NOTE PURCHASE AGREEMENT
AMONG
CIDCO INCORPORATED
AND
ID HOLDING PARTNERSHIP, L.P.
AND
ID PARTNERSHIP, L.P.
Dated as of June 7, 1996
TABLE OF CONTENTS
Page
1. Issuance and Sale of Notes................................... 1
1.1. Issuance, Purchase and Sale of Notes................. 1
1.2. Closing.............................................. 1
1.3. Conditions to Closing................................ 1
1.4. Deliveries at Closing................................ 4
1.5. Definitions.......................................... 4
2. Representations and Warranties of the Company................ 4
2.1. Organization and Qualification....................... 4
2.2. Due Authorization.................................... 5
2.3. Subsidiaries......................................... 5
2.4. SEC Reports.......................................... 5
2.5. Financial Statements................................. 6
2.6. Litigation........................................... 6
2.7. Title to Properties; Insurance....................... 6
2.8. Governmental Consents, etc........................... 7
2.9. Holding Company Act and Investment Company Act....... 7
2.10. Taxes................................................ 7
2.11. ERISA................................................ 7
2.12. Intellectual Property Rights......................... 8
2.13. Possession of Franchises, Licenses, Etc.............. 9
2.14. Compliance with Laws................................. 9
2.15. Conflicting Agreements and Charter Provisions........ 9
2.16. Capitalization....................................... 10
2.17. Disclosure........................................... 10
2.18. Offering of Securities............................... 10
2.19. Use of Proceeds...................................... 11
2.20. Election of Director................................. 11
2.21. Brokers or Finders................................... 11
3. Representations and Warranties of the Purchaser.............. 11
3.1. Organization and Qualification....................... 12
3.2. Due Authorization.................................... 12
3.3. Governmental Consents................................ 12
3.4. Conflicting Agreements............................... 12
3.5. Acquisition for Investment........................... 13
3.6. Brokers or Finders................................... 13
3.7. Accredited Investor.................................. 13
4. Registration, Exchange and Transfer of Notes................. 13
4.1. The Note Register; Persons Deemed Owners............. 13
4.2. Issuance of New Notes Upon Exchange or Transfer...... 13
5. Payment of Notes............................................. 14
5.1. Home Office Payment.................................. 14
5.2. Limitation on Interest............................... 14
5.3. Interest............................................. 14
5.4. Supplemental Interest................................ 14
6. Covenants of the Company..................................... 15
6.1. Limitation on Indebtedness........................... 15
6.2. Dividends and Distributions.......................... 15
6.3. Compliance with Laws................................. 16
6.4. Limitation of Agreements............................. 16
6.5. Preservation of Franchises and Existence............. 16
6.6. Insurance............................................ 16
6.7. Payment of Taxes and Other Charges................... 16
6.8. Financial Statements and Other Reports............... 17
6.9. Lost, Stolen, Damaged and Destroyed Securities....... 17
6.10. Financial Statements and Other Reports; Access....... 17
6.11. Information; Access.................................. 18
6.12. Merger, etc.......................................... 18
6.13. Transactions with Affiliates......................... 18
6.14. Notice of Breach..................................... 18
6.15. Right of the Purchaser to Designate Directors........ 19
6.16. Board and Committee Notice Requirement............... 19
6.17. Action by the Board of Directors..................... 20
6.18. Reimbursement of Certain Expenses.................... 20
6.19. Insurance............................................ 20
6.20. Rights of First Offer................................ 20
7. Covenants of the Purchaser................................... 21
7.1. Standstill Provisions................................ 21
7.2. Voting Restrictions.................................. 22
7.3. Restrictions on Transfer............................. 23
7.4. Nondisclosure of Confidential Information............ 23
8. Events of Default and Remedies............................... 24
8.1. Events of Default.................................... 24
8.2. Acceleration of Maturity............................. 26
8.3. Other Remedies....................................... 27
8.4. Conduct no Waiver; Collection Expenses............... 27
8.5. Annulment of Acceleration............................ 27
8.6. Remedies Cumulative.................................. 28
9. Redemption................................................... 28
9.1. Optional Redemption.................................. 28
9.2. Procedures for Partial Redemption.................... 29
9.3. Change in Control.................................... 29
9.4. Redemption Procedures................................ 29
10. Conversion................................................... 30
10.1. Holder's Option to Convert into Common Stock......... 30
10.2. Exercise of Conversion Privilege..................... 30
10.3. Fractions of Shares; Interest........................ 31
10.4. Reservation of Stock; Listing........................ 32
10.5. Rights............................................... 32
10.6. Adjustment of Conversion Price....................... 32
10.7. Merger or Consolidation.............................. 35
10.8. Notice of Certain Corporate Actions.................. 35
10.9. Reports as to Adjustments............................ 36
11. Subordination of Notes....................................... 36
11.1. Subordination of Notes to Senior Indebtedness........ 36
11.2. Proofs of Claim of Holders of Senior Indebtedness;
Voting.............................................. 40
11.3. Rights of Holders of Senior Indebtedness Unimpaired.. 41
11.4. Effects of Event of Default.......................... 41
11.5. Company's Obligations Unimpaired..................... 41
11.6. Subrogation.......................................... 41
12. Interpretation............................................... 42
12.1 Definitions.......................................... 42
12.2. Accounting Principles................................ 51
13. Miscellaneous................................................ 51
13.1. Payments............................................. 51
13.2. Severability......................................... 51
13.3. Specific Enforcement................................. 52
13.4. Entire Agreement..................................... 52
13.5. Counterparts......................................... 52
13.6. Notices and other Communications..................... 52
13.7. Amendments........................................... 53
13.8. Cooperation; Further Assurances...................... 53
13.9. Successors and Assigns............................... 54
13.10. Expenses............................................. 54
13.11. Adjustments.......................................... 54
13.12. Indemnification...................................... 54
13.13. Survival............................................. 55
13.14. Transfer of Securities............................... 55
13.15. Governing Law........................................ 55
13.16. Submission to Jurisdiction........................... 56
13.17. Service of Process................................... 56
13.18. Waiver of Jury Trial................................. 56
13.19. Public Announcements................................. 56
13.20. Signatures........................................... 56
Exhibit A - Form of Note
Exhibit B - Form of legal opinion of Carter, Ledyard & Milburn
Exhibit C - Form of Registration Rights Agreement
THIS NOTE PURCHASE AGREEMENT, dated as of June 7, 1996
(this "Agreement"), between CIDCO INCORPORATED, a Delaware
corporation (the "Company"), ID HOLDING PARTNERSHIP, L.P., a
Delaware limited partnership (the "Purchaser"), and ID
PARTNERSHIP, L.P., a Delaware limited partnership and the parent
of Purchaser ("ID Partners").
WHEREAS, the Purchaser wishes to purchase from the
Company, and the Company wishes to sell to the Purchaser, 3.75%
Subordinated Convertible Notes due June 30, 2003 (the "Notes")
issued by the Company in the aggregate principal amount set forth
herein;
WHEREAS, the Notes shall be convertible (under the
circumstances described herein) into shares (the "Shares"; and
together with the Notes, the "Securities") of Common Stock, par
value $.01 per share of the Company (the "Common Stock"); and
WHEREAS, the Purchaser and the Company desire to
provide for such purchase and sale and to establish various
rights and obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties and agreements herein set
forth, the parties hereto agree as follows:
1. ISSUANCE AND SALE OF NOTES
1.1. Issuance, Purchase and Sale of Notes. Upon the
terms and subject to the conditions set forth herein, the Company
will sell to the Purchaser, and the Purchaser will purchase from
the Company, Notes in the aggregate principal amount of One
Hundred Fifty Million Dollars ($150,000,000) (the aggregate of
such Notes, the "Initial Principal Balance"), at a price equal to
100% of the Initial Principal Balance (the "Purchase Price").
Each Note shall be in the form of Exhibit A hereto.
1.2. Closing. The closing of the transactions
contemplated hereby (the "Closing") will take place at the
offices of Fried, Frank, Harris, Shriver & Jacobson, New York,
New York, at 9:00 a.m. on June 28, 1996 or on such other date as
shall be mutually agreed by the Company and the Purchaser (the
"Issue Date").
1.3. Conditions to Closing. (a) The obligations of
the Company to consummate the transactions contemplated hereby at
the Closing are subject to the satisfaction (or waiver by the
Company) of the following conditions:
(i) the representations and warranties of
the Purchaser contained in this Agreement shall be
true and correct in all material respects as of the
date hereof and shall continue to be true and
correct in all material respects at and as of the
Issue Date as though made on and as of such date;
the Purchaser shall have performed, satisfied and
complied with all covenants, agreements, and
conditions required by this Agreement to be
performed, satisfied or complied with by it at or
before the Closing; and the Company shall have
received a certificate of the general partner of the
Purchaser dated the Closing Date to such effect;
(ii) all consents, approvals,
authorizations, exemptions and waivers from
Governmental Entities that shall be required in
order to enable the Company to consummate the
transactions contemplated hereby shall have been
obtained (except for such consents, approvals,
authorizations, exemptions and waivers, the absence
of which would not prohibit consummation of such
transactions or render such consummation illegal);
and
(iii) there shall not have been issued
any injunction, order or other decree or enacted
any Law which prevents the consummation of the
transactions contemplated by any of the
Transaction Documents.
(b) The obligation of the Purchaser to
consummate the transactions contemplated hereby at the Closing is
subject to the satisfaction (or waiver by the Purchaser) of the
following conditions:
(i) the representations and warranties of
the Company contained in this Agreement shall be
true and correct in all material respects as of
the date hereof and shall continue to be true and
correct in all material respects at and as of the
Issue Date as though made on and as of such date;
the Company shall have performed, satisfied and
complied with all covenants, agreements, and
conditions required by this Agreement to be
performed, satisfied or complied with by it at or
before the Closing, no Event of Default shall have
occurred and be continuing on the Issue Date, nor
shall an Event of Default result from or exist
after giving effect to the purchase and sale of
the Notes and the consummation of the transactions
contemplated hereby; and the Purchaser shall have
received a certificate of an executive officer of
the Company dated the Closing Date to such effect;
(ii) all consents, approvals,
authorizations, exemptions and waivers from
Governmental Entities that shall be required in
order to enable the Purchaser to consummate the
transactions contemplated hereby shall have been
obtained (except for such consents, approvals,
authorizations, exemptions and waivers, the
absence of which would not prohibit consummation
of such transactions or render such consummation
illegal);
(iii) there shall not have been issued
any injunction, order or other decree or enacted
any Law which prevents the consummation of the
transactions contemplated by any of the
Transaction Documents;
(iv) there shall not have been
instituted, pending or threatened any action, suit
or proceeding by or before any court or
Governmental Entity (A) which may be reasonably
expected to enjoin consummation of the
transactions contemplated by any of the
Transaction Documents or (B) otherwise affecting
the Purchaser, the Company or any of their
respective subsidiaries or affiliates which may
reasonably be expected to have a material adverse
effect on the Purchaser or a Material Adverse
Effect;
(v) there shall not have occurred after
December 31, 1995 any material adverse change or
any development involving a prospective material
adverse change (including as a result of any
change in the Law which has caused or is
reasonably likely to cause a Material Adverse
Effect except for those disclosed in Schedule 2.5;
(vi) Carter, Ledyard & Milburn, counsel
to the Company, shall have delivered to the
Purchaser opinions dated the Issue Date, in form
reasonably satisfactory to the Purchaser, with
respect to the matters set forth in Exhibit B
hereto;
(vii) at the Closing, the Company shall
have executed and delivered the registration
rights agreement in the form of Exhibit C hereto
(the "Registration Rights Agreement");
(viii) the Original Purchaser Designee
shall have been elected to the Board of Directors
of the Company effective, without any further
action, immediately upon the Closing; and
(ix) all corporate proceedings taken in
connection with the transactions contemplated
hereby, and all documents necessary to the
consummation thereof, shall be reasonably
satisfactory in form and substance to the
Purchaser and counsel to the Purchaser, and the
Purchaser shall have received a copy (executed or
certified as may be appropriate) of all documents
or corporate proceedings taken in connection with
the consummation of said transactions, including
the following:
a. Certified copies of the Certificate of
Incorporation and By-Laws of the Company;
b. Certified copies of resolutions of the Board
of Directors of the Company authorizing the
execution, delivery, and performance of the
Transaction Documents, and any other documents
provided for in this Agreement; and
c. A certificate of the Secretary of the
Company certifying the names of the officer or
officers of the Company authorized to sign the
Transaction Documents and any other documents
provided for in this Agreement, together with a
sample of the true signature of each such officer.
1.4. Deliveries at Closing. At the Closing, the
Company shall deliver to the Purchaser, against payment in full
of the Purchase Price in immediately available funds by wire
transfer to such bank or brokerage account as the Company shall
designate, Notes in such denominations as the Purchaser has
requested, dated the Issue Date and registered in the name of the
Purchaser, in an aggregate principal amount of the Initial
Principal Balance.
The Closing of the purchase and sale of the Notes shall
be deemed to have taken place in the State of New York.
1.5. Definitions. Certain capitalized terms used in
this Agreement are defined in Section 12 hereof.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the date
hereof, and as of the Issue Date, as follows:
2.1. Organization and Qualification. Each of the
Company and its Subsidiary is a corporation duly organized and
existing in good standing under the laws of the jurisdiction in
which it is incorporated and has the power to own its respective
property and to carry on its respective business as now being
conducted. Each of the Company and its Subsidiary is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the
respective business conducted or property owned by it makes such
qualification necessary and where the failure to so qualify would
individually or in the aggregate have a Material Adverse Effect.
2.2. Due Authorization. The Company has all right,
power and authority to enter into the Transaction Documents and
to consummate the transactions contemplated thereby. The
execution and delivery of each of the Transaction Documents and
the issuance and sale of the Notes by the Company and compliance
by the Company with all the provisions of each of the Transaction
Documents (including the issuance of Shares upon conversion of
the Notes) and consummation by the Company of the transactions
contemplated hereby (i) are within the corporate power and
authority of the Company; (ii) do not or will not require (if
approval is received from NASD that its rules do not require such
stockholder approval) the approval or consent of the stockholders
of the Company; and (iii) have been authorized by all requisite
corporate proceedings on the part of the Company. This Agreement
and the Registration Rights Agreement have been, and the Notes
when delivered by the Company will have been, duly executed and
delivered by the Company and constitute, or, in the case of the
Notes, will constitute, valid and binding agreements of the
Company, enforceable in accordance with their respective terms,
except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights, and (ii)
the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor
may be brought. The Shares of Common Stock issuable upon
conversion of the Notes have been validly reserved for issuance,
and upon issuance, will be validly issued and outstanding, fully
paid, and nonassessable. The Board of Directors of the Company
has unanimously approved the transactions contemplated hereby for
the purposes of Section 203 of General Corporation Law of the
State of Delaware (the "GCL"), pursuant to Section 203(a)(1)
thereof. The Company has furnished to the Purchasers true and
correct copies of the Company's Certificate of Incorporation and
By-Laws as in effect on the date of this Agreement.
2.3. Subsidiaries. The Company has only one
Subsidiary, CIDCO Worldwide Incorporated, a Delaware corporation.
All of the outstanding shares of capital stock of the Subsidiary
are owned by the Company.
2.4. SEC Reports. The Company has filed all proxy
statements, reports and other documents required to be filed by
it under the Exchange Act from and after March 3, 1994; and the
Company has furnished the Purchaser true and complete copies of
all annual reports, quarterly reports, proxy statements and other
reports under the Exchange Act filed by the Company from and
after such date, each as filed with the Commission (collectively,
the "SEC Reports"). Each SEC Report was in compliance in all
material respects with the requirements of its respective report
form and did not on the date of filing contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, and as of the date hereof there is no fact
or facts not disclosed in the SEC Reports which relate
specifically to the Company and which individually or in the
aggregate may have a Material Adverse Effect.
2.5. Financial Statements. The financial statements
(including any related schedules and/or notes) included in the
SEC Reports have been prepared in accordance with generally
accepted accounting principles consistently followed (except as
indicated in the notes thereto) throughout the periods involved
and fairly present in all material respects the consolidated
financial condition, results of operations and changes in
stockholders' equity of the Company and its Subsidiary as of the
respective dates thereof and for the respective periods then
ended (in each case subject, as to interim statements, to changes
resulting from year-end adjustments, none of which were material
in amount or effect). Except as set forth in Schedule 2.5, the
Company has no Material liabilities or obligations, contingent or
otherwise, except (i) liabilities and obligations in the
respective amounts reflected or reserved against in the Company's
balance sheet as of December 31, 1995 included in the SEC Reports
or (ii) liabilities and obligations incurred in the ordinary
course of business since December 31, 1995 which individually or
in the aggregate do not have a Material Adverse Effect. Since
December 31, 1995, the Company and its Subsidiary have operated
their respective businesses only in the ordinary course and there
has not been individually or in the aggregate any Material
Adverse Change, other than changes disclosed in the SEC Reports
or otherwise set forth in Schedule 2.5 hereto.
2.6. Litigation. Except as set forth in Schedule 2.6
hereto, there is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against
the Company or its Subsidiary or any of their respective
properties or assets by or before any court, arbitrator or other
Governmental Entity, which questions the validity or
enforceability of, or seeks to enjoin or invalidate any of the
Transaction Documents or any action taken or to be taken pursuant
to any thereof, or, which if determined adversely would
individually or in the aggregate have a Material Adverse Effect.
2.7. Title to Properties; Insurance. The Company and
its Subsidiary have good and valid title to, or, in the case of
property leased by either of them as lessee, a valid and
subsisting leasehold interest in, their respective properties and
assets, free of all liens and encumbrances other than the
security interests of the Company's bank lender, Comerica Bank -
California, and those referred to in the financial statements of
the Company (or the notes thereto) for the year ended December
31, 1995 included in the SEC Reports, except in each case for
such defects in title and such other liens and encumbrances which
do not individually or in the aggregate materially detract from
the value to the Company of the properties and assets of the
Company and its Subsidiary taken as a whole. The Company and its
Subsidiary maintain insurance in such amounts (to the extent
available in the public market), including self-insurance,
retainage and deductible arrangements, and of such a character as
is reasonable for companies engaged in the same or similar
business.
2.8. Governmental Consents, etc. The Company is not
required to obtain any consent, approval or authorization of, or
to make any declaration or filing with, any Governmental Entity
as a condition to or in connection with the valid execution and
delivery of any of the Transaction Documents or the valid offer,
issue, sale or delivery of the Securities, or the performance by
the Company of its obligations in respect of any thereof, except
for filings required pursuant to state and federal securities
laws to effect any registration of any of the Securities pursuant
to the Registration Rights Agreement and except for the filing on
Form 8K under the Exchange Act to report the consummation of the
transaction contemplated hereby.
2.9. Holding Company Act and Investment Company Act.
Neither the Company nor its Subsidiary is: (i) a "public utility
company" or a "holding company," or an "affiliate" or a
"subsidiary company" of a "holding company," or an "affiliate" of
such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a
"public utility," as defined in the Federal Power Act, as
amended, or (iii) an "investment company" or an "affiliated
person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act
of 1940, as amended.
2.10. Taxes. The Company and its Subsidiary have filed
or caused to be filed all income tax returns which are required
to be filed and have paid or caused to be paid all Taxes that
have become due, except Taxes the validity or amount of which is
being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside, and
except for such returns for which the failure to file would not
individually or in the aggregate have a Material Adverse Effect.
2.11. ERISA. No accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any Pension Plan
(other than a Multiemployer Plan (as defined below)). No
liability to the PBGC has been, or is reasonably likely to be,
incurred with respect to any Pension Plan (other than a
Multiemployer Plan) by the Company, its Subsidiary or any ERISA
Affiliate (as defined below) which is or would be materially
adverse to the Company, its Subsidiary and any ERISA Affiliate.
Neither the Company nor its Subsidiary nor any ERISA Affiliate
has incurred, or is reasonably likely to incur, any withdrawal
liability under Title IV of ERISA with respect to any
Multiemployer Plan which would have a Material Adverse Effect on
the Company, its Subsidiary and its ERISA Affiliates, and if the
Company, its Subsidiary and ERISA Affiliates were to completely
withdraw as of the date hereof from each Multiemployer Plan in
which they participate, the Company, its Subsidiary and its ERISA
Affiliates would not incur any withdrawal liability under Title
IV of ERISA which would have a Material Adverse Effect on the
Company, its Subsidiary and its ERISA Affiliates. To the best
knowledge of the Company, no fiduciary of any employee benefit
plan (as defined in Section 3(s) of ERISA) maintained or
contributed to by the Company or its Subsidiary for the benefit
of their respective employees (each an "Employee Plan") has
engaged or caused any Employee Plan to engage in any prohibited
transaction that has resulted in the imposition of any tax or
penalty imposed under Section 4975 of the Code or Section 502 of
ERISA that has not been satisfied or that is reasonably likely to
result in the imposition of such a tax or penalty that would be
materially adverse to the Company and its Subsidiary. Each
Employee Plan has been maintained and administered in compliance
with all applicable law including ERISA and the Code in all
material respects. An "ERISA Affiliate" for purposes of this
Section is any trade or business, whether or not incorporated,
which, together with the Company, is under common control, as
described in Section 414(b), (c), (m) or (o) of the Code, and the
term "Multiemployer Plan" shall mean any Pension Plan which is a
"multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA).
2.12. Intellectual Property Rights.
(a) Except as disclosed on Schedule 2.12 hereto,
(i) the Company owns or has the right to use pursuant to license,
sub-license, agreement or permission all of its Intellectual
Property (as defined below), except where the absence of any
thereof would not individually or in the aggregate have a
Material Adverse Effect; (ii) the Company has not interfered
with, infringed upon or misappropriated any Intellectual Property
rights of third parties, except for interferences, infringements
and misappropriations which would not individually or in the
aggregate have a Material Adverse Effect, and the Company has not
received any claim, demand or notice alleging any such
interference, infringement or misappropriation (including any
claim that it must license or refrain from using any Intellectual
Property rights of any third party). To the Company's knowledge
no third party has interfered with, infringed upon or
misappropriated any Intellectual Property rights of the Company,
except for interferences, infringements and misappropriations
which would not individually or in the aggregate have a Material
Adverse Effect.
(b) "Intellectual Property" means (a) all world-
wide inventions and discoveries (whether patentable or
unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos,
trade names and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including
all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all mask
works and all applications, registrations and renewals in
connection therewith, (e) all know-how, trade secrets and
confidential business information, whether patentable or
unpatentable and whether or not reduced to practice (including
ideas, research and development, formulas, compositions,
manufacturing and production process and techniques, technical
data, designs, drawings, specifications, customer and supplier
lists, pricing and cost information and business and marketing
plans and proposals), (f) all computer software (including data
and related documentation), (g) all management information
systems, (h) all other proprietary rights, (i) all copies and
tangible embodiments thereof (in whatever form or medium) and (j)
all licenses and agreements in connection therewith.
2.13. Possession of Franchises, Licenses, Etc. The
Company and its Subsidiary possess all franchises, certificates,
licenses, permits and other authorizations from Governmental
Entities and other rights, free from burdensome restrictions,
that are necessary for the ownership, maintenance and operation
of their respective properties and assets, except for those the
absence of which would not individually or in the aggregate have
a Material Adverse Effect, and neither the Company nor its
Subsidiary is in violation of any thereof, except for violations
which individually or in the aggregate would not have a Material
Adverse Effect.
2.14. Compliance with Laws. The Company and its
Subsidiary are in compliance with all applicable Laws including,
without limitation, those relating to protection of the
environment, employment opportunity and employee safety, except
where the failure to comply would not individually or in the
aggregate have a Material Adverse Effect.
2.15. Conflicting Agreements and Charter Provisions.
Neither the Company nor its Subsidiary is a party to any Contract
or is subject to any charter or By-Law provision or any judgment
or decree which individually or in the aggregate has or is
reasonably likely to have a Material Adverse Effect. Neither the
execution and delivery of any of the Transaction Documents, nor
the issuance of any of the Securities, nor the fulfillment of or
compliance with the terms and provisions hereof or thereof, nor
the prepayment of the Notes as contemplated hereby or by the
Notes, nor the conversion of the Notes into Shares as
contemplated hereby or by the Notes, will conflict with or result
in a breach of the terms, conditions, or provisions of, or give
rise to a right of termination under, or constitute a default
under, or result in any violation of, the Certificate of
Incorporation or By-Laws of the Company or any Contract of the
Company or its Subsidiary. Neither the Company nor its
Subsidiary is in default under any outstanding indenture or other
debt instrument or with respect to the payment of the principal
of or interest on any outstanding obligations for borrowed money,
or is in default under any of their respective Contracts, except
for defaults which would not individually or in the aggregate
have a Material Adverse Effect.
2.16. Capitalization. The authorized capital stock of
the Company consists of (i) 35,000,000 shares of Common Stock, of
which, as of the date hereof, 14,289,487 shares were outstanding;
and (ii) 1,000,000 shares of Preferred Stock, of which, as of the
date hereof, no shares are outstanding. All of the outstanding
shares of Common Stock have been validly issued and are fully
paid and nonassessable. No class of Capital Stock of the Company
is entitled to preemptive rights. Except for the options listed
on Schedule 2.16 hereto, there are no outstanding options,
warrants, subscription rights, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into, shares of any class of Capital Stock of the
Company, or Contracts, by which the Company or its Subsidiary is
or may become bound to issue additional shares of its Capital
Stock or options, warrants or other rights to purchase or acquire
any shares of its Capital Stock. Between the date hereof and the
Issue Date, the Company will not have changed the amount of its
authorized Capital Stock, or have subdivided or otherwise changed
any shares of any class of its Capital Stock, whether by way of
reclassification, stock split or otherwise, or have issued any
additional shares of Capital Stock other than pursuant to the
exercise of stock options outstanding on the date hereof and set
forth in Schedule 2.16 hereto and will not have granted any
options, warrants or other rights to purchase or acquire shares
of the Company's Capital Stock. Except as set forth in Schedule
2.16 hereto, the Company has not declared or paid any dividend or
made any other distribution of cash, stock or other property to
its stockholders since May 1993.
2.17. Disclosure. Neither this Agreement nor any
Schedule hereto, nor any certificate furnished to Purchaser by or
on behalf of the Company in connection with the transactions
contemplated hereby, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading.
2.18. Offering of Securities. Neither the Company nor
any Person acting on its behalf has offered the Securities or any
similar securities of the Company for sale to, solicited any
offers to buy the Securities or any similar securities of the
Company from or otherwise approached or negotiated with respect
to the Company with any Person other than the Purchaser and other
"accredited investors" (as defined in Rule 501(a) under the
Securities Act). Neither the Company nor any Person acting on
its behalf has taken or, except as contemplated by the
Registration Rights Agreement will take any action (including,
without limitation, any offering of any securities of the Company
under circumstances which would require the integration of such
offering with the offering of the Securities under the Securities
Act) which could reasonably be expected to subject the offering,
issuance or sale of the Securities to the registration
requirements of Section 5 of the Securities Act or violate the
provisions of any securities, "blue sky", or similar law of any
applicable jurisdiction.
2.19. Use of Proceeds. (a) The proceeds of the sale
of the Notes will be used by the Company for working capital and
other corporate purposes approved by the Company's Board of
Directors.
(b) The Company does not own, directly or
indirectly, any "margin security", as defined in Regulation G
issued by the Board of Governors of the Federal Reserve System
(12 CFR Part 207); and the Company will not use any proceeds from
the sale of the Notes to purchase or carry any "security", as
defined in Section 3(a)(10) of the Exchange Act, or for any other
purpose which would result in any transaction contemplated by
this Agreement constituting a "purpose credit" within the meaning
of said Regulation G, or which would involve a violation of
Section 7 of the Exchange Act or Regulation T, U or X of said
Board of Governors (12 CFR Parts 220, 221 and 224, respectively).
(c) The Company does not intend to apply and
will not apply any part of the proceeds of the sale of the Notes
in any manner which is unlawful or which would involve a
violation of Law.
2.20. Election of Director. Theodore J. Forstmann has
been duly elected by the Board of Directors of the Company to
serve as a member of the Board for a term ending in calendar year
1998, effective upon the issuance of, and payment for, the Notes.
2.21. Brokers or Finders. Except as set forth in
Schedule 2.21, no agent, broker, investment banker or other
Person is or will be entitled to any broker's fee or any other
commission or similar fee from the Company or its Subsidiary in
connection with any of the transactions contemplated by this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser represents and warrants as of the date hereof and as of
the Issue Date as follows:
3.1. Organization and Qualification. The Purchaser is
a partnership duly organized and existing in good standing under
the laws of the State of Delaware and has the requisite power to
own its respective property and to carry on its business as now
being conducted. The Purchaser is duly qualified to do business
and in good standing in every jurisdiction in which the nature of
the respective business conducted or property owned by it makes
such qualification necessary, except where the failure to so
qualify would not prevent consummation of the transactions
contemplated hereby or have a material adverse effect on the
Purchaser's ability to perform its obligations hereunder.
3.2. Due Authorization. The Purchaser has all right,
power and authority to enter into this Agreement and the
Registration Rights Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement and the Registration Rights Agreement by the
Purchaser and the compliance by the Purchaser with all of the
provisions of this Agreement and the Registration Rights
Agreement and consummation by the Purchaser of the transactions
contemplated hereby and thereby (i) are within the partnership
powers of the Purchaser and (ii) have been duly authorized by all
necessary partnership action on behalf of the Purchaser. This
Agreement and the Registration Rights Agreement have been duly
executed and delivered by the Purchaser and constitute valid and
binding agreements of the Purchaser enforceable in accordance
with their terms, except that (i) such enforcement may be subject
to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
3.3. Governmental Consents. The Purchaser is not
required to obtain any consent, approval or authorization of, or
to make any declaration or filing with, any Governmental Entity
as a condition to or in connection with the valid execution,
delivery of either this Agreement or the Registration Rights
Agreement or the performance by the Purchaser of its obligations
in respect hereof and thereof except for filings after the
Closing under the Exchange Act and any filings under the HSR Act
which may be required in connection with the conversion of the
Notes.
3.4. Conflicting Agreements. Neither the execution
and delivery of this Agreement and the Registration Rights
Agreement nor the fulfillment of or compliance with the terms and
provisions hereof or thereof, nor the conversion of the
indebtedness evidenced by the Notes into Common Stock as
contemplated hereby or by the Notes, will conflict with or result
in a breach of the terms, conditions or provisions of, or give
rise to a right of termination under, or constitute a default
under, or result in any violation of the organizational documents
of the Purchaser or any Contract to which the Purchaser or any of
its respective properties is subject.
3.5. Acquisition for Investment. The Purchaser is
acquiring the Notes being purchased by it for its own account for
the purpose of investment and not with a view to or for sale in
connection with any distribution thereof except in compliance
with all applicable securities Laws. The Purchaser acknowledges
that the Securities, including the Shares issuable upon
conversion of the Notes, have not been registered under the
Securities Act, and may be sold or disposed of in the absence of
such registration only pursuant to an exemption from such
registration and in accordance with this Agreement. At the date
hereof the Purchaser does not beneficially own, directly or, to
the knowledge of the Purchaser, indirectly (or have any option or
right to acquire), any securities of the Company other than the
Securities being purchased by it hereunder.
3.6. Brokers or Finders. No agent, broker, investment
banker or other Person is or will be entitled to any broker's fee
or any other commission or similar fee from the Purchaser in
connection with any of the transactions contemplated by this
Agreement for which the Company will be responsible.
3.7. Accredited Investor. The Purchaser is an
"accredited investor" within the meaning of Rule 501 promulgated
under the Securities Act.
4. REGISTRATION, EXCHANGE AND TRANSFER OF NOTES
4.1. The Note Register; Persons Deemed Owners. The
Company shall maintain, at its office designated for notices in
accordance with Section 13.6, a register for the Notes (the "Note
Register"), in which the Company shall record the name and
address of the person in whose name each Note has been issued and
the name and address of each transferee and prior owner of each
Note. The Company may deem and treat the person in whose name a
Note is so registered as the holder and owner thereof for all
purposes and shall not be affected by any notice to the contrary,
until due presentment of such Note for registration of transfer
as provided in this Article 4.
4.2. Issuance of New Notes Upon Exchange or Transfer.
Upon surrender for exchange or registration of transfer of any
Note at the office of the Company designated for notices in
accordance with Section 13.6, the Company shall execute and
deliver, at its expense, one or more new Notes as requested by
the holder of the surrendered Note, each dated the date to which
interest has been paid on the Note so surrendered (or, if no
interest has been paid, the date of such surrendered Note), but
in the same aggregate unpaid principal amount as such surrendered
Note, and registered in the name of such person or persons as
shall be designated in writing by such holder. Every Note
surrendered for registration of transfer shall be duly endorsed,
or be accompanied by a written instrument of transfer duly
executed, by the holder of such Note or by his attorney duly
authorized in writing. The Company may also condition the
issuance of any new Note or Notes to a Person other than the
holder thereof on the payment of a sum sufficient to cover any
stamp tax or other governmental charge imposed in respect of such
transfer.
5. PAYMENT OF NOTES
5.1. Home Office Payment. The Company will pay to the
Purchaser or any transferee thereof all sums becoming due on the
Notes (including all sums which become due on the Notes at the
maturity thereof) (a) prior to the execution of an Indenture and
the exchange of Securities issued under the Indenture for all
outstanding Notes (the "Indenture Date") (i) in the case of the
Purchaser or an institutional investor who holds in excess of $10
million principal amount of the Notes, at the account/address to
be specified by the Purchaser for such purpose by notice to the
Company, or at the account/address specified by such
institutional investor, by wire transfer of immediately available
funds, or at such other address or by such other method as the
Purchaser or such institutional investor shall have designated by
notice to the Company, or (ii) for all other holders of Notes, at
the address specified by such holder, by check, in either case
without presentment for notation of payment and without surrender
and (b) at any time after the Indenture Date, by wire transfer to
the Trustee, as specified in the Indenture. Before selling or
otherwise transferring any Note, the Purchaser or transferee will
make a notation thereon of the aggregate amount of all payments
of principal, if any, theretofore made, and of the date to which
interest has been paid.
5.2. Limitation on Interest. No provision of this
Agreement or of the Notes shall require the payment or permit the
collection of interest in excess of the maximum rate which is
permitted by Law. If any such excess interest is provided for
herein or in the Notes, or shall be adjudicated to be so provided
for, then the Company shall not be obligated to pay such interest
in excess of the maximum rate permitted by Law, and the right to
demand payment of any such excess interest is hereby waived, any
other provisions in this Agreement or in the Notes to the
contrary notwithstanding.
5.3. Interest. Interest on the principal amount of
the Notes shall be due and payable as provided in the Notes.
5.4. Supplemental Interest. The Company shall pay to
the Purchaser, as supplemental interest, an amount equal to
$1,546,875, such amount to be payable within 5 days of the Issue
Date.
6. COVENANTS OF THE COMPANY
A. The Company covenants that until the Issue Date
and thereafter for so long as any of the Notes are outstanding:
6.1. Limitation on Indebtedness. The Company will
not, and will not permit any Subsidiary to, incur, create, assume
or permit to exist any Indebtedness if, as a result thereof or
after giving effect thereto, Total Indebtedness at any time would
exceed one-third of Net Worth at such time.
6.2. Dividends and Distributions. The Company shall
not, and shall cause each of its Subsidiaries not to, directly or
indirectly, (i) declare or pay any dividend or make any
distribution in cash or property (other than, in respect of the
Company, dividends or distributions payable solely in shares of
Capital Stock of the Company or, in respect of any such
Subsidiary, dividends or distributions payable solely in shares
of capital stock of such Subsidiary, as the case may be) to
holders of Capital Stock of the Company or, except for payments
to the Company, any Subsidiary of the Company, or (ii) purchase,
redeem or otherwise acquire or retire for value (other than
through the issuance solely of capital stock of the Company) any
Capital Stock or warrants, rights or options to acquire Capital
Stock of the Company or any securities exchangeable for or
convertible into any such shares or permit any Subsidiary to
purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any Subsidiary or any such
warrants, rights or options or convertible securities (any such
action referred to in clauses (i) or (ii) above referred to as a
"Restricted Payment"), provided that the Company (x) may pay
quarterly cash dividends and (y) may make Capital Stock
repurchases or redemptions if at the time of and after giving
effect to each such Restricted Payment:
(a) no Default or Event of Default shall have
occurred and be continuing;
(b) the Company is permitted to incur at least
$1 of additional Indebtedness under Section 6.1; and
(c) the aggregate amount of all such quarterly
cash dividends for any quarter shall not, unless all members of
the Board of Directors of the Company shall have otherwise
approved, exceed 25% of the aggregate Consolidated Net Income of
the Company during such quarter (excluding extraordinary gains
and gains arising from the proposed or actual disposition of
material assets not in the ordinary course of business).
6.3. Compliance with Laws. The Company will, and will
cause each Subsidiary to, comply with all applicable Laws with
respect to the conduct of its business and the ownership of its
properties, including without limitation, compliance with the
reporting requirements of all applicable securities Laws;
provided that the Company shall not be deemed to be in violation
of this Section 6.3 as a result of any failure to comply with any
provisions of any such Laws, the noncompliance with which would
not, individually or in the aggregate, have a Material Adverse
Effect or have a materially adverse effect on the ability of the
holder of any Securities to sell such Securities.
6.4. Limitation of Agreements. The Company will not,
and will not permit any Subsidiary to, enter into any Contract,
or any amendment, modification, extension or supplement to any
existing Contract, which contractually prohibits the Company from
paying interest on, or principal of, the Notes or effecting the
conversion of the Notes.
6.5. Preservation of Franchises and Existence. The
Company will maintain and cause each Subsidiary to maintain its
corporate existence, rights and franchises in full force and
effect, provided that nothing in this Section 6.5 shall prevent
the Company or any Subsidiary from discontinuing its operations
in any particular state or at any particular location or
locations within the state, or prevent the corporate existence,
rights and franchises of any Subsidiary from being terminated if,
in the opinion of the Board of Directors of the Company, the
preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries taken as a whole.
6.6. Insurance. The Company will, and will cause each
Subsidiary to maintain, with insurers believed by the Company to
be responsible, such insurance, in such amounts and of such types
as are deemed in good faith by the Board of Directors of the
Company to be adequate for the business and properties of the
Company and its Subsidiaries.
6.7. Payment of Taxes and Other Charges. The Company
will pay or discharge, and will cause each Subsidiary to pay or
discharge, before the same shall become delinquent, (i) all Taxes
imposed upon it or any of its properties or income, and (ii) all
claims of materialmen, mechanics, landlords and other like
persons which, in the case of either clause (i) or clause (ii),
if unpaid, might result in the creation of a material lien upon
any of its properties, provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or
discharged any such Tax or claim whose amount, applicability or
validity is being contested in good faith pursuant to appropriate
proceedings.
6.8. Financial Statements and Other Reports. The
Company will furnish to each holder of the Notes, at the times
specified in Section 6.10, the information and reports required
to be delivered to the Purchaser pursuant to Section 6.10.
6.9. Lost, Stolen, Damaged and Destroyed Securities.
Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of any certificate
representing shares of Common Stock or a Note and in the case of
loss, theft or destruction, upon delivery of an indemnity
satisfactory to the Company (which, in the case of the Purchaser,
may be an undertaking by the Purchaser and ID Partners to so
indemnify the Company), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new
share certificate of like tenor for a number of shares of Common
Stock equal to the number of shares of such stock represented by
the certificate lost, stolen, destroyed or mutilated, or a new
Note of like tenor in an amount equal to the amount of such Note
lost, stolen, destroyed or mutilated.
B. The Company covenants that until the Closing and
thereafter for so long as any Purchaser (and/or its Affiliates)
owns any of the Securities:
6.10. Financial Statements and Other Reports; Access.
(i) The Company will, as soon as practicable and
in any event within 45 days after the end of each quarterly
period (other than the last quarterly period) in each fiscal
year, furnish to the Purchaser statements of consolidated net
income and cash flows and a statement of changes in consolidated
stockholders' equity of the Company and its Subsidiaries for the
period from the beginning of the then current fiscal year to the
end of such quarterly period, and a consolidated balance sheet of
the Company and its Subsidiaries as of the end of such quarterly
period, setting forth in each case in comparative form figures
for the corresponding period or date in the preceding fiscal
year, all in reasonable detail and certified by an authorized
financial officer of the Company, subject to changes resulting
from year-end adjustments; provided, however, that delivery
pursuant to clause (iii) below of a copy of the Quarterly Report
on Form 10-Q of the Company for such quarterly period filed with
the Commission shall be deemed to satisfy the requirements of
this clause (i);
(ii) it will, as soon as practicable and in any
event within 100 days after the end of each fiscal year, furnish
to the Purchaser statements of consolidated net income and cash
flows and a statement of changes in consolidated stockholders'
equity of the Company and its Subsidiaries for such year, and a
consolidated balance sheet of the Company and its Subsidiaries as
of the end of such year, setting forth in each case in
comparative form the corresponding figures from the preceding
fiscal year, all in reasonable detail and examined and reported
on by independent public accountants of recognized national
standing selected by the Company; provided, however, that
delivery pursuant to clause (iii) below of a copy of the Annual
Report on Form l0-K of the Company for such fiscal year filed
with the Commission shall be deemed to satisfy the requirements
of this clause (ii); and
(iii) it will, promptly upon transmission
thereof, furnish to the Purchaser copies of all such financial
statements, proxy statements, notices and reports as it shall
send to its stockholders and copies of all such registration
statements (without exhibits), other than registration statements
relating to employee benefit or dividend reinvestment plans, and
all such regular and periodic reports as it shall file with the
Commission.
Together with each delivery of financial statements
required by clauses (i) and (ii) above, the Company will deliver
to Purchaser a certificate of an authorized financial officer of
the Company regarding compliance by the Company with the
covenants set forth in Sections 6.1 and 6.2.
6.11. Information; Access. Upon the good faith request
by the Purchaser for such information or access by the Company
and its properties, books, records and personnel as is
reasonable, the Company will cooperate in promptly providing such
information or access to the Purchaser.
6.12. Merger, etc. The Company will not merge with or
into or consolidate with, or sell all or substantially all of its
assets to, any other Person unless (i) the surviving entity shall
have assumed in writing all of the obligations of the Company
under each of the Transaction Documents, and (ii) immediately
after the consummation of such merger or consolidation the
surviving entity would not be in violation of any of the
provisions applicable to the Company contained in any of the
Transaction Documents.
6.13. Transactions with Affiliates. The Company will
not, and will not permit any Subsidiary to, engage in any
transaction or group of related transactions (including, without
limitation, the purchase, lease, sale or exchange of properties
of any kind or the rendering of any service) with any Affiliate
(other than the Company), except in the ordinary course and
pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would be
obtainable in a comparable arm's-length transaction with a Person
not an Affiliate.
6.14. Notice of Breach. As promptly as practicable,
and in any event not later than five Business Days after senior
management of the Company becomes aware thereof, the Company
shall provide the Purchaser with written notice of any breach by
the Company of any provision of this Agreement, including,
without limitation, this Article 6, specifying the nature of such
breach and any actions proposed to be taken by the Company to
cure such breach.
6.15. Right of the Purchaser to Designate Directors.
(a) Prior to the Closing, the Company will have
taken all necessary action for Theodore J. Forstmann (the
"Original Purchaser Designee") to be elected to the Board of
Directors of the Company. In connection with the 1997 Annual
Meeting of Stockholders, the Company shall take all necessary
action to cause an additional person as ID Partners may designate
and who is either, as of the date hereof, a general partner of
the general partner of the Purchaser or who is reasonably
acceptable to the Company's Chairman and President (together with
the Original Designee and any other person(s) designated by ID
Partners pursuant to this Section 6.15 from time to time, the
"Purchaser Designees") to be nominated and shall use its best
efforts to cause such Purchaser Designee to be elected to the
Board of Directors of the Company. Thereafter, in connection
with any annual meeting of stockholders at which the term of a
Purchaser Designee is to expire, the Company will take all
necessary action to cause a Purchaser Designee to be nominated
and use its best efforts to cause such Purchaser Designee to be
elected to the Board of Directors of the Company. In the event
of any vacancy arising by reason of the resignation, death,
removal or inability to serve of any of the Purchaser Designees,
ID Partners shall be entitled to designate a successor to fill
such vacancy for the unexpired term. The Company further agrees
that ID Partners shall be entitled to designate a non-voting
observer to attend and participate in (but not to vote at) all
meetings of the Board of Directors of the Company and any
committee of the Board (the "Non-voting Observer"). The Non-
voting Observer shall have the same access to information
concerning the business and operations of the Company and its
Subsidiaries and at the same time as directors of the Company,
and shall be entitled to participate in discussions and consult
with the Board of Directors of the Company without voting.
(b) The Company and the Purchaser acknowledge
that the provisions of this Agreement, including Section 6.15(a),
are intended to provide ID Partners and the Purchaser with
"contractual management rights" within the meaning of ERISA and
the regulations promulgated thereunder.
6.16. Board and Committee Notice Requirement. In
addition to any requirements specified in the By-Laws of the
Company, the Company shall notify the Purchaser, each Purchaser
Designee and the Non-voting Observer, by telecopy, of (a) every
meeting (or action by written consent) of the Board of Directors
of the Company and (b) every meeting (or action by written
consent) of the board of directors of any Subsidiary and of any
committee of the Board of Directors or any Subsidiary of the
Company, to the extent, in the case of clause (b), that a
Purchaser Designee is on the Board of Directors of such
Subsidiary or is on such committee of the Board of Directors of
the Company or any Subsidiary, at least three days in advance of
such meeting (or distribution of written consents), or, if such
notice under the circumstances is not practicable, as soon before
the meeting (or distribution) as is practicable.
6.17. Action by the Board of Directors. Without the
approval of the Board of Directors of the Company that includes
the affirmative vote of at least one Purchaser Designee, the
Company shall not, in a single transaction or a series of related
transactions, (a) for the period of nine months following the
Issue Date, issue any Equity Securities at less than the
Conversion Price or (b) amend, supplement, modify or repeal any
provision of the Articles of Incorporation or By-Laws of the
Company or take any other action, including, without limitation,
the adoption of a shareholders' rights plan or similar plan, or
the consummation of a Capital Stock repurchase or redemption,
which would adversely affect the rights or benefits of the
Purchaser under any of the Transaction Documents, including,
without limitation, the conversion rights of the holders of the
Notes hereunder.
6.18. Reimbursement of Certain Expenses. The Company
shall, upon request therefor, promptly reimburse the Purchaser
Designees (and, to the extent that one or more of the Purchaser
Designees shall not attend or charge therefor, the Non-voting
Observer) for all reasonable expenses incurred by them in
connection with their attendance at meetings of the Board of
Directors or of committees of the Board of Directors and any
other activities undertaken by them in their capacity as
directors of the Company or any Subsidiary or observer, as
applicable. The foregoing shall be in addition to, and not in
lieu of (or in duplication of), any indemnification or
reimbursement obligations of the Company under the Articles of
Incorporation or By-Laws of the Company or by Law. The Non-
voting Observer shall be entitled to indemnification from the
Company and its Subsidiaries to the maximum extent permitted by
Law as though he or she were a director of the Company or the
Subsidiary.
6.19. Insurance. To the extent commercially available,
the Company shall at all times maintain directors' and officers'
liability insurance comparable in terms and coverage to that
maintained on the date hereof, and each Purchaser Designee shall
be covered under such insurance.
6.20. Rights of First Offer. Prior to seeking
financing from any third party consisting of an issuance of
Equity Securities (the "Proposed Securities") by the Company on
or after the Issue Date, the Company shall notify the Purchaser
of a description in reasonable detail of the Proposed Securities,
the amount proposed to be issued and the consideration the
Company desires to receive therefor (the "Notice"), which Notice
shall constitute an offer to the Purchaser with respect to the
Proposed Securities on the terms set forth therein. The
Purchaser and the Company shall, for not less than 20 days after
receipt of the Notice (unless the Purchaser earlier indicates
that it has no interest in purchasing the Proposed Securities),
discuss the possibility of Purchaser's acquiring the Proposed
Securities, after which (if the Purchaser has not agreed to
purchase the Proposed Securities on the terms set forth in the
Notice or such other terms as are mutually acceptable to the
Company and the Purchaser) the Company shall be permitted to seek
and obtain third party investors to acquire the Proposed
Securities, provided that the closing of such acquisition by such
third party investor occurs within 90 days from the date of the
Notice and provided that the acquisition of the Proposed
Securities by such third party investor is on terms no more
favorable to such third party investor than those terms set forth
in the Notice. No Equity Securities shall be issued by the
Company to any Person unless the Company has first offered such
Equity Securities to the Purchaser in accordance with this
Section 6.20. This Section 6.20 shall not apply to the following
issuances of securities: (i) pursuant to an approved employee
stock option plan, stock purchase plan, or similar employee
benefit program or agreement, where the primary purpose is not to
raise equity capital for the Company, (ii) issuances of Common
Stock to one or more Strategic Alliance Investors, but not in
excess of 1,800,000 shares of Common Stock (subject to adjustment
as provided in Section 13.11) in the aggregate for all such
issuances (or such greater number of Shares as is approved by all
members of the Board of Directors), (iii) issuance of Equity
Securities as consideration in a business combination, and (iv)
pursuant to a bona fide public offering of Shares registered
under the Securities Act of 1933, as amended.
7. COVENANTS OF THE PURCHASER
7.1. Standstill Provisions. Until the earliest of (i)
the occurrence of an Event of Default under the Notes, (ii) a
public announcement or filing of a third party's acquisition of
or intention to acquire at least 10% of the outstanding Voting
Securities of the Company, for a purpose other than for
investment (as disclosed by the third party), (iii) the incumbent
members of the Board of Directors of the Company (including the
Purchaser Designees) ceasing to represent a majority of the
directors then in office, or (iv) the commencement of a proxy or
consent solicitation to replace a majority of the Board of
Directors of the Company, which is not opposed by the Board of
Directors of the Company (the earliest of any of the foregoing,
the "Standstill Termination Event"), the Purchaser agrees that,
except as otherwise approved by the Board of Directors of the
Company:
(a) the Purchaser will not make, or in any way
participate in, any "solicitation" of "proxies" (as such terms
are defined in Regulation 14A under the Exchange Act) in
opposition to any matter which has been approved by a majority of
the Board of Directors of the Company;
(b) the Purchaser will not acquire, offer to
acquire or agree to acquire, directly or indirectly, by purchase
or otherwise, any Voting Securities or any rights or options to
acquire Voting Securities of the Company except (i) the shares of
Common Stock or other Voting Securities of the Company issuable
upon conversion of the Notes, (ii) as a result of a stock split,
stock dividend or similar recapitalization of the Company, (iii)
pursuant to a merger, consolidation or other business combination
transaction involving the Company, or (iv) in connection with the
exercise of Purchaser's rights pursuant to Section 6.20;
(c) the Purchaser will not deposit any Voting
Securities in a voting trust or otherwise subject any Voting
Securities to any arrangement with respect to the voting of such
Voting Securities inconsistent with this Agreement;
(d) the Purchaser will not form, join in or in
any way participate in a "group" within the meaning of Section
13(d)(3) of the Exchange Act for the purpose of acquiring, voting
or holding Voting Securities of the Company;
(e) the Purchaser will not make any public
announcement with respect to, or submit a proposal for or offer
of (with or without conditions), any Extraordinary Transaction
involving the Company or its securities or assets; and
(f) the Purchaser will not request the Company
or its representatives directly or indirectly to amend or waive
any provision of this Section 7.1 (including this paragraph).
Nothing contained in this Section 7.1 shall prevent the
Purchaser from discussing any matters privately with senior
management or the Board of Directors of the Company; provided
that no proposal regarding any such matters shall be made by the
Purchaser that would require public disclosure by the Company.
7.2. Voting Restrictions. (a) After conversion of
any of the Notes and until the occurrence of a Standstill
Termination Event, (i) the Purchaser shall be present, in person
or represented by proxy, at all stockholder meetings of the
Company so that all Voting Securities Beneficially Owned by it
shall be counted for the purpose of determining the presence of a
quorum at such meetings, and (ii) subject to Section 7.2(b)
below, the Purchaser shall, with respect to any matter submitted
to a vote of stockholders, vote, or cause to be voted or consent
to be given with respect to, all Voting Securities Beneficially
Owned by it with respect to such matter in the same proportion as
the votes cast (or consents given) by or on behalf of the other
holders of the Company's Voting Securities with respect to such
matter.
(b) Notwithstanding anything to the contrary
contained in Section 7.2(a), the Purchaser shall have the right
to vote freely, without regard to any request or recommendation
of the Board of Directors of the Company or the votes or consents
of the other holders of the Company's Voting Securities, with
respect to the following:
(i) the election to the Board of
Directors of the Company of any Purchaser Designee
or any vote for the removal of any Purchaser
Designee; and
(ii) any Extraordinary Transaction.
7.3. Restrictions on Transfer. The Purchaser and its
Affiliates will not, prior to the earlier of (x) the occurrence
of a Standstill Termination Event and (y) the Purchaser and its
Affiliates Beneficially Owning, in the aggregate, less than 5% of
the outstanding Voting Securities of the Company, sell, transfer
or otherwise dispose of ("Transfer") any of the Securities,
except for (a) Transfers between and among the Purchaser and its
Affiliates who agree to be bound by the provisions of this
Agreement applicable to Purchaser; (b) Transfers of Securities
pursuant to the exercise of registration rights set forth in the
Registration Rights Agreement; (c) Transfers to a Person that
would qualify (were such Person to own a sufficient number of
shares to mandate a filing) to file using Schedule 13G adopted by
the Commission under the Exchange Act; (d) Transfers that comply
with the applicable provisions of Rule 144 or 144A of the
Securities Act; provided, however, that no Transfer under this
clause (d) shall be made to any Person who to Purchaser's
knowledge would Beneficially Own Voting Securities representing
more than 5% of the outstanding Voting Securities of the Company
(other than Persons to whom transfers could be made under clause
(c) above); (e) Transfers pursuant to (i) a bona fide tender or
exchange offer to acquire securities of the Company which has
been approved by the Board of Directors of the Company, (ii) any
all cash bona fide tender offer for all of the Company's
outstanding Common Stock, or (iii) any merger, consolidation,
recapitalization or other business combination transaction to
which the Company is a party; or (f) Transfers to the partners of
the Purchaser who are not Affiliates of the Purchaser or their
partners or their respective Affiliates or Associates.
7.4. Nondisclosure of Confidential Information. (a)
Without the prior written consent of the Company, any information
relating to the Company provided to the Purchaser in connection
with this Agreement, or to the Purchaser Designees or the Non-
voting Observer, which is either confidential, proprietary, or
otherwise not generally available to the public (but excluding
information obtained independently from third-party sources
without the recipient's knowledge that the source has violated
any fiduciary or other duty not to disclose such information)
(the "Confidential Information") shall be kept confidential by
the Purchaser and its representatives (the "Representatives"),
using the same standard of care in safeguarding the Confidential
Information as the Purchaser employs in protecting its own
proprietary information which such Purchaser desires not to
disseminate or publish, and shall not be disclosed to any Person,
other than those Representatives who need to know such
Confidential Information. It is understood (i) that such
Representatives shall be informed by the Purchaser of the
confidential nature of the Confidential Information, (ii) that
such Representatives shall be bound by the provisions of this
Section 7.4 as a condition of receiving the Confidential
Information and (iii) that, in any event, the Purchaser shall be
responsible for any breach of this Agreement by any of its
Representatives.
(b) If the Purchaser or its Representatives are
requested or required (by oral question, interrogatories,
requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any
Confidential Information, the Purchaser shall, as soon as
practicable, notify the Company of such request or requirement so
that the Company may seek an appropriate protective order. If,
in the absence of a protective order, the Purchaser or its
Representatives are, in the opinion of the Purchaser's counsel,
compelled to disclose the Confidential Information or else stand
liable for contempt or suffer other censure or penalty, the
Purchaser or its Representatives may disclose (which disclosure
shall be without liability) only such of the Confidential
Information to the party compelling disclosure as is required by
Law. The Purchaser shall, at the Company's request and expense,
cooperate with the Company's reasonable efforts to obtain a
protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information.
8. EVENTS OF DEFAULT AND REMEDIES
8.1. Events of Default. Each of the following shall
constitute an "Event of Default" under this Agreement:
(a) Nonpayment of Principal of the Notes. If
the Company fails to pay the principal of or premium, if any, due
on any Note, when and as the same becomes due and payable,
whether at the maturity thereof, on a date fixed for a
redemption, or otherwise; or
(b) Nonpayment of Interest or Other Amounts. If
the Company fails to pay interest on the Notes or any other
amount due under this Agreement in full, when and as the same
becomes due and payable, and such failure shall be continuing for
five (5) Business Days; or
(c) Voluntary Bankruptcy and Insolvency
Proceedings. If the Company or any Significant Subsidiary shall
file a petition in bankruptcy or for reorganization or for an
arrangement or any composition, readjustment, liquidation,
dissolution or similar relief pursuant to the Federal Bankruptcy
Code of 1978, as amended, or under any similar present or future
federal Law or the Law of any other jurisdiction or shall be
adjudicated a bankrupt or become insolvent, or consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar
official) of the Company or such Subsidiary or for all or any
substantial part of its respective property, or the Company or
any Significant Subsidiary shall make an assignment for the
benefit of its creditors, or shall admit in writing its inability
to pay its debts generally as they become due, or shall take any
corporate action, as the case may be, in furtherance of any of
the foregoing; or
(d) Adjudication of Bankruptcy. If a petition
or answer shall be filed proposing the adjudication of the
Company or any Significant Subsidiary as a bankrupt or its
reorganization or arrangement, or any composition, readjustment,
liquidation, dissolution or similar relief with respect to it
pursuant to the Federal Bankruptcy Code of 1978, as amended, or
under any similar present or future federal Law or the Law of any
other jurisdiction applicable to the Company or such Subsidiary,
and the Company or any Significant Subsidiary shall consent to or
acquiesce in the filing thereof, or such petition or answer shall
not be discharged or denied within 60 days after the filing
thereof; or
(e) Receivership or Sequestration. If a decree
or order is entered by a court having jurisdiction (i) for the
appointment of a receiver or custodian or liquidator or trustee
or sequestrator or assignee (or similar official) in bankruptcy
or insolvency of the Company or any Significant Subsidiary or of
all or a substantial part of its property, or for the winding-up
or liquidation of its affairs, and such decree or order shall
have remained in force undischarged and unstayed for a period of
60 days, or (ii) for the sequestration or attachment of any
property of the Company or any Significant Subsidiary without its
return to the possession of the Company or such Subsidiary or its
release from such sequestration or attachment within 60 days
thereafter; or
(f) Defaults Under Other Agreements. The
Company or any of its Subsidiaries shall (i) default in the
payment or principal or interest on any Indebtedness of
$15,000,000 or more beyond the applicable period of grace, if
any, or (ii) fail to observe or perform any covenant or agreement
contained in any agreement(s) or instrument(s) relating to
Indebtedness of $15,000,000 or more in the aggregate within any
applicable grace period, or any other event shall occur, if the
effect of such failure or other event is to accelerate, or to
permit the holder of such Indebtedness or any other Person to
accelerate, the maturity of $15,000,000 or more in the aggregate
of such Indebtedness; or $15,000,000 or more in the aggregate of
any Indebtedness shall be, or if as a result if such failure or
other event may be, required to be prepaid (other than by
regularly scheduled required prepayment) in whole or in part
prior to its stated maturity;
(g) Covenants. The Company shall fail to
observe or perform any covenant or agreement contained in this
Agreement, except for those covenants and agreements referred to
in Section 8.1(a) or 8.1(b), and, if capable of being remedied,
such failure shall remain unremedied for 30 days after written
notice has been given to the Company by the Purchaser or any
other holder of Securities;
(h) Misrepresentation. The representations and
warranties of the Company set forth in this Agreement shall not
have been true and correct in any material respect as of the date
hereof and shall not be true and correct in any Material respect
as of the Issue Date with the same effect as though such
representations and warranties had been made as of such date;
(i) Purchaser Designee. The failure of at least
one Purchaser Designee to be serving as a director of the
Company, which situation continues for a period of five days or
more, provided that such failure is not the result of Purchaser's
failing to designate a Purchaser Designee, and provided further
that it shall be an Event of Default if, during any period in
which no Purchaser Designee is serving as a director of the
Company, a meeting of the Board of Directors of the Company shall
be called or held or action shall have been taken by written
consent of the directors; or
(j) Judgments. A final judgment or judgments
entered by a court of competent jurisdiction for the payment of
money aggregating in excess of $15,000,000 is or are outstanding
against the Company or any Subsidiary and any one such judgment
in excess of $15,000,000 has, or such judgments aggregating in
excess of $15,000,000 have, remained unpaid, unvacated, unbonded,
or unstayed by appeal or otherwise for a period of 30 days from
the date of entry.
8.2. Acceleration of Maturity. If any Event of
Default shall have occurred and be continuing, the holder or
holders of at least 50.1% in aggregate principal amount of
outstanding Notes may, by notice to the Company, declare the
entire outstanding principal balance of the Notes, premium, if
any, and all accrued and unpaid interest thereon, to be due and
payable immediately, and upon any such declaration the entire
outstanding principal balance of the Notes, premium, if any, and
said accrued and unpaid interest shall become and be immediately
due and payable, without presentment, demand, protest or other
notice whatsoever, all of which are hereby expressly waived,
anything in the Notes or in this Agreement to the contrary
notwithstanding; provided that if an Event of Default under
clause (c), (d), or (e) of Section 8.1 with respect to the
Company or any Significant Subsidiary shall have occurred, the
outstanding principal amount of all of the Notes, premium, if
any, and all accrued and unpaid interest thereon, shall
immediately become due and payable, without any declaration and
without presentment, demand, protest or other notice whatsoever,
all of which are hereby expressly waived, anything in the Notes
or this Agreement to the contrary notwithstanding; and provided,
further, that if an Event of Default under clause (a) or (b) of
Section 8.1 shall have occurred and be continuing with respect to
any Note, the Purchaser or an Affiliate of the Purchaser (but not
any transferee thereof other than an Affiliate of the Purchaser)
holding one or more Notes in an aggregate outstanding principal
amount of at least $10,000,000 may, by notice to the Company,
declare the entire outstanding principal of such Notes so held by
the Purchaser and its Affiliates, premium, if any, and all
accrued and unpaid interest thereon, to be due and payable
immediately, and upon any such declaration the entire outstanding
principal of such Notes, premium, if any, and said accrued and
unpaid interest shall become and be immediately due and payable,
without presentment, demand, protest or other notice whatsoever,
all of which are hereby expressly waived, anything in such Notes
or in this Agreement to the contrary notwithstanding.
8.3. Other Remedies. If any Event of Default shall
have occurred and be continuing, from and including the date of
such Event of Default to but not including the date such Event of
Default is cured or waived, any holder may enforce its rights by
suit in equity, by action at law, or by any other appropriate
proceedings, whether for the specific performance (to the extent
permitted by Law) of any covenant or agreement contained in this
Agreement or the Notes or in aid of the exercise of any power
granted in this Agreement or the Notes, and any holder may
enforce the payment of any Note held by such holder and any of
its other legal or equitable rights.
8.4. Conduct no Waiver; Collection Expenses. No
course of dealing on the part of any holder, nor any delay or
failure on the part of any holder to exercise any of its rights,
shall operate as a waiver of such right or otherwise prejudice
such holder's rights, powers and remedies. If the Company fails
to pay, when due, the principal or the premium, if any, or the
interest on any Note, the Company will pay to each holder, to the
extent permitted by law, on demand, all costs and expenses
incurred by such holder in the collection of any amount due in
respect of any Note hereunder, including reasonable legal fees
incurred by such holder in enforcing its rights hereunder.
8.5. Annulment of Acceleration. If a declaration is
made in accordance with Section 8.2, then and in every such case,
the Purchaser or the holder or holders of at least 50.1% in
aggregate principal amount of outstanding Notes may, by an
instrument delivered to the Company, annul such declaration and
the consequences thereof, provided that at the time such
declaration is annulled:
(a) no judgment or decree has been
entered for the payment of any monies due on the
Notes or pursuant to this Agreement;
(b) all arrears of interest on the
Notes and all other sums payable on the Notes and
pursuant to this Agreement (except any principal
of or interest or premium on the Notes which has
become due and payable by reason of such
declaration) shall have been duly paid; and
(c) every other Event of Default shall
have been duly waived or otherwise made good or
cured;
provided, however, that only the Purchaser or an Affiliate of the
Purchaser (but not any transferee thereof other than an Affiliate
of the Purchaser) that is the holder of the Note or Notes making
the declaration permitted by the last proviso of Section 8.2 may
annul such declaration; and provided, further, that no such
annulment shall extend to or affect any subsequent Event of
Default or impair any right consequent thereon.
8.6. Remedies Cumulative. No right or remedy
conferred upon or reserved to the holders of Notes under this
Agreement is intended to be exclusive of any other right or
remedy, and every right and remedy shall be cumulative and in
addition to every other right and remedy given hereunder or now
and hereafter existing under applicable law. Every right and
remedy given by this Agreement or by applicable Law to the
holders of Notes may be exercised from time to time and as often
as may be deemed expedient by the holders. Without limiting the
generality of the foregoing, if the Event of Default is the
result of the Company's breach of its obligation to convert the
indebtedness evidenced by the Notes into Common Stock in
accordance with the terms and conditions hereof, the holder shall
be entitled to specific performance of such obligation of the
Company; it being expressly acknowledged and agreed by the
Company that no adequate remedy at law exists for any such breach
and that the holder will be irreparably harmed by any such breach
by the Company.
9. REDEMPTION
9.1. Optional Redemption. Subject to the Purchaser's
right of conversion set forth in Section 10, the Company shall
have the right, at its sole option and election made in
accordance with Section 9.4(d) and subject to Section 9.4(d), to
redeem the Notes, after June 30, 2001, in whole or in part, at
the following Redemption Prices (plus accrued and unpaid
interest), if redeemed during the 12-month period beginning on
the anniversary of the Issue Date in each of the years indicated:
Year Redemption Price (as % of principal)
---- ----------------
2001........................... 101%
2002........................... 100.5%
2003........................... 100%
9.2. Procedures for Partial Redemption. If less than
all of the Notes at the time outstanding are to be redeemed, the
aggregate principal amount to be redeemed shall be prorated among
the outstanding Notes; provided, however, that in the event that
the aggregate principal balance of the Notes then outstanding is
$10,000,000 or less, the Company shall be required to redeem all
of such outstanding Notes if it elects to redeem any such Notes.
9.3. Change in Control. In the event that there
occurs a Change in Control during the 12-month period beginning
on the Issue Date and each of the anniversaries of the Issue Date
in each of the years indicated, the Company shall make an offer
to acquire the Notes, in accordance with the procedures set forth
in Section 9.4(b), at the following Redemption Prices (plus
accrued and unpaid interest):
Year Redemption Price (as % of principal)
---- ----------------
1996........................... 110%
1997........................... 108%
1998........................... 106%
1999........................... 104%
2000........................... 102%
2001........................... 101%
2002........................... 100.5%
2003........................... 100%
9.4. Redemption Procedures. (a) Notice of any
redemption of Notes pursuant to Section 9.1 shall be mailed at
least 30 but not more than 60 days prior to the date fixed for
redemption to each holder of Notes to be redeemed, at such
holder's address as it appears in the Note Register. In order to
facilitate the redemption of Notes, the Board of Directors may
fix a record date for the determination of Notes to be redeemed
which shall be a date at least 20 days following the date of the
notice.
(b) Promptly following a Change in Control (but
in no event more than five Business Days thereafter), the Company
shall mail to each holder of Notes, at such holder's address as
it appears in the Note Register, notice of such Change in
Control, which notice shall set forth each holder's right to
require the Company to redeem any or all Notes held by it. The
Company shall thereafter, during a period of 90 days from the
date of such notice redeem any Notes, in whole or in part, at the
option of the holder, upon at least five days' written notice to
the Company by such holder specifying (i) the principal amount of
Notes to be redeemed and (ii) the redemption date.
(c) On the date of any redemption being made
pursuant to Section 9.1 or 9.3 which is specified in a notice
given pursuant to this Section 9.4 the Company shall wire
transfer to such holder the Redemption Price for the principal
amount of Notes so redeemed, together with an amount equal to all
accrued and unpaid interest thereon to the date of redemption.
(d) Notwithstanding the foregoing, the Company
shall not deliver any notice of redemption pursuant to this
Article 9 or any notice of conversion pursuant to Article 10
unless, to the extent required by the HSR Act, (a) the Company
shall have filed its HSR Notification (and the Company agrees to
file an HSR Notification promptly after Purchaser's request), (b)
the applicable waiting period shall have expired or been
terminated, and (c) the date fixed for redemption in accordance
with this Section 9.4 or conversion in accordance with Article 10
shall be a date upon which the Purchaser shall not be prohibited
from owning Voting Securities under the HSR Act. The Purchaser
shall be deemed for the purposes of this Agreement to
Beneficially Own the Voting Securities into which the Notes are
convertible as of the Issue Date. The Purchasers agree not to
vote any such Voting Securities until the applicable period under
the HSR Act expires or is terminated.
10. CONVERSION
10.1. Holder's Option to Convert into Common Stock.
Subject to the provisions for adjustment hereinafter set forth,
any Note or any portion of the outstanding principal amount of
such Note shall be convertible at the option of the holder at any
time after the earlier of (i) December 31, 1996 and (ii) the
occurrence of a Change in Control or the public announcement or
filing of a third party's intention to effect or to seek to
effect a Change in Control into fully paid and non-assessable
shares of Common Stock at a conversion price, determined as
hereinafter provided, in effect at the time of conversion.
The price at which shares of Common Stock shall be
delivered upon conversion (herein called the "Conversion Price")
of the Notes shall be initially $41.00 in principal amount of the
Notes per share of Common Stock. The Conversion Price shall be
adjusted in certain instances as provided in this Section 10.
10.2. Exercise of Conversion Privilege. (a)
Conversion of the Notes may be effected by any holder thereof
upon the surrender to the Company at the office of the Company
designated for notices in accordance with Section 13.6 or at the
office of any agent or agents of the Company, as may be
designated by the Board of Directors (the "Transfer Agent"), of
the Notes to be converted, accompanied by a written notice
stating that such holder elects to convert all or a specified
portion of the outstanding principal amount of such Notes in
accordance with the provisions of this Article 10 and specifying
the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. In case
any holder's notice shall specify a name or names other than that
of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common
Stock in such name or names. Other than such taxes, the Company
will pay any and all issue and other taxes (other than taxes
based on income) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of Notes
pursuant hereto. As promptly as practicable, and in any event
within five Business Days after the surrender of such Notes and
the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes (or the demonstration to the
satisfaction of the Company that such taxes have been paid), the
Company shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock to which the holder of
the Notes being converted shall be entitled and (ii) if less than
the entire outstanding principal amount of any Note surrendered
is being converted, a new Note in the principal amount which
remains outstanding upon such partial conversion. Such
conversion shall be deemed to have been made at the close of
business on the date of giving such notice so that the rights of
the holder thereof as to the Note or Notes (or portion thereof)
being converted shall cease except for the right to receive
shares of Common Stock in accordance herewith, and the Person
entitled to receive the shares of Common Stock shall be treated
for all purposes as having become the record holder of such
shares of Common Stock at such time, so long as such holder's
Notes are delivered to the Company within two Business Days after
the date of the giving of notice.
(b) In case any Notes are to be redeemed
pursuant to Section 9.1, the right of conversion of any or all of
the Notes to be redeemed provided for under this Section 10 shall
continue through and until the close of business on the Business
Day preceding the date fixed for redemption, whereupon such
conversion right shall cease and terminate as to the Notes to be
redeemed unless (i) the Company shall default in the payment of
the Redemption Price or (ii) a holder of a Note to be redeemed
has given notice to the Company of such holder's election to
convert all or any portion of a Note prior to the date fixed for
redemption.
10.3. Fractions of Shares; Interest. In connection
with the conversion of any Note into Common Stock, no fractional
shares shall be issued, but in lieu thereof the Company shall pay
a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the
Current Market Price per share of Common Stock on the Trading Day
on which such Note is deemed to have been converted. If more
than one Note shall be surrendered for conversion by the same
holder at the same time, the number of full shares of Common
Stock issuable on conversion thereof shall be computed on the
basis of the aggregate outstanding principal amount of Notes so
surrendered. Promptly upon conversion, the Company shall pay to
holders of Notes so converted an amount equal to any accrued and
unpaid interest on the Notes surrendered for conversion to the
date of such conversion, together with cash in lieu of any
fractional share of Common Stock.
10.4. Reservation of Stock; Listing. (a) The Company
shall at all times reserve and keep available for issuance upon
the conversion of the Notes, free from any preemptive rights,
such number of its authorized but unissued shares of Common Stock
as will from time to time be sufficient to permit the conversion
of the entire outstanding principal amount of the Notes into
Common Stock, and shall take all action required to increase the
authorized number of shares of Common Stock, if necessary, to
permit the conversion of the entire outstanding principal amount
of the Notes.
(b) If at the time of conversion, the Common
Stock is listed on a national securities exchange, or is
designated as a "national market system security" on the National
Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ"), the Company shall take all action necessary to
cause the shares of Common Stock issuable upon conversion of the
Notes to be listed on such exchange, subject to official notice
of issuance.
10.5. Rights. If the Company shall issue shares of
Common Stock upon conversion of any Notes as contemplated by this
Article 10, the Company shall issue together with each such share
of Common Stock any rights issued to holders of Common Stock,
irrespective of whether such rights shall be exercisable at such
time, but only if such rights are issued and outstanding and held
by other holders of Common Stock at such time and have not
expired.
10.6. Adjustment of Conversion Price. The Conversion
Price will be subject to adjustment from time to time as follows:
(a) In case the Company shall at any time or
from time to time after the date hereof (A) pay a dividend, or
make a distribution, on the outstanding shares of Common Stock in
shares of Common Stock; (B) subdivide the outstanding shares of
Common Stock; (C) combine the outstanding shares of Common Stock
into a smaller number of shares; (D) issue by reclassification of
the shares of Common Stock any shares of capital stock of the
Company, then, and in each such case, the Conversion Price in
effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the
holder of any Note thereafter surrendered for conversion into
Common Stock shall be entitled to receive, for each $100 of
outstanding principal amount of Notes, the number of shares of
Common Stock of the Company which such holder would have owned or
have been entitled to receive after the happening of any of the
events described above, had such $100 principal amount of Notes
been surrendered for conversion immediately prior to the
happening of such event or the record date therefor, whichever is
earlier. An adjustment made pursuant to this clause (a) shall
become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the
record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y)
in the case of such subdivision, reclassification or combination,
at the close of business on the day upon which such corporate
action becomes effective. No adjustment shall be made pursuant
to this clause (a) in connection with any transaction to which
Section 10.7 applies.
(b) If at any time following the Issue Date, the
Company shall issue shares of Common Stock (or rights, warrants
or other securities convertible into or exchangeable for shares
of Common Stock (collectively "Convertible Securities")) at a
price per share (or having a conversion price per share) less
than the Current Market Price per share of Common Stock as of the
date of issuance of such shares (or, in the case of Convertible
Securities, less than the Current Market Price as of the date of
issuance of the Convertible Securities in respect of which shares
of Common Stock were issued), then the Conversion Price shall be
adjusted by multiplying (A) the Conversion Price in effect on the
day immediately prior to such date by (B) a fraction, the
numerator of which shall be the sum of (1) the number of shares
of Common Stock outstanding on such date and (2) the number of
shares of Common Stock purchasable at the then Current Market
Price per share with the aggregate consideration receivable by
the Company for the total number of shares of Common Stock so
issued (or into which the Convertible Securities may convert),
and the denominator of which shall be the sum of (x) the number
of shares of Common Stock outstanding on such date and (y) the
number of additional shares of Common Stock issued (or into which
the Convertible Securities may convert).
An adjustment made pursuant to this Section 10.6(b) shall be made
on the next Business Day following the date on which any such
issuance is made and shall be effective retroactively to the
close of business on the date of such issuance. For purposes of
this Section 10.6(b), the aggregate consideration receivable by
the Company in connection with the issuance of shares of Common
Stock or of Convertible Securities shall be deemed to be equal to
the sum of the aggregate offering price (before deduction of
underwriting discounts or commissions and expenses payable to
third parties) of all such Common Stock and Convertible
Securities plus the minimum aggregate amount, if any, payable
upon exercise or conversion of any such Convertible Securities.
The issuance or reissuance of any shares of Common Stock (whether
treasury shares or newly issued shares) pursuant to (i) a
dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock
requiring an adjustment in the Conversion Price pursuant to
Section 10.6(a), or (ii) any stock option plan, stock purchase
plan or other benefit program of the Company or executive
compensation package approved by the Company's Board of Directors
involving the grant of options to employees or directors of the
Company shall not be deemed to constitute an issuance of Common
Stock or Convertible Securities by the Company to which this
Section 10.6(b) applies. In addition, the issuance of Common
Stock by the Company at or above 95% of the Current Market Price
of the Common Stock for the period of 20 Trading Days preceding
such issuance to one or more Strategic Alliance Investors, but
not in excess of 1,800,000 shares of Common Stock (subject to
adjustment pursuant to Section 13.11) in the aggregate for all
such issuances (or such lower price or greater number of Shares
as is approved by all members of the Board of Directors), shall
not be deemed to constitute an issuance of Common Stock by the
Company to which this Section 10.6(b) applies. Upon the
expiration unexercised of any Convertible Securities for which an
adjustment has been made pursuant to this Section 10.5(b), the
adjustments shall forthwith be reversed to effect such rate of
conversion as would have been in effect at the time of such
expiration or termination had such Convertible Securities, to the
extent outstanding immediately prior to such expiration or
termination, never been issued. No adjustment shall be made
pursuant to this Section 10.6(b) in connection with any
transaction to which Section 10.7 applies.
(c) In case the Company shall at any time or
from time to time after the date hereof declare, order, pay or
make a dividend or other distribution (including, without
limitation, any distribution of stock or other securities or
property or Convertible Securities of the Company or any of its
Subsidiaries by way of dividend or spinoff), on its Common Stock,
then, and in each such case, the Conversion Price shall be
adjusted by multiplying (1) the applicable Conversion Price on
the day immediately prior to the record date fixed for the
determination of stockholders entitled to receive such dividend
or distribution by (2) a fraction, the numerator of which shall
be the average Current Market Price of the Common Stock for the
period of 20 Trading Days preceding such record date less the
Fair Market Value per share of Common Stock (as determined in
good faith by the Board of Directors, a certified resolution with
respect to which shall be mailed to each holder of Notes) of such
dividend or distribution, and the denominator of which shall be
such average Current Market Price of the Common Stock. The
Company acknowledges that this Section 10.6(c) shall not
constitute a waiver of Section 6.2 of this Agreement. No
adjustment shall be made pursuant to this Section 10.6(c) in
connection with any transaction to which Section 10.7 applies or
in connection with the payment of quarterly cash dividends on the
Common Stock permitted pursuant to Section 6.2.
(d) For purposes of this Section 10.6, the
number of shares of Common Stock at any time outstanding shall
not include any shares of Common Stock then owned or held by or
for the account of the Company.
(e) The term "dividend," as used in this Section
10.5, shall mean a dividend or other distribution upon stock of
the Company.
(f) Anything in this Section 10.6 to the
contrary notwithstanding, the Company shall not be required to
give effect to any adjustment in the Conversion Price unless and
until the net effect of one or more adjustments (each of which
shall be carried forward), determined as above provided, shall
have resulted in a change of the Conversion Price by at least one
percent, and when the cumulative net effect of more than one
adjustment so determined shall be to change the Conversion Price
by at least one percent, such change in Conversion Price shall
thereupon be given effect.
(g) The certificate of any firm of independent
public accountants of recognized national standing selected by
the Board of Directors (which may be the firm of independent
public accountants regularly employed by the Company) shall be
presumptively correct for any computation made under this Section
10.6.
(h) If the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, and shall thereafter
and before the distribution to stockholders thereof legally
abandon its plan to pay or deliver such dividend or distribution,
then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted
by this Section 10.6 or in the Conversion Price then in effect
shall be required by reason of the taking of such record.
10.7. Merger or Consolidation. In the case of any
consolidation or merger of the Company with or into another
corporation, or in case of any sale or conveyance to another
corporation of all or substantially all of the assets or property
of the Company (each of the foregoing being referred to as a
"Transaction") occurring in each case at any time, each Note then
outstanding shall thereafter be convertible into, in lieu of the
Common Stock issuable upon such conversion prior to consummation
of such Transaction, the kind and amount of shares of stock and
other securities and property receivable (including cash) upon
the consummation of such Transaction by a holder of that number
of shares of Common Stock into which the principal balance of
such Note was convertible immediately prior to such Transaction.
In case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all
references in this Article 10 shall be deemed to apply, so far as
appropriate and nearly as may be, to such other securities or
property.
10.8. Notice of Certain Corporate Actions. In case at
any time or from time to time the Company shall pay any stock
dividend or make any other non-cash distribution to the holders
of its Common Stock, or shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of
any class or any other right, or there shall be any capital
reorganization or reclassification of the Common Stock or
consolidation or merger of the Company with or into another
corporation, or any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an
entirety, or there shall be a Change in Control, or there shall
be a voluntary or involuntary dissolution, liquidation or winding
up of the Company, then, in any one or more of said cases the
Company shall give at least 20 days' prior written notice (the
time of mailing of such notice shall be deemed to be the time of
giving thereof) to the registered holders of the Notes at the
addresses of each as shown in the Note Register as of the date on
which (i) a record shall be taken for such stock dividend,
distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, sale or conveyance,
Change in Control, dissolution, liquidation or winding up shall
take place, as the case may be, provided that in the case of any
Transaction to which Section 10.7 applies the Company shall give
at least 30 days' prior written notice as aforesaid. Such notice
shall also specify the date as of which the holders of the Common
Stock of record shall participate in said dividend, distribution
or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger,
sale or conveyance or Change in Control or participate in such
dissolution, liquidation or winding up, as the case may be.
Failure to give such notice shall not invalidate any action so
taken.
10.9. Reports as to Adjustments. Upon any adjustment
of the Conversion Price then in effect and any increase or
decrease in the number of shares of Common Stock issuable upon
the operation of the conversion provisions set forth in this
Article 10, then, and in each such case, the Company shall
promptly deliver to the Purchaser, each other holder of the Notes
and the Transfer Agent of the Notes and Common Stock, a
certificate signed by the President or a Vice President and by
the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company setting forth in reasonable
detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the Conversion
Price then in effect following such adjustment, and shall set
forth in reasonable detail the method of calculation of each and
a brief statement of the facts requiring such adjustment. Where
appropriate, such notice to holders of the Notes may be given in
advance and included as part of the notice required under the
provisions of Section 10.8.
11. SUBORDINATION OF NOTES
11.1. Subordination of Notes to Senior Indebtedness.
The Indebtedness evidenced by the Notes and all renewals and
extensions thereof, all obligations of the Company under this
Agreement (other than the obligations of the Company under
Sections 13.10 and 13.12), the Notes and all other instruments
and agreements arising out of or relating to any or all of the
foregoing and all renewals and extensions thereof (collectively,
the "Junior Indebtedness") shall at all times be wholly
subordinate and junior in right of payment to any and all Senior
Indebtedness of the Company (including any claims by the holders
of such Senior Indebtedness for interest accruing after any
assignment for the benefit of creditors by the Company or the
institution by or against the Company of any proceedings under
the Bankruptcy Code or any law for the relief of or relating to
debtors, or any other claim by such holders for any such interest
which would have accrued in the absence of such assignment or the
institution of such proceedings) in the manner and with the force
and effect hereafter set forth:
(a) In the event of any liquidation,
dissolution or winding up of the Company, or of
any execution, sale, receivership, insolvency,
bankruptcy, liquidation, readjustment,
reorganization or other similar proceeding
relative to the Company or its property, all sums
owing on all Senior Indebtedness of the Company
(including cash collateral and amounts not yet due
and payable) shall first be paid in full in cash,
or provision shall be made for such payment in
money or money's worth, before any payment is made
upon the Junior Indebtedness; and if in any such
event any payment or distribution, whether in
cash, property, or securities shall be made upon
or in respect of the Junior Indebtedness at a time
when such payment is prohibited under this Section
11, the same shall be paid over to the holders of
the Senior Indebtedness of the Company, pro rata,
for application in payment thereof unless and
until such Senior Indebtedness shall have been
paid or satisfied in full in cash, or provision
shall be made for such payment in money or money's
worth.
In case of any assignment for the benefit of
creditors by the Company or in case any
proceedings under the Bankruptcy Code or any other
law for the relief of or relating to debtors are
instituted by or against the Company, or in case
of the appointment of any receiver for the
Company's business or assets, or in case of any
dissolution or winding up of the affairs of the
Company, the Company and any assignee, trustee in
bankruptcy, receiver, debtor in possession or
other person or persons in charge are hereby
directed to pay to the holders of the Senior
Indebtedness of the Company the full amount of
such holders' claims against the Company
(including interest to the date of payment) in
cash, or provision shall be made for such payment
in money or money's worth, before making any
payments to the holders of Junior Indebtedness,
and insofar as may be necessary for that purpose,
each holder of the Notes hereby assigns and
transfers to the holders of Senior Indebtedness of
the Company all rights to any payments, dividends
or other distributions.
(b) In the event that all or any part
of the Junior Indebtedness is declared or becomes
due and payable because of the occurrence of any
Event of Default or otherwise than at the option
of the Company (other than pursuant to its terms
at its final maturity or upon a Change in
Control), under circumstances when the foregoing
clause (a) shall not be applicable, the holders of
the Junior Indebtedness shall be entitled to
payments only after there shall first have been
paid in full in cash, or provision shall be made
for such payment in money or money's worth, all
Senior Indebtedness of the Company or payment
shall have been provided therefor in a manner
satisfactory to the holders of such Senior
Indebtedness.
(c) For purposes of this Section 11
only, the words "cash, property or securities"
shall (so long as the effect of this paragraph is
not to cause the Note to be treated in any case or
proceeding or other event described in this
Section as part of the same class of claims as any
Senior Indebtedness or any class of claims on a
parity with or senior to any Senior Indebtedness
for any payment or distribution) not be deemed to
include shares of stock of the Company as
reorganized or readjusted, or securities of the
Company or any other corporation provided for by a
plan of reorganization or readjustment which are
subordinated in right of payment to all Senior
Indebtedness which may at the time be outstanding
to substantially the same extent as, or to a
greater extent than, the Notes are so subordinated
as provided in this Section 11. The consolidation
of the Company with, or the merger of the Company
into, another Person or the liquidation or
dissolution of the Company following the sale or
transfer of its properties and assets
substantially as an entirety to another Person
upon the terms and conditions set forth in this
Agreement shall not be deemed a dissolution,
winding up, liquidation, reorganization,
assignment for the benefit of creditors or
marshaling of assets and liabilities of the
Company for the purposes of this Section if the
Person formed by such consolidation or into which
the Company is merged or which acquires by sale or
transfer such properties and assets substantially
as an entirety, as the case may be, shall, as a
part of such consolidation, merger, sale or
transfer, comply with the conditions set forth in
this Agreement.
In the event and during the continuation
of any default in the payment of the principal of
or premium, if any, or interest on any Senior
Indebtedness continuing beyond the period of
grace, if any, specified in the instrument
evidencing such Senior Indebtedness, upon written
notice thereof to the Company and the holders of
the Notes, then, unless and until such default
shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment (in
cash, property, securities, by set-off or
otherwise) shall be made or agreed to be made on
account of the principal of, premium, if any, or
interest on the Junior Indebtedness, or in respect
of the retirement, purchase or other acquisition
by the Company of any of the Junior Indebtedness.
In addition, in the event and during the
continuance of any other event of default with
respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be
accelerated, upon receipt by the Company and the
holders of the Notes of written notice of such
event of default from the holders of such
Designated Senior Indebtedness (or their
respective Senior Indebtedness Representatives, if
any), then, unless and until such event of default
shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment (in
cash, property, securities, by set-off or
otherwise) shall be made or agreed to be made on
account of the principal of, premium, if any, or
interest on the Junior Indebtedness, or in respect
of any retirement, purchase or other acquisition
by the Company of any of the Junior Indebtedness,
for a period (a "Payment Blockage Period")
commencing as of the earlier of the date of
receipt of such notice or, if applicable, the date
of such acceleration of the Junior Indebtedness,
and ending 180 days thereafter (unless such
Payment Blockage Period shall be terminated by
written notice to the holders of the Notes from
such holders or Senior Indebtedness
Representatives commencing the Payment Blockage
Period). Not more than one Payment Blockage
Period may be commenced with respect to the Junior
Indebtedness during any period of 360 consecutive
days. For all purposes of this paragraph (d), no
event of default which existed or was continuing
on the date of the commencement of any Payment
Blockage Period shall be, or be made, the basis
for the commencement of a second Payment Blockage
Period by the Senior Indebtedness Representatives
for or the holders of such Designated Senior
Indebtedness whether or not within a period of 360
consecutive days unless such event of default
shall have been cured or waived for a period of
not less than 90 consecutive days.
(d) All payments, cash, or noncash
distributions made to the holders of Junior
Indebtedness which should have been made to the
holders of Senior Indebtedness of the Company
shall be received and held by the former in trust
for the benefit of the latter, and the holders of
Junior Indebtedness shall forthwith remit such
payments, cash, or noncash distributions to the
holders of the Senior Indebtedness of the Company,
pro rata, in the form in which it was received,
together with such endorsements or documents as
may be necessary to effectively negotiate or
transfer the same to the holders of the Senior
Indebtedness of the Company.
(e) Without in any way waiving the
rights of the holders of any Junior Indebtedness
under Section 6.1, each holder of Senior
Indebtedness of the Company is hereby authorized
by the holders of Junior Indebtedness to:
(i) renew, compromise, extend,
accelerate or otherwise change the time of
payment, or any other terms, of any Senior
Indebtedness of the Company held by such
holder;
(ii) increase or decrease the rate of
interest payable thereon or any part thereof;
(iii) exchange, enforce, waive or
release any security therefor;
(iv) apply such security and direct the
order or manner of sale thereof in such
manner as such holder may at its discretion
determine; and/or
(v) release the Company or any guarantor
of any Senior Indebtedness of the Company
from liability;
all without notice to any holder of Junior
Indebtedness and without affecting the
subordination provided by this Agreement.
Notwithstanding anything set forth in this Section 11.1,
nothing set forth herein shall restrict holders of the Notes
from exercising their rights of conversion hereunder and,
unless a payment default shall have occurred with respect to
any Senior Indebtedness, holders of the Notes shall be
entitled to receive, upon conversion thereof, any balance
due to such holders by reason of the limitation on the
number of shares issuable upon such conversion set forth in
Article 10 hereof.
11.2. Proofs of Claim of Holders of Senior
Indebtedness; Voting. Each holder of Junior Indebtedness
undertakes and agrees for the benefit of each holder of Senior
Indebtedness of the Company to execute, verify, deliver and file
any proofs of claim relating to the Junior Indebtedness which any
holder of such Senior Indebtedness may at any time require in
order to prove and realize upon any rights or claims pertaining
to the Junior Indebtedness and to effectuate the full benefit of
the subordination contained herein. Upon failure of any holder
of Junior Indebtedness to file the required proof or proofs of
claim prior to 30 days before the expiration of the time to file
claims in such proceeding, each holder of Senior Indebtedness of
the Company is hereby irrevocably appointed such holder of Junior
Indebtedness to be such holder's agent to file the appropriate
claim or claims and if such holder of Senior Indebtedness elects
at its sole discretion to file such claim or claims (i) to accept
or reject any plan of reorganization or arrangement on behalf of
such holder, and (ii) to otherwise vote such holder's claim in
respect of the Junior Indebtedness in any manner deemed
appropriate for the benefit and protection of the holders of the
Senior Indebtedness of the Company.
11.3. Rights of Holders of Senior Indebtedness
Unimpaired. No right of any holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time or in
any way be affected or impaired by any failure to act on the part
of the Company or the holders of Senior Indebtedness, or by any
noncompliance by the Company with any of the terms, provisions
and covenants of this Agreement, regardless of any knowledge
thereof that any such holder of Senior Indebtedness may have or
be otherwise charged with.
11.4. Effects of Event of Default. The Company agrees,
for the benefit of the holders of Senior Indebtedness, that in
the event that any Note is declared due and payable before its
maturity because of the occurrence of an Event of Default, the
Company will give prompt notice in writing of such happening to
the holders of Senior Indebtedness.
11.5. Company's Obligations Unimpaired. The provisions
of this Article 11 are solely for the purpose of defining the
relative rights of the holders of Senior Indebtedness on the one
hand, and the holders of Junior Indebtedness on the other hand,
and nothing herein shall impair, as between the Company and the
holders of Junior Indebtedness, the obligation of the Company
which is unconditional and absolute, to pay the principal,
premium, if any, and interest on the Notes in accordance with
this Agreement and the terms of the Notes, nor shall anything
herein prevent any holder of Junior Indebtedness from exercising
all remedies otherwise permitted by applicable law or under this
Agreement or the Notes upon the occurrence of an Event of
Default, subject to the rights of the holders of Senior
Indebtedness as herein provided for.
11.6. Subrogation. Subject to the payment in full of
Senior Indebtedness, holders of the Notes shall be subrogated to
the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities made on
the Senior Indebtedness until the Senior Indebtedness shall be
paid in full in cash; and, for the purposes of such subrogation,
payments or distributions to the holders of Senior Indebtedness
of any cash, property or securities to which any holder of Notes
would be entitled except for the provisions of this Agreement
shall, as between the Company and its creditors other than the
holders of Senior Indebtedness and holders of the Notes, be
deemed to be a payment by the Company to or on account of the
Notes, it being understood that the provisions of this Agreement
are and are intended solely for the purpose of defining the
relative rights of the holders of the Notes on the one hand, and
the holders of Senior Indebtedness, on the other hand. The
purpose of this Section 11.6 is to grant to holders of the Notes
the same rights against the Company with respect to the aggregate
amount of such payments or distributions as the holders of Senior
Indebtedness would have against the Company if such aggregate
amount were considered overdue Senior Indebtedness.
12. INTERPRETATION
12.1 Definitions.
"Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act. Notwithstanding
the foregoing, "Affiliate" shall not include the limited partners
of the limited partner of the Purchaser.
"Beneficially Own" with respect to any securities shall
mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or
understanding, whether or not in writing.
"Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive
order to close.
"Capital Stock" means, in the case of the Company, any
and all shares (however designated) of the capital stock of the
Company now or hereafter outstanding.
"Capitalized Lease" shall mean, with respect to any
Person, any lease or any other agreement for the use of property
which, in accordance with generally accepted accounting
principles, should be capitalized on the lessee's or user's
balance sheet.
"Capitalized Lease Obligation" of any Person shall mean
and include, as of any date as of which the amount thereof is to
be determined, the amount of the liability capitalized or
disclosed (or which should be disclosed) in a balance sheet of
such Person in respect of a Capitalized Lease of such Person.
"Change in Control" shall mean:
(a) the acquisition by any individual,
entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 35%
or more of the combined voting power of the then
outstanding Voting Securities of the Company, but
excluding, for this purpose, any such acquisition
by (i) the Company or any Subsidiary, (ii) any
employee benefit plan (or related trust) of the
Company or any Subsidiary, or (iii) any
corporation with respect to which, following such
acquisition, 50% or more of the combined voting
power of the then outstanding Voting Securities of
such corporation is then beneficially owned,
directly or indirectly, by individuals and
entities who were the beneficial owners of Voting
Securities of the Company immediately prior to
such acquisition in substantially the same
proportion as their ownership, immediately prior
to such acquisition, of the combined voting power
of the then outstanding Voting Securities of the
Company; or
(b) a reorganization, merger or
consolidation, in each case, with respect to which
all or substantially all the Persons who were the
respective Beneficial Owners of the Voting
Securities of the Company immediately prior to
such reorganization, merger or consolidation do
not, following such reorganization, merger or
consolidation Beneficially Own, directly or
indirectly, more than 35% of the combined voting
power of the then outstanding Voting Securities of
the corporation resulting from such
reorganization, merger or consolidation; or
(c) the Incumbent Board shall cease for
any reason to constitute at least 50% of the
members of the Board; or
(d) the sale, lease or other
disposition of all or a substantial part of the
Company's assets in one transaction or a series of
related transactions.
"Closing" shall have the meaning ascribed thereto in
Section 1.2.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Common Stock" shall have the meaning ascribed thereto
in the recitals.
"Confidential Information" shall have the meaning
ascribed thereto in Section 7.13.
"Consolidated" or "consolidated", when used with
reference to any financial term in this Agreement (but not when
used with respect to any tax return or tax liability), shall mean
the aggregate for two or more Persons of the amounts signified by
such term for all such Persons, with inter-company items
eliminated and, with respect to earnings, after eliminating the
portion of earnings properly attributable to minority interests,
if any, in the capital stock of any such Person or attributable
to shares of preferred stock of any such Person not owned by any
other such Person.
"Contracts" shall mean all agreements, contracts,
leases, purchase orders, arrangements, commitments and licenses
to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound.
"Conversion Price" shall have the meaning ascribed
thereto in Section 10.1.
"Covered Damages" means any and all costs, expenses,
damages or other liabilities resulting from any legal,
administrative or other proceedings arising out of the
consummation of the transactions contemplated hereby, other than
such costs, expenses, damages or other liabilities resulting from
the violation by the Purchaser of any legal investment laws or
other laws restricting or governing the Purchaser's investments
generally, from the violation or alleged violation by the
Purchaser of any of its agreements contained herein or from the
gross negligence or willful misconduct of the Purchaser or any
person who controls the Purchaser.
"Current Market Price", when used with reference to
shares of Common Stock or other securities on any date, shall
mean the closing price per share of Common Stock or such other
securities on such date and, when used with reference to shares
of Common Stock or other securities for any period shall mean the
average of the daily closing prices per share of Common Stock or
such other securities for such period. If the Common Stock or
such other securities are listed or admitted to trading on a
national securities exchange, the closing price shall be the last
sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock or such other securities are not
listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal
national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading or, if the
Common Stock or such other securities are not so listed on any
national securities exchange, as reported in the transaction
reporting system applicable to securities designated as a
"national market system security" or NASDAQ. If the Common Stock
or such other securities are not publicly held or so listed or
designated, "Current Market Price" shall mean the Fair Market
Value per share of Common Stock or of such other securities as
determined in good faith by the Board of Directors of the Company
based on an opinion of an independent investment banking firm
with an established national reputation with respect to the
valuation of securities.
"Designated Senior Indebtedness" means at any time any
issue of Senior Indebtedness having a principal amount due and
payable upon maturity or upon any acceleration thereof at such
time of at least $20,000,000.
"Equity Securities" shall mean with respect to any
Person, shares of capital stock or other equity interest of such
Person, and any rights, options or warrants to purchase stock or
other securities exchangeable for or convertible into capital
stock of or other equity interest in such Person.
"Employee Plan" shall have the meaning ascribed thereto
in Section 2.11.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" shall have the meaning ascribed
thereto in Section 2.11.
"Event of Default" shall mean each of the happenings or
circumstances enumerated in Section 8.1.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any successor federal statute, and the
rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. Reference to a particular
section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such
successor federal statute.
"Extraordinary Transaction" shall mean any merger or
consolidation or other business combination transaction or
reorganization or dissolution or liquidation of the Company or
any sale or other disposition of all or a substantial part of the
assets of the Company.
"Fair Market Value" shall mean, as to shares of Common
Stock or any other securities of the Company or any other issuer
which are publicly traded, the average of the Current Market
Prices of such shares or securities during the period of five
consecutive trading days preceding the date as of which the Fair
Market Value of a security is to be determined. The "Fair Market
Value" of any security which is not publicly traded or of any
other property shall mean the fair value thereof as determined by
an independent investment banking or appraisal firm experienced
in the valuation of such securities or property selected in good
faith by the Board of Directors of the Company or a committee
thereof.
"GCL" shall have the meaning ascribed thereto in
Section 2.2.
"Governmental Entity" shall mean any supernational,
national, foreign, federal, state or local judicial, legislative,
executive, administrative or regulatory body or authority.
"Guarantee" by any Person shall mean all obligations
(other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of any Person
guaranteeing, or in effect guaranteeing, any Indebtedness,
dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance
sheet condition or otherwise to advance or make available funds
for the purchase or payment of such Indebtedness or obligation,
(iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the
owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of such Indebtedness or
obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of any computations made under
this Agreement, a Guarantee in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the
outstanding amount of the Indebtedness for borrowed money which
has been guaranteed, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and
regulations thereunder.
"HSR Notification" shall mean the notification of the
particular transaction pursuant to the requirements of the HSR
Act.
"Incumbent Board" shall mean the individuals who,
immediately after the Closing, constitute the Board of Directors
of the Company (including the Original Purchaser Designee);
provided, however, that any individual becoming a director
subsequent to the Closing whose election, or nomination for
election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be deemed to be a member of the Incumbent
Board.
"Indebtedness" shall mean, with respect to any Person,
(i) all obligations of such Person for borrowed money, or with
respect to deposits or advances of any kind, (ii) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations of such Person under
conditional sale or other title retention agreements relating to
property purchased by such Person, (iv) all obligations of such
Person issued or assumed as the deferred purchase price of
property or services (other than accounts payable to suppliers
and similar accrued liabilities incurred in the ordinary course
of business and paid in a manner consistent with industry
practice), (v) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any lien or security
interest on property owned or acquired by such Person whether or
not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such Person, (vii) all
Guarantees of such Person, (viii) all obligations (including but
not limited to reimbursement obligations) relating to the
issuance of letters of credit for the account of such Person,
(ix) all obligations arising out of foreign exchange contracts,
and (x) all obligations arising out of interest rate and currency
swap agreements, cap, floor and collar agreements, interest rate
insurance, currency spot and forward contracts and other
agreements or arrangements designed to provide protection against
fluctuations in interest or currency exchange rates.
"Initial Principal Balance" shall have the meaning
ascribed thereto in Section 1.1 (as it may be adjusted in Section
1.4).
"Intellectual Property" shall have the meaning ascribed
thereto in Section 2.12(b).
"Issue Date" shall have the meaning ascribed thereto in
Section 1.2.
"Junior Indebtedness" shall have the meaning ascribed
thereto in Section 11.1.
"Law" shall include any foreign, federal, state, or
local law, statute, ordinance, rule, regulation, order, judgment
or decree.
"Material" shall mean material in relation to the
properties, business, prospects, operations, earnings, assets,
liabilities or condition (financial or otherwise) of the Company
and its Subsidiary taken as a whole, whether or not in the
ordinary course of business.
"Material Adverse Change" shall mean a change that has
a Material Adverse Effect.
"Material Adverse Effect" shall mean a material adverse
effect on properties, business, prospects, operations, earnings,
assets, liabilities or the condition (financial or otherwise) of
the Company and its Subsidiary taken as a whole, whether or not
in the ordinary course of business.
"Multiemployer Plan" shall have the meaning ascribed
thereto in Section 2.11.
"Net Income" shall mean, for any period, the net
earnings income (or loss) after taxes of the Company and its
Subsidiaries on a consolidated basis for such period taken as a
single accounting period determined in accordance with generally
accepted accounting principles.
"Net Worth" shall mean at any time the consolidated
stockholders' equity of the Company and its Subsidiaries at such
time determined in accordance with generally accepted accounting
principles consistently applied plus the outstanding principal
balance of the Notes.
"Notes" shall have the meaning ascribed thereto in the
recitals.
"Note Register" shall have the meaning ascribed thereto
in Section 4.2.
"Original Purchaser Designee" shall have the meaning
ascribed thereto in Section 6.16.
"outstanding" shall mean when used with reference to
the Notes at a particular time, all Notes theretofore issued as
provided in this Agreement, except (i) Notes theretofore reported
as lost, stolen, damaged or destroyed, or surrendered for
transfer, exchange or replacement, in respect to which
replacement Notes have been issued, (ii) Notes theretofore paid
in full, and (iii) Notes therefore cancelled by the Company,
except that, for the purpose of determining whether holders of
the requisite principal amount of Notes have made or concurred in
any waiver, consent, approval, notice or other communication
under this Agreement, Notes registered in the name of, or owned
beneficially by, the Company or any Subsidiary of any thereof,
shall not be deemed to be outstanding.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation, or any successor thereto.
"Pension Plan" shall mean any multiemployer plan or
single employer plan, as defined in Section 4001 of ERISA, that
is subject to Title IV of ERISA, that the Company, any Subsidiary
or any ERISA Affiliate maintains or is or ever has been obligated
to contribute to for the benefit of employees or former employees
of the Company, any Subsidiary or any ERISA Affiliate.
"Person" shall mean any individual, firm, corporation,
limited liability company, partnership, company or other entity,
and shall include any successor (by merger or otherwise) of such
entity.
"Purchase Price" shall have the meaning ascribed
thereto in Section 1.1.
"Purchaser Designee" shall have the meaning ascribed
thereto in Section 7.2.
"Redemption Price" shall mean, in the case of a
redemption effective pursuant to Section 9.1, the applicable
percentage of principal set forth in the table included in
Section 9.1, and, in the case of a redemption effected pursuant
to Section 9.3, the applicable percentage of principal set forth
in the table included in Section 9.3.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement dated the date hereof between the
Purchaser and the Company.
"Representatives" shall have the meaning ascribed
thereto in Section 7.4.
"SEC Reports" shall have the meaning ascribed thereto
in Section 2.4.
"Securities" shall have the meaning ascribed thereto in
the recitals.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect at the time. Reference to a particular section of
the Securities Act shall include reference to the comparable
section, if any, of such successor federal statute.
"Senior Indebtedness" shall mean, as of any date as of
which the amount thereof is to be determined, the principal of
and premium, if any, and interest due on (a) any Indebtedness for
money borrowed from banks and institutional lenders, whether
outstanding on the date of this Agreement or thereafter created,
incurred or assumed, except for any such Indebtedness that by the
terms of the instrument or instruments by which such indebtedness
was created or incurred expressly provides that it (i) is
subordinated in right of payment to the Notes or (ii) ranks pari
passu in right of payment with the Notes and (b) any amendments,
renewals, extensions, modifications and refundings of any such
Indebtedness.
"Senior Indebtedness Representative" means the trustee,
agent or other representative for holders of all or any of the
Senior Indebtedness, if any, designated in the indenture,
agreement or other document creating, evidencing or governing
such Senior Indebtedness or pursuant to which it was issued, or
otherwise duly designated by the holders of such Senior
Indebtedness.
"Shares" shall have the meaning ascribed thereto in the
recitals.
"Significant Subsidiary" shall have the meaning
ascribed thereto in Rule 1-02 of Regulation S-X under the
Exchange Act.
"Standstill Termination Event" shall have the meaning
ascribed thereto in Section 7.1.
"Strategic Alliance Investor" shall mean a Person with
which the Company has a material business relationship (separate
from such Person's investment in Equity Securities of the
Company) involving the development, purchase or sale of products
or services with, to or from the Company or any Subsidiary or the
joint ownership with the Company or any Subsidiary of any other
Person or of any material assets relating to the business of the
Company.
"Subsidiary" of any Person shall mean any corporation
or other entity of which a majority of the voting power or the
voting equity securities or equity interest is owned, directly or
indirectly, by such Person.
"Taxes" shall mean all federal, state, local or foreign
taxes, including but not limited to income, gross receipts,
windfall profits, value added, severance, property, production,
sales, use, license, excise, franchise, employment, withholding
or similar taxes, together with any interest, additions or
penalties with respect thereto and any interest in respect of
such additions or penalties.
"Total Indebtedness" shall mean consolidated
Indebtedness of the Company and all of its Subsidiaries
determined in accordance with generally accepted accounting
principles excluding the principal amount of the Notes.
"Trading Day" shall mean a Business Day or, if the
Common Stock is listed or admitted to trading on any national
securities exchange, a day on which such exchange is open for the
transaction of business.
"Transaction" shall have the meaning ascribed thereto
in Section 10.6.
"Transaction Documents" shall mean this Agreement, the
Notes and the Registration Rights Agreement.
"Transfer" shall have the meaning ascribed thereto in
Section 7.9.
"Transfer Agent" shall have the meaning ascribed
thereto in Section 10.2.
"Transferor" shall have the meaning ascribed thereto in
Section 7.10.
"Voting Securities" shall mean at any time shares of
any class of capital stock of the Company (or other corporation)
which are then entitled to vote generally in the election of
directors of the Company (or such other corporation).
12.2. Accounting Principles. The character or
amount of any asset, liability, capital account or reserve and of
any item of income or expense required to be determined pursuant
to this Agreement, and any consolidation or other accounting
computation required to be made pursuant to this Agreement, and
the construction of any definition in this Agreement containing a
financial term, shall be determined or made, as the case may be,
in accordance with generally accepted accounting principles, to
the extent applicable, unless such principles are inconsistent
with the express requirements of this Agreement.
13. MISCELLANEOUS
13.1. Payments. The Company agrees that, so long as
the Purchaser shall hold any Securities, it will make all cash
interest or dividend payments thereon in immediately available
funds in such manner as the Purchaser may reasonably request in
writing. Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or interest on any
Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day. If the date for
payment is extended to the next succeeding Business Day by reason
of the preceding sentence, the period of such extension will be
included in the computation of the interest payable on such next
succeeding Business Day.
13.2. Severability. If any term, provision, covenant
or restriction of this Agreement or any exhibit hereto is held by
a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement and such exhibits shall remain
in full force and effect and shall in no way be affected,
impaired or invalidated. It is hereby stipulated and declared to
be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid,
void or unenforceable.
13.3. Specific Enforcement. The Purchaser, on the one
hand, and the Company, on the other, acknowledge and agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an
injunction to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state thereof
having jurisdiction, this being in addition to any other remedy
to which they may be entitled at Law or equity.
13.4. Entire Agreement. This Agreement (including the
Schedules and Exhibits hereto) contains the entire understanding
of the parties with respect to the transactions contemplated
hereby.
13.5. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or
more of the counterparts have been signed by each party and
delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
13.6. Notices and other Communications. All notices,
consents, requests, instructions, approvals, financial
statements, proxy statements, reports and other communications
provided for herein shall be deemed given, if in writing and
delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
If to CIDCO Incorporated, to:
CIDCO Incorporated
220 Cochrane Circle
Morgan Hill, CA 95037
Attention: President
With a copy to:
Carter, Ledyard & Milburn
2 Wall Street
New York, NY 10005
Attention: James E. Abbott, Esq.
If to the Purchaser, to:
ID Holding Partnership, L.P.
c/o Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, NY 10153
Attention: Mr. Steven B. Klinsky
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: F. William Reindel, Esq.
or to such other address as any party may, from time to time,
designate in a written notice given in a like manner.
13.7. Amendments. This Agreement may be amended as to
the Purchaser, any holder of the Securities and their respective
successors and assigns, and the Company may take any action
herein prohibited, or omit to perform any act required to be
performed by it, if the Company shall obtain the written consent
of the registered holders of not less than a majority of the
outstanding principal amount of the Notes (treating any Notes
that shall have been converted pursuant to Article 10 as still
outstanding and the holders of the shares of Common Stock issued
upon such conversion as holding the aggregate principal amount of
Notes surrendered in the conversion). This Agreement may not be
waived, changed, modified, or discharged orally, but only by an
agreement in writing signed by the party or parties against whom
enforcement of any waiver, change, modification or discharge is
sought or by parties with the right to consent to such waiver,
change, modification or discharge on behalf of such party.
13.8. Cooperation; Further Assurances.
(a) The Purchaser and the Company agree to take,
or cause to be taken, all such further or other actions as shall
reasonably be necessary to make effective and consummate the
transactions contemplated by this Agreement.
(b) The Purchaser shall vote the shares of
Voting Securities owned by the Purchaser, and the Purchaser and
the Company shall take all other actions, necessary to ensure
that the Certificate of Incorporation and By-Laws of the Company
do not at any time conflict with the provisions of this
Agreement.
13.9. Successors and Assigns. All covenants and
agreements contained herein shall bind and inure to the benefit
of the parties hereto and their respective successors and
assigns, it being understood however that the covenants set forth
in Sections 6.15 and 6.16 shall not inure to the benefit of any
assignee of the Purchasers other than Affiliates of the Purchaser
and the restrictions contained in Article 7 shall not be
applicable to any subsequent holder of the Securities (other than
Affiliates of the Purchaser).
13.10. Expenses. (a) The Company shall pay (x) all
reasonable costs and expenses of Purchaser and each Person who
controls the Purchaser (including, without limitation, their
respective fees and expenses of their counsel and accountants)
and (y) indemnify the Purchaser and each Person who controls the
Purchaser from all Covered Damages, in each case incurred in
connection with the negotiation, execution and delivery of the
Transaction Documents and the consummation of the transactions
contemplated thereby up to a maximum amount, in the case of
clause (x) above, of $500,000; provided that the Company shall
have no obligation to make such payment if Purchaser declines to
consummate the transactions contemplated hereby in breach of this
Agreement. The Company further agrees to pay to holders of
Securities all reasonable costs and expenses relating to any
future amendment or supplement to any of the Transaction
Documents or any of the Securities (or any proposal by the
Company for such amendment or supplement) whether or not
consummated or any waiver or consent with respect thereto (or any
proposal for such waiver or consent) whether or not consummated,
and all costs and expenses of the holders of Securities relating
to the enforcement of any of the Transaction Documents.
13.11. Adjustments. In the event that any capital
stock or other securities are issued in respect of, in exchange
for, or in substitution of, any Common Stock by reason of any
reorganization, recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock
dividend, split-up, sale of assets, distribution to stockholders
or combination of the shares of Common Stock or any other change
in the Company's capital structure, appropriate adjustments shall
be made to the number of shares of Common Stock referred to in
Sections 6.20 and 10.6(b) in this Agreement so as to fairly and
equitably reflect such change in the Common Stock or the
Company's capital structure.
13.12. Indemnification. Each party (an
"Indemnifying Party") hereto agrees to indemnify and hold
harmless the other party (an "Indemnified Party") against and in
respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries, and deficiencies,
including reasonable attorneys' fees, that such Indemnified Party
shall incur or suffer, that arise, result from, or relate to any
breach of, or failure by such Indemnifying Party to perform, any
of its representations, warranties, covenants, or agreements set
forth in any of the Transaction Documents.
13.13. Survival. All covenants, agreements,
representations and warranties contained herein and in any
certificates delivered pursuant hereto in connection with the
transactions occurring on the Closing Date shall survive the
closing and the delivery of the Transaction Documents, regardless
of any investigation made by or on behalf of any party.
13.14. Transfer of Securities. (a) The Purchaser
understands and agrees that the Securities have not been
registered under the Securities Act or the securities laws of any
state and that they may be sold or otherwise disposed of only in
one or more transactions registered under the Securities Act and,
where applicable, such laws or transactions as to which an
exemption from the registration requirements of the Securities
Act and, where applicable, such laws are available. The
Purchaser acknowledges that, except as provided in the
Registration Rights Agreement, the Purchaser has no right to
require the Company to register the Securities. The Purchaser
understands and agrees that each Note or certificate representing
the Securities shall bear the following legends:
"THE TRANSFER OF [THE SECURITIES REPRESENTED BY THIS
CERTIFICATE] [THIS NOTE] IS RESTRICTED BY AND PURSUANT
TO A NOTE PURCHASE AGREEMENT DATED AS OF JUNE 7, 1996,
A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
CORPORATION."
"[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE]
[THIS NOTE HAS] NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
13.15. GOVERNING LAW. THIS AGREEMENT AND THE NOTES
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN SUCH STATE.
13.16. Submission to Jurisdiction. If any action,
proceeding or litigation shall be brought by the Purchaser in
order to enforce any right or remedy under this Agreement or any
of the Notes, the Company hereby consents and will submit, and
will cause each of its Subsidiaries to submit, to the
jurisdiction of any state or federal court of competent
jurisdiction sitting within the area comprising the Southern
District of New York on the date of this Agreement. The Company
hereby irrevocably waives any objection, including, but not
limited to, any objection to the laying of venue or based on the
grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any such action, proceeding or litigation
in such jurisdiction.
13.17. Service of Process. Nothing herein shall
affect the right of any holder of a Note to serve process in any
other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Company in any other jurisdiction.
13.18. WAIVER OF JURY TRIAL. THE COMPANY HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
NOTES.
13.19. Public Announcements. Neither the Company
nor the Purchaser shall make any public statements, including,
without limitation, any press releases, with respect to this
Agreement and the transactions contemplated hereby without the
prior written consent of the other party (which consent shall not
be unreasonably withheld) except as may be required by law. If a
public statement is required to be made by law, the parties shall
consult with each other in advance as to the contents and timing
thereof.
13.20. Signatures. This Agreement shall be
effective upon delivery of original signature pages or facsimile
copies thereof executed by each of the parties hereto.
IN WITNESS WHEREOF, the Company and the Purchaser have
caused this Agreement to be executed and delivered by their
respective officers or partners thereunto duly authorized.
CIDCO INCORPORATED
By:
-----------------------------
Name:
-------------------------
Title:
------------------------
ID HOLDING PARTNERSHIP, L.P.
By: FLC XXX Partnership,
its general partner
By:
-------------------------
a general partner
ID PARTNERSHIP, L.P.
By: FLC XXIX Partnership,
a general partner
By:
-------------------------
Note Purchase Agreement - Cidco Inc., ID Holding Partnership L.P., and ID Partnership, L.P.
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