand (350,000) shares of Common
Stock reserved for issuance under the Company's 1991 Employee Stock Purchase
Plan (the "Purchase Plan"), (iii) two hundred fifty thousand (250,000) shares of
Common Stock subject to outstanding warrants held by a financial advisor to the
Company, (iv) two hundred twenty-five thousand (225,000) shares of Common Stock
subject to options granted to members of the Company's Board of Directors and
Wireless Communications Industry Advisory Board and (v) three million ninety-two
thousand seven hundred eight-four (3,092,784) shares of Common Stock issuable
upon conversion of 8% Convertible Subordinated Notes due 2003, there are not
outstanding as of the date of this Agreement any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock or any
securities
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exercisable for or convertible into shares of its capital stock. As of the date
of this Agreement, the Company has available for future grant nine hundred
fifty-four thousand four hundred forty-seven (954,447) shares of Common stock
for issuance pursuant to the Option Plans.
4.3 DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENT. The
Company's execution, delivery and performance of the Agreement, the Seventh
Amendment to Registration Rights Agreement (the "Seventh Amendment") and the
transactions contemplated hereby and thereby, based on the representations of
Purchaser set forth in Section 5.4 hereof, (a) have been duly authorized under
applicable Delaware law by all requisite corporate action by the Company,
including the unanimous vote of those directors in attendance at the meeting at
which such authorization was given, and (b) will not violate any law or the
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") or By-Laws of the Company or any provision of any material
indenture, mortgage, agreement, contract or other material instrument to which
the Company or any subsidiary is a party or by which the Company or any
subsidiary or any of their respective properties or assets is bound as of the
date hereof, or result in a breach of or constitute (upon notice or lapse of
time or both) a default under any such indenture, mortgage, agreement, contract
or other material instrument or result in the creation or imposition of any
lien, security interest, mortgage, pledge, charge or other encumbrance, of any
material nature whatsoever, upon any properties or assets of the Company or any
subsidiary. Upon execution and delivery, and assuming the valid execution
thereof by Purchaser, the Agreement and the Seventh Amendment will constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective 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).
4.4 APPROVAL OF PURCHASER AS "INTERESTED STOCKHOLDER." In
connection with its approval of the transactions contemplated hereby, the Board
of Directors of the Company understands and intends that, by virtue of and upon
Purchaser's entry into this Agreement, Purchaser will become an "interested
stockholder" of the Company within the meaning of Section 203 of the Delaware
General Corporation Law.
4.5 ISSUANCE, SALE AND DELIVERY OF THE SHARES. When issued and
paid for pursuant to the terms of this Agreement, the Shares to be sold
hereunder by the Company will
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be validly issued and outstanding, fully paid and nonassessable.
4.6 ADDITIONAL INFORMATION. The Company represents and warrants
that the information contained in the following documents, which the Company has
furnished to Purchaser or will furnish prior to the Closing, did not or will
not, as the case may be, at the respective dates of filing with the Securities
and Exchange Commission (the "Commission") or, with respect to any proxy
statement, the date of mailing to stockholders, contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading:
(a) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (without
exhibits);
(b) the Company's Quarterly Reports on Form
10-Q for the three-month periods ended June 30, 1997 and
September 30, 1997;
(c) Notice to Stockholders and Proxy Statement
for its Annual Meeting of Stockholders held on May 1, 1997;
(d) Notice to Stockholders and Proxy Statement
for the Special Meeting of Stockholders to be held in connection with the
transactions contemplated hereby (except for information included therein that
is furnished by or related to Purchaser and its affiliates or associates of such
affiliates, as those terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (collectively,
"Affiliates")); and
(e) all other documents, if any, filed by the
Company with the Commission since January 1, 1997 pursuant to the reporting
requirements of the Exchange Act.
4.7 NO MATERIAL CHANGE. As of the date of this Agreement, other
than continuing operating losses not materially inconsistent with past operating
results, there has been no material adverse change in the financial condition or
results of operations of the Company since June 30, 1997.
4.8 LOS ANGELES CONTRACT. Termination by the Company of its
contractual arrangements with respect to the deployment and operation of
Ricochet wireless data transmission systems for the City of Los Angeles would
not result in material contractual liability (in excess of $500,000) to the
Company.
4.9 COMPLIANCE WITH LAWS. To its knowledge, the
Company is not in violation of any applicable statute, rule,
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regulation or order of the United States or any state in which the Company is
engaged in business the effect of which violation would be materially adverse to
the financial condition or results of operations of the Company and would
seriously undermine the prospects of the Company.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants to the Company as follows:
5.1 ORGANIZATION AND QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington and has all requisite corporate power and authority to
conduct its business as currently conducted.
5.2 DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENT.
Purchaser has full right, power, authority and capacity to enter into this
Agreement and the Seventh Amendment and to consummate the transactions
contemplated hereby and thereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement and the Seventh
Amendment, and (ii) upon execution and delivery, this Agreement and the Seventh
Amendment shall constitute valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their respective 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).
5.3 INVESTMENT REPRESENTATIONS. Purchaser understands that the
Shares have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"). Purchaser also understands that the Shares are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon Purchaser's representations contained in this
Agreement. Purchaser hereby represents and warrants as follows:
(a) Purchaser, taking into account the
personnel and resources it can practically bring to bear on the purchase of the
Shares contemplated hereby, is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares presenting an investment decision like that involved in the purchase of
the Shares, including investments in securities issued by the Company, and has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to purchase the Shares.
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(b) Purchaser is acquiring the number of
Shares set forth in Section 2 above in the ordinary course of its business and
for its own account for investment only and with no present intention of
distributing any of such Shares and no arrangement or understanding with any
other persons regarding the distribution of such Shares.
(c) Purchaser 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
Shares except in compliance with the Securities Act, the rules and regulations
promulgated thereunder and the terms and conditions hereof.
(d) Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
5.4 INTERESTED STOCKHOLDER. In each case within the meaning of
Section 203 of the Delaware General Corporation Law:
(a) at no time since immediately prior to the
time the Company's Board of Directors approved the transactions contemplated by
this Agreement through the time of the signing hereof, has Purchaser or any
"affiliate" or "associate" of Purchaser "owned" fifteen percent (15%) or more of
the Company's "voting stock"; and
(b) there are no facts, known to Purchaser or
any "affiliate" or "associate" of Purchaser, that have not been disclosed to the
Company that relate to whether Purchaser or any "affiliate" or "associate" of
Purchaser, directly or indirectly, through one or more intermediaries,
"controls" or "controlled" or is or was "controlled by" or is or was "under
common control with" the Company.
5.5 PROXY STATEMENT. All information included in the Proxy
Statement (as defined in Section 8.3) furnished by or relating to Purchaser and
its Affiliates will not, at the date of mailing of the Proxy Statement to the
stockholders of the Company, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which made, not misleading.
6. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees
with Purchaser as follows:
6.1 STOCKHOLDERS MEETING. The Company shall cause a meeting of
its stockholders to be duly called and held as soon as reasonably practicable
for the purpose of voting on the approval of this Agreement and the transactions
contemplated hereby. The proxy materials relating to such
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meeting shall contain the recommendation of the Board of Directors of the
Company that the stockholders approve this Agreement and the transactions
contemplated hereby unless the Board of Directors determines that the making of
such recommendation is not consistent with the fulfillment of its fiduciary
duties.
6.2 CONDUCT OF BUSINESS.
(a) Subject to Section 6.2(b) below, from and
after the date of this Agreement to and including the Closing Date, the Company
will carry on its business consistent with its past practices and, except with
Purchaser's consent, will not effect any corporate actions other than in the
ordinary course of business, including (i) soliciting, initiating or engaging in
any discussions or negotiations concerning any Transaction Proposal (as
hereinafter defined), (ii) substantially altering the Company's business plan or
adopting a new business plan, (iii) electing a new Chief Executive Officer, (iv)
making new commitments for capital expenditures in excess of five million
dollars ($5,000,000) in any one quarter or (v) making new contractual
commitments (excluding commitments to the parties identified on SCHEDULE I)
involving disbursements in excess of one million dollars ($1,000,000) for any
one contract.
(b) Notwithstanding anything to the contrary
contained in this Section 6.2 or elsewhere in this Agreement, nothing in this
Agreement shall be construed to prohibit the Company, its subsidiaries,
officers, directors or advisors from: (i) with respect to certain parties
previously identified to Purchaser in a memorandum dated October 10, 1997 (the
"Identified Companies"), directly or indirectly soliciting or initiating the
submission of any Transaction Proposal (as hereinafter defined); (ii) continuing
preexisting discussions with the parties identified in the Schedule of
Exceptions attached hereto as SCHEDULE I (none of which discussions presently
involves a Transaction Proposal) and consummating the transactions contemplated
by such discussions; or (iii) with respect to any Transaction Proposal from any
of the Identified Companies or any unsolicited Transaction Proposal from any
other party (A) participating in any discussions or negotiations regarding, or
furnishing to any persons or entities any non-public information with respect
to, such Transaction Proposal or potential Transaction Proposal; (B) approving,
endorsing or recommending such Transaction Proposal or (C) entering into any
letter of intent, contract or other instrument with respect to such Transaction
Proposal. In its sole discretion, the Board of Directors of the Company may
recommend approval of any such Transaction Proposal to the stockholders of the
Company.
(c) If, prior to the Closing Date or the
termination of this Agreement, the Company receives any
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Transaction Proposal, it will so advise Purchaser a reasonable period of time
prior to such time, if any, as the Board of Directors of the Company approves
such Transaction Proposal and will afford Purchaser an opportunity to discuss
with the Company what, if any, response Purchaser may desire to make with
respect to such Transaction Proposal.
(d) If, prior to the Closing Date or the
termination of this Agreement, the Board of Directors recommends to its
stockholders, or enters into a definitive agreement to consummate, a Transaction
Proposal (other than with Purchaser or its Affiliates) that involves (i) a
merger involving the Company in which the stockholders of the Company
immediately prior to the transaction would own a minority of the surviving or
acquiring entity, (ii) a sale or other disposition of more than twenty percent
(20%) of the consolidated assets of the Company and its subsidiaries, (iii) a
liquidation or dissolution of the Company, or (iv) a sale or disposition of, or
other business combination involving, the issuance of capital stock of the
Company representing more than twenty percent (20%) of the outstanding Common
Stock of the Company, then the Company shall pay to Purchaser, by wire transfer
or certified check, a fee of three million dollars ($3,000,000); provided,
however, that if the transactions contemplated by this Agreement are
subsequently consummated, Purchaser shall immediately repay to the Company, by
wire transfer or certified check, such fee of three million dollars
($3,000,000).
(e) For purposes of this Agreement,
"Transaction Proposal" shall mean any proposal (other than any proposal by
Purchaser or its Affiliates) regarding (i) any merger, consolidation, share
exchange, business combination or other similar transaction or series of related
transactions involving the Company; (ii) any sale, lease, exchange, transfer or
other disposition of more than twenty percent (20%) of the assets of the Company
or any subsidiary of the Company; and (iii) any offer to purchase (whether from
the Company or otherwise), tender offer, exchange offer or similar transaction
involving the capital stock of the Company.
(f) Notwithstanding anything to the contrary
contained in this Section 6.2 or elsewhere in this Agreement, at any time after
the date hereof, the Company may file with the Commission a Current Report on
Form 8-K with respect to this Agreement and may file a copy of this Agreement
and any related agreement as an exhibit to such Report.
6.3 ADDITIONAL ISSUANCES.
(a) At any time after the Closing, so long as
Purchaser (together with its Affiliates) holds of record or beneficially owns at
least twenty percent (20%) of the Common Stock of the Company (the "Minimum
Percentage"), in the event
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the Company shall issue (an "Additional Issuance") any capital stock, including
securities of any type that are, or may become, convertible into or exercisable
or exchangeable for capital stock of the Company (the "Additional Securities"),
Purchaser shall have the right to subscribe for and to purchase that number of
Additional Securities such that Purchaser holds the same percentage of the
Company's outstanding capital stock immediately prior to and immediately
following the Additional Issuance (the "Pro Rata Share"); provided, however,
that this Section 6.3 shall not apply to shares issued
(i) to employees, officers or directors
of, or consultants or advisors to the Company or any
subsidiary, pursuant to stock purchase or stock option plans
or other arrangements;
(ii) pursuant to any options, warrants,
conversion rights or other rights or agreements outstanding as
of the date of this Agreement;
(iii) for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar
business combination;
(iv) in connection with any stock split,
stock dividend or recapitalization by the Company;
(v) pursuant to any equipment leasing
arrangement or debt financing from a bank or similar financial
institution; and
(vi) in connection with any strategic
transaction involving the Company and other entities, including (A) joint
ventures, manufacturing, marketing or distribution arrangements or (B)
technology transfer or development arrangements; provided, however, that the
exception set forth in this subsection (vi) shall not apply to the extent any
individual strategic transaction involves the issuance of shares of Common Stock
in excess of five percent (5%) of the currently outstanding shares of Common
Stock or all such strategic transactions together involve the issuance of shares
of Common Stock in excess of ten percent (10%) of the currently outstanding
shares of Common Stock.
(b) If the Company proposes an Additional
Issuance, the Company shall, at least thirty (30) days prior to the proposed
closing date of such issuance, give written notice to Purchaser and offer to
sell to Purchaser its Pro Rata Share of the Additional Securities at the lowest
price per share, and otherwise on the same terms and conditions, offered to
other investors. Such notice shall describe the type of Additional Securities
which the Company is offering to Purchaser, the price of the Additional
Securities and the
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general terms upon which the Company will issue same. Purchaser shall have
fifteen (15) days from the date of mailing of any such notice to agree to
purchase its Pro Rata Share of such Additional Securities for the price and upon
the general terms specified in the notice by giving written notice to the
Company and stating therein the quantity of Additional Securities to be
purchased. Sale and issuance of the Additional Securities which Purchaser has
elected to purchase shall be effected within forty-five (45) days of the date of
the original notice, but only after compliance with all governmental
regulations, including but not limited to the expiration of the applicable
waiting periods under the ▇▇▇▇- ▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976
and the rules promulgated thereunder (the "HSR Act").
(c) In the event that, at any time,
Purchaser's percentage ownership (calculated pursuant to Section 6.3(a) above)
shall be decreased as a result of (i) any transfer by Purchaser or any of its
Affiliates to one or more transferees that are not Affiliates of Purchaser of
any Shares or other securities held of record or beneficially owned by Purchaser
or its Affiliates, or (ii) Purchaser's not purchasing the full amount of
Additional Securities offered for purchase pursuant to this Section 6.3, a new
percentage ownership level shall be established based on Purchaser's percentage
ownership in effect immediately following such transfer or Additional Issuance
(the "Reduced Percentage Ownership"), and thereafter the Company shall be
required to offer to Purchaser only such number of Additional Securities
pursuant to this Section 6.3 as would permit Purchaser to maintain the Reduced
Percentage Ownership.
7. COVENANTS OF PURCHASER. Purchaser hereby covenants and agrees with
the Company as follows:
7.1 CREDIT FACILITY. From and after the date of this Agreement,
to and including the Closing Date, Purchaser will, upon written request of the
Company from time to time, make available to the Company up to ten million
dollars ($10,000,000) in the form of an unsecured credit facility (the "Credit
Facility"); provided, however, that any balance under the Credit Facility
outstanding on the Closing Date shall be repaid from the net proceeds to the
Company from the sale of the Shares or from the net proceeds to the Company from
the sale of other securities in one or more capital-raising transactions. The
Credit Facility shall have a term of nine (9) months from the initial drawdown
of the Credit Facility, any outstanding balance shall bear interest at the rate
of twelve percent (12%) per annum, payable quarterly, and each advance under the
Credit Facility shall be evidenced by a promissory note to the foregoing effect.
Prior and as a condition to the initial drawdown under the Credit Facility,
Purchaser shall have received an opinion of ▇▇▇▇▇▇ Godward LLP to the effect
that such promissory note(s), when delivered by
15
the Company in connection with each drawdown, will be valid and binding
obligations of the Company, enforceable in accordance with their 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).
7.2 RESTRICTIONS ON TRANSFER.
(a) Purchaser agrees not to make any
disposition of all or any portion of the Shares unless and
until:
(i) There is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or
(ii) (A) The transferee has agreed in
writing to be bound by this Section 7.2, and (B) Purchaser or any transferor
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances surrounding
the proposed disposition, and if reasonably requested by the Company, shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Securities Act. It is agreed that the Company will not require
agreements of transferees or opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of
paragraphs (i) and (ii) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by Purchaser or any transferor which
is (A) a partnership to its partners or former partners in accordance with
partnership interests, (B) a corporation to its stockholders in accordance with
their interest in the corporation, (C) a limited liability company to its
members or former members in accordance with their interest in the limited
liability company, or (D) to such holder's family member or trust for the
benefit of such holder, provided the transferee will be subject to the terms of
this Section 7.2.
(b) If Purchaser (or Purchaser and its
Affiliates together) proposes to transfer, directly or indirectly, shares of
Common Stock representing more than twenty percent (20%) of the then outstanding
Common Stock of the Company to any single transferee not affiliated with
Purchaser (with any group of affiliated transferees or
16
multiple transferees acting in concert considered to be a single transferee for
purposes of this provision), Purchaser may effect such transfer only (i) with
the prior express approval of a majority of the directors of the Company serving
on the Board of Directors prior to and after the Closing Date or successors to
such directors appointed or elected pursuant to the procedure described in
Section 8.1(d) below (such directors being hereinafter referred to as
"Independent Directors" and such approval being hereinafter referred to as
"Approval of the Independent Directors") or (ii) if such transferee or
transferees shall agree to make, as soon as practicable after such transfer, a
bona fide offer, through a tender offer or otherwise, to purchase a pro rata
portion of the outstanding Common Stock held by stockholders other than
Purchaser or the transferee or transferees on the same terms and conditions as
the proposed transfer; provided, however, that such requirement shall not apply
to transfers to Affiliates of Purchaser that agree to be bound by the
restrictions set forth in this Section 7.2.
(c) Any purported transfer of Shares in
violation of this Agreement shall be void and of no effect, and shall not
operate to transfer any interest or title to the purported transferee. Transfers
to any Affiliate of Purchaser shall be effective only if such Affiliate of
Purchaser agrees in writing to be bound by the restrictions contained herein
applicable to Purchaser.
7.3 STANDSTILL AGREEMENT.
(a) Except with the Approval of the
Independent Directors, Purchaser will not (and will not assist or encourage
others affiliated with it to), and Purchaser will ensure that its Affiliates do
not (and will not assist or encourage others affiliated with them to), directly
or indirectly:
(i) make, effect, initiate, cause or
participate in (A) any acquisition of ownership (including, but not limited to,
beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any
securities of the Company or any subsidiary or other Affiliate of the Company,
(B) any acquisition of any assets of the Company or any subsidiary or other
Affiliate of the Company except as anticipated hereby, or (C) any tender offer,
exchange offer, merger, business combination, recapitalization, restructuring,
liquidation, dissolution or extraordinary transaction involving the Company or
any subsidiary or other Affiliate of the Company, or involving any securities or
assets of the Company or any subsidiary or other Affiliate of the Company; or
(ii) initiate, propose, make or in any way
participate in, directly or indirectly, any "solicitation" of "proxies" to vote,
or seek to influence any person or entity
17
with respect to voting of, any securities of the Company against the election of
any of the Independent Directors, or become a "participant" in a "solicitation"
or "election contest" (as such terms are defined or used in Regulation 14A under
the Exchange Act) in any election contest with respect to the removal of any of
the Independent Directors.
(b) Notwithstanding Section 7.3(a)(i) above, Purchaser
and its Affiliates may acquire equity securities of the Company (i) as provided
in Section 7.4 below and (ii) from and after the Closing to the extent that such
acquisition does not cause Purchaser's and its Affiliates' aggregate beneficial
ownership of the outstanding capital stock of the Company to increase to a
percentage of the then outstanding capital stock of the Company that exceeds the
sum of (A) Purchaser's and its Affiliates' aggregate beneficial ownership of the
outstanding capital stock of the Company immediately after the Closing as a
percentage of the outstanding capital stock of the Company immediately after the
Closing and (B) ten (10) percentage points.
(c) This Section 7.3 shall cease to have any
further force or effect if any person or group makes a bona fide tender offer to
purchase more than fifty percent (50%) of the then outstanding shares of capital
stock of the Company (determined as if all convertible securities were converted
into shares of Common Stock); provided, however, that this paragraph (c) shall
not be applied to any tender offer caused, influenced, encouraged, induced,
assisted or participated in by Purchaser or any of its Affiliates.
(d) Purchaser acknowledges that money damages
would not be a sufficient remedy for any breach of this Section 7.3 by Purchaser
or its directors, officers, employees or agents and that, in addition to all
other remedies, the Company shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach or any
threatened breach, and Purchaser further agrees to waive and to use its best
efforts to cause Purchaser's directors, officers, employees or agents to waive,
any requirement for the securing or posting of any bond in connection with such
remedy.
7.4 ACQUISITION OF THE COMPANY BY PURCHASER.
(a) If, at any time after the date of this Agreement, Purchaser
or any of its Affiliates intend to acquire all of the outstanding equity
securities not held of record or beneficially owned by Purchaser or its
Affiliates (the "Independent Shares"), Purchaser shall notify the Company in
writing of such intention. The Company may, upon approval of the Board of
Directors, enter into an agreement with respect to such proposal so long as such
agreement does not provide for any "breakup" or "topping" fee, expense
18
reimbursement or other similar payment by the Company in the event that the
transactions contemplated by such proposal are not consummated. Purchaser will
ensure that any such proposal submitted by Purchaser or any of its Affiliates
and any agreement of the Company with respect thereto will be on terms and
conditions consistent with, and that do not render impracticable, the procedures
set forth in this Section 7.4.
(b) For ninety (90) days following receipt of such notice (or
such shorter period, if any, as the Independent Directors may deem appropriate),
the Independent Directors shall have full authority to conduct a "market check"
with respect to the proposed transaction, which may include (i) authorizing the
Company's independent financial advisors to (A) advise the market and potential
acquirors of the Company that Purchaser has submitted a proposal to acquire the
Independent Shares and that offers by other persons or entities to acquire the
Company or the Independent Shares may be submitted for consideration by the
Independent Directors and the Board of Directors as a whole and (B) provide
other customary investment banking services with respect to any offers that may
be received; (ii) causing the Company to enter into engagement letters or
customary terms with such financial advisors with respect to the foregoing
services; and (iii) disclosing any non-public information concerning the Company
or any of its subsidiaries to, or affording any access to the properties, books
or records of the Company or any of its subsidiaries to any person or entity
desiring to submit such an offer.
(c) In the event that, (i) within such ninety (90) day period (or
such shorter period, if any, as the Independent Directors may deem appropriate),
the Company receives a proposal to acquire the Independent Shares or the Company
(whether through merger, acquisition of all or substantially all of the
Company's assets, a tender or exchange offer for the Company's securities, or
otherwise) that the Board of Directors determines, after consultation with its
independent financial advisors, would be reasonably likely to result in a
transaction more favorable than Purchaser's proposal, from a financial point of
view, to the holders of the Independent Shares (a "Superior Proposal"), and (ii)
the Board of Directors causes the Company to enter into a definitive agreement
to effect the transactions contemplated by the Superior Proposal or recommends
to the stockholders of the Company the acceptance of the Superior Proposal,
Purchaser shall (and shall cause its Affiliates to) cast its votes or submit
proxies in favor of such Superior Proposal at any meeting of stockholders held
to approve such Superior Proposal or shall tender its shares of the Company in
response to any tender offer made in connection with the Superior Proposal,
unless such recommendation is withdrawn or modified because the Company has
received a proposal that is determined by the
19
Board of Directors, as set forth above, to be superior to the Superior Proposal,
or for any other reason.
(d) In the event that, within the ninety (90) day period (or such
shorter period, if any, as the Independent Directors may deem appropriate), the
Company does not receive a Superior Proposal, the Company and Purchaser may
consummate the transactions contemplated by Purchaser's proposal, provided that
the Board has received an opinion from an independent financial advisor, in form
and substance satisfactory to the Independent Directors, to the effect that the
transaction is fair to the holders of the Independent Shares from a financial
point of view and that the price to be received by the holders of the
Independent Shares in the transaction includes a control premium comparable to
that which would be obtained in an auction of the Company unconstrained by the
effects of the existence of any dominant or controlling ownership interest.
7.5 "MARKET STAND-OFF" AGREEMENT. Purchaser agrees not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by it during the ninety (90) day period following the effective
date of a registration statement of the Company filed under the Securities Act
in connection with any underwritten public offering of Common Stock (or other
securities) of the Company if so requested by the Company and the underwriters;
provided that:
(a) all officers and directors of the Company
enter into similar agreements; and
(b) such time period may be waived or
shortened by such underwriter.
The Company may impose stop-transfer instructions with respect to the shares (or
securities) subject to the foregoing restriction until the end of such period.
7.6 DISCLOSURE. Purchaser and the Company shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the transactions contemplated by this Agreement.
20
8. ADDITIONAL COVENANTS OF THE PARTIES.
8.1 BOARD COMPOSITION.
(a) Upon the Closing, appropriate action shall
be taken so that the Company's Board of Directors will consist of the
individuals identified in the memorandum dated October 10, 1997 from the Company
to Purchaser (the "Board Memorandum"). If the number of authorized members of
the Board is increased, the number of Independent Directors shall be
proportionately increased.
(b) For so long as any Independent Director
continues as a member of the Board of Directors of the Company, the Company
shall maintain in effect all (or implement equivalent) compensatory plans,
programs and other benefits that are in effect immediately prior to the Closing
for the benefit of non-employee directors of the Company, including without
limitation, stock plans, expense reimbursement, indemnification agreements and
liability insurance, and the Company shall continue to operate such plans,
programs and benefits in a manner consistent with past practice.
(c) At any meeting of stockholders of the
Company at which the election of directors is submitted to a vote of the
stockholders, Purchaser shall cause the Board of Directors of the Company to
include on the slate of nominees for election those Independent Directors who
are in the class whose term of office is then ending and shall recommend to the
stockholders the election of such Independent Directors. In casting votes (or
giving proxies) with respect to the election of any of the Independent Directors
submitted for a vote of the stockholders of the Company, Purchaser shall vote
(and Purchaser shall cause any Affiliate of Purchaser to vote) all shares held
of record or beneficially owned by Purchaser or its Affiliates, respectively, in
the same proportion as the votes cast in favor of or withheld from such nominees
for Independent Directors by other holders of Common Stock of the Company.
(d) In the event of any vacancy on the Board
created as a result of the resignation, death, disability, removal or
disqualification of any of the Independent Directors, an Independent Director
Nominating Committee composed of the remaining Independent Directors, after
consultation with the other directors, shall be entitled to select a nominee to
complete the remaining term of the Independent Director whose position was
vacated and either (i) such nominee shall be elected as an Independent Director
by action of the full Board of Directors or (ii) if such nominee is not so
elected, the Board shall call a special meeting of stockholders of the Company
to consider and vote on the election of such nominee. In connection with such
21
election, Purchaser shall vote (and Purchaser shall cause any Affiliate of
Purchaser to vote) with respect to the election of such new Independent Director
in accordance with Section 8.1(c) hereof. Nothing contained herein shall be
deemed to preclude or restrict any stockholder of the Company who is not
affiliated or associated with Purchaser from nominating a person for election to
the Board, in accordance with procedure set forth in the Company's By-Laws, and
any person so nominated who is then elected as a director shall be deemed to be
an Independent Director.
8.2 INDEPENDENT DIRECTOR ACTION.
(a) Without the Approval of the Independent
Directors, Purchaser shall not (and shall not permit any of its Affiliates to):
(i) engage in any transaction with the Company or any subsidiary of the Company
other than in the ordinary course of business or having a dollar value less than
twenty-five thousand dollars ($25,000); or (ii) agree to any amendment of, or
waiver of any rights under, this Agreement or any other agreement to which the
Company and Purchaser or any its Affiliates are parties.
(b) No Sale of the Company (as hereinafter
defined) may be authorized by any corporate action on the part of the Company
unless (i) the Company shall have first engaged a nationally recognized
investment banking firm selected with the Approval of the Independent Directors
and (ii) such firm has rendered to the Board an opinion, satisfactory in form
and substance to the Independent Directors, to the effect that the transaction
is fair, from a financial point of view, to the stockholders of the Company and
that the price to be received by the stockholders of the Company in the
transaction includes a control premium comparable to that which would be
obtained in an auction of the Company unconstrained by the effects of the
existence of any dominant or controlling ownership interest.
(c) A "Sale of the Company" shall mean any
form of merger with, recapitalization, restructuring, liquidation, dissolution
or sale of all or substantially all the assets of, or similar business
combination or other similar transaction with or involving the Company or any of
its subsidiaries (other than with Purchaser or any of its Affiliates).
8.3 PROXY STATEMENT. As promptly as practicable after the date
of this Agreement, the Company shall prepare and cause to be filed with the
Commission a Proxy Statement in connection with the transactions contemplated
hereby (the "Proxy Statement"), and the Company shall respond promptly to any
comments of the Commission or its staff with respect thereto. The Company will
afford Purchaser a reasonable opportunity to review and comment on the proposed
form of
22
Proxy Statement prior to its filing with the Commission. Purchaser shall
promptly furnish to the Company all information concerning Purchaser, its
subsidiaries and its stockholders as may be required or reasonably requested in
connection with any action contemplated by this Section 8.3. Such Proxy
Statement shall include as an exhibit the opinion from the Company's financial
advisor referred to in Section 9.2(h). The Company shall (a) notify Purchaser
promptly of the receipt of any comments from the Commission or its staff and of
any request by the Commission or its staff for amendments or supplements to the
Proxy Statement or for additional information and (b) supply Purchaser with
copies of all correspondence with the Commission or its staff with respect to
the Proxy Statement. Whenever any event occurs that should be set forth in an
amendment or supplement to the Proxy Statement, Purchaser or the Company, as the
case may be, shall promptly inform the other of such occurrence and shall
cooperate in filing with the Commission or its staff, and, if appropriate,
mailing to stockholders of the Company, such amendment or supplement.
8.4 REGULATORY APPROVAL. The Company and Purchaser shall use
commercially reasonable efforts to file, as soon as practicable after the date
of this Agreement, all notices, reports and other documents required to be filed
with any federal, state, local, municipal, foreign or other governmental body
("Governmental Body") with respect to the transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. Without limiting the generality of the foregoing, the
Company and Purchaser shall, promptly after the date of this Agreement, prepare
and file the notifications required under the HSR Act in connection with the
transactions contemplated by this Agreement. The Company and Purchaser shall
respond as promptly as practicable to (i) any inquiries or requests received
from the Federal Trade Commission or the Department of Justice for additional
information or documentation and (ii) any inquiries or requests received from
any state attorney general or other Governmental Body in connection with
antitrust or related matters. Each of the Company and Purchaser shall (A) give
the other party prompt notice of the commencement of any action, suit,
litigation, arbitration, preceding or investigation ("Legal Proceeding") by or
before any Governmental Body with respect to the transactions contemplated by
this Agreement, (B) keep the other party informed as to the status of any such
Legal Proceeding, and (C) promptly inform the other party of any communication
to or from the Federal Trade Commission, the Department of Justice or any other
Governmental Body regarding the transactions contemplated by this Agreement.
8.5 AMENDMENT OF CERTIFICATE OF INCORPORATION OR BYLAWS. The
Company and Purchaser shall take all steps reasonably necessary to amend the
Company's Certificate of
23
Incorporation and By-Laws to implement the rights and obligations of the parties
contained herein to the extent necessary or appropriate under Delaware law. The
Company's Certificate of Incorporation and By-Laws shall be amended to provide
that, to the full extent permitted by the Delaware General Corporation Law, the
filling of vacancies on the Board of Directors may be effected by written
consent of a majority in interest of the stockholders.
9. CONDITIONS TO CLOSING.
9.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING.
Purchaser's obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE;
PERFORMANCE OF OBLIGATIONS. The representations and warranties made by the
Company in Section 4 hereof shall have been true and correct in all material
respects as of the Closing Date except for changes contemplated by this
Agreement and except for those representations and warranties that address
matters only as of the date of this Agreement or any other particular date
(other than the Closing Date), which shall remain true and correct in all
material respects as of such particular date, and the Company shall have
performed in all material respects all covenants and obligations herein required
to be performed or observed by it on or prior to the Closing.
(b) CONSENTS, PERMITS, AND WAIVERS. On or
prior to the Closing Date, Purchaser shall have obtained any and all consents,
permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement and the Seventh Amendment to
Registration Rights Agreement (except for such as may be properly obtained
subsequent to the Closing).
(c) ABSENCE OF RESTRAINT. No order to
restrain, enjoin or otherwise prevent the consummation of the transactions
contemplated hereby shall have been entered by any court or other governmental
authority and no litigation shall be pending which challenges or seeks to
restrain or prohibit the consummation of the transactions contemplated hereby.
(d) STATUTORY REQUIREMENTS. All statutory
requirements and regulatory approvals for the valid consummation by Purchaser of
the transactions contemplated by this Agreement, including the termination of
the waiting period of the HSR Act if such filing is required, shall have been
fulfilled or received.
24
(e) STOCKHOLDER APPROVAL. On or prior to the
Closing Date, the transactions contemplated by this Agreement shall have been
approved by the affirmative vote of the stockholders of the Company as required
by applicable law or the requirements of the Nasdaq Stock Market applicable to
National Market securities.
(f) SEVENTH AMENDMENT TO REGISTRATION RIGHTS
AGREEMENT. The Company and holders of at least fifty-one percent (51%) of the
Registrable Securities (as defined in the original Registration Rights
Agreement, dated June 23, 1986, as amended to date) shall have entered into the
Seventh Amendment to Registration Rights Agreement, in substantially
the form attached hereto as EXHIBIT A.
(g) BOARD OF DIRECTORS. As of the Closing,
all necessary corporate action shall have been taken to the effect that,
effective immediately following the Closing, the Board of Directors of the
Company shall consist of the individuals determined pursuant to the Board
Memorandum.
(h) LEGAL OPINION. Purchaser shall have
received from ▇▇▇▇▇▇ Godward LLP an opinion addressed to it, dated as of the
Closing, substantially in the form attached hereto as EXHIBIT B.
(i) COMPLIANCE CERTIFICATE. The Company shall
have delivered to Purchaser or its counsel a Compliance Certificate, executed by
the President and the Chief Financial Officer of the Company, dated as of the
date of the Closing, to the effect that the conditions specified in subsections
(a) through (h) of Section 9.2 have been satisfied.
9.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE;
PERFORMANCE OF OBLIGATIONS. The representations and warranties made by Purchaser
in Section 5 hereof shall have been true and correct in all material respects as
of the Closing Date except for changes contemplated by this Agreement and except
for those representations and warranties that address matters only as of the
date of this Agreement or any other particular date (other than the Closing
Date), which shall remain true and correct in all material respects as of such
particular date, and Purchaser shall have performed in all material respects all
covenants and obligations herein required to be performed or observed by it on
or prior to the Closing.
(b) CONSENTS, PERMITS, AND WAIVERS. On or
prior to the Closing Date, the Company shall have obtained any
25
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by this Agreement and the Seventh Amendment to
Registration Rights Agreement (except for such as may be properly obtained
subsequent to the Closing).
(c) ABSENCE OF RESTRAINT. No order to
restrain, enjoin or otherwise prevent the consummation of the transactions
contemplated hereby shall have been entered by any court or other governmental
authority and no litigation shall be pending which challenges or seeks to
restrain or prohibit the consummation of the transactions contemplated hereby.
(d) STOCKHOLDER APPROVAL. On or prior to the
Closing Date, the transactions contemplated by this Agreement shall have been
approved by the affirmative vote of the holders of a majority of the capital
stock of the Company represented and voting on such matters, excluding the
shares of capital stock held by Purchaser and its Affiliates or which Purchaser
and its Affiliates have the sole or shared power to vote (the "Requisite Vote").
(e) STATUTORY REQUIREMENTS. All statutory
requirements and regulatory approvals for the valid consummation by Purchaser of
the transactions contemplated by this Agreement, including the termination of
the waiting period of the HSR Act if such filing is required, shall have been
fulfilled or received.
(f) SEVENTH AMENDMENT TO REGISTRATION RIGHTS
AGREEMENT. Purchaser and holders of at least fifty-one percent (51%) of the
Registrable Securities (as defined in the original Registration Rights
Agreement, dated June 23, 1986, as amended to date) shall have entered into the
Seventh Amendment to Registration Rights Agreement, in substantially
the form attached hereto as EXHIBIT A.
(g) LEGAL OPINION. The Company shall have
received from Irell & ▇▇▇▇▇▇▇ an opinion addressed to it, dated as of the
Closing, substantially in the forms attached hereto as Exhibit C.
(h) FAIRNESS OPINION. The opinion of ▇▇▇▇▇▇
▇▇▇▇ LLC to the Company's Board of Directors, dated the date hereof, to the
effect that the transactions contemplated by this Agreement are fair from a
financial point of view to the stockholders of the Company shall not have been
withdrawn or modified.
(i) COMPLIANCE CERTIFICATE. Purchaser shall
have delivered to the Company or its counsel a Compliance Certificate, executed
by the President and the Chief Financial Officer of Purchaser, dated as of the
date of the Closing, to
26
the effect that the conditions specified in subsections (a) through (h) of
Section 9.1 have been satisfied.
10. TERMINATION AND AMENDMENT.
10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual agreement of the Company and
Purchaser;
(b) by either the Company or Purchaser if this
Agreement shall not have been consummated by January 31, 1998, unless extended
by mutual agreement or unless the failure to consummate the Agreement is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Closing Date; or
(c) by either the Company or Purchaser if the
meeting of the Company's stockholders shall have been
concluded and:
(i) with respect to Purchaser, the vote
of the Company's stockholders required by applicable laws to approve the
transactions contemplated by this Agreement shall not have been obtained; or
(ii) with respect to the Company, the
Requisite Vote of the stockholders shall not have been obtained.
10.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 10.1, this Agreement shall become void and
have no effect, without any liability on the part of any party or its directors,
officers or stockholders, except as set forth in Section 6.2(c), and except for
the provisions set forth in Sections 7.3(a), (c) and (d), which shall continue
for a period of three (3) years from the date of this Agreement, unless the
failure to consummate this Agreement or the transactions contemplated hereby is
attributable to a failure on the part the Company to perform any material
obligation required to be performed by the Company. Notwithstanding the
foregoing, nothing in this Section 10.2 shall relieve any party to this
Agreement of liability for a material breach of any provision of this Agreement.
10.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
11. MISCELLANEOUS.
27
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENT.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
Purchaser herein and in the certificates for the Shares delivered pursuant
hereto shall survive the execution of this Agreement and shall expire as of and
be of no further force or effect after the Closing.
11.2 NO TRANSFER OF RIGHTS. Except as otherwise provided herein,
no rights granted to Purchaser hereunder may be assigned or otherwise conveyed
by Purchaser to any transferee.
11.3 RESTRICTED SECURITIES; LEGENDS. Notwithstanding the
foregoing, Purchaser understands that (i) the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, and may
not be transferred or resold except pursuant to an effective registration
statement or exemption from registration; (ii) each certificate representing the
Shares will be endorsed with the following legends:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES
MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) Any legend required to be placed thereon
by applicable federal or state securities laws.
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Shares unless the conditions specified in the foregoing
legends are satisfied.
11.4 FEES AND EXPENSES. Each of the parties hereto shall bear its
own expenses in connection with negotiation, preparation, execution and
consummation of this Agreement and the transactions contemplated hereby,
including, but not limited to, legal, accounting and investment banking fees and
expenses.
11.5 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be in writing, shall be
mailed by first-class registered or certified airmail, or nationally recognized
overnight express
28
courier postage prepaid, and shall be deemed given when so mailed and shall be
delivered as follows:
(a) if to the Company, to:
Metricom, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy so mailed to:
▇▇▇▇▇▇ Godward LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
or to such other person at such other place as the Company
shall designate to Purchaser in writing; and
(b) if to Purchaser, at its address as set
forth at the end of this Agreement, or at such other address or addresses as may
have been furnished to the Company in writing.
11.6 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
11.7 SEVERABILITY. In case any provision contained in this
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.
11.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware as to matters
between the Company and its stockholders and other matters of corporate
governance and, as to all other matters, with the laws of the State of
California, without regard to the choice of law provisions thereof, and the
federal law of the United States of America.
11.9 COUNTERPARTS. This 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.
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
METRICOM, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Executive
Officer
VULCAN VENTURES INCORPORATED
By:
Address:
▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
30
EXHIBIT A
SEVENTH AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This SEVENTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT is entered into
as of _________________, 1997, by and between METRICOM, INC., a Delaware
corporation (the "Company"), and VULCAN VENTURES INCORPORATED ("Vulcan
Ventures"), each as indicated by its execution and delivery of the counterpart
signature pages attached hereto.
WITNESSETH
WHEREAS, the Company and certain of its security holders (including
Vulcan Ventures) are parties to that certain Registration Rights Agreement,
originally dated as of June 23, 1986, as amended to date (the "Registration
Rights Agreement"); and
WHEREAS, pursuant to that certain Common Stock Purchase Agreement dated
as of October __, 1997, between the Company and Vulcan Ventures (the "Vulcan
Ventures Agreement"), Vulcan Ventures has purchased from the Company
[________________] shares of the Company's Common Stock (the "Vulcan Shares")
and has the right, under certain circumstances, to purchase Additional
Securities (as defined in the Vulcan Ventures Agreement); and
WHEREAS, the Company and the holders of the requisite percentage of
Registrable Securities (as defined in the Registration Rights Agreement) desire
to amend the Registration Rights Agreement to permit the Company to grant to
Vulcan Ventures registration rights as set forth in Sections 2 ("Form S-3
Registration") and 3 ("Piggyback Registration"), respectively, of the
Registration Rights Agreement with respect to the Vulcan Shares and any
Additional Securities; and
WHEREAS, the Company and the holders of the requisite percentage of
Registrable Securities desire to amend the Registration Rights Agreement to
provide that any individual holder of Registrable Securities who holds at least
twenty-five percent (25%) of the then outstanding Registrable Securities can
request that the Company effect any Registration (as defined in the Registration
Rights Agreement) on Form S-3.
NOW, THEREFORE, the parties hereto agree as follows:
1. The execution and delivery by Vulcan Ventures of this Seventh
Amendment to Registration Rights Agreement shall for all purposes be deemed to
be, as of the date first set forth above,
A-1
31
the execution of a counterpart of the Registration Rights Agreement as required
pursuant to Section 8 of the Registration Rights Agreement. Accordingly, Vulcan
Ventures shall be deemed to be, as of the date first set forth above, a party to
the Registration Rights Agreement with respect to the Vulcan Shares and any
Additional Securities, in addition to any other Registrable Securities currently
held by it, and shall continue to be considered an "Investor" for all purposes
of the Registration Rights Agreement. Notwithstanding the foregoing, the Vulcan
Shares and any Additional Securities shall be eligible for Form S-3 Registration
and Piggyback Registration only.
2. In accordance with Section 8 of the Registration Rights Agreement,
Schedule A to the Registration Rights Agreement shall be amended to include the
Vulcan Shares upon execution and delivery of this Seventh Amendment to
Registration Rights Agreement by Vulcan Ventures.
3. Schedule A to the Registration Rights Agreement shall be further
amended to include only those holders and those holders' shares which are
eligible for registration rights as of the date first set forth above.
4. In accordance with Section 12.6 of the Registration Rights Agreement,
the first sentence of Section 2.3 thereof is hereby amended to read as follows:
Subject to the terms of this Agreement, in the event that the
Company receives from either (a) an individual Holder who holds
at least twenty-five percent (25%) of the then outstanding
Registrable Securities (each of such Holders being referred to
herein as a "Major Holder") or (b) Holders who in the aggregate
hold at least twenty-five percent (25%) of the then outstanding
Registrable Securities, excluding Registrable Securities held by
Major Holders, a written request that the Company effect any
Registration on Form S-3 (or any successor form to Form S-3
regardless of its designation) at a time when the Company is
eligible to register securities on Form S-3 (or any successor
form to Form S-3 regardless of its designation) for an offering
of Registrable Securities, the Company will promptly give written
notice of the proposed Registration to all Holders and will as
soon as practicable use its best efforts to effect Registration
of the Registrable Securities specified in such request, together
with all or such portion of the Registrable Securities of any
Holder
A-2
32
joining in such request as are specified in a written request
delivered to the Company within 30 days after written notice from
the Company of the proposed Registration.
IN WITNESS WHEREOF, the parties hereto have executed this Seventh
Amendment to Registration Rights Agreement as of the date first set forth above.
COMPANY REGISTRABLE SECURITIES HOLDER
METRICOM, INC.
By: By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (signature)
Chief Executive Officer
Name:
(printed name)
Title:
(if a corporation)
Common Shares
Outstanding:
Common Shares
Exercisable
Under Warrant:
VULCAN VENTURES INCORPORATED
By:
Name:
Title:
33
SCHEDULE A
INVESTORS
REGISTRABLE REGISTRABLE
SHARES
SHARES EXERCISABLE
INVESTOR OUTSTANDING UNDER WARRANT
34
EXHIBIT B
OPINION OF ▇▇▇▇▇▇ GODWARD LLP
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to conduct its business as currently
conducted;
(b) The authorized capital stock of the Company consists of (a) 50,000,000
shares of common stock, $.001 par value per share, and (b) 2,000,000
shares of undesignated preferred stock, $.001 par value;
(c) The Company's execution, delivery and performance of the
Agreement (a) have been duly authorized under Delaware law
by all requisite corporate action by the Company, and
(b) will not violate any applicable provision of federal
law, the law of the State of California or the General
Corporation Law of the State of Delaware or the Amended and
Restated Certificate of Incorporation or By-Laws of the
Company or any provision of any material agreement,
contract or instrument (i.e., those agreements, contracts
and instruments included or incorporated by reference as
exhibits to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 together with any other
agreements, contracts or instruments identified by the
Company as being required to be so filed if such Report
covered the period to the date of the opinion) or result in
a breach of or constitute (upon notice or lapse of time or
both) a default under any such agreement, contract or
instrument (except that no opinion need be rendered as to
any issue governed by Delaware law upon which Delaware
legal counsel has opined);
(d) Upon execution and delivery, the Agreement will constitute
a valid and binding obligation of the Company, enforceable
against the Company 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) (except that no opinion need be rendered as to any
issue governed by Delaware law upon which Delaware legal
counsel has opined); and
(e) When issued and paid for, the Shares to be sold by the Company will be
validly issued, fully paid and nonassessable.
35
Note: Cooley Godward may rely on opinions of other
firms with respect to certain regulatory matters.
36
EXHIBIT C
OPINION OF IRELL & ▇▇▇▇▇▇▇
(a) Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington, has all requisite
corporate power and authority to conduct its business as currently
conducted and is duly qualified in each jurisdiction in which the failure
to be so qualified would have a material adverse effect on its business
or properties;
(b) Purchaser's execution, delivery and performance of the
Agreement (a) have been duly authorized under Washington
law by all requisite corporate action by Purchaser, and
(b) will not violate any applicable provision of federal
law, the law of the State of California or the General
Corporate Code of the State of Washington or the Articles
of Incorporation or Bylaws of Purchaser or any provision of
any material agreement, contract or instrument to which
Purchaser is a party or by which it is bound, or result in
a breach of or constitute (upon notice or lapse of time or
both) a default under any such agreement, contract or
instrument; and
(c) Upon execution and delivery, and assuming the valid
execution thereof by Purchaser, the Agreement will
constitute a valid and binding obligation of Purchaser,
enforceable 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).