EXHIBIT 2.2
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SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
PROXIM CORPORATION
AND
THE PURCHASERS NAMED HEREIN
DATED AS OF JUNE 16, 2002
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This SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as
of the 16th day of June 2002 by and among Proxim Corporation, a Delaware
corporation with its principal office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(the "Company"), and each of the purchasers named in EXHIBIT A attached hereto
(each, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company has authorized the issuance of (i) up to
3,000,000 shares of its Series A Convertible Preferred Stock (the "Preferred
Stock"), which shares are, or will be, upon issuance, convertible into
authorized but unissued shares of class A common stock, $.01 par value per
share, of the Company (the "Common Stock"), and (ii) warrants to purchase
12,271,345 shares of Common Stock (the "Warrants");
WHEREAS, the Company seeks financing to fund the Acquisition (as
defined below); and
WHEREAS, the Company desires to issue and sell to the Purchasers
pursuant to this Agreement, and the Purchasers, severally, desire to purchase
from the Company (i) the number of shares of Preferred Stock as is set forth
opposite its respective name in EXHIBIT A hereto, (ii) Warrants to purchase the
number of shares of Common Stock as is set forth opposite its respective name in
EXHIBIT A hereto and (iii) the aggregate principal amount of senior convertible
promissory notes as is set forth opposite its respective name in EXHIBIT A
hereto;
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1. "Affiliate" shall mean, with respect to any Person, any
other Person controlling, controlled by or under direct or indirect common
control with such Person. For the purposes of this definition "control," when
used with respect to any specified Person, shall mean the power to direct the
management and policies of such Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
1.2. "Code" means the Internal Revenue Code of 1986, as amended.
1.3. "Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract or credit arrangement,
as trustee or executor, or otherwise.
1.4. "Disclosure Documents" means the Company's Registration
Statement on Form S-4, filed on February 25, 2002, the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002, any Current Reports on
Form 8-K filed by the Company on or after March 31, 2002, and the Company's
Schedule 14A Proxy Statement for its Annual Meeting
of Stockholders, dated May 14, 2002, together in each case with any documents
incorporated by reference therein or exhibits thereto.
1.5. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations promulgated thereunder.
1.6. "Material Adverse Change" means any change, event or
occurrence which, individually or in the aggregate, has had a material adverse
effect on, or a material adverse change in, (i) the business, operations,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, that had the effect of reducing revenues or net
income of the Company and its subsidiaries, taken as a whole, by more than $15
million in any quarter compared to published financial statements (if publicly
announced) or consensus analysts estimates (in the case of a quarter for which
financial results have not yet been publicly announced) and that was not
disclosed in any Disclosure Document filed on or prior to the date hereof or
(ii) the ability of the Company to perform its obligations under this Agreement,
in each case other than any change, event or occurrence (a) resulting from
conditions in the United States or foreign economies or securities markets in
general or any change in the Company's stock price, (b) resulting from
conditions in the industry in which the Company operates in general, except to
the extent that the Company is disproportionately affected thereby, (c)
resulting from the public announcement of the transactions contemplated by this
Agreement, (d) arising out of or resulting from actions of the Purchasers in
connection with this Agreement or (e) that may constitute a material adverse
change (or similar effect) under the Orinoco Agreement, whether or not waived by
the Company.
1.7. "Material Adverse Effect" means, collectively, a material
adverse effect on, or a material adverse change in, or group of such effects on
or changes in, (i) the business, operations, financial condition, results of
operations, assets or liabilities of the Company and its subsidiaries, taken as
a whole or (ii) the ability of the Company to perform its obligations under this
Agreement, in each case other than any change, event or occurrence (a) resulting
from conditions in the United States or foreign economies or securities markets
in general or any change in the Company's stock price, (b) resulting from
conditions in the industry in which the Company operates in general, except to
the extent that the Company is disproportionately affected thereby, (c)
resulting from the public announcement of the transactions contemplated by this
Agreement, or (d) arising out of or resulting from actions of the Purchasers in
connection with this Agreement
1.8. "Note" means one or more senior convertible promissory
note(s) containing the same terms and conditions, and with the same conversion
features, as set forth in the form of note attached hereto as EXHIBIT B.
1.9. "Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association or joint venture.
1.10. "Plans" shall mean employee benefit plans as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and all other employee benefit practices or arrangements, including,
without limitation, any such practices or arrangements providing severance pay,
sick leave, vacation pay, salary continuation for
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disability, retirement benefits, deferred compensation, bonus pay, incentive
pay, stock options or other stock-based compensation, hospitalization insurance,
medical insurance, life insurance, scholarships or tuition reimbursements,
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries is obligated to contribute for Employees or individuals
other than Employees who at any time prior to the date of this Agreement
performed services as an Employee primarily for the Company ("Former
Employees").
1.11. "SEC" shall mean the Securities and Exchange Commission.
1.12. "Securities" shall mean the Shares, the Notes, the
Warrants, shares of Common Stock issuable upon conversion of the Shares and
exercise of the Warrants and shares of Preferred Stock issuable upon conversion
of the Notes; provided, that for purposes of Section 7 (other than Section 7.1
and 7.2) "Securities" shall not include the Notes.
1.13. "Securities Act" shall mean the Securities Act of 1933, as
amended, and all of the rules and regulations promulgated thereunder.
1.14. "Shares" shall mean the shares of Series A Convertible
Preferred Stock issued pursuant to this Agreement.
1.15. "Tax Returns" shall mean returns, reports, information
statements and other documentation (including any additional or supporting
material) filed or maintained, or required to be filed or maintained, in
connection with the calculation, determination, assessment or collection of any
Tax and shall include any amended returns required as a result of examination
adjustments made by the Internal Revenue Service or other Tax authority.
1.16. "Taxes" shall mean any and all federal, state, local,
foreign and other taxes, levies, fees, imposts, duties and charges of whatever
kind (including any interest, penalties or additions to the tax imposed in
connection therewith or with respect thereto), whether or not imposed on the
Company, including, without limitation, taxes imposed on, or measured by,
income, franchise, profits or gross receipts, and also ad valorem, value added,
sales, use, service, real or personal property, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premium, windfall profits, transfer and gains taxes and customs duties.
1.17. "Warburg" shall refer to Warburg Pincus Private Equity
VIII, L.P. and its Affiliates.
2. Authorization, Purchase and Sale of Shares and Warrants.
2.1. Authorization of Securities. The Company has, or on or
before the Initial Closing Date (as defined below) will have, (i) authorized and
created a series of its preferred stock consisting of 3,000,000 shares of
Preferred Stock, par value $.01 per share, designated as its "Series A
Convertible Preferred Stock," (ii) authorized the Notes, (iii) authorized the
Warrants, (iv) authorized the issuance of the shares of Common Stock issuable
upon conversion of the Shares and exercise of the Warrants and (v) authorized
the issuance of the shares of Preferred Stock issuable upon conversion of the
Notes. The terms, limitations and relative rights
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and preferences of the Preferred Stock are set forth in a Certificate of
Designations, Number, Preferences and Rights of Series A Convertible Preferred
Stock of the Company, which will have been filed on or before the Initial
Closing Date with the Secretary of State of the State of Delaware and a copy of
which is attached hereto as EXHIBIT C (the "Certificate of Designation").
2.2. Purchase and Sale of Preferred Stock and Notes.
(a) Subject to and upon the terms and conditions set forth in
this Agreement, at the Initial Closing (as defined below), the Company shall
issue and sell to each Purchaser, and each Purchaser, severally, shall purchase
from the Company (i) the total number of Shares set forth opposite the name of
such Purchaser under the heading "No. of Shares of Series A Convertible
Preferred Stock to be Purchased" on EXHIBIT A hereto, at a purchase price of
$25.00 per share and (ii) the aggregate principal amount of Notes set forth
opposite the name of such Purchaser under the heading "Principal Amount of Notes
to be Purchased" on EXHIBIT A hereto, at a purchase price equal to the principal
amount of Notes purchased.
(b) Subject to and upon the terms and conditions set forth in
this Agreement, at the Second Closing (as defined below) the Company shall issue
the shares of Preferred Stock issuable upon conversion of the Notes in
accordance with the terms of the Notes.
2.3. Issuance of Warrants. Subject to the terms and conditions of
this Agreement, the Company hereby agrees to issue to each Purchaser, as part of
its inducement to purchase the Shares and Notes being purchased by such
Purchaser: (i) at the Initial Closing, a Warrant entitling it to purchase the
number of shares of Common Stock as set forth opposite its name under the
heading "Initial Closing Warrant Coverage" on EXHIBIT A hereto and (ii) at the
Second Closing, a Warrant entitling it to purchase the number of shares of
Common Stock as set forth opposite its name under the heading "Second Closing
Warrant Coverage" on EXHIBIT A hereto, each with an exercise price of $3.0559
per share (subject to adjustment as provided therein). The Warrants shall
contain the same terms and conditions and have the same exercise features as are
set forth in the form of Warrant attached hereto as EXHIBIT D.
2.4. Closing.
(a) The initial closing (the "Initial Closing") shall take place
at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇ on the date the Acquisition (as defined below) is scheduled to occur or such
other date mutually agreed to by the Company and the Purchasers (the "Initial
Closing Date"). At the Initial Closing, the Company shall deliver to each
Purchaser (i) a certificate for the number of Shares being purchased by it at
the Initial Closing as set forth on EXHIBIT A hereto, registered in the name of
such Purchaser, (ii) one or more Note(s) in the principal amount as set forth
opposite such Purchaser's name on EXHIBIT A hereto and (iii) a Warrant
representing the right to purchase the number of shares of Common Stock as set
forth opposite its name under the heading "Initial Closing Warrant Coverage" on
EXHIBIT A hereto, against payment to the Company of the purchase price therefor
set forth opposite the name of such Purchaser on EXHIBIT A hereto under the
caption "Purchase Price Payable at the Initial Closing" by wire transfer to the
Company of immediately available funds.
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(b) The second closing (the "Second Closing") shall take place at
the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇
on the first business day following the date of the special meeting of
stockholders of the Company (the "Special Meeting") approving the issuance of
(i) the shares of Preferred Stock issuable upon conversion of the Notes in
accordance with the terms of the Notes and (ii) the additional Warrants to be
issued at the Second Closing as provided herein. At the Second Closing, the
Company shall deliver to each Purchaser (i) a certificate for the number of
shares of Preferred Stock issuable upon conversion of the Notes held by such
Purchaser and (ii) a Warrant representing the right to purchase the number of
shares of Common Stock as set forth opposite its name under the heading "Second
Closing Warrant Coverage" on EXHIBIT A hereto. The Initial Closing and the
Second Closing are collectively referred to as the "Closings." If at the Special
Meeting the stockholders of the Company do not approve the issuance of the
shares of Preferred Stock issuable upon conversion of the Notes and the issuance
of the additional Warrants to be issued at the Second Closing then no Second
Closing shall occur and the Notes shall remain outstanding in accordance with
their terms.
2.5. Use of Proceeds. The Company will apply the net proceeds
from the sale of the Shares, the Notes and the Warrants to finance (i) the
acquisition (the "Acquisition") of the wireless Local Area Network operations of
Agere Systems, Inc. ("Agere") currently known as ORiNOCO, all as provided in
that certain Asset Purchase Agreement by and between Agere and the Company,
dated as of even date herewith (the "Orinoco Agreement"), (ii) the payment of
fees and expenses related to the Acquisition and this Agreement and (iii)
working capital requirements of the Company.
3. Representations and Warranties of the Company. Except as set
forth in the Disclosure Documents or in a corresponding numbered section of the
disclosure schedule delivered to each Purchaser prior to the execution of this
Agreement (the "Disclosure Schedule"), the Company hereby represents and
warrants to each of the Purchasers as follows:
3.1. Incorporation. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business in each jurisdiction in which the character of
its properties or the nature of its business requires such qualification, except
where the failure to so qualify would not have a Material Adverse Effect. The
Company has all requisite corporate power and authority to carry on its business
as now conducted.
3.2. Subsidiaries. The Company has no material subsidiaries and
no material interests or investments in any partnership, trust or other entity
or organization. Each subsidiary of the Company that is a corporation has been
duly incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its properties and to conduct its business and is duly
registered, qualified and authorized to transact business and is in good
standing in each jurisdiction in which the conduct of its business or the nature
of its properties requires such registration, qualification or authorization,
except where such failure to so qualify or register would not be reasonably
likely to have a Material Adverse Effect. All of the issued and outstanding
capital stock of each subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable, and is owned by the Company free and clear of any
mortgage, pledge,
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lien, encumbrance, security interest, claim or equity, other than any of the
foregoing pledged pursuant to the Security Agreement, dated November 1, 1999, by
and between the Company and Credit Suisse First Boston (the "Security
Agreement").
3.3. Capitalization.
(a) As of the date of this Agreement, the authorized capital
stock of the Company consists of 200,000,000 shares of Common Stock, 100,000,000
shares of class B common stock, par value $.01 per share (the "Class B Common
Stock") and 25,000,000 shares of undesignated preferred stock, par value $.01
per share. As of the date of this Agreement, there are no shares of Class B
Common Stock or Preferred Stock issued and outstanding. The number of
outstanding shares of Common Stock as of June 14, 2002 was 119,143,217 and the
total number of shares of Common Stock issuable pursuant to stock options
outstanding at June 14, 2002 was 33,621,083. All such shares of Common Stock
have been duly authorized, and all such issued and outstanding shares of Common
Stock have been validly issued, are fully paid and nonassessable. No such
outstanding shares of Common Stock were issued in violation of any preemptive
rights, "poison pill" provisions, rights of first offer or refusal or similar
rights.
(b) Except for the issuance of shares of Common Stock pursuant to
the exercise of outstanding options granted pursuant to the Company's option
plans or pursuant to the exercise of warrants to purchase shares of Common
Stock, including any such options granted after March 31, 2002, the Company has
not issued any capital stock since March 31, 2002, except as contemplated by
this Agreement. Except as set forth in or contemplated by the Disclosure
Documents or this Agreement, and except for the issuance of options to purchase
shares of the Company's Common Stock pursuant to the Company's option plans,
there are no existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character obligating the Company to issue, transfer or sell, or cause to be
issued, transferred or sold, any shares of the capital stock of the Company or
other equity interests in the Company or any securities convertible into or
exchangeable for such shares of capital stock or other equity interests, and
there are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of its capital stock or other equity
interests.
3.4. Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization of the Securities and the filing of the Certificate of
Designation, the authorization, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein has been
taken, other than the approvals contemplated at the Special Meeting. When
executed and delivered by the Company, this Agreement shall constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as rights to indemnity and
contribution may be limited by state or federal securities laws or the public
policy underlying such laws, and except as may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally
and by general equitable principles. The Company has all requisite corporate
power to enter into this Agreement and to carry out and perform its obligations
under the terms of this Agreement. The Board of Directors of the Company (the
"Board of Directors") has taken all action necessary to render inapplicable, as
it relates to Warburg, the provisions of Section 203 of the General Corporation
Law of the State of
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Delaware. At or prior to the Initial Closing, the Company will have reserved for
issuance (i) the shares of Common Stock initially issuable upon conversion of
the Shares and exercise of the Warrants and (ii) the shares of Preferred Stock
initially issuable upon conversion of the Notes.
3.5. Valid Issuance.
(a) The Shares being purchased by the Purchasers hereunder will,
upon issuance pursuant to the terms hereof and upon payment therefor, be duly
authorized and validly issued, fully paid and non-assessable shares of Preferred
Stock, free of preemptive or similar rights. Upon their issuance in accordance
with the terms of the Preferred Stock or Warrants, as the case may be, the
shares of Common Stock issued upon conversion of the Shares or exercise of the
Warrants, as the case may be, will be duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock, free of all preemptive or
similar rights. Upon their issuance in accordance with the terms of the Notes,
the shares of Preferred Stock issued upon conversion of the Notes will be duly
authorized, validly issued, fully paid and non-assessable shares of Preferred
Stock, free of all preemptive or similar rights.
(b) Subject to the accuracy of the representations made by the
Purchasers in Section 4 hereof, the Securities will be issued to the Purchasers
in compliance with applicable exemptions from (i) the registration and
prospectus delivery requirements of the Securities Act and (ii) the registration
and qualification requirements of all applicable securities laws of the states
of the United States. The Company is eligible to file as of the date hereof a
registration statement on Form S-3 under the Securities Act and is current in
its filings with the SEC under Section 13(a) of the Exchange Act.
3.6. Financial Statements. The financial statements of the
Company included in the Disclosure Documents (collectively, the "Financial
Statements") present fairly the consolidated financial position of the Company
and its subsidiaries as of the dates indicated, and the results of its
operations and cash flows for the periods therein specified. The Financial
Statements fairly present the consolidated financial position of the Company at
the dates thereof and the consolidated results of operations for the periods
then ended in accordance with generally accepted accounting principles applied
on a consistent basis ("GAAP") throughout the period therein specified (except
in the case of quarterly financial statements for the absence of footnote
disclosure and subject, in the case of interim periods, to normal year-end
adjustments which, individually, and in the aggregate are not expected to be
material).
3.7. Absence of Certain Changes. Since December 29, 2001, the
Company and its subsidiaries have conducted their business only in the ordinary
course of such business consistent with past practice and there has not been (i)
any Material Adverse Effect, (ii) any material commitment, contractual
obligation, borrowing, capital expenditure or transaction (each, a "Commitment")
entered into by the Company or any of its subsidiaries, other than (a)
Commitments in the ordinary course of business, (b) this Agreement and (c) the
Orinoco Agreement and any other Commitments contemplated thereby, (iii) any
action taken which, if taken after the date hereof, would constitute a material
breach of any provision or covenant herein, or (iv) any material change in the
Company's accounting principles, practices or methods other than as required by
concurrent changes in GAAP.
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3.8. Absence of Litigation. There is no action, suit, proceeding,
arbitration, claim, investigation or inquiry pending or, to the Company's
knowledge, threatened by or before any governmental body against the Company in
which an unfavorable outcome, ruling or finding in any said matter, or for all
such matters taken as a whole, would reasonably be expected to have a Material
Adverse Effect. The foregoing includes, without limitation, any such action,
suit, proceeding or investigation that questions this Agreement or seeks to
delay or prevent the consummation of the transactions contemplated hereunder or
the right of the Company to execute, deliver and perform under same. The Company
is not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. No
action, suit, proceeding, claim, investigation or inquiry by the Company or any
subsidiary is currently pending nor does the Company intend to initiate any
action, suit, proceeding, claim, investigation or inquiry, in each case, that if
resolved in a manner adverse to the Company, is reasonably likely to have a
Material Adverse Effect.
3.9. Intellectual Property. (i) The Company owns or possesses
sufficient rights to use all (A) material patents (and any renewals and
extensions thereof), patent rights (and any applications therefor), rights of
priority and other rights in inventions; (B) trademarks, service marks, trade
names and trade dress, and all registrations and applications therefor and all
legal or common-law equivalents of any of the foregoing; (C) copyrights and
rights in mask works (and any applications or registrations for the foregoing,
and all renewals and extensions thereof), common-law copyrights and rights of
authorship including all rights to exploit any of the foregoing in any media and
by any manner and means now known or hereafter devised; (D) industrial design
rights, and all registrations and applications therefor; (E) rights in data,
collections of data and databases, and all legal or common-law equivalents
thereof; (F) rights in domain names and domain name reservations; (G) rights in
trade secrets, proprietary information and know-how (collectively with all
licenses and other agreements providing Company with the right to use any item
of the type referred to in clauses (A) through (G), "Intellectual Property")
that are necessary for the conduct of its business as now conducted except where
the failure to currently own or possess would not have a Material Adverse
Effect; (ii) the Intellectual Property is valid, subsisting, in proper form and
enforceable and all renewal fees and other maintenance fees have been paid;
(iii) the Company is in material compliance with all contractual obligations
relating to the use and protection of such of the Intellectual Property as is
used pursuant to license or other agreement; (iv) to the knowledge of the
Company there is no present or former employee, officer or director of Company
or agent or outside contractor that holds or claims any material right, title or
interest, directly or indirectly, in or to any Intellectual Property; and (v) to
the Company's knowledge, the present business activities and products of the
Company have not and do not infringe any known intellectual property or other
proprietary rights of any third party, the Company is not making unauthorized
use of any confidential information or trade secrets of any third party, the
Company has not received any notice of any asserted infringement (nor is the
Company aware of any reasonable basis for any third party asserting an
infringement) by the Company of, any rights of a third party with respect to any
Intellectual Property that, individually or in the aggregate, would have a
Material Adverse Effect.
3.10. Disclosure Documents. The information contained or
incorporated by reference in the Disclosure Documents was true and correct in
all material respects as of the respective dates of the filing thereof with the
SEC; and, as of such respective dates, the Disclosure Documents did not contain
an untrue statement of a material fact or omit to state a
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material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent updated or superseded by any report
subsequently filed by the Company with the SEC. The Company is not party to any
material contract, agreement or other arrangement that was required to have been
filed as an exhibit to any Disclosure Document that was not so filed, other than
this Agreement and the Orinoco Agreement.
3.11. Books and Records. The minute books and other records of
the Company and its subsidiaries contain in all material respects accurate
records of all Company board, committee and stockholders' meetings and
accurately reflect in all material respects all other corporate action of the
stockholders and directors and any committees thereof of the Company and its
subsidiaries and all actions of the directors of the Company's subsidiaries, in
each case since January 1, 2001.
3.12. Consents. All consents, approvals, orders and
authorizations required on the part of the Company in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated herein, other than (i) in connection with the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the regulations promulgated thereunder, (ii) the filing of the Certificate
of Designation with the Secretary of State of the State of Delaware, have been
obtained and will be effective as of the Initial Closing Date, other than such
filings required to be made after the Initial Closing under applicable federal
and state securities laws and (iii) other than any of the foregoing, the failure
to make or obtain will not have a Material Adverse Effect. Except for the
approvals contemplated at the Special Meeting, the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated herein do not require the approval of the Company stockholders.
3.13. No Conflict. The execution and delivery of this Agreement
by the Company and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) any provision of the Certificate of Incorporation or By-laws
of the Company or (ii) any agreement or instrument, permit, franchise, license,
judgment, order, statute, law, ordinance, rule or regulations, applicable to the
Company or its properties or assets, except, in the case of clause (ii), as
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect.
3.14. Brokers or Finders. Other than with respect to Credit
Suisse First Boston and Broadview International, LLC, the fees of which will be
borne by the Company, the Company has not incurred, and shall not incur,
directly or indirectly, any liability for any brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.15. Nasdaq National Market. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act and is listed on the Nasdaq
National Market ("Nasdaq"), and, except as contemplated by this Agreement, the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the
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Exchange Act or delisting the Common Stock from Nasdaq, nor has the Company
received any notification that the SEC or the NASD, Inc. is contemplating
terminating such registration or listing.
3.16. No Manipulation of Stock. The Company has not taken, in
violation of applicable law, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the transactions contemplated hereby or the sale or
resale of the shares of Common Stock.
3.17. Company Not an "Investment Company". The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The Company is not, and immediately
after receipt of payment for the Shares and Warrants will not be, an "investment
company" or an entity "controlled" by an "investment company" within the meaning
of the Investment Company Act.
3.18. Title to Property and Assets. The Company and each of its
subsidiaries owns or possesses the necessary right to use or title to all
properties, assets, licenses, permits and the like required to operate its
business as currently operated, except for such properties, assets, licenses,
permits and the like, the absence of which would not result in a Material
Adverse Effect. The properties and assets of the Company and each of its
subsidiaries owned by them are owned free and clear of all mortgages, deeds of
trust, liens, charges, encumbrances and security interests except (i) for
statutory liens for the payment of current taxes that are not yet delinquent,
(ii) liens arising under the Security Agreement and (iii) liens, encumbrances
and security interests that arise in the ordinary course of business and do not
in any material respect impair the properties and assets of the Company and its
subsidiaries. With respect to the property and assets it leases, the Company and
each of its subsidiaries is in compliance with such leases in all material
respects.
3.19. Labor Relations. Neither the Company nor its subsidiaries
is party to any collective bargaining agreement covering any individual who
performs services as an employee primarily for the Company or any of its
subsidiaries (including such persons who are on an approved leave of absence,
vacation, short-term disability or otherwise treated as an active employee of
the Company or any of its subsidiaries, "Employees"), and there are no
controversies or unfair labor practice proceedings pending or, to the Company's
knowledge, threatened between the Company or any of its subsidiaries and any of
their current or former Employees or any labor or other collective bargaining
unit representing any current or former Employee of the Company or any of its
subsidiaries that would reasonably be expected to result in a labor strike,
dispute, slow-down or work stoppage or otherwise have a Material Adverse Effect.
To the Company's knowledge, no organizational effort is presently being made or,
to the Company's knowledge, threatened by or on behalf of any labor union.
3.20. Employee Benefits.
(a) Neither the Company nor any trade or business (whether or not
incorporated) which has been under common control or treated as a single
employer with the Company under Section 414(b), (c) or (m) of the Code (an
"ERISA Affiliate") has incurred, or is reasonably likely to incur, any liability
under Title IV of ERISA or Section 412 of the Code and
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none of the Plans is a Multiemployer Plan, as defined in Section 3(37) of ERISA.
Neither the Company nor any ERISA Affiliate has incurred any liability resulting
from a complete or partial withdrawal from any Multiemployer Plan, and none of
them has incurred, or is reasonably likely to incur, any liability due to the
termination or reorganization of a Multiemployer Plan which has not been
satisfied in full, and to the Company's knowledge, no event has occurred that
would subject the Company or any ERISA Affiliate to any such liability.
(b) Each Plan has been administered in material compliance with
its terms, and other applicable laws, rules and regulations including, without
limitation, the provisions of ERISA and the Code, and there are no material
pending or, to Company's knowledge, threatened claims by, on behalf of or
involving any plan administrator or any plan trustee (other than routine claims
for benefits).
(c) No "prohibited transaction" within the meaning of Section
4975 of the Code has occurred with respect to any Plan.
(d) Each Plan that is intended to qualify under Section 401(a) of
the Code does so qualify.
(e) Except as set forth on Schedule 3.20 of the Disclosure
Schedule or as may be required under Section 4980B of the Code, or Section 601
of ERISA, neither the Company nor any of its subsidiaries has any liability for
post-retirement medical or life insurance benefits or coverage for any Employee
or Former Employee or any dependent of any such Employee or Former Employee.
(f) The consummation of the transactions contemplated hereby will
not result in any increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any compensation or benefits
payable by the Company to or in respect of any Employee or Former Employee or
the beneficiary or dependent of any such Employee or Former Employee under any
Plan.
(g) Except as set forth on Schedule 3.20 of the Disclosure
Schedule, no amount payable by the Company or any of its subsidiaries to any
Employee or Former Employee will fail to be deductible for Federal income tax
purposes by reason of Section 162(m) or 280G of the Code.
(h) All employee benefits practices or arrangements which are
maintained by the Company or any of its subsidiaries for the benefit of their
non-United States Employees or United States Employees located in a foreign
jurisdiction (collectively, the "Foreign Plans") have been maintained in all
material respects in accordance with the applicable laws of such foreign
jurisdiction, and all Foreign Plans required to be registered with any
governmental agency have been registered and have been maintained in good
standing with such governmental agency.
3.21. Environmental Matters.
(a) Except as would not reasonably be likely to result in a
material liability to the Company, no underground storage tanks and no amount of
any substance that has been designated by any governmental agency or by
applicable federal, state or local law to be
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radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding routine quantities of office
and janitorial supplies (a "Hazardous Material"), are present as a result of the
actions of the Company, or, to the Company's knowledge, as a result of the
actions of a third party, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company or
any of its subsidiaries currently owns, operates, occupies or leases, or to the
Company's knowledge, has at any time owned, operated, occupied or leased.
(b) Except as would not reasonably be likely to result in a
material liability to the Company (in any individual case or in the aggregate),
neither the Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of or arranged for the disposal of, released or exposed
its employees or others to Hazardous Materials in violation of any federal,
state or local law, rule, regulation, treaty or statute in effect before the
Initial Closing Date related to protection of human health, safety, and the
environment, including natural resources (collectively, "Environmental Laws"),
or in a manner that would likely result in any material liability to the
Company.
(c) Except as would not reasonably be likely to result in a
material liability to the Company, the Company and its subsidiaries currently
hold and are in compliance with all approvals, permits, licenses, clearances and
consents required under Environmental Laws for the conduct of the Company's and
its subsidiaries' businesses as currently being conducted.
(d) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or to the Company's knowledge,
threatened alleging that the Company and its subsidiaries are in violation of or
liable under any Environmental Law.
(e) To the Company's knowledge, there are no material
expenditures required to maintain or achieve compliance with all applicable
Environmental Laws.
3.22. Taxes.
(a) Except as otherwise disclosed in Schedule 3.22, (i) the
Company has filed (or joined in the filing of) when due all Tax Returns required
by applicable law to be filed with respect to the Company and all Taxes shown to
be due on such Tax Returns have been paid; (ii) all such Tax Returns were true,
correct and complete in all material respects as of the time of such filing; or
(iii) any liability of the Company for Taxes not yet due and payable, or which
are being contested in good faith, in each case as of December 31, 2001, has
been accrued or reserved for on the financial statements of the Company in
accordance with GAAP. Since December 31, 2001, the Company has not incurred any
material Taxes other than in the ordinary course of business.
(b) No current or former subsidiary of the Company has ever been
a member of any "affiliated group" (within the meaning of Section 1504(a) of the
Code) included in any
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consolidated federal income Tax Return filed with the Internal Revenue Service
other than an affiliated group of which the Company is the common parent.
3.23. Insurance. All insurance policies carried by, or covering
the Company's properties are in full force and effect, and no notice of
cancellation has been given with respect to any such policy. All premiums due on
such policies have been paid in a timely manner and the Company has complied in
all material respects with the terms and provisions of such policies. The
insurance coverage provided by such policies is provided by insurers that, to
the knowledge of the Company, are solvent and is in such amount and types of
coverage which are adequate and customary for the industries in which the
Company operates.
3.24. General Solicitation; No Integration. Neither the Company
nor any other person or entity authorized by the Company to act on its behalf
has engaged in a general solicitation or general advertising (within the meaning
of Regulation D of the Securities Act) of investors with respect to offers or
sales of the Shares, the Notes and the Warrants. The Company has not, directly
or indirectly, sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any security (as defined in the Securities Act) which,
to its knowledge, is or will be integrated with the Shares, the Notes and
Warrants sold pursuant to this Agreement.
3.25. Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain assets accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.26. By-Laws. The Company's By-Laws provide that all matters
submitted to a meeting of stockholders, including the vote relating to the
issuance of the shares of Preferred Stock on conversion of the Notes and the
issuance of the Warrants to be issued at the Second Closing, shall require the
affirmative vote of a majority of the total number of votes cast, present in
person or by proxy.
3.27. Credit Agreement. As of the date hereof, there are no
amounts outstanding under the Credit Agreement, dated November 1, 1999, by and
between the Company and Credit Suisse First Boston.
4. Representations and Warranties of Each Purchaser. Each
Purchaser, severally for itself and not jointly with the other Purchasers,
represents and warrants to the Company as follows:
4.1. Organization. Each Purchaser, if it is a legal entity, is
duly and validly existing under the jurisdiction of its organization.
4.2. Authorization. All action on the part of such Purchaser
necessary for the authorization, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein has been
taken. This Agreement constitutes the legal, valid
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and binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally
and by general equitable principles. Such Purchaser has all requisite power to
enter into this Agreement and to carry out and perform its obligations under the
terms of this Agreement.
4.3. Purchase Entirely for Own Account Etc. Such Purchaser is
acquiring the Securities for its own account, and not with a view to, or for
sale in connection with, any distribution of the Securities in violation of the
Securities Act. Except as contemplated by this Agreement, such Purchaser has no
present agreement, undertaking, arrangement, obligation or commitment providing
for the disposition of the Securities. Such Purchaser, if it is a legal entity,
has not been organized, reorganized or recapitalized specifically for the
purpose of investing in the Securities.
4.4. Investor Status; Etc. Such Purchaser certifies and
represents to the Company that at the time such Purchaser acquires any of the
Shares, the Notes or Warrants, such Purchaser will be an "accredited investor"
as defined in Rule 501 of Regulation D promulgated under the Securities Act.
Such Purchaser's financial condition is such that it is able to bear the risk of
holding the Shares, the Notes or Warrants for an indefinite period of time and
the risk of loss of its entire investment. Such Purchaser has been afforded the
opportunity to ask questions of and receive answers from the management of the
Company concerning this investment and has sufficient knowledge and experience
in investing in companies similar to the Company in terms of the Company's stage
of development so as to be able to evaluate the risks and merits of its
investment in the Company.
4.5. Securities Not Registered. Such Purchaser understands that
the Securities have not been registered under the Securities Act, by reason of
their issuance by the Company in a transaction exempt from the registration
requirements of the Securities Act, and that the Securities must continue to be
held by such Purchaser unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration. Such Purchaser
understands that the exemptions from registration afforded by Rule 144 (the
provisions of which are known to it) promulgated under the Securities Act depend
on the satisfaction of various conditions, and that, if applicable, Rule 144 may
afford the basis for sales only in limited amounts.
4.6. No Conflict. The execution and delivery of this Agreement by
such Purchaser and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of or default by such Purchaser
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to a
loss of a material benefit under (i) any provision of the organizational
documents of such Purchaser or (ii) any agreement or instrument, permit,
franchise, license, judgment, order, statute, law, ordinance, rule or
regulations, applicable to such Purchaser or its respective properties or
assets.
4.7. Brokers. Such Purchaser has not retained, utilized or been
represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
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4.8. Consents. Except in connection with the HSR Act, all
consents, approvals, orders and authorizations required on the part of such
Purchaser in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated herein have been
obtained and will be effective as of the Initial Closing Date.
4.9. No Manipulation of Stock. The Purchasers have not taken, in
violation of applicable law, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the transactions contemplated hereby or the sale or
resale of the shares of Common Stock.
5. Covenants.
5.1. HSR Act Filings. The Company and each Purchaser shall file
with the proper authorities all forms and other documents necessary to be filed
pursuant to the HSR Act, and the regulations promulgated thereunder, as promptly
as possible and shall cooperate with the each other in promptly producing such
additional information as those authorities may reasonably require to allow
early termination of the notice period provided by the HSR Act or as otherwise
necessary to comply with statutory requirements of the Federal Trade Commission
or the Department of Justice. The Company and each Purchaser shall pay the
filing fee associated with its respective filing of the HSR Act notification.
5.2. Other Governmental Approvals. As soon as practicable after
the execution of this Agreement, the Company and each Purchaser shall file all
applications and reports and take such other action (in addition to filings
required under the HSR Act) which is reasonably required to be taken or filed
with any governmental authority in connection with the transactions contemplated
by this Agreement. The Company and each Purchaser shall give all additional
notices to third parties and take other action reasonably required to be or
taken by it under any authorization, lease, note, mortgage, indenture, agreement
or other instrument or any law, rule, regulation, demand or court or
administrative order in connection with the transactions contemplated by this
Agreement.
5.3. Further Assurances. Each party agrees to cooperate with each
other and their respective officers, employees, attorneys, accountants and other
agents, and, generally, do such other acts and things in good faith as may be
reasonable or appropriate to timely effectuate the intents and purposes of this
Agreement and the consummation of the transactions contemplated hereby,
including, but not limited to, taking any action to facilitate the filing any
document or the taking of any action to assist the other parties hereto in
complying with the terms of Sections 5.1 and 5.2 hereof.
5.4. Board Designee; Board Observer.
(a) As provided in Section 9(e) of the Certificate of
Designation, Warburg shall be able to appoint one director (the "Board
Designee") to the Board of Directors. Notwithstanding anything to the contrary
in Section 9(e) of the Certificate of Designation, if the NASD, Inc. approves
the Board Designee's appointment to the Board of Directors prior to the
-15-
Special Meeting, then Warburg shall have the right to appoint the Board Designee
to the Board of Directors at such time.
(b) In addition to the Board Designee, Warburg shall have the
right to have one observer (the "Board Observer") attend meetings of the Board
of Directors immediately upon the Initial Closing and for so long as Warburg has
the right to designate the Board Designee pursuant to Section 9(e) of the
Certificate of Designation.
(c) Warburg hereby designates ▇▇▇▇▇ ▇▇▇▇▇▇▇ as the initial Board
Designee to commence his term in accordance with Section 9(e) of the Certificate
of Designation and Section 5.4(a) hereof.
(d) For so long as Warburg has the right to designate the Board
Designee pursuant to Section 9(e) of the Certificate of Designation, the Board
Designee and the Board Observer shall each receive a copy of all materials
distributed to the Board of Directors, whether provided to directors in advance
of, during or after any meeting of the applicable Board of Directors, regardless
of whether the Board Designee or the Board Observer shall be in attendance at
any such meeting, provided, however; that the Company has the right to withhold
any information from the Board Observer and to exclude the Board Observer from
any meeting or portion thereof if access to such information or attendance at
such meeting could:
(i) in the reasonable judgment of the Company's outside counsel,
adversely affect the attorney-client privilege between the Company and its
counsel;
(ii) cause the Board of Directors to breach its fiduciary duties;
or
(iii) result in a conflict between the interests of the Company,
on the one hand, and those of the Board Observer or any of its affiliates, on
the other hand.
The Company will use its reasonable best efforts to ensure that any withholding
of information or any restriction on attendance is strictly limited only to the
extent necessary set forth in the preceding sentence.
(e) The Board Designee and the Board Observers shall be
reimbursed for out-of-pocket expenses incurred in connection with participation
as a member or observer, as the case may be, of the Board of Directors in a
manner consistent with the Company's policies for reimbursing other outside
members of the Board of Directors. In addition, the Board Designee shall be
entitled to the same compensation paid to other outside members of the Board of
Directors in his or her capacity as a director, which compensation shall be
assignable to Warburg.
5.5. Covenant Pending Each Closing. Between the date of this
Agreement and the date of each Closing, the Company will promptly advise each
Purchaser of any action or event of which it becomes aware which has the effect
of making incorrect, in any material respect, any of the Company's
representations or warranties or which has the effect of rendering any of the
Company's covenants incapable of performance.
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5.6. Proxy Statement. The Company shall use its reasonable best
efforts to prepare and file with the SEC, as promptly as practicable after the
date hereof but in no event later than 30 days after the Initial Closing,
preliminary proxy materials with respect to a meeting of the stockholders for
the purpose of approving the issuance of shares of Preferred Stock upon
conversion of the Notes in accordance with the terms of the Notes and the
issuance of the Warrants to be issued at the Second Closing as contemplated by
this Agreement. Thereafter, the Company shall as promptly as possible file with
the SEC the definitive proxy statement and acting through its Board of
Directors, (i) call a Special Meeting to be held at the earliest practicable
date but in no event later than 45 days after the earlier of (x) receiving
notification that the SEC is not reviewing the preliminary proxy materials and
(y) the conclusion of any SEC review of the preliminary proxy materials, for the
sole purpose of voting upon the approval of the issuance of shares of Preferred
Stock upon conversion of the Notes in accordance with the terms of the Notes and
the issuance of the Warrants to be issued at the Second Closing as contemplated
by this Agreement and (ii) include in the proxy statement the recommendation of
its Board of Directors that holders of the Common Stock approve such issuances
referred to in clause (i) above; provided, however, that the Board of Directors
may withdraw or adversely modify their recommendation of the issuances referred
to in clause (i) above if the Board of Directors determines in good faith (after
consultation with its financial advisors and legal counsel) that from a
financial point of view to the stockholders of the Company, based solely on
facts or conditions arising after the date hereof, that the issuances referred
to in clause (i) above are not in the best interests of the Company's
stockholders. In the event that the Board of Directors withdraws or adversely
modifies its recommendation of the issuances referred to in clause (i) above,
the Company will pay to the Purchasers (based on their pro rata percentage of
the aggregate Purchase Price) in immediately available funds an amount in cash
as liquidated damages equal to five percent (5%) of the aggregate principal
amount of the Notes issued hereunder, payable within two (2) business days of
such withdrawal or modification. Neither prior to nor at the Special Meeting
shall the Company put forth any matter, other than those matters relating to
transactions expressly contemplated by this Agreement, to the holders of Common
Stock for their approval without the prior written consent of Warburg.
5.7. Subscription Right.
(a) If at any time after the date hereof, and for so long as a
Purchaser Beneficially Owns (as defined in the Certificate of Designation) at
least twenty-five percent (25%) of the shares of Common Stock issuable to such
Purchaser pursuant to this Agreement (including upon conversion of the Shares
and exercise of the Warrants), the Company proposes to issue equity securities
of any kind (the term "equity securities" shall include for these purposes any
warrants, options or other rights to acquire equity securities and debt
securities convertible into equity securities) of the Company, other than (i)
shares of Common Stock issuable upon conversion of the Shares or exercise of the
Warrants, (ii) shares of Preferred Stock issuable upon conversion of the Notes,
(iii) the Warrants to be issued at the Second Closing, (iv) shares of Common
Stock issued to the public in a firm commitment underwriting pursuant to a
registration statement filed under the Securities Act with anticipated gross
proceeds to the Company of at least $20 million, (v) shares of Common Stock
issued in connection with bona fide acquisitions, mergers, joint venture or
similar transactions, the terms of which are approved by the Board of Directors,
(vi) shares of Common Stock issued pursuant to any stock option, stock purchase
or similar plan or arrangement for the benefit of the employees of the Company
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or its subsidiaries, duly adopted by the Board of Directors, or (vii) pursuant
to the terms of this Agreement, then, as to each Purchaser, the Company shall:
(i) give written notice to such Purchaser (no less than ten (10)
business days prior to the closing of such issuance) setting forth in reasonable
detail (A) the designation and all of the terms and provisions of the securities
proposed to be issued (the "Proposed Securities"), including, where applicable,
the voting powers, preferences and relative participating, optional or other
special rights, and the qualification, limitations or restrictions thereof and
interest rate and maturity; (B) the price and other terms of the proposed sale
of such securities; (C) the amount of such securities proposed to be issued; and
(D) such other information as such Purchaser may reasonably request in order to
evaluate the proposed issuance; and
(ii) offer to issue and sell to such Purchaser, on such terms as
the Proposed Securities are issued and upon full payment by such Purchaser, a
portion of the Proposed Securities equal to a percentage determined by dividing
(A) the number of shares of Common Stock beneficially owned such Purchaser
(within the meaning of Rule 13d-3 under the Exchange Act) by (B) the total
number of shares of Common Stock then outstanding, including for purposes of
this calculation all shares of Common Stock issuable upon conversion or exercise
in full of any convertible or exercisable securities (other than employee stock
options) then outstanding.
(b) Each Purchaser must exercise its purchase rights hereunder
within ten (10) business days after receipt of such notice from the Company. To
the extent that the Company offers two or more securities in units, each
Purchaser must purchase such units as a whole and will not be given the
opportunity to purchase only one of the securities making up such unit. The
closing of the exercise of such subscription right shall take place
simultaneously with the closing of the sale of the Proposed Securities giving
rise to such subscription right.
(c) Upon the expiration of the 10-day offering period described
above, the Company will be free to sell such Proposed Securities that the
Purchasers have not elected to purchase during the ninety (90) days following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such holders. Any Proposed Securities offered or
sold by the Company after such 90 day period must be reoffered to the Purchasers
pursuant to this Section 5.7.
(d) The election by any Purchaser not to exercise its
subscription rights under this Section 5.7 in any one instance shall not affect
its right (other than in respect of a reduction in its percentage holdings) as
to any subsequent proposed issuance. Any sale of such securities by the Company
without first giving each Purchaser the rights described in this Section 5.7
shall be void and of no force and effect.
5.8. Standstill. For as long as the Purchasers and each
subsidiary or other controlled affiliate of the Purchasers (the "Purchaser
Group") collectively Beneficially Own (as defined in the Certificate of
Designation) twenty-five percent (25%) or more of the shares of the Common Stock
issuable to them pursuant to this Agreement (including upon conversion of shares
of Series A Preferred Stock and exercise of the Warrants), no member of the
Purchaser
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Group shall, without the prior written consent of a majority of the members of
the Board of Directors who are not affiliated with the Purchaser Group:
(a) acquire, seek to acquire, propose, offer or agree to acquire,
directly or indirectly, by purchase or otherwise, any shares of Common Stock (or
options or warrants to acquire, or securities convertible into or exchangeable
for, shares of Common Stock) if, as a result of such acquisition, the Purchaser
Group would in the aggregate Beneficially Own, or, with the passage of time,
would have the right to Beneficially Own, more than 40% of the then-outstanding
shares of Common Stock;
(b) make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" (as such terms are used in the rules of the
Securities and Exchange Commission), or seek to advise or influence any person
or entity with respect to the voting of any voting securities of the Company;
(c) make any public announcement with respect to any transaction
or proposed or contemplated transaction between the Company or any of its
security holders and Purchaser Group, including, without limitation, any tender
or exchange offer, merger or other business combination or acquisition of a
material portion of the assets of the Company;
(d) except as otherwise permitted by Section 5.8(a), enter into
or agree, offer, propose or seek to enter into, or otherwise be involved in or
part of, directly or indirectly, any acquisition transaction or other business
combination relating to all or any part of the Company or its subsidiaries or
any acquisition transaction for all or part of the assets of the Company or any
subsidiary of the Company or any of their respective businesses;
(e) except among any Purchaser and it subsidiaries and/or
controlled affiliates, form, join or in any way participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of the Company or any of its subsidiaries;
(f) seek or propose, alone or in concert with others, to
influence or control the Company's management policies, other than when voting
as a stockholder on matters submitted to the Company's stockholders generally,
except as contemplated by Section 5.9;
(g) except as otherwise permitted by Section 5.8(a), directly or
indirectly enter into any discussions, negotiations, arrangements or
understandings with any other person with respect to any of the foregoing
activities or propose any of such activities to any other person; or
(h) disclose any intention, plan or arrangement inconsistent with
any of the foregoing.
5.9. Agreement to Vote. At or with respect to any election of one
or more directors (including to fill any vacancy on the Board of Directors), for
so long as the Purchasers are subject to Section 5.8, each Purchaser shall vote
all of its shares of Common Stock and/or Series A Preferred Stock in favor of
the election of any nominee to the Board of Directors whose nomination was
approved by the unanimous consent of the Board of Directors, other than the
Warburg Designee.
5.10. Agreement Not to Vote. In the event a Purchaser exercises a
Warrant prior to earlier of (i) the Special Meeting or (ii) December 31, 2002,
such Purchaser agrees that (a) it shall not vote any shares of Common Stock
received upon exercise of such Warrant at any time prior to or at the Special
Meeting and (b) prior to or at the Special Meeting, such shares of Common Stock
shall not be counted for determining the existence of a quorum at any meeting
of the Company's stockholders, unless in either case the Company receives
confirmation from the NASD, Inc. (which confirmation shall be reasonably
satisfactory to the Company) that such Purchaser shall be permitted to vote
such shares of Common Stock or that such shares of Common Stock may be counted
for determining the existence of a quorum at a meeting of the Company's
stockholders. The Purchasers agree not to transfer the Warrants or shares of
Common Stock issuable upon exercise thereof to any transferee that does not
agree in writing with the Company to be bound by the provisions of this Section
5.10.
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6. Conditions Precedent.
6.1. Conditions to the Obligation of the Purchasers to Consummate
the Initial Closing. The several obligations of each Purchaser to consummate the
transactions to be consummated at the Initial Closing, and to purchase and pay
for the Shares, Notes and Warrants being purchased by it at such Closing
pursuant to this Agreement, are subject to the satisfaction of the following
conditions precedent:
(a) The representations and warranties contained herein of the
Company shall be true and correct on and as of the Initial Closing Date with the
same force and effect as though made on and as of the Initial Closing Date (it
being understood and agreed by each Purchaser that for purposes of this Section
6.1(a), in the case of any representation and warranty of the Company contained
herein (i) which is qualified by application thereto by a Material Adverse
Effect standard, such representation and warranty need be true and correct by
application thereto only of a Material Adverse Change standard, (ii) which is
not hereinabove qualified by application thereto of a materiality standard, such
representation and warranty need be true and correct only in all material
respects or (iii) which is made as of a specific date, such representation and
warranty need be true and correct only as of such specific date).
(b) The Company shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by the
Company on or prior to the Initial Closing Date.
(c) Each Purchaser shall have received a certificate, dated the
Initial Closing Date, signed by each of the President and the Chief Financial
Officer of the Company, certifying on behalf of the Company that the conditions
specified in the foregoing Sections 6.1(a) and (b) have been fulfilled.
(d) The purchase of and payment for the Shares, the Notes or the
Warrants by each Purchaser shall not be prohibited or enjoined by any law or
governmental or court order or regulation.
(e) Each Purchaser shall have received from the Company's
counsel, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, an opinion in form and substance reasonably
satisfactory to the Purchasers.
(f) The Certificate of Designation shall have been filed by the
Company with the Secretary of State of the State of Delaware, and satisfactory
evidence of such filing shall have been delivered to the Purchasers.
(g) There shall not have been any Material Adverse Change.
(h) All corporate and other proceedings to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers and the Purchasers shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.
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(i) All consents and waivers identified on Schedule 6.1(i) of the
Disclosure Schedule shall have been obtained.
(j) The approval of the NASD, Inc. with respect to the
transactions contemplated hereby shall have been obtained.
(k) The Company shall have entered into the Orinoco Agreement
pursuant to which the Company will consummate the Acquisition and all conditions
to closing of the Acquisition shall have been satisfied or waived by the Company
with the prior written consent of Warburg.
(l) The Company and each of Ripplewood Partners, L.P., Ripplewood
Employee Co-Investment Fund, L.P. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and any other Person
controlled by any of foregoing parties that beneficially owns any shares of
Common Stock shall have executed and delivered a counterpart signature page to
the Voting Agreement, substantially in the form of EXHIBIT E hereto.
(m) The waiting period under the HSR Act shall have expired or
notice of early termination of the waiting period shall have been received by
the Company and the Purchasers.
6.2. Conditions to the Obligation of the Company to Consummate
the Initial Closing. The obligation of the Company to consummate the
transactions to be consummated at the Initial Closing, and to issue and sell to
each Purchaser the Shares, Notes or Warrants to be purchased by it at the
Initial Closing pursuant to this Agreement, is subject to the satisfaction of
the following conditions precedent:
(a) The representations and warranties contained herein of such
Purchaser shall be true and correct on and as of the Initial Closing Date, with
the same force and effect as though made on and as of Initial Closing Date (it
being understood and agreed by the Company that, in the case of any
representation and warranty of such Purchaser contained herein which is not
hereinabove qualified by application thereto of a materiality standard, such
representation and warranty need be true and correct only in all material
respects).
(b) Such Purchaser shall have performed in all material respects
all obligations and conditions herein required to be performed or observed by
such Purchaser on or prior to the Initial Closing Date.
(c) The sale of the Shares, Notes and Warrants by the Company
shall not be prohibited or enjoined by any law or governmental or court order or
regulation.
(d) The Certificate of Designation shall have been filed by the
Company with the Secretary of State of the State of Delaware.
(e) The waiting period under the HSR Act shall have expired or
notice of early termination of the waiting period shall have been received by
the Company and the Purchasers.
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(f) The Company shall have entered into the Orinoco Agreement
pursuant to which the Company will consummate the Acquisition and all conditions
to closing of the Acquisition shall have been satisfied or waived by the Company
with the prior written consent of Warburg.
Each Purchaser's obligations under this Section 6.2 shall be
several and independent from the obligations of each other Purchaser; and the
failure by any Purchaser to fulfill or comply with any of the conditions set
forth in this Section 6.2 shall not affect the obligations of the Company to any
other Purchaser to consummate the transactions contemplated by this Agreement.
6.3. Conditions Precedent to the Second Closing. The Second
Closing shall be subject to the condition precedent that the Company's
stockholders shall have approved the issuance of shares of Preferred Stock
issuable upon conversion of the Notes in accordance with the terms of the Notes
and the issuance of the Warrants to be issued at the Second Closing pursuant to
the terms of this Agreement.
7. Registration of the Securities; Compliance with the Securities
Act.
7.1. Securities Law Transfer Restrictions. No Purchaser shall
sell, assign, pledge, transfer or otherwise dispose or encumber any of the
Securities being purchased by it hereunder, except (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to an available
exemption from registration under the Securities Act and applicable state
securities laws and, if requested by the Company, upon delivery by such
Purchaser of an opinion of counsel reasonably satisfactory to the Company to the
effect that the proposed transfer is exempt from registration under the
Securities Act and applicable state securities laws. The Company shall not
register any transfer of the Securities in violation of this Section 7.1. The
Company may, and may instruct any transfer agent for the Company to, place such
stop transfer orders as may be required on the transfer books of the Company in
order to ensure compliance with the provisions of this Section 7.1.
Notwithstanding the foregoing, the Notes shall not be transferable without the
prior written consent of the Company, except for transfers to Affiliates of the
Purchasers that agree not to further transfer the Notes.
7.2. Legends. Each certificate representing any of the Securities
shall be endorsed with the legend set forth below, and each Purchaser covenants
that, except to the extent such restrictions are waived by the Company, it shall
not transfer the shares represented by any such certificate without complying
with the restrictions on transfer described in this Agreement and the legends
endorsed on such certificate:
"THE SECURITIES REPRESENTED BY THIS [CERTIFICATE] [NOTE], [WARRANT] [AND THE
SECURITIES ISSUABLE UPON ITS CONVERSION] HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR SECURITIES LAWS OF ANY STATE
AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT OR SUCH LAWS AND, IF REQUESTED BY THE
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COMPANY, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM THE ACT OR SUCH LAWS."
7.3. Registration Procedures and Other Matters. The Company
shall:
(a) subject to receipt of necessary information from each
Purchaser for inclusion in such filing, prepare and file with the SEC, within
180 days after the Initial Closing, a registration statement on Form S-3 (the
"Registration Statement") covering the Securities held by each Purchaser, or the
Holders (defined in Section 7.4 below), from time to time, in compliance with
the Securities Act;
(b) use its reasonable best efforts to cause the Registration
Statement to become effective as promptly as practicable after filing, such
efforts to include, without limiting the generality of the foregoing, preparing
and filing with the SEC any financial statements that are required to be filed
prior to the effectiveness of such Registration Statement;
(c) use its reasonable best efforts to prepare and file with the
SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith (the "Prospectus") as may be necessary
to keep the Registration Statement continuously effective and free from any
material misstatement or omission to state a material fact for a period not
exceeding, with respect to each Holder's Securities, the earlier of (i) the date
on which each Holder may sell all Securities then held by such Holder without
restriction by the volume limitations of Rule 144(e) of the Securities Act or
(ii) such time as all Securities purchased by such Holder have been sold
pursuant to a registration statement or are otherwise freely tradeable;
(d) furnish to each Holder with respect to the Securities
registered under the Registration Statement such number of copies of the
Registration Statement, Prospectuses and preliminary prospectuses in conformity
with the requirements of the Securities Act and such other documents as such
Holder may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Securities by such Holder; provided, however,
that the obligation of the Company to deliver copies of Prospectuses or
Preliminary Prospectuses to such Holder shall be subject to the receipt by the
Company of reasonable assurances from such Holder that such Holder will comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with any use of
such Prospectuses or Preliminary Prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in states specified in writing by each Holder and use its reasonable
best efforts to maintain such blue sky qualifications during the period the
Company is required to maintain the effectiveness of the Registration Statement
pursuant to Section 7.3(c); provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in this
Section 7.3 and the registration of the Securities pursuant to the Registration
Statement (provided that the
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Holders shall bear the cost of all underwriting discounts and selling
commissions and similar fees applicable to the sale of Securities and all fees
and expenses of legal counsel for any Holder and all transfer taxes);
(g) advise each Holder promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its
reasonable best efforts to prevent the issuance of any stop order or to obtain
its withdrawal at the earliest possible moment if such stop order should be
issued; and
(h) use its reasonable best efforts to cause the Common Stock
underlying the Shares and the Warrants to be listed on the Nasdaq National
Market in connection with the filing of the Registration Statement.
Notwithstanding anything to the contrary herein, the Registration
Statement shall cover only the Securities.
7.4. Transfer of Securities; Suspension.
(a) Each Purchaser agrees that in case of any disposition of its
Securities not made pursuant to the Registration Statement to (i) a third party
who agrees to be bound by the provisions of this Section 7 and makes the
representations to the Company contained in Section 4 hereof or (ii) its
partners as part of a distribution of all or part of the Securities (in each
case the "Transferee", and together with the Purchasers, the "Holders"), such
Purchaser will promptly notify the Company of any changes in the information set
forth in the Registration Statement regarding the Holders or their plans of
distribution. The Company agrees, in case of such sale, transfer or distribution
(to the extent made in accordance with Section 7.1), to promptly file one or
more post-effective amendments to the Registration Statement or a supplement to
the related Prospectus, naming each Transferee as a Selling Shareholder in
accordance with the provisions of the Securities Act.
(b) Except in the event that paragraph (c) below applies, the
Company shall (i) prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that, as thereafter delivered
to the purchasers of Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; (ii)
provide each Holder copies of any documents filed pursuant to Section 7.4(b)(i);
and (iii) inform each Holder that the Company has complied with its obligations
in Section 7.4(b)(i) (or that, if the Company has filed a post-effective
amendment to the Registration Statement which has not yet been declared
effective, the Company will notify each Holder to that effect, will use its
reasonable best efforts to secure the effectiveness of such post-effective
amendment as promptly as possible and will
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promptly notify each Holder pursuant to Section 7.4(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
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) of any event or circumstance which, upon the
advice of its counsel, necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or (v) the Company determines in good faith that
offers and sales pursuant to the Registration Statement should not be made by
reason of the presence of material undisclosed circumstances or developments
with respect to which the disclosure that would be required in such a
Registration Statement or related Prospectus is premature, would have an adverse
effect on the Company or is otherwise inadvisable, then the Company shall
deliver a certificate in writing to each Holder (the "Suspension Notice") to the
effect of the foregoing and, upon receipt of such Suspension Notice, such Holder
will refrain from selling any Securities pursuant to the Registration Statement
(a "Suspension") until such Holder's receipt of copies of a supplemented or
amended Prospectus prepared and filed by the Company, or until it is advised in
writing by the Company that the current Prospectus may be used, and has received
copies of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. In the event of any
Suspension, the Company will use its reasonable best efforts to cause the use of
the Prospectus so suspended to be resumed as soon as reasonably practicable
after the delivery of a Suspension Notice to each Holder. In addition to and
without limiting any other remedies (including, without limitation, at law or at
equity) available to such Holder, such Holder shall be entitled to specific
performance in the event that the Company fails to comply with the provisions of
this Section 7.4(c).
(d) Notwithstanding the foregoing paragraphs of this Section 7.4,
no Holder shall be prohibited from selling Securities under the Registration
Statement as a result of Suspensions on more than three occasions of not more
than 30 days each in any twelve month period unless, in the good faith judgment
of the Board of Directors, upon the written opinion of counsel, the sale of
Securities under the Registration Statement in reliance on this paragraph 7.4(d)
would be reasonably likely to cause a violation of the Securities Act or the
Exchange Act and result in liability to the Company.
(e) Provided that a Suspension is not then in effect, each Holder
may sell Securities under the Registration Statement, provided that it arranges
for delivery of a current
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Prospectus to the transferee of such Securities. Upon receipt of a request
therefor, the Company will provide an adequate number of current Prospectuses to
such Holder and to supply copies to any other parties requiring such
Prospectuses.
(f) Each Holder acknowledges and agrees that the Securities sold
pursuant to the Registration Statement are not transferable on the books of the
Company unless the stock certificate submitted to the transfer agent evidencing
such Securities is accompanied by a certificate reasonably satisfactory to the
Company to the effect that (i) the Securities have been sold in accordance with
such Registration Statement and (ii) the requirement of delivering a current
prospectus has been satisfied.
(g) In the event of a sale of Securities by any Holder pursuant
to the Registration Statement, such Holder shall deliver to the Company's
transfer agent an appropriate notification of the sale, so that the Securities
may be properly transferred.
7.5. Company Registration.
(a) If the Company shall determine to register any of its equity
securities either for its own account or for the account of other stockholders
at any time prior to the effectiveness of the Registration Statement, other
than (i) a registration relating solely to employee benefit plans, (ii) a
registration relating solely to a SEC Rule 145 transaction or (iii) a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Securities
registration as a result of a demand made by a holder having a contractual
right, the Company will:
(i) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) if so requested by the Holders of at least 51% or more of
the Securities (on an as-converted, as exercised basis), include in such
registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the Securities
specified in a written request or requests made by the Holders within fifteen
(15) days after receipt of the written notice from the Company described in
clause (i) above, except as set forth in Section 7.5(b) below. Such written
request may specify all or a part of the Holders' Securities. In the event any
Holder requests inclusion in a registration pursuant to this Section 7.5 in
connection with a distribution of Securities to its partners, the registration
shall provide for the resale by such partners, if requested by such Holder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 7.5(a)(i). In such event, the right of each of the
Holders to registration pursuant to this Section 7.5 shall be conditioned upon
such Holders' participation in such underwriting and the inclusion of such
Holders' Securities in
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the underwriting to the extent provided herein. The Holders whose shares are to
be included in such registration shall (together with the Company and the other
stockholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 7.5, if the representative
determines that marketing factors require a limitation on the number of shares
to be underwritten, the representative may limit the number of Securities to be
included in the registration and underwriting. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated in the following manner: The securities, including the
Securities, of the Company held by stockholders of the Company (other than
securities held by holders who by contractual right demanded such registration
and securities to be offered by the Company) shall be excluded from such
registration and underwriting to the extent required by such limitation, and, if
a limitation on the number of shares permits additional shares to be included in
the registration and underwriting, each of the Holders and other holders
requesting to have their shares included in such registration will have the
right to include such shares in such registration (allocated pro rata among such
Holders and holders on the basis of the relative number of shares requested to
be registered by such Holders and holders up to the permitted amount). If any of
the Holders or any officer, director or other stockholder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration. Notwithstanding the foregoing, if at any time after giving written
notice referred to above, and prior to the effective date of the applicable
registration statement filed in connection therewith, the Company determines for
any reason not to proceed with the proposed registration statement, the Company
may, at its election, give written notice of such determination to the Holders
that have elected to have their Securities included in such registration and
thereupon will be relieved of its obligations to register such Securities in
connection with such registration.
7.6. Indemnification.
(a) For the purpose of this Section 7.6:
(i) the term "Selling Stockholder" shall include each Holder and
any Affiliate of such Holder; and
(ii) the term "Registration Statement" shall include the
Prospectus in the form first filed with the SEC pursuant to Rule 424(b) of the
Securities Act or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) filing is required, exhibit, supplement or
amendment included in or relating to the Registration Statement referred to in
Section 7.1.
(b) The Company agrees to indemnify and hold harmless each
Selling Stockholder and its officers, directors, partners, employees and agents
and each underwriter of Securities, if any, and each person who controls any
such underwriter from and against any losses, claims, damages or liabilities to
which such Person may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
-27-
proceedings in respect thereof) arise out of, or are based upon (i) any untrue
statement of a material fact contained in the Registration Statement as amended
at the time of effectiveness or any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any failure by the Company to fulfill any undertaking included in the
Registration Statement as amended at the time of effectiveness, and the Company
will reimburse such Selling Stockholder for any reasonable legal or other
out-of-pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim, or preparing to defend
any such action, proceeding or claim, provided, however, that the Company shall
not be liable in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement made in such
Registration Statement or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Selling Stockholder specifically for use in preparation of the
Registration Statement or the failure of such Selling Stockholder to comply with
its covenants and agreements contained in Section 7.4 hereof respecting sale of
the Securities or any statement or omission in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Selling Stockholder prior
to the pertinent sale or sales by the Selling Stockholder. The Company shall
reimburse each Selling Stockholder for the amounts provided for herein on demand
as such expenses are incurred.
(c) Each Selling Stockholder, severally and not jointly, agrees
to indemnify and hold harmless the Company (and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, each of its officers, directors, employees and
agents from and against any losses, claims, damages or liabilities to which the
Company (or any such officer, director, employee, agent or controlling person)
may become subject (under the Securities Act or otherwise), insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any failure by a Selling
Stockholder to comply with the covenants and agreements contained in Section 7.4
hereof respecting the sale of the Securities, or (ii) any untrue statement of a
material fact contained in the Registration Statement or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading if and to the extent that such untrue statement or
omission was made in reliance upon and in conformity with written information
furnished by or on behalf of any Selling Stockholder specifically for use in
preparation of the Registration Statement, and each Selling Stockholder,
severally and not jointly, will reimburse the Company (or such officer,
director, employee, agent or controlling person), as the case may be, for any
legal or other out-of-pocket expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim; provided,
however, that the obligation of each Selling Stockholder to indemnify the
Company (or such officer, director, employee, agent or controlling person) shall
be limited to the net amount received by such Selling Stockholder from the sale
of its Securities.
(d) Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.6, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, but the omission to so notify the
indemnifying person will not relieve it from any liability which it may have to
any indemnified person under this Section 7.6 (except to the extent that such
omission
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materially and adversely affects the indemnifying person's ability to defend
such action) or from any liability otherwise than under this Section 7.6.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified person promptly after receiving the aforesaid
notice from such indemnified person, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified person. After
notice from the indemnifying person to such indemnified person of its election
to assume the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
further, however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided,
however, that such consent shall not be unreasonably withheld. No indemnifying
person shall, without the prior written consent of the indemnified person,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and indemnification
could have been sought hereunder by such indemnified person, unless such
settlement includes an unconditional release of such indemnified person from all
liability on claims that are the subject matter of such proceeding.
(e) If the indemnification provided for in this Section 7.6 is
unavailable to or insufficient to hold harmless an indemnified person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying person shall contribute to the amount paid or payable by
such indemnified person as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and any Purchaser,
as well as any other Selling Shareholders under such registration statement on
the other in connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, in the case of an
untrue statement, whether the untrue statement relates to information supplied
by the Company on the one hand or any Purchaser or other Selling Shareholder on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement. The Company and each
Purchaser agree that it would not be just and equitable if contribution pursuant
to this subsection (e) were determined by pro rata allocation (even if the
Purchasers and other Selling Shareholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified person in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
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subsection (e), no Selling Stockholder shall be required to contribute any
amount in excess of the amount by which the net amount received by such Selling
Stockholder from the sale of the Securities to which such loss relates exceeds
the amount of any damages which such Selling Stockholder has otherwise been
required to pay by reason of such untrue statement (except in the event of fraud
by such Selling Stockholder). No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Selling Stockholder's obligations in this subsection to
contribute shall be in proportion to the respective sale of Securities of such
Selling Stockholder and shall not be joint with any other Selling Shareholders.
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 7.6, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 7.6
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement as required by the Securities Act and the Exchange
Act. The parties are advised that federal or state public policy as interpreted
by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 7.6, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 7.6 and further agree not to attempt to assert any
such defense.
7.7. Termination of Conditions and Obligations. The conditions
precedent imposed by this Section 7 upon the transferability of the Securities
shall cease and terminate as to any particular number of the Securities when
such Securities shall have been effectively registered under the Securities Act
and sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering such Securities or
at such time as an opinion of counsel reasonably satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.
7.8. Information Available. So long as the Registration Statement
is effective covering the resale of Securities owned by each Holder, the Company
will furnish to each Holder, upon the reasonable request of such Holder, an
adequate number of copies of the Prospectuses to supply to any other party
requiring such Prospectuses; and upon the reasonable request of any Purchaser,
the President or the Chief Financial Officer of the Company (or an appropriate
designee thereof) will meet with such Purchaser or a representative thereof at
the Company's headquarters to discuss all information relevant for disclosure in
the Registration Statement covering the Securities and will otherwise cooperate
with any Holder's conducting an investigation for the purpose of reducing or
eliminating such Holder exposure to liability under the Securities Act,
including the reasonable production of information at the Company's
headquarters; provided, that the Company shall not be required to disclose any
confidential information to any holder or meet at its headquarters with any
Purchaser until and unless such Holder or Purchaser shall have entered into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company with the Company with respect thereto.
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7.9. Delay of Registration. The Holders shall have no right to
take any action to restrain, enjoin or otherwise delay any registration pursuant
to this Section 7 as a result of any controversy that may arise with respect to
the interpretation or implementation of this Agreement.
8. Termination.
8.1. Conditions of Termination. Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated at any time before
the Initial Closing (a) by mutual consent of the Company and the Purchasers, or
(b) by either party hereto if the Initial Closing shall not have occurred on or
prior to December 31, 2002.
8.2. Effect of Termination. In the event of termination pursuant
to Section 8.1 hereof, this Agreement shall become null and void and have no
effect, with no liability on the part of the Company or the Purchasers, or their
directors, officers, agents or stockholders, with respect to this Agreement,
except for the (i) liability of a party for expenses pursuant to Section 9.9
hereof and (ii) liability for any breach of this Agreement.
9. Miscellaneous Provisions.
9.1. Public Statements or Releases. Neither the Company nor any
Purchaser shall make any public announcement with respect to the existence or
terms of this Agreement or the transactions provided for herein without the
prior approval of the other parties, which shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, nothing in this Section 9.1 shall
prevent any party from making any public announcement it considers necessary in
order to satisfy its obligations under the law or the rules of any national
securities exchange, provided such party, to the extent practicable, provides
the other parties with an opportunity to review and comment on any proposed
public announcement before it is made.
9.2. Rights Cumulative. Each and all of the various rights,
powers and remedies of the parties shall be considered to be cumulative with and
in addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
9.3. Pronouns. All pronouns or any variation thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
9.4. Notices.
(a) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be given
hereunder shall be sent by postage prepaid first class mail, courier or
facsimile or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder. The date of giving any notice shall
be the date of its actual receipt.
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(b) All correspondence to the Company shall be addressed as
follows:
Proxim Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) All correspondence to any Purchaser shall be sent to such
Purchaser at the address set forth in EXHIBIT A.
(d) Any Person may change the address to which correspondence to
it is to be addressed by notification as provided for herein.
9.5. Captions. The captions and paragraph headings of this
Agreement are solely for the convenience of reference and shall not affect its
interpretation.
9.6. Severability. Should any part or provision of this Agreement
be held unenforceable or in conflict with the applicable laws or regulations of
any jurisdiction, the invalid or unenforceable part or provisions shall be
replaced with a provision which accomplishes, to the extent possible, the
original business purpose of such part or provision in a valid and enforceable
manner, and the remainder of this Agreement shall remain binding upon the
parties hereto.
9.7. Governing Law; Injunctive Relief.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) Each of the parties hereto acknowledges and agrees that
damages will not be an adequate remedy for any material breach or violation of
this Agreement if such material breach or violation would cause immediate and
irreparable harm (an "Irreparable Breach"). Accordingly, in the event of a
threatened or ongoing Irreparable Breach, each party hereto shall be entitled to
seek, in any state or federal court in the State of New York, equitable relief
of a kind appropriate in light of the nature of the ongoing or threatened
Irreparable Breach, which relief may include, without limitation, specific
performance or injunctive relief; provided, however, that if the party bringing
such action is unsuccessful in obtaining the relief sought, the moving party
shall pay the non-moving party's reasonable costs, including attorney's fees,
incurred in connection with defending such action. Such remedies shall not be
the parties' exclusive remedies, but shall be in addition to all other remedies
provided in this Agreement.
9.8. Waiver. No waiver of any term, provision or condition of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or be construed as, a further or continuing waiver of any
such term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
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9.9. Expenses. The Company shall pay the documented fees and
expenses incurred by Warburg in connection with the transactions contemplated
hereby including, without limitation, legal, consulting and accounting fees
("Transaction Fees"); provided, however, that the Company shall not be obligated
to pay Transaction Fees in excess of $250,000. Payments due pursuant to this
Section 9.9 will be made at the Initial Closing, in the event the Initial
Closing occurs, or if the Initial Closing does not occur then upon termination
of this Agreement, and in any event, any remaining payments will be made not
later than 30 days after a ▇▇▇▇ for such fees and expenses has been sent by
Warburg to the Company.
9.10. Assignment. The rights and obligations of the parties
hereto shall inure to the benefit of and shall be binding upon the authorized
successors and permitted assigns of each party. None of the parties may assign
its rights or obligations under this Agreement or designate another person (i)
to perform all or part of its obligations under this Agreement or (ii) to have
all or part of its rights and benefits under this Agreement, in each case
without the prior written consent of the other parties, provided, however, that
Warburg shall have the right to assign and transfer all or a portion of its
rights and obligations under this Agreement to one or more of its Affiliates. In
the event of any assignment in accordance with the terms of this Agreement, the
assignee shall specifically assume and be bound by the provisions of the
Agreement by executing and agreeing to an assumption agreement reasonably
acceptable to the Company.
9.11. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument
9.12. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether written or oral. No
modification, alteration, waiver or change in any of the terms of this Agreement
shall be valid or binding upon the parties hereto unless made in writing and
duly executed by the Company and Purchasers beneficially holding in the
aggregate at least a majority of the Shares issued or to be issued pursuant to
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal as of the day and year first above written.
PROXIM CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name:
Title:
PURCHASERS:
WARBURG PINCUS PRIVATE EQUITY VIII, L.P.
By: WARBURG, ▇▇▇▇▇▇ & CO.,
its General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Managing Director
BROADVIEW CAPITAL PARTNERS L.P.
By: Broadview Capital Partners Management
LLC its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
BROADVIEW CAPITAL PARTNERS QUALIFIED
PURCHASER FUND L.P.
By: Broadview Capital Partners Management
LLC its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
[Signature Page to Securities Purchase Agreement]
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON ITS
CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT OR
SUCH LAWS AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
EXEMPT FROM THE ACT OR SUCH LAWS.
SENIOR CONVERTIBLE PROMISSORY NOTE
$____________ ___________, 2002
FOR VALUE RECEIVED, Proxim Corporation, a Delaware corporation
(the "Maker"), hereby unconditionally promises to pay to the order of
__________________ (the "Holder" or the "Lender"), having an address at
____________________, at such address or at such other place as may be
designated in writing by the Holder, or its permitted assigns, the original
aggregate principal sum of ______________ ($________.00), together with interest
on the unpaid principal balance of this Note outstanding at a rate per annum
equal to ten percent (10%) (computed on the basis of the actual number of days
elapsed in a 365-day year) compounded semi-annually and shall continue on the
outstanding principal until this Note is converted or paid in full. All payments
of principal and interest by the Maker under this Note shall be made in cash in
immediately available funds.
From and after the Maturity Date, every amount due and owing
under this Note shall bear interest at an annual rate of twelve percent (12%)
(the "Default Interest Rate"). Commencing after the Maturity Date, any accrued
but unpaid interest on this Note shall be payable on demand and shall accrue
until the obligation of the Maker with respect to the payment of such interest
has been discharged (whether before or after judgment). In no event shall any
interest charged, collected or reserved under this Note exceed the maximum rate
then permitted by applicable law and if any such payment is paid by the Maker,
then such excess sum shall be credited by the Holder as a payment of principal.
1. Definitions. Unless the context otherwise requires, when used herein
the following terms shall have the meaning indicated:
"Certificate of Designation" shall mean the Maker's Certificate
of Designations, Preferences and Rights of the Preferred Stock.
"Change of Control" shall have the meaning ascribed to such term
in the Certificate of Designation.
"Conversion Date" shall mean the date on which the stockholders
of the Maker approve the Proposal, whether at the Special Meeting or otherwise.
"Maturity Date" shall mean (i) the date on which any Event of
Default shall have occurred and be continuing or (ii) the earlier of (a) any
date, occurring at least 120 days after the Negative Vote Date, on which the
Holder shall have demanded payment of this Note and (b) December 31, 2002.
"Negative Vote Date" shall mean the date on which the Maker's
stockholders reject or fail to approve for any reason the Proposal at the
Special Meeting.
"Preferred Stock" shall mean the shares of Series A Convertible
Preferred Stock, par value $.01 per share, of the Maker.
"Proposal" shall mean the proposal to be submitted to the
stockholders of the Maker at the Special Meeting to approve the issuance of the
Preferred Stock (as defined in the Purchase Agreement) upon conversion of the
Notes and the issuance of the Warrants to be issued at the Second Closing (as
defined in the Purchase Agreement) in accordance with the terms of the Purchase
Agreement.
"Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of June 16, 2002, between the Maker and the other parties
named therein.
"Special Meeting" shall mean the special meeting of stockholders
of the Maker to be called by the Maker for the sole purpose of approving the
Proposal.
2. Securities Purchase Agreement. This Senior Convertible Promissory
Note (this "Note") is one of the several promissory notes of the Maker (the
"Notes") referred to in the Purchase Agreement. The Note is subject to the terms
and conditions of the Purchase Agreement. The Note is transferable and
assignable to any person to whom such transfer is permissible under applicable
law. The Maker agrees to issue from time to time replacement Notes in the form
hereof to facilitate such transfers and assignments. In addition, after delivery
of an indemnity in form and substance satisfactory to the Maker, the Maker also
agrees to issue a replacement Note if the Note is lost, stolen, mutilated or
destroyed.
3. Conversion.
(a) On the Conversion Date, all outstanding principal on this
Note shall immediately and automatically be converted into such number of shares
of Preferred Stock as shall be equal to the quotient obtained by dividing the
aggregate outstanding principal balance then outstanding on this Note on the
Conversion Date by $25.00. In the event this Note is so converted, the Maker
shall pay the Holder on the Conversion Date an amount in cash equal to 20% of
the accrued but unpaid interest as of such date and the Holder shall forfeit any
remaining accrued but unpaid interest effective upon such conversion. All shares
of Preferred Stock issued upon conversion of this Note shall be entitled to all
accretion from the Original Issuance Date (as defined in the Certificate of
Designation), as provided in Section 4 of the Certificate of Designation.
-2-
(b) If at the time of conversion of this Note into shares of
Preferred Stock there are insufficient authorized shares of Preferred Stock to
permit conversion of this Note in full, then the Maker shall take all corporate
action necessary to authorize a sufficient number of shares of Preferred Stock
to permit such conversion in full. No fractional shares of the Preferred Stock
will be issued upon conversion of this Note. In lieu of any fractional share to
which the Holder would otherwise be entitled, the Maker will pay to the Holder
in cash the amount of the unconverted principal balance of this Note that would
otherwise be converted into such fractional share. Upon conversion of this Note,
the Holder shall surrender this Note, duly endorsed, at the principal offices of
the Maker or any transfer agent of the Maker. At its expense, the Maker will, as
soon as practicable thereafter, issue and deliver to such Holder, at such
principal office, a certificate or certificates for the number of shares to
which such Holder is entitled upon such conversion, together with other
securities and property to which the Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the Holder for any
cash amounts payable as described herein. Upon conversion of this Note and
payment of interest and for fractional shares as provided above, the Maker will
be forever released from all of its payment obligations and liabilities under
this Note with regard to that portion of the principal amount being converted.
4. Payments. This Note may be prepaid in whole or in part at any time or
from time to time without premium or penalty after the earlier of the Negative
Vote Date and December 31, 2002. Any voluntary or mandatory prepayment of this
Note shall be applied first to the payment of interest accrued and unpaid on
this Note and second to the payment of principal. All payments by the Maker
under this Note shall be made without set-off, defense or counterclaim and be
free and clear and without any deduction or withholding for any taxes or fees of
any nature whatever, unless the obligation to make such deduction or withholding
is imposed by law. The principal balance and all accrued but unpaid interest on
this Note shall be paid in full on the Maturity Date.
5. Waiver. No delay or omission on the part of the Holder in exercising
any right under this Note shall operate as a waiver of such right or of any
other right of the Holder, nor shall any delay, omission or waiver on any one
occasion be deemed a bar to or waiver of the same or any other right on any
future occasion. The Maker hereby forever waives presentment, demand,
presentment for payment, protest, notice of protest, notice of dishonor of this
Note and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note.
6. Negative Covenants. Without the prior written consent of the holders
of a majority in principal amount of the Notes then outstanding, the Maker shall
not, and will not permit any of its subsidiaries to (a) incur any indebtedness
for money borrowed, other than (i) indebtedness under the Notes, (ii)
indebtedness not in excess of $20 million in principal amount outstanding
(including without limitation under any existing lines of credit as of the date
of this Note) at any time and (iii) indebtedness the net proceeds of which are
used to repay the Notes in their entirety, (b) grant any liens, pledges or
encumbrances (collectively, "Liens") on any of its assets or permit any Liens to
exist other than (i) statutory liens or mechanics liens or non-consensual liens
that do not materially impair the value of the assets and (ii) Liens granted to
secure indebtedness permitted under clause (a) above, (c) sell any material
assets for consideration in excess of $10 million in the aggregate other than
sales of inventory in the ordinary course of the Maker's business or (d) pay or
declare any dividend or distribution (other
-3-
than dividends or distributions by wholly owned subsidiaries of the Maker to the
Maker).
7. Event of Default.
(a) The Maker agrees that: (i) upon the failure to pay when due
the principal balance and accrued interest hereunder; (ii) if the Maker (1)
commences any voluntary proceeding under any provision of Title 11 of the United
States Code, as now or hereafter amended, or commences any other proceeding,
under any law, now or hereafter in force, relating to bankruptcy, insolvency,
reorganization, liquidation, or otherwise to the relief of debtors or the
readjustment of indebtedness, (2) makes any assignment for the benefit of
creditors or a composition or similar arrangement with such creditors, or (3)
appoints a receiver, trustee or similar judicial officer or agent to take charge
of or liquidate any of its property or assets; (iii) upon the commencement
against the Maker of any involuntary proceeding of the kind described in
paragraph (ii); (iv) upon the acceleration of any other indebtedness of the
Company for borrowed money in excess of $1,000,000; (v) upon the rendering of a
judgment or judgments involving an amount in excess of $1,000,000 and such
judgment or judgments shall not have been vacated, discharged, stayed or bonded
pending appeal within 30 days from the entry thereof; (vi) if the Maker breaches
Section 5.6 of the Purchase Agreement; (vii) if Maker breaches Section 6 of this
Note; (viii) upon a Change of Control; (ix) if prior to the Special Meeting, the
Maker shall issue, or agree to issue, in a transaction exempt from registration
under the Act shares of Common Stock, or Common Stock equivalents, in an amount
in excess of 15% of the shares of Common Stock then outstanding; or (x) if the
Maker's Board of Directors withdraws or adversely modifies its recommendation
relating to the Proposal in accordance with Section 5.6 of the Purchase
Agreement (any of (i) through (x), an "Event of Default"), all unpaid principal
and accrued interest under this Note shall become immediately due and payable
without presentment, demand, protest or notice of any kind.
(b) Upon the occurrence and continuance of an Event of Default,
the Holder shall have all the rights and remedies under the Uniform Commercial
Code of the State of New York.
8. Amendment. None of the terms or provisions of this Note may be
excluded, modified or amended except by a written instrument duly executed by
the Holder and the Maker expressly referring to this Note and setting forth the
provision so excluded, modified or amended.
9. Costs. If action is instituted to collect on this Note, the Maker
promises to pay all costs and expenses, including reasonable attorney's fees,
incurred in connection with such action.
10. Governing Law. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
-4-
11. Notices. All notices hereunder shall be given in writing and shall
be deemed delivered when received by the other party hereto at the address set
forth in the Purchase Agreement or at such other address as may be specified by
such party from time to time in accordance with the Purchase Agreement.
12. Transferability. This Note may not be transferred by the Holder
except in accordance with Section 7 of the Purchase Agreement.
[Remainder of Page Intentionally Left Blank]
-5-
This Note shall be binding upon the successors or assigns of the
Maker and shall inure to the benefit of the successors and assigns of the
Holder.
PROXIM CORPORATION
By:
---------------------------------
Name:
Title:
EXHIBIT C
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A
CONVERTIBLE PREFERRED STOCK OF PROXIM CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned, pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware, does hereby certify that,
pursuant to the authority expressly vested in the Board of Directors of Proxim
Corporation, a Delaware corporation (the "CORPORATION"), by the Corporation's
Certificate of Incorporation, the Board of Directors of the Corporation (the
"BOARD OF DIRECTORS") has duly provided for the issuance of and created a series
of Preferred Stock (the "PREFERRED STOCK") of the Corporation, par value $.01
per share, and in order to fix the designation and amount and the voting powers,
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions, of a
series of Preferred Stock, has duly adopted this Certificate of Designations,
Preferences and Rights of Preferred Stock (the "CERTIFICATE").
Each share of such series of Preferred Stock shall rank equally in
all respects and shall be subject to the following provisions:
1. NUMBER OF SHARES AND DESIGNATION. 3,000,000 shares of Preferred
Stock of the Corporation shall constitute a series of Preferred Stock designated
as Series A Convertible Preferred Stock (the "SERIES A PREFERRED STOCK"). The
number of shares of Series A Preferred Stock may be increased (to the extent of
the Corporation's authorized and unissued Preferred Stock) or decreased (but not
below the number of shares of Series A Preferred Stock then outstanding) by
further resolution duly adopted by the Board of Directors and the filing of a
certificate of increase or decrease, as the case may be, with the Secretary of
State of the State of Delaware.
2. RANK. The Series A Preferred Stock shall, with respect to payment
of dividends, redemption payments, rights upon liquidation, dissolution or
winding up of the affairs of the Corporation, or otherwise (i) rank senior and
prior to the Common Stock (as defined below), and each other class or series of
equity securities of the Corporation, whether currently issued or issued in the
future, that by its terms ranks junior to the Series A Preferred Stock (whether
with respect to payment of dividends, redemption payments, rights upon
liquidation, dissolution or winding up of the affairs of the Corporation, or
otherwise) (all of such equity securities, including the Common Stock, are
collectively referred to herein as the "JUNIOR SECURITIES"), (ii) rank on a
parity with each other class or series of equity securities of the Corporation,
whether currently issued or issued in the future, that does not by its terms
expressly provide that it ranks senior to or junior to the Series A Preferred
Stock (whether with respect to payment of dividends, redemption payments, rights
upon liquidation, dissolution or winding up of the affairs of the Corporation,
or otherwise) (all of such equity securities are collectively referred to herein
as the "PARITY SECURITIES"), and (iii) rank junior to each other class or series
of equity securities of the Corporation, whether currently issued or issued in
the future, that by its terms ranks senior to the Series A Preferred Stock
(whether with respect to payment of dividends, redemption payments, rights upon
liquidation, dissolution or winding up of the affairs
2
of the Corporation, or otherwise) (all of such equity securities are
collectively referred to herein as the "SENIOR SECURITIES"). The respective
definitions of Junior Securities, Parity Securities and Senior Securities shall
also include any rights or options exercisable or exchangeable for or
convertible into any of the Junior Securities, Parity Securities or Senior
Securities, as the case may be.
3. DIVIDENDS.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available for the payment of dividends, dividends on the terms
described below:
(i) Holders of shares of Series A Preferred Stock shall be
entitled to participate equally and ratably with the holders of shares of Common
Stock in all dividends and distributions paid (whether in the form of cash,
stock or otherwise) on the shares of Common Stock as if immediately prior to
each record date for the Common Stock, shares of Series A Preferred Stock then
outstanding were converted into shares of Common Stock (in the manner described
in Section 7); provided, however, that the holders of shares of Series A
Preferred Stock shall not be entitled to participate in such dividend or
distribution if an adjustment to the Conversion Price (as defined below) shall
be required with respect to such dividends or distributions pursuant to Section
7(c) hereof; and
(ii) In addition to any dividends paid pursuant to Section
3(a)(i), in respect of each semi-annual period beginning with the semi-annual
period commencing ________ __, 2005 [Day after the third anniversary of Original
Issuance Date], the Corporation shall pay a dividend on each share of Series A
Preferred Stock at an annual rate equal to 8% (compounded semi-annually) of the
Liquidation Value (as defined below) then in effect; such dividends shall be
paid, at the Corporation's option, in cash or in shares of Common Stock, which
shares of Common Stock shall be valued at the volume weighted average closing
price of the Common Stock on the principal national securities exchange or
inter-dealer quotation system on which the Common Stock is then traded for the
10 trading days prior to period ending on the relevant Dividend Payment Record
Date (as defined below).
Dividends payable pursuant to Section 3(a)(i) shall be payable on the same date
that such dividends are payable to holders of shares of Common Stock. Dividends
payable pursuant to Section 3(a)(ii) shall be payable semi-annually in arrears
on _____________ __ and _____________ __ of each year (unless such day is not a
Business Day (as defined below), in which event such dividends shall be payable
on the next succeeding Business Day) (each such payment date being a "DIVIDEND
PAYMENT DATE" and the period from the day after the third anniversary of the
Original Issue Date (as defined below) until the first Dividend Payment Date and
each such semi-annual period thereafter being a "DIVIDEND PERIOD"). The amount
of dividends payable on the Series A Preferred Stock for any period shorter or
longer than a full Dividend Period shall be computed on the basis of a 360-day
year of twelve 30-day months. As used herein, the term "BUSINESS DAY" means any
day except a Saturday, Sunday or day on which banking institutions are legally
authorized to close in the City of New York.
3
(b) Each dividend shall be payable to the holders of record of
shares of Series A Preferred Stock as they appear on the stock records of the
Corporation at the close of business on such record dates (each, a "DIVIDEND
PAYMENT RECORD DATE"), which shall be not more than 60 days nor less than 10
days preceding the Dividend Payment Date thereof, as shall be fixed by the Board
of Directors.
(c) From and after the time, if any, as the Corporation fails to pay
to the holder of any shares of Series A Preferred Stock, on the date specified
for redemption in accordance with Section 5 or on the date specified for
repurchase in accordance with Section 6, the redemption price calculated
pursuant to Section 5 or the Change of Control Price (as defined below) after
such holder has delivered notice to the Corporation pursuant to Section 6 of its
intention to exercise its repurchase rights under Section 6, (i) no dividends
shall be declared or paid or set apart for payment, or other distribution
declared or made, upon any Junior Securities, nor shall any Junior Securities be
redeemed, purchased or otherwise acquired (other than a redemption, purchase or
other acquisition of shares of Common Stock expressly required and made for
purposes of any employee incentive or benefit plans or arrangements of the
Corporation or any subsidiary of the Corporation or the payment of cash in lieu
of fractional shares in connection therewith) for any consideration (nor shall
any moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such Junior Securities) by the Corporation, directly or
indirectly (except by conversion into or exchange for Junior Securities or the
payment of cash in lieu of fractional shares in connection therewith) and (ii)
the Corporation shall not, directly or indirectly, make any payment on account
of any purchase, redemption, retirement or other acquisition of any Parity
Securities (other than for consideration payable solely in Junior Securities or
the payment of cash in lieu of fractional shares in connection therewith);
provided, however, that this Section 3(c) shall not be applicable at any time
that (A) the Corporation has paid, in accordance with Section 5, the redemption
price to each holder of Series A Preferred Stock or (B) the Corporation has
paid, in accordance with Section 6, the Change of Control Price (as defined
below) to each holder that has exercised its repurchase right pursuant to
Section 6.
4. LIQUIDATION PREFERENCE.
(a) The initial liquidation preference for the shares of
Series A Preferred Stock shall be $25.00 per share, which amount shall accrete
from the Original Issue Date (as defined below) until the third anniversary of
the Original Issue Date at an annual rate of 8%, compounded semi-annually,
computed on the basis of a 360 day year of twelve 30-day months (such accreted
amount being the "LIQUIDATION VALUE"). Notwithstanding the foregoing, in the
event of a Change in Control (as defined below) that occurs within three years
after the Original Issue Date, the Liquidation Value upon such Change in Control
shall be increased by the amount, if any, by which (i) the amount of the
Liquidation Value had it fully accreted from the date of the Change of Control
through the third anniversary of the Original Issuance Date exceeds (ii) the
Liquidation Value in effect prior to the adjustment pursuant to this Section
4(a).
(b) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock shall be entitled to receive the greater of (i) the Liquidation
Value of such shares in effect on the date of such
4
liquidation, dissolution or winding up, plus an amount equal to (A) the
unrecognized accretion, if any, from the end of the most recent semi-annual
period ending ___________ __ or ___________ __ up to but not including the date
of such liquidation, dissolution or winding up and (B) after the third
anniversary of the Original Issuance Date, the dividends accrued and unpaid
thereon, whether or not declared, up to but not including the date of such
liquidation, dissolution or winding up or (ii) the payment such holders would
have received had such holders, immediately prior to such liquidation,
dissolution or winding up, converted their shares of Series A Preferred Stock
into shares of Common Stock (pursuant to, and at a conversion rate described in,
Section 7).
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock (i) shall not be entitled to receive the Liquidation Value of
such shares until payment in full or provision has been made for the payment in
full of all claims of creditors of the Corporation and the liquidation
preferences for all Senior Securities, and (ii) shall be entitled to receive the
Liquidation Value of such shares before any payment or distribution of any
assets of the Corporation shall be made or set apart for holders of any Junior
Securities. Subject to clause (i) above, if the assets of the Corporation are
not sufficient to pay in full the Liquidation Value payable to the holders of
shares of Series A Preferred Stock and the liquidation preference payable to the
holders of any Parity Securities, then such assets, or the proceeds thereof,
shall be distributed among the holders of shares of Series A Preferred Stock and
any such other Parity Securities ratably in accordance with the Liquidation
Value for the Series A Preferred Stock and the liquidation preference for the
Parity Securities, respectively.
(d) Neither a consolidation or merger of the Corporation with or
into any other entity, nor a merger of any other entity with or into the
Corporation, nor a sale or transfer of all or any part of the Corporation's
assets for cash, securities or other property shall be considered a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
4.
5. REDEMPTION; PROCEDURES FOR REDEMPTION.
(a) On _________ __, 2007 [five years from Original Issuance Date],
the Corporation shall redeem all outstanding shares of Series A Preferred Stock,
if any, at a cash redemption price equal to the Liquidation Value in effect on
the Redemption Date (as defined below), plus an amount equal to the dividends
accrued and unpaid thereon, whether or not declared, up to but not including the
Redemption Date (such amount being referred to herein as the "REDEMPTION
PRICE"). In the event that the Corporation does not pay the Redemption Price on
the Redemption Date, the Redemption Price shall be calculated as if the
Redemption Date were the later of the Redemption Date and the date on which such
payment is made. If the Corporation is unable at the Redemption Date to redeem
any or all shares of Series A Preferred Stock then to be redeemed because such
redemption would violate the applicable laws of the State of Delaware, then the
Corporation shall redeem such shares as soon thereafter as redemption would not
violate such laws. In the event of any redemption of only a part of the then
outstanding Series A Preferred Stock, the Corporation shall effect such
redemption pro rata among the holders thereof (based on the number of shares of
Series A Preferred Stock held on the date of notice of redemption).
5
(b) In the event of a redemption of shares of Series A Preferred
Stock pursuant to Section 5(a), notice of such redemption shall be given by the
Corporation, by first class mail, postage prepaid, mailed not less than 15 days
nor more than 45 days prior to the Redemption Date, to each holder of Series A
Preferred Stock at the address appearing in the Corporation's records. Such
notice shall state: (i) the date on which the holder is to surrender to the
Corporation the certificates for any shares to be redeemed (such date, or if
such date is not a Business Day, the first Business Day thereafter, the
"REDEMPTION DATE") and (ii) the number of shares of Series A Preferred Stock to
be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of shares to be redeemed from such holder (such notice
being referred to as the "REDEMPTION NOTICE"). On or prior to the Redemption
Date, each holder of Series A Preferred Stock to be redeemed shall surrender
his, her or its certificate or certificates representing such shares to the
Corporation, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price of such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be canceled. In the event
less than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and after
the Redemption Date, unless there shall have been a default in payment of the
Redemption Price, all rights of the holders of the Series A Preferred Stock
(except the right to receive the Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or deemed to be outstanding for any purpose whatsoever.
(c) Except as provided in Section 5(a), the Corporation shall have
no right to redeem the shares of Series A Preferred Stock. Any shares of Series
A Preferred Stock so redeemed shall be permanently retired, shall no longer be
deemed outstanding and shall not under any circumstances be reissued, and the
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce the authorized Series A Preferred Stock accordingly.
6. CHANGE OF CONTROL; PROCEDURES UPON CHANGE OF CONTROL.
(a) If the Company undergoes a Change of Control that is a
Qualifying Change of Control, the Corporation shall have the right to require
each holder to convert its shares of Series A Preferred Stock into Common Stock
pursuant to the provisions of Section 7(a)(iv); provided, that in the event of a
Change of Control the Corporation may, at its option, reduce the Conversion
Price appropriately in order to effect a Qualifying Change of Control (as
defined below). In the event that the Corporation undergoes a Change of Control
that is not a Qualifying Change of Control (the date of such occurrence being a
"CHANGE OF CONTROL DATE"), the Corporation shall be required to make an offer
(the "CHANGE OF CONTROL OFFER") to each holder of shares of Series A Preferred
Stock to repurchase such holder's shares of Series A Preferred Stock, in whole
or in part, at such holder's option, at a cash redemption price (the "CHANGE OF
CONTROL PRICE") equal to 101% of the Liquidation Value in effect on the Change
of Control Repurchase Date (as defined below) (after taking into account any
adjustment thereto pursuant to Section 4(a)), plus an amount equal to (i) the
unrecognized accretion, if any, from the end of the immediately preceding
semi-annual period ending
6
___________ __ or ______________ __ to but not including the Change of Control
Repurchase Date and (ii) any dividends accrued and unpaid thereon, whether or
not declared, up to but not including the Change of Control Repurchase Date.
(b) The Corporation shall send notice to each holder of Series A
Preferred Stock of the Change of Control Offer within 30 days of the Change of
Control Date, which notice shall specify the date on which the Change of Control
Offer shall be consummated (the "CHANGE OF CONTROL REPURCHASE DATE"). The Change
of Control Repurchase Date shall be no more than 60 days after the Change of
Control Date. Any holder wishing to submit its shares of Series A Preferred
Stock for repurchase pursuant to a Change of Control Offer shall submit its
certificates representing any such shares to be repurchased to the Corporation
for repurchase no later than the third Business Day immediately preceding the
Change of Control Repurchase Date.
(c) Upon surrender in accordance with the notice of the Change of
Control Offer of the certificates for any shares to be repurchased, such shares
shall be repurchased by the Corporation on the Change of Control Repurchase Date
at the Change of Control Price. In case fewer than all the shares represented by
any such certificate are to be repurchased, a new certificate shall be issued
representing the unpurchased shares without cost to the holder thereof.
7. CONVERSION.
(a) Right to Convert; Mandatory Conversion.
(i) Subject to the provisions of this Section 7, each holder
of shares of Series A Preferred Stock shall have the right, at any time and from
time to time after the Stockholders Vote (as defined below), at such holder's
option, to convert any or all of such holder's shares of Series A Preferred
Stock, in whole or in part, into fully paid and non-assessable shares of Common
Stock at the conversion price equal to the initial conversion price (as defined
below) per share of Common Stock, subject to adjustment as described in Section
7(c) (as adjusted, the "CONVERSION PRICE"). The number of shares of Common Stock
into which a share of the Series A Preferred Stock shall be convertible
(calculated as to each conversion to the nearest 1/100th of a share) shall be
determined by dividing the Liquidation Value in effect at the time of conversion
by the Conversion Price in effect at the time of conversion. The "INITIAL
CONVERSION PRICE" shall be $3.0559 per share.
(ii) From and after the second anniversary of the Original
Issue Date, subject to the provisions of this Section 7, the Corporation shall
have the right to require the holder of shares of Series A Preferred Stock, from
time to time, at the Corporation's option, to convert any or all of such
holder's shares of Series A Preferred Stock, in whole or in part, into fully
paid and non-assessable shares of Common Stock at the Conversion Price then in
effect; provided, that the Market Price (as defined below) of the Common Stock
has exceeded 250% of the Conversion Price then in effect for the 30 consecutive
trading days prior to the Corporation's delivery of the notice required by
Section 7(b)(i)(B).
(iii) From and after the third anniversary of the Original
Issue Date, subject to the provisions of this Section 7, the Corporation shall
have the right to require the
7
holder of shares of Series A Preferred Stock, from time to time, at the
Corporation's option, to convert any or all of such holder's shares of Series A
Preferred Stock, in whole or in part, into fully paid and non-assessable shares
of Common Stock at the Conversion Price then in effect; provided, that the
Market Price of the Common Stock has exceeded 200% of the Conversion Price then
in effect for the 30 consecutive trading days prior to the Corporation's
delivery of the notice required by Section 7(b)(i)(B).
(iv) From and after the fourth anniversary of the Original
Issue Date, subject to the provisions of this Section 7, the Corporation shall
have the right to require the holder of shares of Series A Preferred Stock, from
time to time, at the Corporation's option, to convert any or all of such
holder's shares of Series A Preferred Stock, in whole or in part, into fully
paid and non-assessable shares of Common Stock at the Conversion Price then in
effect; provided that the Market Price of the Common Stock has exceeded 150% of
the Conversion Price then in effect for the 30 consecutive trading days prior to
the Corporation's delivery of the notice required by Section 7(b)(i)(B).
(v) Upon the occurrence of a Qualifying Change of Control,
subject to the provisions of this Section 7, the Corporation shall have the
right to require the holders of shares of Series A Preferred Stock, at the
Corporation's option, to convert any or all of such holder's shares of Series A
Preferred Stock, in whole or in part, into fully paid and non-assessable shares
of Common Stock at the Conversion Price then in effect , such that such holders
shall receive the As-Converted Consideration in such Qualifying Change of
Control.
(b) Mechanics of Conversion.
(i) A holder of shares of Series A Preferred Stock or the
Corporation, as the case may be, that elects to exercise its conversion rights
pursuant to Section 7(a) shall provide notice to the other party as follows:
(A) Holder's Notice and Surrender. To exercise its conversion
right pursuant to Section 7(a)(i), the holder of shares of Series A Preferred
Stock to be converted shall surrender the certificate or certificates
representing such shares at the office of the Corporation (or any transfer agent
of the Corporation previously designated by the Corporation to the holders of
Series A Preferred Stock for this purpose) with a written notice of election to
convert, completed and signed, specifying the number of shares to be converted.
(B) Corporation's Notice. To exercise its conversion right
pursuant to Section 7(a)(ii), 7(a)(iii) or 7(a)(iv), the Corporation shall
deliver written notice to such holder, at least 10 days and no more than 60 days
prior to the Conversion Date (as defined below), specifying: (i) the number of
shares of Series A Preferred Stock to be converted and, if fewer than all the
shares held by such holder are to be converted, the number of shares to be held
by such holder; (ii) the Conversion Date; (iii) the number of shares of Common
Stock to be issued in respect of each share of Series A Preferred Stock that is
converted; (iv) the place or places where certificates for such shares are to be
surrendered for issuance of certificates representing shares of Common Stock;
and (v) that any accretion dividends on the shares to be converted will cease to
accrue on such Conversion Date.
8
Unless the shares issuable upon conversion are to be issued in the same name as
the name in which such shares of Series A Preferred Stock are registered, each
share surrendered for conversion shall be accompanied by instruments of
transfer, in form reasonably satisfactory to the Corporation, duly executed by
the holder or the holder's duly authorized attorney and an amount sufficient to
pay any transfer or similar tax in accordance with Section 7(b)(vi). As promptly
as practicable after the surrender by the holder of the certificates for shares
of Series A Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver to such holder, or on the holder's written order to the holder's
transferee, a certificate or certificates for the whole number of shares of
Common Stock issuable upon the conversion of such shares and a check payable in
an amount corresponding to any fractional interest in a share of Common Stock as
provided in Section 7(b)(vii).
(ii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on (x) in the case of conversion
pursuant to Section 7(a)(i), the first Business Day on which the certificates
for shares of Series A Preferred Stock shall have been surrendered and such
notice received by the Corporation as aforesaid or (y) in the case of conversion
pursuant to Section 7(a)(ii), 7(a)(iii) or 7(a)(iv), the date specified as the
Conversion Date in the Corporation's notice of conversion delivered to each
holder pursuant to Section 7(b)(i)(B) (in each case, the "CONVERSION DATE"). At
such time on the Conversion Date:
(A) the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder of record of the shares of Common
Stock represented thereby at such time; and
(B) such shares of Series A Preferred Stock so converted shall
no longer be deemed to be outstanding, and all rights of a holder with respect
to such shares (x) in the event of conversion pursuant to Section 7(a)(i),
surrendered for conversion and (y) in the event of conversion pursuant to
Section 7(a)(ii), 7(a)(iii) or 7(a)(iv), covered by the Corporation's notice of
conversion, shall immediately terminate except the right to receive the Common
Stock, payment of any accrued and unpaid dividends on shares of Series A
Preferred Stock until the Conversion Date and other amounts payable pursuant to
this Section 7.
All shares of Common Stock delivered upon conversion of the Series A Preferred
Stock will, upon delivery, be duly and validly authorized and issued, fully paid
and nonassessable, free from all preemptive rights and free from all taxes,
liens, security interests and charges (other than liens or charges created by or
imposed upon the holder or taxes in respect of any transfer occurring
contemporaneously therewith).
(iii) Holders of shares of Series A Preferred Stock at the
close of business on a Dividend Payment Record Date shall be entitled to receive
the dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such Dividend Payment Record
Date and prior to such Dividend Payment Date. A holder of shares of Series A
Preferred Stock on a Dividend Payment Record Date who (or whose transferee)
tenders any such shares for conversion into shares of Common Stock on before the
corresponding Dividend Payment Date will receive the dividend payable by the
9
Corporation on such shares of Series A Preferred Stock if and when paid, and the
converting holder need not include payment of the amount of such dividend upon
surrender of shares of Series A Preferred Stock for conversion.
(iv) The Corporation will at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, solely for the purpose of effecting conversions of the Series A
Preferred Stock, the aggregate number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock. The Corporation will procure, at its
sole expense, the listing of the shares of Common Stock, subject to issuance or
notice of issuance on the principal domestic stock exchange or inter-dealer
quotation system on which the Common Stock is then listed or traded. The
Corporation will take all commercially reasonable action as may be necessary to
ensure that the shares of Common Stock may be issued without violation of any
applicable law or regulation or of any requirement of any securities exchange or
inter-dealer quotation system on which the shares of Common Stock are listed or
traded.
(v) Issuances of certificates for shares of Common Stock upon
conversion of the Series A Preferred Stock shall be made without charge to the
holder of shares of Series A Preferred Stock for any issue or transfer tax
(other than taxes in respect of any transfer occurring contemporaneously
therewith or as a result of the holder being a non-U.S. person) or other
incidental expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Corporation; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance or delivery of shares of Common Stock
in a name other than that of the holder of the Series A Preferred Stock to be
converted, and no such issuance or delivery shall be made unless and until the
person requesting such issuance or delivery has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(vi) In connection with the conversion of any shares of Series
A Preferred Stock, no fractions of shares of Common Stock shall be issued, but
in lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Market Price per share of Common Stock on the Conversion Date.
(vii) If fewer than all of the outstanding shares of Series A
Preferred Stock are to be converted pursuant to Section 7(a)(ii), 7(a)(iii) or
7(a)(iv), the shares shall be converted on a pro rata basis (according to the
number of shares of Series A Preferred Stock held by each holder, with any
fractional shares rounded to the nearest whole share or in such other manner as
the Board of Directors may determine, as may be prescribed by resolution of the
Board of Directors).
(viii) Notwithstanding anything to the contrary in this
Certificate, if a notice of conversion has been given by the Corporation
pursuant to Section 7(b)(ii) and any holder of shares of Series A Preferred
Stock shall, prior to the close of business on the Business Day preceding the
Conversion Date, give written notice to the Corporation pursuant to Section 6 as
to the repurchase of any or all of the shares to be converted held by the holder
that would
10
otherwise be converted on such Conversion Date, then such conversion shall not
become effective as to such shares to be repurchased and such shares shall be
repurchased as provided in Section 6.
(c) Adjustments to Conversion Price. The Conversion Price shall be
adjusted from time to time as follows:
(i) Common Stock Issued at Less than Conversion Price. If
after the Original Issuance Date the Corporation issues or sells any Common
Stock (including any securities exercisable, exchangeable or convertible into
Common Stock) other than Excluded Stock (as defined below) without consideration
or for consideration per share (as determined below) less than the Conversion
Price in effect as of the date of such issuance or sale, the Conversion Price in
effect immediately prior to each such issuance or sale will immediately be
reduced to the price determined by multiplying (A) the Conversion Price at which
shares of Series A Preferred Stock were theretofore convertible by (B) a
fraction of which the numerator shall be the sum of (1) the number of shares of
Common Stock Outstanding immediately prior to such issuance or sale plus (2) the
number of additional shares of Common Stock that the aggregate consideration
received by the Corporation for the number of shares of Common Stock (or the
number of shares of Common Stock issuable upon exercise, exchange or conversion)
so issued or sold would purchase at the Conversion Price per share of Common
Stock (or the number of shares of Common Stock issuable upon exercise, exchange
or conversion) so issued or sold would purchase at the Conversion Price per
share of Common Stock in effect on the last trading day immediately preceding
such issuance or sale, and of which the denominator shall be the sum of (3) the
number of shares of Common Stock Outstanding immediately prior to such issuance
or sale, plus (4) the number of additional shares of Common Stock (or the number
of shares of Common Stock issuable upon exercise, exchange or conversion) so
issued. For the purposes of any adjustment of the Conversion Price pursuant to
this Section 7(c), the following provisions shall be applicable:
(A) In the case of the issuance of Common Stock for cash, the
amount of the consideration received by the Corporation shall be deemed to be
the amount of the cash proceeds received by the Corporation for such Common
Stock before deducting therefrom any discounts or commissions allowed, paid or
incurred by the Corporation for any underwriting or otherwise in connection with
the issuance and sale thereof.
(B) In the case of the issuance of Common Stock (otherwise
than upon the conversion of shares of Capital Stock or other securities of the
Corporation) for a consideration in whole or in part other than cash, including
securities acquired in exchange therefor (other than securities by their terms
so exchangeable), the consideration other than cash shall be deemed to be the
fair value thereof as determined by the Board of Directors, provided, however,
that such fair value as determined by the Board of Directors shall not exceed
the aggregate Market Price of the shares of Common Stock being issued as of the
date the Board of Directors authorizes the issuance of such shares.
(C) In the case of the issuance of (I) options, warrants or
other rights to purchase or acquire Common Stock (whether or not at the time
exercisable) or (II) securities by their terms convertible into or exchangeable
for Common Stock (whether or not at the time so
11
convertible or exchangeable) or options, warrants or rights to purchase such
convertible or exchangeable securities (whether or not at the time exercisable):
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options, warrants or other rights to
purchase or acquire Common Stock shall be deemed to have been issued at the time
such options, warrants or rights are issued and for a consideration equal to the
consideration (determined in the manner provided in Section 7(c)(i) (A) and (B),
if any, received by the Corporation upon the issuance of such options, warrants
or rights plus the minimum purchase price provided in such options, warrants or
rights for the Common Stock covered thereby;
(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options, warrants or other
rights to purchase or acquire such convertible or exchangeable securities and
the subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options, warrants or
rights were issued and for a consideration equal to the consideration, if any,
received by the Corporation for any such securities and related options,
warrants or rights (excluding any cash received on account of accrued interest
or accrued dividends), plus the additional consideration (determined in the
manner provided in Section 7(c)(i) (A) and (B), if any, to be received by the
Corporation upon the conversion or exchange of such securities, or upon the
exercise of any related options, warrants or rights to purchase or acquire such
convertible or exchangeable securities and the subsequent conversion or exchange
thereof;
(3) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options, warrants or rights or
conversion or exchange of such convertible or exchangeable securities or any
change in the consideration to be received by the Corporation upon such
exercise, conversion or exchange, but excluding changes resulting from the
anti-dilution provisions thereof (to the extent comparable to the anti-dilution
provisions contained herein), the Conversion Price as then in effect shall
forthwith be readjusted to such Conversion Price as would have been obtained had
an adjustment been made upon the issuance of such options, warrants or rights
not exercised prior to such change, or of such convertible or exchangeable
securities not converted or exchanged prior to such change, upon the basis of
such change;
(4) on the expiration or cancellation of any such
options, warrants or rights (without exercise), or the termination of the right
to convert or exchange such convertible or exchangeable securities (without
exercise), if the Conversion Price shall have been adjusted upon the issuance
thereof, the Conversion Price shall forthwith be readjusted to such Conversion
Price as would have been obtained had an adjustment been made upon the issuance
of such options, warrants, rights or such convertible or exchangeable securities
on the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options, warrants or rights, or upon
the conversion or exchange of such convertible or exchangeable securities; and
(5) if the Conversion Price shall have been adjusted
upon the issuance of any such options, warrants, rights or convertible or
exchangeable securities, no
12
further adjustment of the Conversion Price shall be made for the actual issuance
of Common Stock upon the exercise, conversion or exchange thereof.
(ii) Stock Splits, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (A) declare a dividend or make a
distribution on its Common Stock in shares of Common Stock, (B) subdivide or
reclassify the outstanding shares of Common Stock into a greater number of
shares, or (C) combine or reclassify the Outstanding Common Stock into a smaller
number of shares, the Conversion Price in effect at the time of the record date
for such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted to the number obtained by
multiplying the Conversion Price at which the shares of Series A Preferred Stock
were theretofore convertible by a fraction, the numerator of which shall be the
number of shares of Common Stock Outstanding immediately prior to such action,
and the denominator of which shall be the number of shares of Common Stock
Outstanding immediately following such action.
(iii) Other Distributions. In case the Corporation shall fix a
record date for the making of a distribution to all holders of shares of its
Common Stock (A) of shares of any class or of any Person (as defined below)
other than shares of Common Stock or (B) of evidence of indebtedness of the
Corporation or any Subsidiary (as defined below) or (C) of assets (excluding
Ordinary Cash Dividends (as defined below), and dividends or distributions
referred to in Section 7(c)(ii)), or (D) of rights or warrants (excluding any
rights or warrants referred to in Section 7(c)(i)), in each such case the
Conversion Price in effect immediately prior thereto shall be reduced
immediately thereafter to the price determined by multiplying (1) the Conversion
Price in effect immediately prior thereto by (2) a fraction, the numerator of
which shall be the Market Price per share of Common Stock on such record date
less the then fair market value (as determined by the Board of Directors, whose
good faith determination shall be conclusive) as of such record date of the
shares, assets, evidences of indebtedness, rights or warrants so paid with
respect to one share of Common Stock, and the denominator of which shall be the
Market Price per share of Common Stock on such record date; provided, however,
that in the event the then fair market value (as so determined) so paid with
respect to one share of Common Stock is equal to or greater than the Market
Price per share of Common Stock on such record date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of shares of
Series A Preferred Stock shall have the right to receive the amount and kind of
shares, assets, evidences of indebtedness, rights or warrants such holder would
have received had such holder converted each such share of Series A Preferred
Stock immediately prior to record date for such distribution. In the event that
such distribution is not so made, the Conversion Price then in effect shall be
readjusted, effective as of the date when the Board of Directors determines not
to distribute such shares, evidences of indebtedness, assets, rights or
warrants, as the case may be, to the Conversion Price that would then be in
effect if such record date had not been fixed.
(iv) Business Combinations. In case of any Business
Combination or reclassification of Common Stock (other than a reclassification
of Common Stock referred to in Section 7(c)(ii)), lawful provision shall be made
as part of the terms of such Business Combination or reclassification whereby
the holder of each share of Series A Preferred Stock then outstanding shall have
the right thereafter to convert such share only into the kind and amount of
securities, cash and other property receivable upon the Business Combination or
reclassification by a holder of the number of shares of Common Stock of the
Corporation into
13
which a share of Series A Preferred Stock would have been convertible
immediately prior to the Business Combination or reclassification. The
Corporation, the Person formed by the consolidation or resulting from the merger
or which acquires such assets or which acquires the Corporation's shares, as the
case may be, shall make provisions in its certificate or articles of
incorporation or other constituent documents to establish such rights and to
ensure that the dividend, voting and other rights of the holders of Series A
Preferred Stock established herein are unchanged, except as permitted by Section
9 or as required by applicable law, rule or regulation. The certificate or
articles of incorporation or other constituent documents shall provide for
adjustments, which, for events subsequent to the effective date of the
certificate or articles of incorporation or other constituent documents, shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Section 7. Notwithstanding the provisions of this Section 7(c)(iv), in the
event of a Business Combination that also constitutes a Change of Control, the
provisions of Section 6 (and, the case of a Qualifying Change of Control,
Section 7(a)(iv)) shall apply to such Business Combination and the provisions of
this Section 7(c)(iv) shall not apply.
(v) Successive Adjustments. Successive adjustments in the
Conversion Price shall be made, without duplication, whenever any event
specified in Sections 7(c)(i), (ii), (iii) and (iv) shall occur.
(vi) Rounding of Calculations; Minimum Adjustments. All
calculations under this Section 7(c) shall be made to the nearest one-tenth
(1/10th) of a cent. No adjustment in the Conversion Price is required if the
amount of such adjustment would be less than $0.01; provided, however, that any
adjustments which by reason of this Section 7(c)(vi) are not required to be made
will be carried forward and given effect in any subsequent adjustment.
(vii) Adjustment for Unspecified Actions. If the Corporation
takes any action affecting the Common Stock, other than action described in this
Section 7(c), which in the opinion of the Board of Directors would materially
adversely affect the conversion rights of the holders of shares of Series A
Preferred Stock, the Conversion Price may be adjusted, to the extent permitted
by law, in such manner, if any, and at such time, as such Board of Directors may
determine in good faith to be equitable in the circumstances; provided, however,
that in no event shall adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to any of the provisions of this Section
7(c), except in the case of a combination of shares of a type contemplated in
Section 7(c)(ii), and then in no event to an amount more than the Conversion
Price as adjusted pursuant to Section 7(c)(ii). Failure of the Board of
Directors to provide for any such adjustment prior to the effective date of any
such action by the Corporation affecting the Common Stock will be evidence that
the Board of Directors has determined that it is equitable to make no
adjustments in the circumstances.
(viii) Voluntary Adjustment by the Corporation. The
Corporation may at its option, at any time during the term of the Series A
Preferred Stock, reduce the then current Conversion Price to any amount deemed
appropriate by the Board of Directors; provided, however, that if the
Corporation elects to make such adjustment, such adjustment will remain in
effect for at least a 15-day period, after which time the Corporation may, at
its option, reinstate the Conversion Price in effect prior to such reduction,
subject to any interim adjustments pursuant to this Section 7(c).
14
(ix) Statement Regarding Adjustments. Whenever the Conversion
Price shall be adjusted as provided in this Section 7(c), the Corporation shall
forthwith file, at the principal office of the Corporation, a statement showing
in reasonable detail the facts requiring such adjustment and the Conversion
Price that shall be in effect after such adjustment and the Corporation shall
also cause a copy of such statement to be sent by mail, first class postage
prepaid, to each holder of shares of Series A Preferred Stock at the address
appearing in the Corporation's records.
(x) Notices. In the event that the Corporation shall give
notice or make a public announcement to the holders of Common Stock of any
action of the type described in this Section 7(c) (but only if the action of the
type described in this Section 7(c) would result in an adjustment in the
Conversion Price or a change in the type of securities or property to be
delivered upon conversion of the Series A Preferred Stock), the Corporation
shall, at the time of such notice or announcement, and in the case of any action
which would require the fixing of a record date, at least 10 days prior to such
record date, give notice to the holder of shares of Series A Preferred Stock, in
the manner set forth in Section 7(c)(ix), which notice shall specify the record
date, if any, with respect to any such action and the approximate date on which
such action is to take place. Such notice shall also set forth the facts with
respect thereto as shall be reasonably necessary to indicate the effect on the
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable upon conversion of the Series A Preferred
Stock. Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any such action.
(xi) Purchase Rights. If at any time or from to time after the
Original Issuance Date, the Corporation shall grant, issue or sell any (I)
options, warrants or other rights to purchase or acquire Common Stock (other
than Excluded Stock), (II) securities by their terms convertible into or
exchangeable for Common Stock (other than Excluded Stock) or options, warrants
or other rights to purchase or acquire such convertible or exchangeable
securities or (III) rights to purchase property (collectively, the "PURCHASE
RIGHTS") pro rata to the record holders of any class of Common Stock and such
grants, issuance or sales do not result in an adjustment of the Conversion Price
under Section 7(c), then each holder of Series A Preferred Stock shall be
entitled to acquire (within thirty (30) days after the later to occur of the
initial exercise date of such Purchase Rights or receipt by such holder of the
notice concerning Purchase Rights to which such holder shall be entitled under
Section 7(c)(x)) and upon the terms applicable to such Purchase Rights either:
(A) the aggregate Purchase Rights which such holder could have
acquired if it had held the number of shares of Common Stock acquirable upon
conversion of the Series A Preferred Stock immediately before the grant,
issuance or sale of such Purchase Rights; provided that if any Purchase Rights
were distributed to holders of Common Stock without the payment of additional
consideration by such holders, corresponding Purchase Rights shall be
distributed to the exercising holders of the Series A Preferred Stock as soon as
possible after such exercise and it shall not be necessary for the exercising
holder of the Series A Preferred Stock specifically to request delivery of such
rights; or
(B) in the event that any such Purchase Rights shall have
expired or shall expire prior to the end of said thirty (30) day period, the
number of shares of Common
15
Stock or the amount of property which such holder could have acquired upon such
exercise at the time or times at which the Corporation granted, issued or sold
such expired Purchase Rights.
(xii) Miscellaneous. Except as provided in Section 7(c), no
adjustment in respect of any dividends or other payments or distributions made
to holders of Series A Preferred Stock of securities issuable upon the
conversion of the Series A Preferred Stock will be made during the term of the
Series A Preferred Stock or upon the conversion of the Series A Preferred Stock.
In addition, notwithstanding any of the foregoing, no such adjustment will be
made for the issuance or exercise of the Warrants (as defined below).
8. STATUS OF SHARES. All shares of Series A Preferred Stock that are
at any time redeemed pursuant to Section 5, repurchased pursuant to Section 6 or
converted pursuant to Section 7 and all shares of Series A Preferred Stock that
are otherwise reacquired by the Corporation shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, subject to reissuance by the Board of Directors as shares of any one or
more other series.
9. VOTING RIGHTS.
(a) The holders of record of shares of Series A Preferred Stock
shall not be entitled to any voting rights except as hereinafter provided in
this Section 9 or as otherwise provided by law.
(b) Upon the earliest to occur of (I) the Stockholders Vote, (II)
the time the Corporation receives confirmation from the NASD, Inc. (which
confirmation shall be reasonably satisfactory to the Corporation) that the
holders of the shares of Series A Preferred Stock would be permitted to vote
such shares as provided in this paragraph (b) or (III) December 31, 2002, the
holders of the shares of Series A Preferred Stock (i) shall be entitled to vote
with the holders of the Common Stock on all matters submitted for a vote of
holders of Common Stock (voting together with the holders of Common Stock as one
class), (ii) shall be entitled to a number of votes equal to the number of votes
to which shares of Common Stock issuable upon conversion of such shares of
Series A Preferred Stock would have been entitled if such shares of Common Stock
had been outstanding at the time of the applicable vote and related record date
(provided that, solely for purposes of determining the number of shares of
Common Stock issuable upon conversion of Series A Preferred Stock for this
Section 9(b), no adjustments to the Conversion Price pursuant to Section 7(c)
(other than any adjustments made pursuant to Section 7(c)(ii)) that would make
the Conversion Price less than $2.18) shall be taken into account) and (iii)
shall be entitled to notice of any stockholders' meeting in accordance with the
certificate of incorporation and bylaws of the Corporation. Notwithstanding the
foregoing, the holders of the shares of Series A Preferred Stock shall not be
entitled to vote in connection with the Stockholders Vote unless approved by the
NASD, Inc.
(c) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not, without the written consent or
affirmative vote at a meeting called for that purpose by holders of at least a
majority of the outstanding shares of Series A Preferred Stock, voting as a
single class:
16
(i) amend, alter or repeal any provision of the Corporation's
certificate of incorporation (by merger or otherwise) or bylaws so as to
adversely affect the preferences, rights or powers of the Series A Preferred
Stock; provided that any such amendment, alteration or repeal to create,
authorize or issue any Junior Securities, or any security convertible into, or
exchangeable or exercisable for, shares of Junior Securities, shall not be
deemed to have any such adverse effect;
(ii) create, authorize or issue any Senior Securities or
Parity Securities, or any security convertible into, or exchangeable or
exercisable for, shares of Senior Securities or Parity Securities;
(iii) repurchase or redeem any of its equity securities or
rights to acquire equity securities (other an from an employee, director or
consultant following the termination of employment or service with the
Corporation of such Person); or
(iv) declare or pay any dividend on the Common Stock;
provided that no such consent or vote of the holders of Series A Preferred Stock
shall be required if at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such securities is to be
made, as the case may be, all shares of Series A Preferred Stock at the time
outstanding shall have been called for redemption by the Corporation or
submitted for repurchase by the holders thereof in accordance with Section 5 or
Section 6, as the case may be, and the funds necessary for such redemption or
repurchase shall have been set aside.
(d) The consent or votes required in Section 9(c) shall be in
addition to any approval of stockholders of the Corporation which may be
required by law or pursuant to any provision of the Corporation's certificate of
incorporation or bylaws, which approval shall be obtained by vote of the
stockholders of the Corporation in the manner provided in Section 9(b).
(e) After the time of the Stockholders Vote and for as long as
Warburg Pincus Private Equity VIII, L.P. and its Affiliates (collectively,
"WARBURG") Beneficially Owns at least twenty-five percent (25%) of the shares of
the Series A Preferred Stock issued to Warburg pursuant to the Purchase
Agreement (including as owned and outstanding for this purpose shares of Common
Stock issuable upon conversion of shares of the Series A Preferred Stock and
exercise of the Warrants issued to Warburg thereunder), Warburg shall have the
exclusive right to appoint one (1) director (hereinafter referred to as the
"WARBURG DIRECTOR") to the Corporation's Board of Directors. The Warburg
Director shall be duly appointed in accordance with the Corporation's bylaws,
Certificate of Incorporation and the General Corporation Law of Delaware. Each
Warburg Director so elected shall serve for a term of three years as a Class II
Director (as designated in the Corporation's Certificate of Incorporation) and
until his or her successor is elected and qualified. For so long as such
membership does not conflict with any applicable law or regulation or listing
requirement of the Nasdaq National Market (as determined in good faith by the
Board of Directors of the Corporation), the Warburg Director shall serve as a
member of the Audit Committee, Compensation Committee and each other principal
committee of the Board of Directors. Any vacancy in the position of a Warburg
Director may be filled only by Warburg. The Warburg Director may, during his or
her term of office, be removed at any
17
time, with or without cause, by and only by Warburg, at a special meeting called
for such purpose or by written consent of Warburg. Any vacancy created by such
removal may also be filled at such meeting or by such consent.
10. DEFINITIONS.
Unless the context otherwise requires, when used herein the
following terms shall have the meaning indicated.
"Affiliate" means with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person. For purposes of this
definition, the term "control" (and correlative terms "controlling," "controlled
by" and "under common control with") means possession of the power, whether by
contract, equity ownership or otherwise, to direct the policies or management of
a Person.
"Beneficially Own" or "Beneficial Ownership" is defined in Rules
13d-3 and 13d-5 of the Exchange Act, but without taking into account any
contractual restrictions or limitations on voting or other rights.
"Business Combination" means (a) any reorganization, consolidation,
merger, share exchange or similar business combination transaction involving the
Corporation with any Person or (b) the sale, assignment, conveyance, transfer,
lease or other disposition by the Corporation of all or substantially all of its
assets.
"Capital Stock" means (a) with respect to any Person that is a
corporation or company, any and all shares, interests, participations or other
equivalents (however designated) of capital or capital stock of such Person and
(b) with respect to any Person that is not a corporation or company, any and all
partnership or other equity interests of such Person.
"Change in Control" shall mean the happening of any of the following
events:
(a) The acquisition by any Person of Beneficial Ownership of 50% or
more of either (i) the then-outstanding shares of Common Stock (the "Outstanding
Corporation Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Corporation entitled to vote generally
in the election of directors (the "Outstanding Corporation Voting Securities");
provided, however, that, for purposes of this definition, the following
acquisitions shall not constitute a Change in Control: (A) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any company that is an Affiliate of the Corporation or (B) any
acquisition by any corporation pursuant to a transaction that complies with
(c)(i) and (c)(ii) in this definition; or
(b) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board; or
18
(c) Consummation of a Business Combination, in each case, unless,
following such Business Combination, (i) all or substantially all of the Persons
that were the Beneficial Owners of the Outstanding Corporation Common Stock and
the Outstanding Corporation Voting Securities immediately prior to such Business
Combination Beneficially Own, directly or indirectly, more than 50% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Corporation Common Stock and the
Outstanding Corporation Voting Securities, as the case may be, and (ii) no
Person (excluding any Person resulting from such Business Combination or any
employee benefit plan (or related trust) of the Corporation or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 50% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such
corporation; or
(d) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
"Common Stock" means the Class A Common Stock of the Corporation,
par value $.01 per share.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and regulations promulgated
thereunder.
"Excluded Stock" means (a) shares of Common Stock issued by the
Corporation as a stock dividend payable in shares of Common Stock, or upon any
subdivision or split-up of the outstanding shares of Capital Stock, in each case
which is subject to the provisions of Section 7(c)(ii), or upon conversion of
shares of Capital Stock (but not the issuance of such Capital Stock which will
be subject to the provisions of Section 7(c)(i)(C)), (b) the issuance of shares
of Common Stock in any Qualified Public Offering, (c) the issuance of shares of
Common Stock (including upon exercise of options, warrants or other securities)
to directors, advisors, employees or consultants of the Corporation pursuant to
a stock option plan, restricted stock plan or other agreement approved by the
Board of Directors, (d) the issuance of shares of Common Stock in connection
with acquisitions of assets or securities of another Person, (e) the issuance
of shares of Common Stock upon exercise of the Series A Preferred Stock and the
Warrants and (f) the issuance of any Warrants issued after the date hereof.
"Market Price" means, with respect to a particular security, on any
given day, the average of the highest and lowest reported sale prices regular
way or, in case no such reported sales takes place on such day, the average of
the highest asked and lowest bid prices regular way, in either case on the
principal national securities exchange on which the applicable securities are
listed or admitted to trading, or if not listed or admitted to trading on any
national securities exchange, (a) the average of the highest and lowest sale
prices for such day reported by the Nasdaq Stock Market if such security is
traded over-the-counter and quoted in the Nasdaq Stock
19
Market, or (b) if such security is so traded, but not so quoted, the average of
the highest reported asked and lowest reported bid prices of such security as
reported by the Nasdaq Stock Market or any comparable system, or (c) if such
security is not listed on the Nasdaq Stock Market or any comparable system, the
average of the highest asked and lowest bid prices as furnished by two members
of the National Association of Securities Dealers, Inc. selected from time to
time by the Corporation for that purpose. If such security is not listed and
traded in a manner that the quotations referred to above are available for the
period required hereunder, the Market Price per share of Common Stock shall be
deemed to be the fair value per share of such security as determined in good
faith by the Board of Directors.
"Ordinary Cash Dividends" means any cash dividend or cash
distribution which, when combined on a per share of Common Stock basis with the
per share amounts of all other cash dividends and cash distributions paid on the
Common Stock during the 365-day period ending on the Dividend Payment Record
Date of such dividend or distribution (as adjusted to appropriately reflect any
of the events referred to in Section 7(c) and excluding (i) cash dividends or
cash distributions that resulted in an adjustment to the Conversion Price, (ii)
cash dividends paid on the Common Stock in which the Preferred Stock
participates, and (iii) cash dividends or cash distributions paid on the Series
A Preferred Stock), does not exceed 15% of the Market Price of a share of Common
Stock on the trading day immediately preceding the date of declaration of such
dividend or distribution.
"Original Issue Date" means the date upon which the initial shares
of Series A Preferred Stock were originally issued by the Corporation.
"Outstanding" means, at any time, the number of shares of Common
Stock then outstanding calculated on a fully diluted basis, assuming the
exercise, exchange or conversion into Common Stock of all outstanding securities
exercisable, exchangeable or convertible into shares of Common Stock (whether or
not then exercisable, exchangeable or convertible).
"Person" means an individual, corporation, partnership, other entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act).
"Purchase Agreement" means the Purchase Agreement, dated as of June
16, 2002, among the Corporation and the purchasers named therein, including all
schedules and exhibits thereto.
"Stockholders Vote" means the vote of the stockholders of the
Corporation contemplated by Section 5.6 of the Purchase Agreement.
"Qualifying Change of Control" means a Change of Control following
the consummation of which the value of the consideration (in the form of cash or
liquid securities) that would be received upon conversion of one share of Series
A Preferred Stock (the "As-Converted Consideration") would equal or exceed 110%
of the Liquidation Value then in effect (after taking into account any increase
in the Liquidation Value as a result of such Change in Control) (the "Value
Threshold"); provided, that a Change of Control will also constitute a
Qualifying Change of Control if the Corporation, at its option, reduces the
Conversion Price then in effect in order to make the As-Converted Consideration
equal or exceed the Value Threshold.
20
"Qualified Public Offering" means a public or private offering of
the shares of Common Stock pursuant to an effective registration statement,
pursuant to which the gross proceeds to the Corporation are not less than
$20,000,000.
"Subsidiary" of a Person means (a) a corporation, a majority of
whose stock with voting power, under ordinary circumstances, to elect directors
is at the time of determination, directly or indirectly, owned by such Person or
by one or more Subsidiaries of such Person, or (b) any other entity (other than
a corporation) in which such Person or one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has at least a
majority ownership interest.
"Warrants" means collectively the warrants which are issuable to the
purchasers named in the Purchase Agreement pursuant to the Purchase Agreement.
11. NO OTHER RIGHTS.
The shares of Series A Preferred Stock shall not have any relative,
optional or other special rights and powers except as set forth herein or as may
be required by law.
This Certificate shall become effective at _____ p.m. Eastern
Standard Time on _________________ __, 2002.
21
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed and acknowledged by its undersigned duly authorized officer
this __________________ day of _____, 2002.
PROXIM CORPORATION
By:
-------------------------------
Name:
Title:
EXHIBIT D
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT OR SUCH LAWS, AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THEY PROPOSED TRANSFER IS
EXEMPT FROM THE ACT OR SUCH LAWS.
WARRANT
No. _____ ________ __, 2002
TO PURCHASE SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01
PER SHARE, OF PROXIM CORPORATION
1. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Affiliate" means with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person. For purposes of this
definition, the term "control" (and correlative terms "controlling," "controlled
by" and other "under common control with") means possession of the power,
whether by contract, equity ownership or otherwise, to direct the policies or
management of a Person.
"Board" means the Board of Directors of the Company.
"Business Combination" means (a) any reorganization, consolidation,
merger, share exchange or similar business combination transaction involving the
Company with any Person or (b) the sale, assignment, conveyance, transfer, lease
or other disposition by the Company of all or substantially all of its assets.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in New
York City, New York generally are authorized or required by law or other
governmental actions to close.
"Capital Stock" means (a) with respect to any Person that is a
corporation or company, any and all shares, interests, participations or other
equivalents (however designated)
2
of capital or capital stock of such Person and (b) with respect to any Person
that is not a corporation or company, any and all partnership or other equity
interests of such Person.
"Certificate of Designation" means the Certificate of Designations,
Preferences and Rights relating to the Preferred Stock filed with the Secretary
of State of Delaware on ___________ __, 2002.
"Common Stock" means the Company's Class A Common Stock, par value
$.01 per share.
"Company" means Proxim Corporation, a Delaware corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and regulations promulgated
thereunder.
"Excluded Stock" means (a) shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock, or upon any
subdivision or split-up of the outstanding shares of Capital Stock, in each case
which is subject to Section 13(B), or upon conversion of shares of Capital Stock
(but not the issuance of such Capital Stock which will be subject to the
provisions of Section 13(A) (iii)), (b) the issuance of shares of Common Stock
in any Qualified Public Offering, (c) the issuance of shares of Common Stock
(including upon exercise of options, warrants or other securities) to directors,
advisors, employees or consultants of the Company pursuant to a stock option
plan, employee stock purchase plan, restricted stock plan or other agreement
approved by the Board, (d) the issuance of shares of Common Stock in connection
with acquisitions of assets or securities of another Person (other than
issuances to Affiliates of the Company), and (e) the issuance of shares of
Common Stock upon conversion of the Preferred Stock and exercise of the
Warrants.
"Exercise Price" has the meaning given to it in Section 2(A).
"Expiration Time" has the meaning given to it in Section 3.
"Initial Conversion Price" shall have the meaning set forth in
Section 7 of the Certificate of Designation.
"Market Price" means, with respect to a particular security, on any
given day, the average of the highest and lowest reported sale prices regular
way or, in case no such reported sales takes place on such day, the average of
the highest asked and lowest bid prices regular way, in either case on the
principal national securities exchange on which the applicable securities are
listed or admitted to trading, or if not listed or admitted to trading on any
national securities exchange, (a) the average of the highest and lowest sale
prices for such day reported by the Nasdaq Stock Market if such security is
traded over-the-counter and quoted in the Nasdaq Stock Market, or (b) if such
security is so traded, but not so quoted, the average of the highest reported
asked and lowest reported bid prices of such security as reported by the Nasdaq
Stock Market or any comparable system, or (c) if such security is not listed on
the Nasdaq Stock Market or any comparable system, the average of the highest
asked and lowest bid prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If such security is not listed and traded in a manner
that the
3
quotations referred to above are available for the period required hereunder,
the Market Price per share of Common Stock shall be deemed to be the fair value
per share of such security as determined in good faith by the Board.
"Ordinary Cash Dividends" means any cash dividend or cash
distribution which, when combined on a per share of Common Stock basis with the
per share amounts of all other cash dividends and cash distributions paid on the
Common Stock during the 365-day period ending on the date of declaration of such
dividend or distribution (as adjusted to appropriately reflect any of the events
referred to in Section 13 and excluding (i) cash dividends or cash distributions
that resulted in an adjustment to the Exercise Price, (ii) cash dividends paid
on the Common Stock in which the Preferred Stock participates pursuant to
Section 3(a)(i) of the Certificate of Designation and (ii) cash dividends or
cash distributions paid on the Preferred Stock), does not exceed 15% of the
Market Price of a share of Common Stock on the trading day immediately preceding
the date of declaration of such dividend or distribution.
"Original Issue Date" means the date on which the Warrants of this
Series were first issued.
"Outstanding" means, at any time, the number of shares of Common
Stock then outstanding calculated on a fully diluted basis, assuming the
exercise, exchange or conversion into Common Stock of all securities
exercisable, exchangeable or convertible into shares of Common Stock (whether or
not then exercisable, exchangeable or convertible).
"Qualified Public Offering" means a public or private offering of
the shares of Common Stock pursuant to an effective registration statement,
pursuant to which the gross proceeds to the Company are not less than
$20,000,000.
"Person" means an individual, corporation, partnership, other entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act).
"Preferred Stock" means the Series A Convertible Preferred Stock of
the Company or successor preferred stock as contemplated by the Certificate of
Designation.
"Purchase Agreement" means the Securities Purchase Agreement, dated
as of June 16, 2002, among the Company and the purchasers named therein,
including all schedules and exhibits thereto.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor statute, and the rules and regulations promulgated thereunder.
"Shares" is defined in Section 2(A).
"Subsidiary" of a Person means (a) a corporation, a majority of
whose stock with voting power, under ordinary circumstances, to elect directors
is at the time of determination, directly or indirectly, owned by such Person or
by one or more Subsidiaries of such Person, or (b) any other entity (other than
a corporation) in which such Person or one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has at least a
majority ownership interest.
4
"Warrantholder" has the meaning given to it in Section 2(A).
"Warrants" means collectively the warrants represented hereby (and
by any instrument replacing, in whole or in part, this instrument) which were
issued to the purchasers named in the Purchase Agreement pursuant to the
Purchase Agreement.
2. Number of Shares; Exercise Price.
(A) This certifies that, for value received, ________ or its
registered assigns (the "Warrantholder") is entitled, upon the terms and subject
to the conditions hereinafter set forth, to acquire from the Company, in whole
or in part, up to an aggregate of fully paid and
nonassessable shares of Class A Common Stock, par value $.01 per share, (the
"Shares") of the Company, at a per Share purchase price (the "Exercise Price")
equal to $3.0559. The number and type of Shares and the Exercise Price are
subject to adjustment as provided herein, and all references to "Shares",
"Common Stock" and "Exercise Price" herein shall be deemed to include any such
adjustment or series of adjustments.
3. Exercise Rights.
(A) Exercise of Warrant; Term. The right to purchase the Shares
represented by this Warrant is exercisable, in whole or in part, by the
Warrantholder, at any time or from time to time but in no event later than 11:59
p.m. New York City Time, on ___________ __, 2007 [Fifth anniversary of closing
date] (the "Expiration Date"), by (a) the surrender of this Warrant and Notice
of Exercise annexed hereto, duly completed and executed on behalf of the
Warrantholder, at the office of the Company in Sunnyvale, California (or such
other office or agency of the Company in the United States as it may designate
by notice in writing to the Warrantholder at the address of the Warrantholder
appearing on the books of the Company), and (b) payment of the Exercise Price
for the Shares thereby purchased at the election of the Warrantholder in one or
a combination of the following manners:
(i) by tendering in cash, by certified or cashier's check or
by wire transfer payable to the order of the Company; or
(ii) by having the Company withhold shares of Common Stock
issuable upon exercise of this Warrant equal in value to the aggregate Exercise
Price as to which this Warrant is so exercised based on the Market Price of the
Common Stock on the trading day prior to the date on which this Warrant and the
Notice of Exercise are delivered to the Company.
(B) Replacement of Warrant. If the exercising (or selling, as the
case may be) Warrantholder does not exercise (or sell, as the case may be) this
Warrant in its entirety, the Warrantholder will be entitled to receive from the
Company within a reasonable time, not exceeding five (5) Business Days, a new
warrant in substantially identical form for the purchase of that number of
Shares equal to the difference between the number of Shares subject to this
Warrant and the number of Shares as to which this Warrant is so exercised (or
sold, as the case may be).
(C) Notwithstanding anything to the contrary contained herein, if
the Holder shall have given the Company written notice or its intention to
exercise this Warrant on or before
5
11:59 p.m., New York City time on the Expiration Date, the Holder may exercise
this Warrant at any time through (and including) the Business Day next following
the date that all applicable required regulatory holding periods have expired
and all applicable required governmental approvals have been obtained in
connection with such exercise of this Warrant.
4. Issuance of Shares; Authorization; Listing. Subject to the next
sentence, certificates for Shares issued upon exercise of this Warrant will be
issued in such name or names as the Warrantholder may designate and will be
delivered to such named Person or Persons within a reasonable time, not to
exceed five (5) Business Days after the date on which this Warrant has been duly
exercised in accordance with the terms of this Warrant. The Company hereby
represents and warrants that any Shares issued upon the exercise of this Warrant
in accordance with the provisions of Section 3 will, upon issuance and payment
therefor, be duly and validly authorized and issued, fully paid and
nonassessable, free from all preemptive rights and free from all taxes, liens,
security interests and charges (other than liens or charges created by or
imposed upon the Warrantholder or taxes in respect of any transfer occurring
contemporaneously therewith). The Company agrees that the Shares so issued will
be deemed to have been issued to the Warrantholder as of the close of business
on the date on which this Warrant and payment of the Exercise Price are
delivered (or deemed delivered upon a cashless exercise) to the Company in
accordance with the terms of this Warrant, notwithstanding that the stock
transfer books of the Company may then be closed or certificates representing
such Shares may not be actually delivered on such date. The Company will at all
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, the aggregate number of shares of Common Stock
issuable upon exercise of this Warrant. The Company will procure, at its sole
expense, the listing of the Shares, subject to issuance or notice of issuance on
the principal domestic stock exchange or inter-dealer quotation system on which
the Common Stock is then listed or traded. The Company will take all
commercially reasonable action as may be necessary to ensure that the Shares may
be issued without violation of any applicable law or regulation or of any
requirement of any securities exchange on which the Shares are listed or traded.
5. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon any exercise of this
Warrant. In lieu of any fractional Share to which the Warrantholder would
otherwise be entitled, the Warrantholder shall be entitled to receive a cash
payment equal to the Market Price per share of Common Stock computed as of the
trading day immediately preceding the date the Warrant is presented for
exercise, multiplied by such fraction of a Share.
6. No Rights as Shareholders. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a shareholder of the
Company prior to the date of exercise hereof.
7. Charges, Taxes and Expenses. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the Warrantholder or such designated Persons for any issue or transfer tax
(other than taxes in respect of any transfer occurring contemporaneously
therewith or as a result of the holder being a non-U.S. person) or other
incidental expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company
6
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of Common Stock in a
name other than that of the Warrantholder or such designated Persons, and no
such issuance or delivery shall be made unless and until the person requesting
such issuance or delivery has paid to the Company the amount of any such tax or
has established, to the satisfaction of the Company, that such tax has been
paid.
8. Transfer/Assignment. This Warrant and any rights hereunder are
not transferable by the Warrantholder, in whole or in part, in the absence of
any effective registration statement related to this Warrant or an opinion of
counsel, satisfactory in form and substance to the Company, that such
registration is not required under the Securities Act and any applicable state
securities laws. Subject to compliance with the preceding sentence, this Warrant
and all rights hereunder are transferable, in whole or in part, upon the books
of the Company by the registered holder hereof in person or by duly authorized
attorney, and a new warrant shall be made and delivered by the Company, of the
same tenor as this Warrant but registered in the name of the transferee, upon
surrender of this Warrant, duly endorsed, to the office or agency of the Company
described in Section 3. All expenses, taxes (other than stock transfer taxes or
taxes imposed because the transferee is a non-U.S. Person) and other charges
payable in connection with the preparation, execution and delivery of the new
warrants pursuant to this Section 8 shall be paid by the Company. The
restrictions imposed by the first sentence of this Section 8 shall terminate as
to the Warrant (i) when such security has been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering such security, except with respect to securities held following such
disposition by Affiliates of the Company, or (ii) when, in the opinion of
counsel for the Company, such restrictions are no longer required in order to
achieve compliance with the Securities Act.
9. Exchange and Registry of Warrant. This Warrant is exchangeable,
upon the surrender hereof by the Warrantholder at the office or agency of the
Company described in Section 3, for a new warrant or warrants of like tenor
representing the right to purchase in the aggregate a like number of Shares. The
Company shall maintain at the office or agency described in Section 3 a registry
showing the name and address of the Warrantholder as the registered holder of
this Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
10. Loss, Theft, Destruction or Mutilation of Warrant. If this
Warrant is mutilated, lost, stolen or destroyed, the Company will issue and
deliver in substitution for and upon cancellation of the mutilated Warrant, or
in substitution for the Warrant lost, stolen or destroyed, a new warrant or
warrants of like tenor and representing an equivalent right or interest, but
only upon, in the case of a lost, stolen or destroyed certificate, receipt of
evidence satisfactory to the Company of such loss, theft or destruction. If
required by the Company, the Warrantholder shall furnish an indemnity bond
sufficient to protect the Company from any out-of-pocket loss which it may
suffer if a Warrant is replaced. The Company may charge the Warrantholder for
its reasonable expenses in replacing a Warrant.
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a
7
Business Day, then such action may be taken or such right may be exercised on
the next succeeding day that is a Business Day.
12. Rule 144 Information. The Company covenants that it will file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder (or, if the Company is
not required to file such reports, it will, upon the request of any
Warrantholder, make publicly available such information as is described in Rule
144(c)(2) under the Securities Act). Upon the request of any Warrantholder, the
Company will deliver to such Warrantholder a written statement that it has
complied with such requirements.
13. Adjustments and Other Rights. The Exercise Price and the number
of Shares issuable upon exercise of this Warrant shall be subject to adjustment
from time to time as follows:
(A) Common Stock Issued at Less than Exercise Price. If the Company
issues or sells any Common Stock (including any securities exercisable,
exchangeable or convertible into Common Stock) other than Excluded Stock without
consideration or for consideration per share (as determined below) less than the
Exercise Price in effect as of the day of such issuance or sale, the Exercise
Price in effect immediately prior to each such issuance or sale will immediately
be reduced to the price determined by multiplying the Exercise Price in effect
immediately prior to such issuance or sale, by a fraction, (1) the numerator of
which shall be the sum of (w) the number of shares of Common Stock Outstanding
immediately prior to such issuance or sale plus (x) the number of additional
shares of Common Stock which the aggregate consideration received by the Company
for the total number of such shares of Common Stock (or shares of Common Stock
issuable upon exercise, exchange or conversion) so issued or sold would purchase
at the Exercise Price in effect on the last trading day immediately preceding
such issuance or sale, and (2) the denominator of which shall be the sum of (y)
the number of shares of Common Stock Outstanding immediately prior to such
issuance or sale plus (z) the number of additional shares of Common Stock (or
shares of Common Stock issuable upon exercise, exchange or conversion) so issued
or sold. In such event, the number of shares of Common Stock issuable upon the
exercise of this Warrant shall be increased to the number obtained by dividing
(i) the product of (a) the number of Shares issuable upon the exercise of this
Warrant before such adjustment, and (b) the Exercise Price in effect immediately
prior to the issuance giving rise to this adjustment by (ii) the new Exercise
Price determined in accordance with the immediately preceding sentence. For the
purposes of any adjustment of the Exercise Price and the number of Shares
issuable upon exercise of this Warrant pursuant to this Section 13(A), the
following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash, the
amount of the consideration received by the Company shall be deemed to be the
amount of the cash proceeds received by the Company for such Common Stock before
deducting therefrom any discounts or commissions allowed, paid or incurred by
the Company for any underwriting or otherwise in connection with the issuance
and sale thereof.
(ii) In the case of the issuance of Common Stock (otherwise
than upon the conversion of shares of Capital Stock or other securities of the
Company) for a consideration
8
in whole or in part other than cash, including securities acquired in exchange
therefor (other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be the fair value thereof as
determined by the Board, provided, however, that such fair value as determined
by the Board shall not exceed the aggregate Market Price of the shares of Common
Stock being issued as of the date the Board authorizes the issuance of such
shares.
(iii) In the case of the issuance of (a) options, warrants or
other rights to purchase or acquire Common Stock (whether or not at the time
exercisable) or (b) securities by their terms convertible into or exchangeable
for Common Stock (whether or not at the time so convertible or exchangeable) or
options, warrants or rights to purchase such convertible or exchangeable
securities (whether or not at the time exercisable):
(a) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options, warrants or other rights to purchase
or acquire Common Stock shall be deemed to have been issued at the time such
options, warrants or rights are issued and for a consideration equal to the
consideration (determined in the manner provided in Section 13(A)(i) and (ii)),
if any, received by the Company upon the issuance of such options, warrants or
rights plus the minimum purchase price provided in such options, warrants or
rights for the Common Stock covered thereby;
(b) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options, warrants or other
rights to purchase or acquire such convertible or exchangeable securities and
the subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options, warrants or
rights were issued and for a consideration equal to the consideration, if any,
received by the Company for any such securities and related options, warrants or
rights (excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration (determined in the manner provided
in Section 13(A)(i) and (ii)), if any, to be received by the Company upon the
conversion or exchange of such securities, or upon the exercise of any related
options, warrants or rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion or exchange thereof;
(c) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options, warrants or rights or conversion
or exchange of such convertible or exchangeable securities or any change in the
consideration to be received by the Company upon such exercise, conversion or
exchange, but excluding changes resulting from the anti-dilution provisions
thereof (to the extent comparable to the anti-dilution provisions contained
herein), the Exercise Price and the number of Shares issuable upon exercise of
this Warrant as then in effect shall forthwith be readjusted to such Exercise
Price and number of Shares as would have been obtained had an adjustment been
made upon the issuance of such options, warrants or rights not exercised prior
to such change, or of such convertible or exchangeable securities not converted
or exchanged prior to such change, upon the basis of such change;
(d) on the expiration or cancellation of any such options, warrants
or rights (without exercise), or the termination of the right to convert or
exchange such convertible or exchangeable securities (without exercise), if the
Exercise Price and the number of Shares
9
issuable upon exercise of this Warrant shall have been adjusted upon the
issuance thereof, the Exercise Price and the number of Shares issuable upon
exercise of this Warrant shall forthwith be readjusted to such Exercise Price
and number of Shares as would have been obtained had an adjustment been made
upon the issuance of such options, warrants, rights or such convertible or
exchangeable securities on the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options,
warrants or rights, or upon the conversion or exchange of such convertible or
exchangeable securities; and
(e) if the Exercise Price and the number of Shares issuable upon
exercise of this Warrant shall have been adjusted upon the issuance of any such
options, warrants, rights or convertible or exchangeable securities, no further
adjustment of the Exercise Price and the number of Shares issuable upon exercise
of this Warrant shall be made for the actual issuance of Common Stock upon the
exercise, conversion or exchange thereof.
(B) Stock Splits, Subdivisions, Reclassifications or Combinations.
If the Company shall (1) declare a dividend or make a distribution on its Common
Stock in shares of Common Stock, (2) subdivide or reclassify the outstanding
shares of Common Stock into a greater number of shares, or (3) combine or
reclassify the outstanding Common Stock into a smaller number of shares, the
number of Shares issuable upon exercise of this Warrant at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be proportionately adjusted
so that the Warrantholder after such date shall be entitled to purchase the
number of shares of Common Stock which such holder would have owned or been
entitled to receive after such date had this Warrant been exercised immediately
prior to such date. In such event, the Exercise Price in effect at the time of
the record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted to the number
obtained by dividing (i) the product of (a) the number of Shares issuable upon
the exercise of this Warrant before such adjustment and (b) the Exercise Price
in effect immediately prior to the issuance giving rise to this adjustment by
(ii) the new number of Shares issuable upon exercise of the Warrant determined
pursuant to the immediately preceding sentence.
(C) Other Distributions. In case the Company shall fix a record date
for the making of a distribution to all holders of shares of its Common Stock
(i) of shares of any class or of any Person other than shares of the Common
Stock or (ii) of evidence of indebtedness of the Company or any Subsidiary or
(iii) of assets (excluding Ordinary Cash Dividends, and dividends or
distributions referred to in Section 13(B)), or (iv) of rights or warrants, in
each such case the number of Shares issuable upon exercise of this Warrant shall
be multiplied by a fraction, the numerator of which is the Market Price per
share of Common Stock on such record date and the denominator of which is the
Market Price per share of Common Stock on such record date less the fair market
value (as reasonably determined by the Board, whose good faith determination
shall be conclusive) of said shares or evidences of indebtedness or assets or
rights or warrants to be so distributed per share of Common Stock; such
adjustment shall take effect on the record date for such distribution. In such
event, the Exercise Price shall be multiplied by a fraction, the numerator of
which is the number of Shares issuable upon the exercise of this Warrant before
such adjustment, and the denominator of which is the new number of Shares
issuable upon exercise of this Warrant determined in accordance with the
immediately preceding sentence. Notwithstanding the foregoing, in the event that
the fair market value (as determined above) of
10
the shares or evidences of indebtedness or assets or rights or warrants to be so
distributed with respect to one share of Common Stock is equal to or greater
than the Market Price per share of Common Stock on such record date, then proper
provision shall be made such that upon exercise of the Warrant, the holder shall
receive the amount and kind of such shares, assets, evidences of indebtedness,
rights or warrants such holders would have received had such holders exercised
this Warrant immediately prior to such record date. In the event that such
distribution is not so made, the Exercise Price and the number of Shares
issuable upon exercise of this Warrant then in effect shall be readjusted,
effective as of the date when the Board determines not to distribute such
shares, evidences of indebtedness, assets, rights or warrants, as the case may
be, to the Exercise Price that would then be in effect and the number of Shares
that would then be issuable upon exercise of this Warrant if such record date
had not been fixed.
(D) Business Combinations. In case of any Business Combination or
reclassification of Common Stock (other than a reclassification of Common Stock
referred to in Section 13(B)), this Warrant after the date of such Business
Combination or reclassification will be exercisable solely for the number of
shares of stock or other securities or property (including cash) to which the
Common Stock issuable (at the time of such Business Combination or
reclassification) upon exercise of this Warrant immediately prior to such
Business Combination or reclassification would have been entitled upon such
Business Combination or reclassification; and in any such case, if necessary,
the provisions set forth herein with respect to the rights and interests
thereafter of the Warrantholder shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant.
In determining the kind and amount of stock, securities or the property
receivable upon consummation of such Business Combination or reclassification,
if the holders of Common Stock have the right to elect the kind or amount of
consideration receivable upon consummation of such Business Combination, then
the Warrantholder shall have the right to make a similar election upon exercise
of this Warrant with respect to the number of shares of stock or other
securities or property which the Warrantholder will receive upon exercise of
this Warrant.
(E) Successive Adjustments. Successive adjustments in the Exercise
Price and the number of shares of Common Stock issuable upon exercise of this
Warrant shall be made, without duplication, whenever any event specified in
Sections 13(A), (B), (C) and (D) shall occur.
(F) Rounding of Calculations; Minimum Adjustments. All calculations
under this Section 13 shall be made to the nearest one-tenth (1/10th) of a cent
or to the nearest one-hundredth (1/100th) of a share, as the case may be. No
adjustment in the Exercise Price or the number of Shares into which this Warrant
is exercisable is required if the amount of such adjustment would be less than
$0.01 or one-tenth (1/10th) of a share of Common Stock, as the case may be;
provided, however, that any adjustments which by reason of this Section 13(F)
are not required to be made will be carried forward and given effect in any
subsequent adjustment.
(H) Adjustment for Unspecified Actions. If the Company takes any
action affecting the Common Stock, other than action described in this Section
13, which in the opinion of the Board would materially adversely affect the
exercise rights of the Warrantholders, the Exercise Price for the Warrants
and/or the number of Shares received upon exercise of the
11
Warrant may be adjusted, to the extent permitted by law, in such manner, if any,
and at such time, as such Board may determine in good faith to be equitable in
the circumstances; provided, however, that in no event shall any adjustment have
the effect of increasing the Exercise Price as otherwise determined pursuant to
any of the provisions of this Section 13 except in the case of a combination of
shares of a type contemplated in Section 13(B) and then in no event to an amount
larger than the Exercise Price as adjusted pursuant to Section 13(B). Failure of
the Board to provide for any such adjustment prior to the effective date of any
such action by the Company affecting the Common Stock will be evidence that the
Board has determined that it is equitable to make no adjustments in the
circumstances.
(I) Voluntary Adjustment by the Company. The Company may at its
option, at any time during the term of the Warrants, reduce the then current
Exercise Price or increase the number of Shares for which the Warrant may be
exercised to any amount deemed appropriate by the Board; provided, however, that
if the Company elects to make such adjustment, such adjustment will remain in
effect for at least a 15-day period, after which time the Company may, at its
option, reinstate the Exercise Price or number of Shares in effect prior to such
reduction, subject to any interim adjustments pursuant to this Section 13.
(J) Statement Regarding Adjustments. Whenever the Exercise Price or
the number of Shares into which this Warrant is exercisable shall be adjusted as
provided in this Section 13, the Company shall forthwith file, at the principal
office of the Company a statement showing in reasonable detail the facts
requiring such adjustment and the Exercise Price that shall be in effect and the
number of Shares into which this Warrant shall be exercisable after such
adjustment and the Company shall also cause a copy of such statement to be sent
by mail, first class postage prepaid, to each Warrantholder at the address
appearing in the Company's records.
(K) Notices. In the event that the Company shall give notice or make
a public announcement to the holders of Common Stock of any action of the type
described in this Section 13 (but only if the action of the type described in
this Section 13 would result in an adjustment in the Exercise Price or the
number of Shares into which this Warrant is exercisable or a change in the type
of securities or property to be delivered upon exercise of this Warrant), the
Company shall, at the time of such notice or announcement, and in the case of
any action which would require the fixing of a record date, at least 10 days
prior to such record date, give notice to the Warrantholder, in the manner set
forth in Section 13(J), which notice shall specify the record date, if any, with
respect to any such action and the approximate date on which such action is to
take place. Such notice shall also set forth the facts with respect thereto as
shall be reasonably necessary to indicate the effect on the Exercise Price and
the number, kind or class of shares or other securities or property which shall
be deliverable upon exercise of this Warrant. Failure to give such notice, or
any defect therein, shall not affect the legality or validity of any such
action.
(L) Miscellaneous. Except as provided in Section 13, no adjustment
in respect of any dividends or other payments or distributions made to
Warrantholders of securities issuable upon exercise of Warrants will be made
during the term of a Warrant or upon the exercise of a Warrant. In addition,
notwithstanding any of the foregoing, no such adjustment will be made for the
issuance or conversion of the Preferred Stock.
12
(M) No Impairment. The Company will not, by amendment of its
Articles or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Warrantholder.
14. GOVERNING LAW. THIS WARRANT SHALL BE BINDING UPON ANY SUCCESSORS
OR ASSIGNS OF THE COMPANY. THIS WARRANT SHALL CONSTITUTE A CONTRACT UNDER THE
LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
15. Amendments. This Warrant may be amended and the observance of
any term of this Warrant may be waived only with the written consent of the
Company and the Warrantholder.
16. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b) one
Business Day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
Business Days after the date on which the same is deposited, postage prepaid, in
the U.S. mail, sent by certified or registered mail, return receipt requested,
and addressed to the party to be notified at the address indicated below for the
Company, or at the address for the Warrantholder set forth in the registry
maintained by the Company pursuant to Section 9, or at such other address and/or
telecopy or telex number and/or to the attention of such other person as the
Company or the Warrantholder may designate by ten-day advance written notice.
17. Entire Agreement. This Warrant and the forms attached hereto
contain the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
undertakings with respect thereto.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by a duly authorized officer.
Dated: ___________ __, 2002
PROXIM CORPORATION
By:
--------------------------------
Name:
Title:
(FORM OF NOTICE OF EXERCISE)(1)
Date: ______________
TO: Proxim Corporation
RE: Election to Subscribe for and Purchase Common Stock
The undersigned, pursuant to the provisions set forth in the
attached Warrant, hereby agrees to subscribe for and purchase the number of
shares of the Common Stock set forth below covered by such Warrant. The
undersigned, in accordance with Section 3 of the Warrant, hereby agrees to pay
the aggregate Exercise Price for such shares of Common Stock in the manner set
forth below. A new warrant evidencing the remaining shares of Common Stock
covered by such Warrant, but not yet subscribed for and purchased, should be
issued in the name set forth below. If the new warrant is being transferred, an
opinion of counsel is attached hereto with respect to the transfer of such
warrant.
Number of Shares of Common Stock:
----------------------------------
Method of Payment of Exercise Price:
------------------------------
Name and Address of Person to be
Issued New Warrant:
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Holder:
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By:
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Name:
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Title:
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(1) Appropriate changes shall be made to form if cashless exercise is mandatory.