<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
CELLNET DATA SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4825 94-2951096
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
125 SHOREWAY ROAD
SAN CARLOS, CA 94070
(415) 508-6000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
---------------------
JOHN M. SEIDL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CELLNET DATA SYSTEMS, INC.
125 SHOREWAY ROAD
SAN CARLOS, CA 94070
(415) 508-6000
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
---------------------
COPIES TO:
BARRY E. TAYLOR, ESQ. JERRY V. ELLIOTT, ESQ.
MICHAEL J. DANAHER, ESQ. SHEARMAN & STERLING
TREVOR J. CHAPLICK, ESQ. 599 LEXINGTON AVENUE
WILSON SONSINI GOODRICH & ROSATI NEW YORK, NEW YORK 10022-4676
PROFESSIONAL CORPORATION (212) 848-4000
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(415) 493-9300
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box.
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value.................. shares $ $172,500,000 $59,483
</TABLE>
(1) Includes shares that the U.S. Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of Prospectus: (i) one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and (ii) the other to be used in a concurrent offering outside the
United States and Canada (the "International Prospectus"). The two prospectuses
are identical in all material respects except for the front cover page. The form
of U.S. Prospectus is included herein and is followed by the alternate page to
be used in the International Prospectus. The alternate page for the
International Prospectus included herein is labeled "Alternate Page for
International Prospectus." Final forms of each Prospectus will be filed with the
Securities and Exchange Commission under Rule 424(b).
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED , 1996
SHARES
[LOGO]
CELLNET DATA SYSTEMS, INC.
COMMON STOCK
-----------------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY, SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE
UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. PRIOR TO
THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK
OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC
OFFERING PRICE PER SHARE WILL BE BETWEEN $ AND $ .
SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS CONSIDERED
IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET.
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 7 HEREOF.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER SHARE.......................................... $ $ $
TOTAL (3).......................................... $ $ $
</TABLE>
- ---------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ .
(3) THE COMPANY HAS GRANTED THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
ADDITIONAL SHARES AT THE PRICE TO PUBLIC LESS UNDERWRITING DISCOUNTS AND
COMMISSIONS FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF ANY. IF THE
U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL PRICE TO PUBLIC,
UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO COMPANY WILL BE
$ , $ AND $ , RESPECTIVELY. SEE "UNDERWRITERS."
------------------------
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY SHEARMAN & STERLING, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1996 AT THE OFFICE
OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR
IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY & CO.
INCORPORATED
COWEN & COMPANY
MONTGOMERY SECURITIES
SMITH BARNEY INC.
, 1996
<PAGE>
[ARTWORK]
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED , 1996
SHARES
[LOGO]
CELLNET DATA SYSTEMS, INC.
COMMON STOCK
-----------------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY CELLNET DATA
SYSTEMS, INC. OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY,
SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES
AND CANADA BY THE INTERNATIONAL UNDERWRITERS AND SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE
U.S. UNDERWRITERS. PRIOR TO THIS OFFERING, THERE HAS BEEN NO
PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS
CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE
PER SHARE WILL BE BETWEEN $ AND $ .
SEE "UNDERWRITERS" FOR A DISCUSSION OF THE
FACTORS CONSIDERED IN DETERMINING THE
INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET.
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 7 HEREOF.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
------------------- ------------------- -------------------
<S> <C> <C> <C>
PER SHARE........................................ $ $ $
TOTAL (3)........................................ $ $ $
</TABLE>
- ---------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT
$ .
(3) THE COMPANY HAS GRANTED THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
ADDITIONAL SHARES AT THE PRICE TO PUBLIC LESS UNDERWRITING DISCOUNTS AND
COMMISSIONS FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF ANY. IF THE
U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL PRICE TO PUBLIC,
UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO COMPANY WILL BE
$ , $ AND $ , RESPECTIVELY. SEE "UNDERWRITERS."
------------------------
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY SHEARMAN & STERLING, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1996 AT THE OFFICE
OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR
IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGANSTANLEY & CO.
INTERNATIONAL
COWEN & COMPANY
MONTGOMERY SECURITIES
SMITH BARNEY INC.
, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
-------------------
For investors outside the United States: No action has been or will be taken
in any jurisdiction by the Company or any Underwriter that would permit a public
offering of the Common Stock or possession or distribution of this Prospectus in
any jurisdiction where action for that purpose is required, other than in the
United States. Persons into whose possession this Prospectus comes are required
by the Company and the Underwriters to inform themselves about and to observe
any restrictions as to, the offering of the Common Stock and the distribution of
this Prospectus.
-------------------
In this Prospectus references to "dollars" and "$" are to United States
Dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary......................................................................................... 3
Risk Factors............................................................................................... 7
Use of Proceeds............................................................................................ 18
Dividend Policy............................................................................................ 18
Capitalization............................................................................................. 19
Dilution................................................................................................... 20
Selected Consolidated Financial and Other Data............................................................. 21
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 22
Business................................................................................................... 27
Management................................................................................................. 44
Certain Transactions....................................................................................... 51
Principal Stockholders..................................................................................... 54
Description of Capital Stock............................................................................... 57
Shares Eligible for Future Sale............................................................................ 60
Underwriters............................................................................................... 62
Legal Matters.............................................................................................. 64
Experts.................................................................................................... 65
Additional Information..................................................................................... 65
Glossary................................................................................................... G-1
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE
U.S. UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) REFLECTS THE AUTOMATIC CONVERSION
OF ALL OUTSTANDING SHARES OF THE COMPANY'S REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND CONVERTIBLE PREFERRED STOCK (COLLECTIVELY, "PREFERRED STOCK") INTO
COMMON STOCK EFFECTIVE UPON THE CLOSING OF THIS OFFERING, (III) ASSUMES THE
EXERCISE OF WARRANTS TO PURCHASE 2,066,485 SHARES OF COMMON STOCK EFFECTIVE UPON
THE CLOSING OF THIS OFFERING AND (IV) GIVES EFFECT TO A -FOR-1 SPLIT OF THE
COMMON STOCK WHICH WILL BE EFFECTED PRIOR TO THE DATE OF THIS PROSPECTUS. SEE
"DESCRIPTION OF CAPITAL STOCK" AND "UNDERWRITERS." REFERENCES HEREIN TO
"CELLNET" OR THE "COMPANY" REFER TO CELLNET DATA SYSTEMS, INC. AND ITS
SUBSIDIARIES. CELLNET WAS INCORPORATED IN CALIFORNIA IN OCTOBER 1984 AND
REINCORPORATED IN DELAWARE IN AUGUST 1996. THE SHARES OFFERED HEREBY ARE SUBJECT
TO A HIGH DEGREE OF RISK. SEE "RISK FACTORS." CERTAIN INFORMATION CONTAINED IN
THIS SUMMARY AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING INFORMATION WITH REGARD
TO THE COMPANY'S EXPECTED WIRELESS DATA COMMUNICATIONS NETWORK DEPLOYMENTS AND
OPERATIONS, ITS STRATEGY FOR MARKETING AND DEPLOYING SUCH NETWORKS AND RELATED
FINANCING ACTIVITIES, CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS."
THE COMPANY
The Company designs, builds, owns and operates innovative wireless networks
capable of providing low-cost real-time status and event monitoring of up to
several million endpoints. The primary application of the Company's network is
to provide network meter reading ("NMR") services to electric, gas and water
utility companies pursuant to long-term contracts. The Company is currently
building wireless networks to provide NMR services to Kansas City Power and
Light Company ("KCPL") and Union Electric Company ("UE") in St. Louis covering a
total of 1,220,000 meters, of which more than 105,000 meters were in revenue
service as of June 30, 1996. CellNet also currently provides certain network
distribution automation services to electric utility customers including
monitoring and control of power distribution equipment. CellNet's network uses
radio devices fitted to existing utility meters to read and report data from
each meter every few minutes. Through efficient use of radio frequency spectrum,
the Company's networks will have substantial additional capacity to service
non-utility applications that require low-cost monitoring of fixed endpoints,
such as home security and remote status monitoring of vending machines and
office equipment. The Company is working with industry leaders in those markets
to encourage further development of such applications.
CellNet believes it has a first-to-market opportunity to offer wireless
communications data services on a commercial scale for utility and selected
non-utility applications. CellNet's network is distinguished by the following
advantages:
- infrastructure and operating costs sufficiently low to permit cost
effective utility meter reading and other fixed point monitoring
applications;
- highly efficient use of spectrum -- the equivalent of approximately a
single voice channel is needed to operate a network;
- proprietary software specifically designed to manage real-time data
collection from up to several million endpoints; and
- open systems approach designed to allow new applications to be added to
the CellNet system.
Utilities are under increasing regulatory and competitive pressures. The
Company offers an outsourced solution which enables utilities to offer
time-of-use pricing plans, peak demand monitoring, real-time response to billing
inquiries, real-time power outage detection, on-demand meter reads, customized
billing
3
<PAGE>
functions and distribution automation. The Company believes its NMR services
provide utilities with an effective solution to many of the demands created by
the increased regulatory and competitive pressures within the utility industry.
CellNet's system allows utilities to respond effectively to regulatory changes,
reduce costs, defer capital spending and enhance their operating efficiencies.
CellNet's strategy is to deploy and operate a series of wireless data
communications networks pursuant to long-term contracts with utility company
customers and to earn recurring revenues by providing NMR services to the
utilities and by using the network to support a variety of non-utility
applications. Principal elements of CellNet's strategy are to (i) focus on
utility markets, (ii) promote development of non-utility applications, (iii)
form strategic alliances, (iv) pursue international expansion and (v) outsource
a substantial portion of its manufacturing and installation activities.
The Company is actively targeting those utilities which operate in the 60
largest Metropolitan Statistical Areas ("MSAs"), which represent a large
majority of the 230 million electric, gas and water meters in the United States.
The Company believes that utilities operating in these densely populated areas
will be the first to experience heightened competitive and regulatory pressures,
and as such, will be most likely to benefit from the Company's services. These
competitive and regulatory pressures have prompted increased activity among the
utilities in the United States as evidenced by the Company's receipt of 19
requests for proposals ("RFPs") from utilities in the first six months of 1996.
CellNet's proprietary technology enables the Company to make extremely
efficient use of spectrum. As a result, relative to other wireless services, the
Company has been able to acquire frequency at a very low cost, and the Company
had capitalized $762,000 for license fees and related expenses as of June 30,
1996. The Company has acquired 50 spectrum licenses in 44 of the top 60 MSAs and
believes that it will be able to obtain additional spectrum at reasonable cost
if required. The Company has focused its spectrum acquisition strategy on these
top 60 markets.
The Company believes its spectrum-efficient networks will have substantial
additional capacity to service non-utility applications which require low-cost
monitoring of fixed endpoints. Potential non-utility applications of the
Company's systems include home security, remote status monitoring of vending
machines, office equipment, parking meters and other equipment and remote
control of traffic lights. The Company is working with industry leaders such as
Ameritech, Hewlett-Packard, Honeywell, Real Time Data, and Interactive
Technologies Inc. to develop such applications. The Company believes that its
utility networks will provide an excellent platform to position the Company as a
leading wholesale provider of wireless communications services for such
non-utility applications.
The Company believes that a significant international market also exists for
its services with more than 600 million electric, gas and water meters outside
of the United States. The Company's strategy is to pursue international markets
through joint ventures. The Company is currently exploring projects with
electric utilities in the U.K., Singapore and Thailand.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered:
U.S. Offering................................. shares
International Offering........................ shares
Total Common Stock Offered (1)............ shares
Common Stock to be outstanding after the
Offering (1)(2)................................ shares
Use of proceeds................................. For general corporate purposes, including
working capital, capital requirements
(capital expenditures and negative
operating cash flow) in connection with
the installation and operation of the
Company's networks and research and
development expenses. See "Use of
Proceeds."
Nasdaq National Market Symbol................... CNDS
</TABLE>
- ---------
(1) Assumes the U.S. Underwriters' over-allotment option is not exercised. See
"Underwriters."
(2) Based on the number of shares outstanding as of June 30, 1996, after giving
effect to the automatic conversion of all outstanding shares of Preferred
Stock into Common Stock and the exercise of warrants to purchase 2,066,485
shares of Common Stock upon the closing of this Offering. Excludes 1,889,568
shares of Common Stock issuable upon exercise of outstanding stock options
as of June 30, 1996 granted under the Company's 1992 Stock Option Plan and
1994 Stock Plan with a weighted average exercise price of $1.25 per share.
Also excludes 26,305 shares of Common Stock issuable upon exercise of
warrants outstanding as of June 30, 1996 with a weighted average exercise
price of $15.18 per share. See "Management -- Incentive Stock Plans,"
"Description of Capital Stock -- Warrants" and Note 7 to Consolidated
Financial Statements.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth summary consolidated financial and other data
of the Company for each of the three years in the period ended December 31,
1995, for the six months ended June 30, 1995 and 1996 and at June 30, 1996. The
financial information data were derived from, and should be read in conjunction
with, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the Consolidated Financial Statements of the Company and the
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------- ----------------------
1993 1994 1995 1995 1996
--------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues............................................. $ 1,757 $ 1,651 $ 2,126 $ 1,291 $ 420
Costs and expenses:
Cost of revenues................................. 1,840 1,191 5,129 1,931 3,483
Research and development......................... 5,262 9,693 22,380 6,735 13,009
Marketing and sales.............................. 1,447 3,257 4,201 1,946 2,924
General and administrative....................... 1,450 2,583 6,805 2,874 5,412
--------- ---------- ---------- ---------- ----------
Total costs and expenses....................... 9,999 16,724 38,515 13,486 24,828
--------- ---------- ---------- ---------- ----------
Loss from operations................................. (8,242) (15,073) (36,389) (12,195) (24,408)
Other income (expense)............................... (148) 441 (4,564) 75 (7,903)
--------- ---------- ---------- ---------- ----------
Loss before income taxes............................. (8,390) (14,632) (40,953) (12,120) (32,311)
Provision for income taxes........................... 1 2 3 1 2
--------- ---------- ---------- ---------- ----------
Net loss............................................. $ (8,391) $ (14,634) $ (40,956) $ (12,121) $ (32,313)
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
Pro forma net loss per share (1)..................... $ $
---------- ----------
---------- ----------
Shares used in computing pro forma net loss per share
(1).................................................
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
SELECTED OTHER DATA:
Meters under contract (2)..................................................... 1,070,000 1,220,000
Meters in revenue service (2)................................................. 17,559 105,354
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
ACTUAL AS ADJUSTED(3)
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................................... $ 102,967
Total assets........................................................................ 162,653
Long-term obligations............................................................... 195,513
Series CC redeemable convertible preferred stock.................................... 29,486 --
Total stockholders' equity (deficit)................................................ (70,400)
</TABLE>
- ---------
(1) For an explanation of the determination of the number of shares used in
computing pro forma net loss per share, see Note 1 to Consolidated Financial
Statements.
(2) "Meters under contract" refers to the aggregate number of meters for which
the Company has agreed to provide network meter reading services under
services agreements with utilities and "Meters in revenue service" refers to
the aggregate number of meters under contract which have been installed on
the Company's networks and for which the Company is receiving NMR service
revenues.
(3) Reflects the conversion of all outstanding shares of Preferred Stock into
Common Stock, the exercise of warrants to purchase 2,066,485 shares of
Common Stock at an aggregate exercise price of $3.7 million upon the closing
of this Offering and the proceeds of this Offering at an assumed initial
public offering price of $ per share and after deducting
estimated underwriting discounts and commissions and offering expenses
payable by the Company. See "Use of Proceeds."
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK BEING OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY. CERTAIN INFORMATION CONTAINED
IN THIS SECTION AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING INFORMATION WITH
REGARD TO THE COMPANY'S EXPECTED WIRELESS COMMUNICATIONS NETWORK DEPLOYMENTS AND
OPERATIONS, ITS STRATEGY FOR MARKETING AND DEPLOYING SUCH NETWORKS AND RELATED
FINANCING ACTIVITIES CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS."
HISTORY AND CONTINUATION OF OPERATING LOSSES
The Company has incurred substantial and increasing operating losses since
inception. As of June 30, 1996, the Company had an accumulated deficit of $127.3
million, primarily resulting from expenses incurred in the development of the
Company's wireless data communications system, marketing of the Company's NMR,
distribution automation and other services, the installation of its wireless
data communications networks and the payment of other normal operating costs.
The Company does not expect significant revenues during 1996 and expects to
incur substantial and increasing operating losses and negative net cash flow
after capital expenditures for the foreseeable future as it expands its research
and development and marketing efforts and installs additional networks. The
Company's network service revenues from a particular network are expected to lag
significantly behind network installation expenses until such network is
substantially complete. If the Company is able to deploy additional networks,
the losses created by this lag in revenues are expected to increase until the
revenues from the installed networks overtake the costs associated with the
deployment of such additional networks. A large portion of the Company's limited
revenues to date has been attributable to miscellaneous equipment sales and
development and other contract revenues that are largely non-recurring and that
the Company expects to decrease and remain at relatively insignificant levels
over the next few years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DEPENDENCE ON AND UNCERTAINTY OF UTILITY MARKET ACCEPTANCE
The Company's success will be almost entirely dependent on whether a large
number of utility companies sign long-term services contracts with CellNet. Any
decision by a utility to utilize the Company's services will involve a
significant organizational, technological and financial commitment by such
utility. The utility industry is generally characterized by long purchasing
cycles and cautious decision making. Utilities typically go through numerous
steps before making a final purchase decision. These steps, which can take up to
several years to complete, may include the formation of a committee to evaluate
the purchase, the review of different technical options with vendors,
performance and cost justifications, regulatory review and the creation and
issuance of requests for quotes and proposals, as well as the utilities' normal
budget approval process. Purchases of the Company's services are, to a
substantial extent, deferrable in the event that utilities seek to reduce
capital expenditures. Outside of pilot trials, only two utilities (KCPL and UE)
have made a significant commitment to purchase the Company's services to date,
and there can be no assurance as to when or if the Company will enter into
additional services contracts or that any such agreement would be on favorable
terms to the Company. See "Business."
Because automation of utility meter reading and distribution is a relatively
new and evolving market, it is difficult to predict the future growth rate and
size of this market. Utility companies are testing products from various
suppliers for various applications, and no industry standard has been broadly
adopted. The CellNet system is one possible solution for automated meter reading
and distribution automation. There can be no assurance that the Company will be
successful in achieving the large-scale adoption of its system. In the event
that the utility industry does not adopt the Company's technology, or does so
less rapidly than expected by the Company, the Company's future results,
including its ability to service its indebtedness and
7
<PAGE>
achieve profitability, will be materially and adversely affected. In recent
competitive bids, potential utility customers have from time to time selected
competing systems to perform services offered by the Company. See "Business --
Competition."
UNCERTAINTY OF FUTURE REVENUES; INCREASING INSTALLATION COSTS; NEED FOR
ADDITIONAL SERVICES CONTRACTS AND FLUCTUATING OPERATING RESULTS
The timing and amount of future revenues will depend almost entirely upon
the Company's ability to obtain new services agreements with utilities and other
parties and upon the successful deployment and operation of the Company's
wireless data communications networks. The signing of any new services contracts
is expected to occur on an irregular basis, if at all. The Company expects that
it will generally take two to four years to complete the installation of each
network after a contract has been signed. The Company will not begin to receive
recurring revenues under a services contract until portions of the network
become operational, which is expected to occur no earlier than six months after
installation begins. The Company's results of operations may be adversely
affected by delays or difficulties arising in the network installation process.
The cost of network deployments will be highly variable depending upon a wide
variety of factors, including radio frequency characteristics, the size and
density of endpoints within a service territory, the nature and sophistication
of services being provided, local labor rates and other economic factors.
CellNet currently derives almost all of its revenues from long-term services
contracts with KCPL and UE. The Company will not generate sufficient cash flow
to service its indebtedness or achieve profitability unless it enters into
additional services contracts. There can be no assurance that the Company will
complete commercial deployments of the CellNet system under the KCPL and UE
contracts successfully or that it will obtain enough additional contracts on
satisfactory terms for network deployments in a sufficient number of locations
to allow the Company to achieve adequate cash flow to service its indebtedness
or achieve profitability. The Company's operating results will fluctuate
significantly in the future as a result of a variety of factors, some of which
are outside of the Company's control, including general economic conditions,
economic conditions in the utility industry, the effects of governmental
regulations and regulatory changes, capital expenditures and other costs
relating to the expansion of operations, the rate at which utilities and other
customers enter into new services contracts, the introduction of new services by
the Company or its competitors, the mix of services sold, pricing changes and
new service introductions by the Company and its competitors and prices charged
by suppliers. As a response to a changing competitive environment, the Company
may elect from time to time to make certain pricing, service or marketing
decisions or enter into strategic alliances or investments that could have a
material adverse effect on the Company's business, results of operations,
financial condition and cash flow. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
UNCERTAINTY OF ACCEPTANCE OF AND DEPENDENCE ON OTHER APPLICATIONS
The Company's long-term business plan contemplates offering non-utility
applications services. The Company believes its future ability to service its
indebtedness and to achieve profitability will be significantly dependent on its
success in generating revenues from such additional services. The Company
currently has no services contracts which provide for the implementation of such
services, and the Company has not yet demonstrated an ability to deploy such
services on a commercial scale. In addition, unless utilities sign services
contracts that enable the Company to deploy its wireless networks in their
service areas the Company may not be able to offer any such services to its
customers or may be able to offer these services only on a limited basis. See
"Business -- Business Strategy -- Promote Development of Non-Utility
Applications" and "Business -- Wireless Communications Industry Overview."
POSSIBLE TERMINATION OF LONG-TERM CONTRACTS
The Company expects that substantially all of its future revenues will be
provided pursuant to long-term services contracts with utility companies and
other parties. These contracts will generally be subject to cancellation or
termination in certain circumstances in the event of a material and continuing
failure on CellNet's part to meet agreed NMR performance standards on a
consistent basis over agreed time periods, subject to certain rights to cure any
such failure. Each of the Company's existing services contracts also provides
for termination of such contracts by the respective utility without cause in
less than ten years,
8
<PAGE>
subject to certain reimbursement provisions. Such contracts also provide that
CellNet will be required to compensate such utilities for the use of its system
for non-utility applications. In the event that a services contract is
terminated by a utility, the Company would incur substantial losses. A network's
service revenues are not expected to exceed the Company's capital investments to
deploy such network for several years. Termination or cancellation of one or
more utility services contracts would have a material adverse effect on the
Company's business, results of operations, financial condition and cash flow.
See "Business -- Current Utility Services Agreements."
TECHNOLOGICAL PERFORMANCE AND BUILD-OUT OF THE SYSTEM
The Company's initial target market is the monitoring, control and
automation of utility companies' electric, gas and water distribution networks.
Although the CellNet system (including both NMR services and distribution
automation) has been deployed commercially with more than 105,000 meters in
revenue service as of June 30, 1996, there can be no assurance that unforeseen
problems will not develop with respect to the Company's technology, products or
services, or that the Company will be successful in completing the development
and commercial implementation of its technology on a wider scale. The Company
must complete a number of technical development projects and continue to expand
and upgrade its capabilities in connection with such commercial implementation,
the success of which cannot be assured.
While the Company believes that it has developed the necessary hardware to
install its endpoint devices on most of the standard electromechanical electric
meters manufactured by the four largest U.S. electric meter manufacturers, there
can be no assurance that the Company will be able to develop successfully a full
range of endpoint devices required by utilities. The Company must also develop
the hardware enhancements necessary to utilize its system on a commercial basis
with gas and water meters. The Company's future success will be materially
adversely affected if it is not successful or is significantly delayed in the
completion of its hardware development programs. The Company's future success
will also depend, in part, on its ability to enhance its existing hardware,
software and wireless communications technology. This development effort will
require continued substantial investments. The Company has encountered product
development delays in the past affecting both software and hardware components
of its system. See "Business -- Research and Development."
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company had outstanding as of June 30, 1996, indebtedness of
approximately $195.5 million, which includes $194.7 million of the Company's 13%
Senior Discount Notes due 2005 (the "Senior Discount Notes"). The Senior
Discount Notes will accrete to $325.0 million by June 2000. The Company must
begin paying cash interest on the Senior Discount Notes in December 2000. The
Company and its subsidiaries intend to incur substantial additional
indebtedness, primarily in connection with installing future networks. As a
result, the Company and its subsidiaries will have substantial debt service
obligations. The Company expects that its cash flow taking into account capital
expenditures will be increasingly negative over the next several years. The
ability of the Company to meet its debt service requirements will depend upon
achieving significant and sustained growth in the Company's cash flow, which
will be affected by its success in implementing its business strategy,
prevailing economic conditions and financial, business and other factors,
certain of which are beyond the Company's control. The Company's ability to
generate such cash flow is subject to a number of risks and contingencies.
Included among these risks are: (i) the possibilities that the Company may not
obtain sufficient additional services agreements or complete scheduled
installations on a timely basis, (ii) revenues may not be generated quickly
enough to meet the Company's operating costs and debt service obligations, (iii)
the Company's wireless systems could experience performance problems or (iv)
adoption of the Company's system could be less than anticipated. Accordingly,
there can be no assurance as to whether or when the Company's operations will
generate positive cash flow or become profitable or whether the Company or its
subsidiaries will at any time have sufficient resources to meet their debt
service obligations. If the Company is unable to generate sufficient cash flow
to service its indebtedness, it will have to reduce or delay planned capital
expenditures, sell assets, restructure or refinance its indebtedness or seek
additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all, particularly in
light of the Company's high levels of indebtedness.
9
<PAGE>
Substantially all of the operations of the Company are and will be conducted
through subsidiaries. Nonetheless, the Company has incurred significant
indebtedness at the holding company level, and intends to incur substantial
additional holding company indebtedness. The ability of the Company to service
such indebtedness will depend on the availability of income and cash flow from
its subsidiaries for distribution to the holding company. Such availability will
depend on a number of factors, including the terms of financing agreements
entered into by the Company's subsidiaries and restrictions arising under the
laws of the jurisdictions wherein those subsidiaries conduct their businesses.
The Company's subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due on the Company's
indebtedness or to make any funds available therefor, whether in the form of
loans, dividends or otherwise. Any default in the payment of its debt
obligations could seriously impair the value of the Common Stock.
In the event that the Company is unable to generate sufficient cash flow and
is otherwise unable to obtain funds necessary to meet required payments on its
indebtedness, the Company could be in default under the terms of the agreements
governing such indebtedness. In the event of such default, the holders of such
indebtedness would have certain enforcement rights, including the right to
accelerate such debt and the right to commence an involuntary bankruptcy
proceeding against the Company. In any such proceeding, the holders of the
Company's debt would be entitled to receive payment of their claims prior to any
distributions to equity holders. In addition, any holders of secured
indebtedness of the Company and its subsidiaries would have certain rights to
repossess, foreclose upon and sell the assets securing such indebtedness. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
POSSIBLE NEGATIVE EFFECTS OF LEVERAGE
The Company is highly leveraged and is permitted to incur substantial
additional indebtedness, subject to certain restrictions. The degree to which
the Company is leveraged could have significant consequences, including, but not
limited to, the following: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, research and
development, acquisitions, and other general corporate purposes may be
materially limited or impaired, (ii) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of principal and interest
on its indebtedness and therefore cannot be used in the Company's business and
(iii) the Company's high degree of leverage may make it more vulnerable to
economic downturns, may limit its ability to withstand competitive pressures and
may reduce its flexibility in responding to changing business and economic
conditions.
SUBSTANTIAL AND INCREASING COMPETITION
The emerging market for utility NMR systems, and the potential market for
other applications accessible once a common infrastructure is in place, have led
electronics, communications and utility product companies to begin developing
various systems, some of which currently compete, and others of which may in the
future compete, with the CellNet system. The Company believes that its only
significant direct competitor in the marketplace at present is Itron, Inc.
("Itron"), an established manufacturer and seller of hand-held and drive-by
automated meter reading equipment to utilities. Itron has announced the
development of its Genesis-TM- system, a radio network system similar to the
Company's, for meter reading purposes and is presently offering that system in
the marketplace. The Company believes that Itron has signed at least two
contracts with utilities for the commercial installation of its Genesis-TM-
system.
There may be many potential alternative solutions to the Company's NMR
services including traditional wireless solutions. Metricom, Inc. a provider
primarily of subscriber-based, wireless data communications for users of
portable and desktop computers; First Pacific Networks, a provider primarily of
bandwidth efficient wireline communications technology; and Lucent Technologies,
are examples of companies whose technology might be adapted for NMR and who may
become direct competitors of the Company in the future. Schlumberger is
developing a fixed network system in cooperation with Motorola for meter reading
as well. Schlumberger, Lucent Technologies and First Pacific Networks either
have conducted, or are in the process of conducting, pilot trials of utility
network automation systems. Established suppliers of equipment, services and
technology to the utility industry such as Asea Brown Boveri and General
Electric could expand their current product and service offerings so as to
compete directly with the Company, although they have
10
<PAGE>
not yet done so. Many of the Company's present and potential future competitors
have substantially greater financial, marketing, technical and manufacturing
resources, name recognition and experience than the Company. The Company's
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements or to devote greater resources to the
development, promotion and sale of their products and services than the Company.
While CellNet believes its technology is widely regarded as competitive at the
present time, there can be no assurance that the Company's competitors will not
succeed in developing products or technologies that are better or more cost
effective. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties that increase their ability to address the needs of the Company's
prospective customers. Accordingly, it is possible that new competitors or
alliances among current and new competitors may emerge and rapidly gain
significant market share. In addition, if the Company achieves significant
success it could draw additional competitors into the market. Traditional
providers of wireless services may in the future choose to enter the Company's
markets. Such existing and future competition could materially adversely affect
the pricing for the Company's services and the Company's ability to sign
long-term contracts and maintain existing agreements with utilities. There can
be no assurance that the Company will be able to compete successfully against
current and future competitors, and any failure to do so would have a material
adverse effect on the Company's business, operating results, financial condition
and cash flow. See "Business -- Competition."
DEPENDENCE ON BUSINESS ALLIANCES
A key element of the Company's business strategy is the formation of
corporate alliances with leading companies. The Company is currently investing,
and plans to continue to invest, significant resources to develop these
relationships. The Company believes that its success in penetrating markets for
non-utility applications of its network will depend in large part on its ability
to maintain these relationships and to cultivate additional or alternative
relationships. There can be no assurance that the Company will be able to
develop additional corporate alliances with such companies, or that existing
relationships will continue or be successful in achieving their purposes or that
such companies will not form competing arrangements. See "Business -- Business
Strategy -- Form Strategic Alliances."
RAPID TECHNOLOGICAL CHANGE AND UNCERTAINTY
The telecommunications industry has been characterized by rapid, significant
technological advances. The advent of computer-linked electronic networks, fiber
optic transmission, advanced data digitization technology, cellular and
satellite communications capabilities and personal communications systems
("PCS") have radically expanded communications capabilities and market
opportunities. Future advances may render the Company's technology obsolete or
less cost effective than competitive systems or erode the Company's market
position. Many companies from diverse industries are seeking solutions for the
transmission of data over traditional communications media, including radio, as
well as more recently developed media such as cellular and PCS-based networks.
Competitors may be capable of offering significant cost savings or other
benefits to the Company's customers, and there can be no assurance that the
Company will maintain competitive services or obtain appropriate new
technologies on a timely basis or on satisfactory terms. See "Business --
Wireless Communications Industry Overview."
DEPENDENCE ON THIRD-PARTY MANUFACTURERS
The Company relies and will continue to rely on outside parties to
manufacture a majority of its network equipment such as radio devices and
printed circuit boards. As the Company signs additional services contracts,
there will be a significant ramp-up in the amount of manufacturing necessary to
meet the Company's contractual commitments. The Company currently relies on
single manufacturers for radio devices and for printed circuit boards. There can
be no assurance that these manufacturers will be able to meet the Company's
manufacturing needs in a satisfactory and timely manner or that the Company can
obtain additional manufacturers when and if needed. Although the Company
believes alternative manufacturers are available, the inability of the Company
to develop alternative suppliers quickly or cost-effectively could materially
impair its ability to manufacture and install systems. The Company's reliance on
third-party manufacturers involves a number of additional risks, including the
absence of guaranteed capacity and reduced control over delivery schedules,
quality assurance, production yields and costs. Although the
11
<PAGE>
Company believes that these manufacturers would have an economic incentive to
perform such manufacturing for the Company, the quality, amount and timing of
resources to be devoted to these activities is not within the control of the
Company, and there can be no assurance that manufacturing problems will not
occur in the future. A significant price increase, a quality control problem, an
interruption in supply from one or more of such manufacturers or the inability
to obtain additional manufacturers when and if needed could have a material
adverse effect on the Company's business, operating results, financial condition
and cash flow. See "Business -- Manufacturing and Operations."
EXPOSURE TO COMPONENT SHORTAGES
Certain of the Company's subassemblies, components and network equipment are
procured from single sources and others are procured only from a limited number
of sources. In addition, CellNet may be affected by general shortages of certain
components, such as surface mounted integrated circuits and memory chips. There
have been shortages of such materials generally in the marketplace from time to
time in the past. The Company's reliance on such components and on a limited
number of vendors and subcontractors involves certain risks, including the
possibility of shortages and reduced control over delivery schedules,
manufacturing capability, quality and cost. A significant price increase or
interruption in supply from one or more of such suppliers could have a material
adverse effect on the Company's business, operating results, financial condition
and cash flow. Although the Company believes alternative suppliers of
sub-assemblies, components and network equipment are available, the inability of
the Company to develop alternative sources quickly or cost-effectively could
materially impair its ability to manufacture and install systems. Lead times can
be as long as a year for certain components, which may require the Company to
use working capital to purchase inventory significantly in advance of receiving
any revenues. See "Business -- Manufacturing and Operations."
SUBSTANTIAL FUTURE CAPITAL NEEDS
The Company will require substantial additional funds for the development,
commercial deployment and expansion of its networks, as well as to fund
operating losses. As of June 30, 1996, the Company had $103.0 million in cash,
cash equivalents and short-term investments (excludes the assumed exercise of
warrants to purchase 2,066,485 effective upon the closing of this Offering for
expected proceeds of $3.7 million). The Company believes that the net proceeds
of this Offering, together with its existing cash, cash equivalents and
short-term investments and anticipated interest income and other revenues, will
be sufficient to meet its cash requirements for at least the next 12 months.
Thereafter, the Company expects that it will require substantial additional
capital. Depending upon the number and timing of any new services agreements and
upon the associated network deployment costs and schedules, the Company may
require additional equity or debt financing earlier than estimated in order to
fund its working capital and other requirements. There can be no assurance that
additional financing will be available when required or, if available, that it
will be on terms satisfactory to the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
ACCESS TO RADIO FREQUENCY ("RF") SPECTRUM
The Company will attempt to obtain exclusive usage of licensed bandwidth
and/or secure its own licenses. CellNet is engaged in a program to license radio
spectrum for its wireless networks in the top 60 MSAs in the U.S. sufficient to
support its projected utility and non-utility applications with a margin for
future growth. Enough frequency spectrum may not be available to fully enable
the delivery of all or a part of the Company's wireless data communications
services or the Company may be required to find alternative frequencies. The
cost of obtaining such spectrum is currently difficult to estimate and may
involve time delays and/or increased cost to the Company. The Company could also
be unable to obtain frequency in certain areas. Any of these circumstances could
have a material adverse impact on the Company's future ability to provide its
network services and on the Company's business, operating results, financial
condition and cash flow. See "Business -- Regulation"
REGULATION BY THE FEDERAL COMMUNICATIONS COMMISSION ("FCC")
The Company's network equipment uses radio spectrum and, as such, is subject
to regulation by the FCC. In addition, CellNet intends to provide services as a
private carrier. This status allows services to be
12
<PAGE>
provided pursuant to individual contracts without becoming subject to many of
the statutory requirements and FCC and state regulations that govern the
provision of common carrier services. The Company's network equipment uses both
licensed RF spectrum allocated for multiple address system ("MAS") operations in
the 928/952 MHz band and unlicensed spectrum in the 902-928 MHz band. In order
to obtain a license to operate the Company's network equipment in the 928/952
MHz band, license applicants may need to obtain a waiver of various sections of
the FCC's rules. Although the Company has obtained such waivers for its licensed
systems routinely in the past, and expects the required waivers to be granted on
a routine basis in the future, there can be no assurance that the Company will
be able to obtain such waivers on a timely basis or to obtain them at all. In
addition, as the amount of spectrum in the 928/952 MHz band is limited, issuance
of these licenses is contingent upon the availability of spectrum in the area(s)
for which the licenses are requested. The Company might not be able to obtain
licenses to the spectrum it needs in every area in which it has prospective
customers. The FCC's rules, subject to a number of limited exceptions, permit
third parties such as CellNet to operate on spectrum licensed to utilities to
provide other services. The Company plans to use these provisions of the FCC's
rules to expand its CellNet system. The FCC requires that licensees of MAS
frequencies construct a minimum configuration of their system and initiate
service within one year after authorization or risk forfeiture of the license.
The one-year deadline may be extended for good cause, but there can be no
assurance that the FCC will grant any such extension. The Company is responding
to this requirement by selectively building out transmission capacity in some
areas where it does not yet have utility telecommunications services contracts
and may permit licenses to lapse in certain areas.
No license is needed to operate the Company's equipment utilizing the
902-928 MHz band, although the equipment must be certified by the Company and
the FCC as being compliant with certain FCC restrictions on radio frequency
emissions designed to protect licensed services from objectionable interference.
While the Company believes it has obtained all required certifications for its
products, the FCC could modify the limits imposed on such products or otherwise
impose new authorization requirements, and in either case, such changes could
have a material adverse impact on the Company's business. The FCC recently
completed a new rulemaking proceeding designed to better accommodate the
cohabitation in the 902-928 MHz band of existing licensed services with newly
authorized and expanded uses of licensed systems, and existing and newly
designed unlicensed devices like those used by the Company. In this proceeding,
the FCC expressly recognized the rights of such unlicensed services to operate
under certain delineated operating parameters even if the potential for
interference to the licensed operations exists. The Company's systems will
operate within those specified parameters. The FCC retains the right to modify
those rules or to allow for other uses of this spectrum that might create
interference to the Company's systems, which could, in either case, have a
material adverse impact on the Company's business, operating results, financial
condition and cash flow.
While the Company intends to offer non-utility services as a private carrier
and in accordance with FCC Rules, each such service offering would need to be
reviewed relative to these rules. The FCC's rules currently prohibit the use of
the MAS frequencies on which the Company is operating its systems for the
provision of common carrier service offerings. In the event that it is
determined that a particular service offering does not comply with the rules,
the Company may be required to restructure such offering or to access other
frequencies for the purpose of providing such service. There can be no assurance
that the Company will gain access to such other frequencies. Future
interpretation of regulations by the FCC or changes in the regulation of the
Company's industry by the FCC or other regulatory bodies or legislation by
Congress could have a material adverse effect on the Company's business,
operating results, financial condition and cash flow. See "Business --
Regulation."
DEPENDENCE ON KEY PERSONNEL
The success of the Company is substantially dependent on its key management
and technical personnel, the loss of one or more of whom could adversely affect
the Company's business. All of the Company's employees and officers are employed
on an at-will basis. Presently, the Company does not maintain a "key man" life
insurance policy on any of its executives or employees. The Company's future
success also depends on its continuing ability to identify, hire, train and
retain other highly qualified technical and managerial personnel. Competition
for such personnel is intense, and there can be no assurance that the Company
will
13
<PAGE>
be able to attract or retain highly qualified technical and managerial personnel
in the future. An inability to attract and retain the necessary technical and
managerial personnel could have a material adverse effect on the Company's
business, operating results, financial condition and cash flow. See "Business --
Employees" and "Management."
MANAGEMENT OF GROWTH
The Company's recent growth has placed, and is expected to continue to
place, a significant strain on its managerial, operational and financial
resources. The Company's ability to manage growth effectively will require it to
continue to implement and improve its operational and financial systems and to
expand, train and manage its employee base. These demands are expected to
require the addition of new management personnel and the development of
additional expertise by existing management personnel. There can be no assurance
that the Company will be able to effectively manage the expansion of its
operations, that its systems, procedures or controls will be adequate to support
the Company's operations or that Company management will be able to exploit
opportunities for the Company's services. An inability to manage growth, if any,
could have a material adverse effect on the Company's business, results of
operations, financial condition and cash flow. See "Management."
UNCERTAINTY OF PROTECTION OF COPYRIGHTS, PATENTS AND PROPRIETARY RIGHTS
The Company relies on a combination of trade secret protection, copyright,
patent, trademark and confidentiality agreements and licensing arrangements to
establish and protect its proprietary rights. The Company's success will depend
in part on its ability to maintain copyright and patent protection for its
products, to preserve its trade secrets and to operate without infringing the
proprietary rights of third parties. While the Company has obtained and applied
for patents, and intends to file applications as appropriate for patents
covering its products and processes, there can be no assurance that additional
patents will be issued or, if issued, that the scope of any patent protection
will be significant, or that any patents issued to the Company or licensed by
the Company will not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide proprietary protection to the Company.
Since U.S. patent applications are maintained in secrecy until patents are
issued, and since publication of inventions in the technical or patent
literature tend to lag behind such inventions by several months, CellNet cannot
be certain that it was the first creator of inventions covered by its issued
patents or pending patent applications, that it was the first to file patent
applications for such inventions or that no patent conflict will exist with
other products or processes which could compete with the Company's products or
approach. Despite the Company's efforts to safeguard and maintain these
proprietary rights, there can be no assurance that the Company will be
successful or that the Company's competitors will not independently develop and
patent technologies that are substantially equivalent or superior to the
Company's technologies. Participants in the wireless industry, including
competitors of the Company, typically seek to obtain patents which will provide
as broad a protection possible for their products and processes. There is a
substantial backlog of patents at the United States Patent Office. It is
uncertain whether any such third-party patents will require the Company to alter
its products or processes, obtain licenses or cease certain activities. An
adverse outcome with regard to a third-party patent infringement claim could
subject the Company to significant liabilities, require disputed rights to be
licensed, or require the Company to cease using such technology. The Company
also relies to a substantial degree upon unpatented trade secrets, and no
assurance can be given that others, including the Company's competitors, will
not independently develop or otherwise acquire substantially equivalent trade
secrets. In addition, whether or not additional patents are issued to the
Company, others may receive patents which contain claims applicable to products
or processes developed by the Company. If any such claims were to be upheld, the
Company would require licenses, and no assurance can be given that licenses
would be available on acceptable terms, if at all. In addition, the Company
could incur substantial costs in defending against suits brought against it by
others for infringement of intellectual property rights or in prosecuting suits
which the Company might bring against other parties to protect its intellectual
property rights. From time to time the Company receives inquiries with respect
to the coverage of its intellectual property rights, and there can be no
assurance that such inquiries will not develop into litigation. See "Business --
Proprietary Rights."
14
<PAGE>
Although the Company has been granted federal registration of its "CellNet"
trademark, another Company has filed a petition for cancellation in an attempt
to challenge such registration which, if successful, would mean the Company
could lose its registration and be required to adopt a new trademark and
possibly a new or modified corporate name. CellNet could encounter similar
challenges to its trademark and corporate name in the future. While the
requirement to adopt a new trademark or new or modified corporate name could
involve a significant expense and could result in the loss of any goodwill and
name recognition associated with the Company's current trademark and corporate
name, the Company does not believe this would have a long-term material adverse
impact on its business, operating results, financial condition and cash flow.
See "Business -- Litigation."
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY OF
STOCK PRICE
Prior to this offering there has been no public market for the Common Stock,
and there can be no assurance that an active public market for the Common Stock
will develop or be sustained after the Offering. The initial public offering
price will be determined by negotiation between the Company and the Underwriters
based upon several factors, and may not be indicative of the market price of the
Common Stock after the Offering. See "Underwriters" for a discussion of the
factors to be considered in determining the initial public offering price. The
trading price of the Common Stock could be subject to wide fluctuations in
response to quarterly variations in the Company's results of operations,
uncertain periodic events such as the signing or termination of services
contracts, changes in financial estimates by analysts, variations between the
Company's results and results expected by financial analysts and investors,
announcements of technological innovations by the Company or its competitors,
conditions in the wireless communications industry, regulatory changes or
general market or economic conditions and other events or factors. In addition,
in recent years the stock market has experienced extreme price and volume
fluctuations. These fluctuations have had a substantial effect on the market
prices for many emerging growth companies, often unrelated to the operating
performance of the specific companies. Such market fluctuations could adversely
affect the price of the Common Stock.
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
The Company plans to expand into international markets and has begun initial
marketing efforts. The Company does not anticipate that it will have any
material international operations in the next 12 months. If revenues generated
by international activities are not adequate to offset the expense of
establishing and maintaining these activities, the Company's business, operating
results, financial condition and cash flow could be materially adversely
affected. International demand for the Company's services and systems is
expected to vary by country, based on such factors as the regulatory
environment, electric power generating capacity and demand, labor costs and
other political and economic conditions. To date, the Company has no experience
in developing a localized version of its wireless data communications system for
foreign markets. The Company believes its ability to establish business
alliances in each international market will be critical to its success. There
can be no assurance that the Company will be able to successfully develop,
market and implement its system in international markets or establish successful
business alliances for these markets. In addition, there are certain risks
inherent in doing business internationally, such as unexpected changes in
regulatory requirements, export restrictions, tariffs and other trade barriers,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems in collecting accounts receivable, political instability, fluctuations
in currency exchange rates and potentially adverse tax consequences, any of
which could adversely impact the Company's potential international operations.
There can be no assurance that one or more of such factors will not have a
material adverse effect on the Company's future international operations and,
consequently, on its business, operating results, financial condition and cash
flow. See "Business -- Strategy -- Pursue International Expansion."
RISK OF ENTERING INTO FOREIGN JOINT VENTURES
The Company intends to enter into joint ventures in order to facilitate its
entry into international markets. The Company may or may not have a majority
interest or control of the board of directors of any such joint venture. The
risk is present in any such joint venture in which the Company may determine to
participate, that the other joint venture partner may at any time have economic,
business or legal interests or goals that are inconsistent with those of the
joint venture or the Company. The risk is also present that a joint
15
<PAGE>
venture partner may be unable to meet its economic or other obligations and that
the Company may be required to fulfill those obligations. In addition, in any
joint venture in which the Company does not have a majority interest, the
Company may not have control over the operations or assets of such joint
venture. See "Business -- Strategy -- Pursue International Expansion."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
following this Offering could adversely affect the market price for the
Company's Common Stock. The number of shares of Common Stock available for sale
in the public market is limited by restrictions under the Securities Act of
1933, as amended (the "Securities Act"), and lock-up agreements pursuant to
which holders have agreed without the prior written consent of Morgan Stanley &
Co. Incorporated not to sell or otherwise dispose of shares for 180 days
after the date of this Prospectus. However, Morgan Stanley & Co. Incorporated
may, in its sole discretion and at any time without notice, release all or any
portion of such shares. In addition, certain other holders have agreed not to
sell or otherwise dispose of shares for 90 days after the date of this
Prospectus, shares for 120 days after the date of this Prospectus and
for 180 days after the date of this Prospectus. On the date of this
Prospectus, no shares other than the Shares will be eligible for sale in the
public market. After the expiration of the lock-up agreements, such shares will
generally be eligible for sale in the public market subject in the case of
certain shares (including shares held by affiliates) to the limitations of Rule
144 under the Securities Act. In addition, the Company intends to register,
following the effective date of this Offering, a total of shares of Common
Stock subject to outstanding options or reserved for issuance under the
Company's 1992 Stock Option Plan or 1994 Stock Plan, 600,000 shares of Common
Stock reserved for issuance under its 1996 Employee Stock Purchase Plan, and
1,300,000 shares of Common Stock issuable upon exercise of warrants which this
Prospectus assumes will be exercised upon the closing of this Offering. Further,
upon expiration of the lock-up agreements referred to above, the holders will be
entitled to certain registration rights with respect to such shares. If such
holders, by exercising their registration rights, cause a large number of shares
of Common Stock to be registered and sold in the public market, such sales could
have a material adverse effect on the market price for the Common Stock. See
"Description of Capital Stock -- Registration Rights" and "Shares Eligible for
Future Sale."
SHAREHOLDERS' AGREEMENT
Holders of shares of Common Stock, or % of the outstanding Common
Stock after completion of this Offering, are parties to a Shareholders'
Agreement dated August 15, 1994, as amended (the "Shareholders' Agreement"),
pursuant to which the Company will be required to cause all persons designated
for election by certain stockholders to be nominated at each meeting of the
Company's stockholders at which a vote for directors will be taken, so long as
each such stockholder holds a minimum number of shares of Common Stock. Under
the Shareholders' Agreement, the Company agreed to set the authorized number of
directors at ten directors. Of these, after the closing of this Offering, nine
directors will be persons designated by certain holders in accordance with the
Shareholders' Agreement. In addition, under the Shareholders' Agreement the
parties thereto have agreed that, until August 15, 1997, the Certificate of
Incorporation will not be amended to eliminate cumulative voting and that the
Board of Directors shall not be comprised of less than eight directors. The
effect of the Shareholders' Agreement is to give certain stockholders greater
influence over the management of the Company than they would otherwise have. See
"Certain Transactions" and "Description of Capital Stock."
SUBSTANTIAL DILUTION
Investors participating in this Offering will incur immediate, substantial
dilution. To the extent outstanding options and warrants to purchase the
Company's Common Stock are exercised, there will be further dilution. See
"Dilution."
EFFECT OF CERTAIN CHARTER PROVISIONS; ANTITAKEOVER EFFECTS OF CERTIFICATE OF
INCORPORATION, INDENTURE, DELAWARE LAW AND CERTAIN AGREEMENTS
The Company's Board of Directors has the authority to issue up to 15,000,000
shares of Preferred Stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of such
16
<PAGE>
shares of Preferred Stock without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no current plans to issue shares of Preferred Stock.
Further, certain provisions of the Company's Certificate of Incorporation and of
Delaware law could discourage potential acquisition proposals and could delay or
prevent a change in control of the Company. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
Board of Directors and in the policies formulated by the Board of Directors and
to discourage certain types of transactions that may involve an actual or
threatened change in control of the Company. These provisions are designed to
reduce the vulnerability of the Company to an unsolicited acquisition proposal
and to discourage certain tactics that may be used in proxy fights. The
Company's Indenture (the "Senior Discount Note Indenture") governing its Senior
Discount Notes provides in the event of certain changes in control of the
Company, each holder will have the right to require the Company to repurchase
such holder's Senior Discount Notes at a premium over the accreted value of such
debt. Certain provisions in the Certificate of Incorporation and Senior Discount
Note Indenture could have the effect of discouraging others from making tender
offers for the Company's shares and, as a consequence, they also may inhibit
increases in the market price of the Company's shares that could otherwise
result from actual or rumored takeover attempts. Such provisions also may have
the effect of limiting changes in the management of the Company. See
"Description of Capital Stock -- Preferred Stock" and "-- Antitakeover Effects
of Provisions of the Certificate of Incorporation and Delaware Law."
NO DIVIDENDS; DIVIDEND RESTRICTIONS.
The Company has not declared or paid any dividends on its capital stock
since its inception. The Company currently anticipates that it will retain all
of its future earnings for use in the operation and expansion of its business
and does not anticipate paying any cash dividends in the foreseeable future. In
addition, the Company's existing financing arrangements restrict the payment of
any dividends. See "Dividend Policy."
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $ million ($ million if the U.S.
Underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company.
The Company anticipates that the net proceeds of this Offering will be used
for general corporate purposes including working capital, capital requirements
(capital expenditures and negative operating cash flow) expected to be incurred
in connection with the installation and operation of the Company's networks and
continuing research and development activities. A portion of the proceeds may
also be used for the licensing of new products or technologies, early retirement
of corporate debt and for investment purposes related to the expansion of its
business, including internationally, although the Company currently has no
specific plans or commitments in this regard. Pending application of the
proceeds as described above, the Company intends to invest the net proceeds of
the Offering in short-term, interest-bearing, investment-grade securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company believes that the
net proceeds of this Offering, together with its existing cash, cash
equivalents, short-term investments and anticipated interest income and other
revenues, will be sufficient to meet its cash requirements for at least the next
12 months. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
DIVIDEND POLICY
The Company has not declared or paid any dividends on its capital stock
since its inception. The Company currently anticipates that it will retain all
of its future earnings for use in the operation and expansion of its business
and does not anticipate paying any cash dividends in the foreseeable future, and
any changes in the Company's dividend policies will be determined by its Board
of Directors. The Company's existing financing arrangements also restrict the
payment of any dividends. The Company anticipates that it and its subsidiaries
will incur substantial additional indebtedness, which is also likely to restrict
the payment of dividends.
18
<PAGE>
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company as of
June 30, 1996, (ii) the pro forma capitalization of the Company after giving
effect to the automatic conversion of all outstanding shares of Preferred Stock
into Common Stock, the issuance of 2,066,485 shares of Common Stock upon the
assumed exercise of certain outstanding warrants for an aggregate of $3.7
million and the reincorporation of the Company in Delaware, and (iii) the as
adjusted capitalization of the Company to reflect the receipt of the estimated
net proceeds from the sale of Common Stock offered hereby at an assumed initial
offering price of $ per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by the
Company.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
----------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations(1)................................................ $ 195,513 $ 195,513 $ 195,513
----------- ------------- -----------
Series CC redeemable convertible preferred stock, $.001 par value;
3,215,768 shares designated and outstanding actual; no shares
outstanding pro forma and as adjusted.................................. 29,486 -- --
----------- ------------- -----------
Stockholders' equity (deficit):
Convertible preferred stock, $.001 par value; 15,000,000 shares
authorized; 9,137,078 shares outstanding actual; 15,000,000 shares
authorized; $.001 par value; no shares outstanding pro forma and as
adjusted............................................................. 27,196 -- --
Common Stock, $.001 par value; 50,000,000 shares authorized; 2,588,209
shares outstanding actual; 50,000,000 shares authorized; $.001 par
value 17,007,540 shares pro forma(2) and shares outstanding as
adjusted............................................................. 27,636 90,947
Notes receivable from sale of Common Stock............................ (866) (866) (866)
Warrants.............................................................. 2,984 9 9
Accumulated deficit................................................... (127,334) (127,334) (127,334)
Net unrealized gain on short-term investments......................... (16) (16) (16)
----------- ------------- -----------
Total stockholders' equity (deficit)................................ (70,400) (37,260)
----------- ------------- -----------
Total capitalization.............................................. $ 154,599 $ 158,253 $
----------- ------------- -----------
----------- ------------- -----------
</TABLE>
- ---------
(1) See Notes 5 and 9 to Consolidated Financial Statements.
(2) Excludes 1,889,568 shares of Common Stock issuable upon the exercise of
outstanding options as of June 30, 1996, with a weighted average exercise
price of $1.25 per share and 26,305 shares of Common Stock issuable upon
exercise of outstanding warrants to purchase Common Stock at a weighted
average exercise price of $15.18 per share. See "Management -- Incentive
Stock Plans," "Description of Capital Stock -- Warrants" and Note 7 to
Consolidated Financial Statements.
19
<PAGE>
DILUTION
The pro forma deficit in net tangible book value of the Company as of June
30, 1996 was $38.0 million or $ per share of outstanding Common Stock. The
pro forma deficit in net tangible book value per share represents the Company's
total assets less net intangibles of $762,000 and less total liabilities,
divided by the number of shares of Common Stock outstanding (after giving effect
to the automatic conversion of the Preferred Stock and the exercise of certain
warrants). Dilution per share represents the difference between the price per
share paid by investors in this Offering and the as adjusted pro forma net
tangible book value per share immediately after this Offering. After giving
effect to this Offering at an assumed initial public offering price of $ per
share, the as adjusted pro forma net tangible book value of the Company at June
30, 1996 would have been $ , or approximately $ per share. This
represents an immediate decrease in the pro forma deficit in net tangible book
value of $ per share to existing stockholders and an immediate dilution of
$ per share to new investors purchasing shares at the assumed initial public
offering price. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................... $
Pro forma net tangible book value (deficit) per share as of June 30,
1996...................................................................
Increase in net tangible book value per share attributable to sale of
Shares in the Offering.................................................
---------
As adjusted pro forma net tangible book value per share after the
Offering.................................................................
---------
Dilution per share to investors in the Offering........................... $
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the exisiting
stockholders and by the new investors before deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company, at an
assumed initial public offering price of $ per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ ------------------------ AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
---------- ------------ ---------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................................ % $ % $
New investors........................................
---------- --- ---------- ---
Total............................................ 100% $ 100%
---------- --- ---------- ---
---------- --- ---------- ---
</TABLE>
The foregoing table assumes the automatic conversion of all Preferred Stock,
the exercise of warrants to purchase 2,066,485 shares of Common Stock, no
exercise of the U.S. Underwriters' over-allotment option and no exercise of
stock options or other warrants outstanding at June 30, 1996. At June 30, 1996,
there were options outstanding to purchase 1,889,568 shares of Common Stock at a
weighted average exercise price of $1.25 per share and other warrants
outstanding to purchase 26,305 shares of Common Stock at a weighted average
exercise price of $15.18 per share. To the extent outstanding options and
warrants are exercised, there will be further dilution to new investors. See
"Management -- Incentive Stock Plans," "Description of the Capital Stock --
Warrants" and Note 7 to Consolidated Financial Statements.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and related
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus. The
consolidated statement of operations data for the years ended December 31, 1993,
1994 and 1995, and the consolidated balance sheet data at December 31, 1994 and
1995 are derived from, and are qualified by reference to, the audited
consolidated financial statements included elsewhere in this Prospectus. The
consolidated statement of operations data for the years ended December 31, 1991
and 1992 and the consolidated balance sheet data at December 31, 1991, 1992 and
1993 are derived from audited consolidated financial statements not included
herein. The consolidated statement of operations data for the six months ended
June 30, 1995 and 1996 and the consolidated balance sheet data at June 30, 1996
are derived from unaudited consolidated financial statements that include, in
the opinion of management, all adjustments, consisting of only normal, recurring
adjustments, necessary for a fair presentation of the information set forth
therein. The consolidated results of operations for the six months ended June
30, 1996 or any other period are not necessarily indicative of future results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................. $ 7,408 $ 3,148 $ 1,757 $ 1,651 $ 2,126 $ 1,291 $ 420
Costs and expenses:
Cost of revenues........................ 6,943 2,509 1,840 1,191 5,129 1,931 3,483
Research and development................ 7,765 6,838 5,262 9,693 22,380 6,735 13,009
Marketing and sales..................... 3,037 1,523 1,447 3,257 4,201 1,946 2,924
General and administrative.............. 2,048 843 1,450 2,583 6,805 2,874 5,412
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses.................. 19,793 11,713 9,999 16,724 38,515 13,486 24,828
--------- --------- --------- --------- --------- --------- ---------
Loss from operations...................... (12,385) (8,565) (8,242) (15,073) (36,389) (12,195) (24,408)
Other income (expense).................... (178) (378) (148) 441 (4,564) 75 (7,903)
--------- --------- --------- --------- --------- --------- ---------
Loss before income taxes.................. (12,563) (8,943) (8,390) (14,632) (40,953) (12,120) (32,311)
Provision for income taxes................ -- -- 1 2 3 1 2
--------- --------- --------- --------- --------- --------- ---------
Net loss.................................. $ (12,563) $ (8,943) $ (8,391) $ (14,634) $ (40,956) $ (12,121) $ (32,313)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Pro forma net loss per share(1)........... $ $
--------- ---------
--------- ---------
Shares used in computing pro forma net
loss per share(1)........................
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
----------------------------------------------------- -------------
1991 1992 1993 1994 1995 ACTUAL
--------- --------- --------- --------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments...................................... $ 669 $ 2,236 $ 8,884 $ 24,508 $ 143,797 $ 102,967
Total assets...................................... 4,833 4,123 11,510 31,809 184,306 162,653
Long-term obligations............................. 1,598 1,734 825 546 183,348 195,513
Series CC redeemable convertible preferred
stock............................................ -- -- -- 29,486 29,486 29,486
Total stockholders' equity (deficit).............. (3,065) (235) 8,011 (1,564) (38,103) (70,400)
</TABLE>
- ------------
(1) See Note 1 to Consolidated Financial Statements for an explanation of the
determination of the number of shares used in computing pro forma net loss
per share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CELLNET DATA SYSTEMS, INC. SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE
IN THIS PROSPECTUS. CERTAIN OF THE INFORMATION CONTAINED IN THIS SECTION AND
ELSEWHERE IN THIS PROSPECTUS, INCLUDING INFORMATION WITH REGARD TO THE COMPANY'S
EXPECTED WIRELESS DATA COMMUNICATIONS NETWORK DEPLOYMENTS AND OPERATIONS, ITS
STRATEGY FOR MARKETING AND DEPLOYING SUCH NETWORKS AND RELATED FINANCING
ACTIVITIES, CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS."
OVERVIEW
The Company intends to deploy and operate a series of wireless data
communications networks pursuant to long-term contracts with utility company
customers and to earn recurring revenues by providing NMR services to the
utilities and using the network to support a variety of non-utility
applications. The Company's business strategy has affected and will continue to
affect its financial condition and results of operations as follows:
CHANGING COMPOSITION OF REVENUES. The Company's revenues in recent years
have been primarily attributable to sales of, and contract fees related to the
development of, miscellaneous utility communication equipment. The Company
believes that such revenues will be largely non-recurring and will diminish to
relatively insignificant levels over the next few years. The Company derives an
increasing proportion of its revenues from fees earned under services agreements
related to its wireless communications networks. Under the Company's existing
services agreements with KCPL and UE, the Company receives monthly NMR service
fees based on the number of endpoint devices that are in revenue service during
the applicable month to bill customers.
UNEVEN REVENUE GROWTH. The timing and amount of the Company's future
revenues will depend upon its ability to obtain additional services agreements
with utilities and other customers and upon the Company's ability to
successfully deploy and operate its wireless communications networks. New
services agreements are expected to be obtained on an irregular basis, and there
may be prolonged periods during which the Company does not enter into any
additional services agreements. As a result, the Company expects that its
revenues will not grow smoothly over time, but will increase unevenly as the
Company enters into new services agreements, and may decrease sharply in the
event that any of its existing services agreements are terminated or not
renewed. See "Risk Factors -- Uncertainty of Future Revenues; Increasing
Installation Costs; Need for Additional Services Contracts; and Fluctuating
Operating Results."
REVENUES LAG NETWORK DEPLOYMENT. The Company generally realizes network
service revenue under a services agreement with a utility only when a portion of
the network is installed and the utility has begun billing customers based upon
NMR data. The Company experienced a delay of approximately one year in the
initial receipt of revenue under its services contracts with KCPL and UE. The
Company expects that its receipt of network service revenue on future contracts
will lag the signing of the related services agreement by a minimum of six
months. Complete network installation is likely to require two to four years. A
network's service revenues are not expected to exceed the Company's capital
investments to deploy such network for several years. The Company signed
agreements with KCPL and UE in August 1994 and August 1995, respectively, and
did not receive its first revenue under the KCPL and UE services agreements
until September 1995 and May 1996, respectively. The Company expects to complete
the KCPL network in 1996 and the UE network in 1998. As additional segments of
the Company's networks are installed and used by its utility clients for billing
purposes, the Company expects to realize a corresponding increase in its network
service revenues. However, if the Company is able to successfully deploy an
increasing number of networks over the next few years, the operating losses
created by this lag in revenues, and negative cash flow resulting from such
operating losses and the capital expenditures expected to be required in
connection with the installation of such networks, are expected to widen for a
period of time and will continue until the operating cash flow from installed
networks exceeds the costs of deploying additional networks.
22
<PAGE>
IMPACT OF RAPID EXPANSION. CellNet will not typically invest the capital
necessary to deploy a wireless communications network prior to entering into a
long-term services agreement with a utility or other customer. However, during
its expansion phase, the Company will be required to invest significant amounts
of capital in its networks and to incur substantial and increasing sales and
marketing expenses before receiving any return on such expenditures through
network service revenues. The Company has incurred substantial operating losses
since inception and, as of June 30, 1996, had an accumulated deficit of $127.3
million. The Company does not expect significant revenues during 1996 and
expects to incur substantial and increasing operating losses and negative net
cash flow for the foreseeable future as it expands its research and development
and marketing efforts and installs additional networks. The Company does not
expect significant cash flow from its NMR services operations for several years.
The Company will require substantial capital to fund cash flow deficits and
capital expenditures for the foreseeable future and expects to finance these
requirements through significant additional external financing. See "Risk
Factors -- History and Continuation of Operating Losses" and "-- Substantial
Future Capital Needs."
INTEREST INCOME. The Company has earned substantial amounts of interest
income on short-term investments of the proceeds of its financing activities,
and expects to earn additional interest income through the investment of a
portion of the proceeds of this Offering. The Company expects to utilize
substantially all of its cash, cash equivalents and short-term investments in
deploying its wireless communications networks, in continuing research and
development activities related thereto and in related selling and marketing
activities. As funds are expended, interest income is expected to decrease. See
"Use of Proceeds."
RESULTS OF OPERATIONS
REVENUES
Revenues for the three years ended December 31, 1993, 1994 and 1995 were
$1.8 million, $1.7 million and $2.1 million, respectively. Revenues for the six
months ended June 30, 1995 and 1996 were $1.3 million and $420,000,
respectively. These revenues are attributable primarily to product sales and
development and other contract revenues that are largely non-recurring and that
are expected to decline and remain at relatively insignificant levels over the
next few years. The Company's network service revenues for the year ended
December 31, 1995 and for the six months ended June 30, 1996 were $35,000 and
$244,000, respectively. In September 1995, the Company began to receive regular
monthly revenue under its services agreement with KCPL based upon the number of
automated meters installed on the network that were being used by KCPL to bill
its customers and the agreed monthly NMR charge per meter. In May 1996, the
Company began to realize regular monthly revenue from its services agreement
with UE on a similar basis.
The Company generally realizes service revenues under its services
agreements with utilities only when its networks or portions thereof are
successfully installed and operating and the utility commences billing its
customers based upon the NMR data obtained. Revenues are expected to increase as
the Company continues to install its networks, the networks or portions thereof
become operational, and utilities begin billing their customers based upon data
obtained over the CellNet system. Due primarily to the nature, amount and timing
of revenues received to date, no meaningful period-to-period comparisons can be
made. Revenues received during the years ended December 31, 1993, 1994 and 1995,
and for the six-month periods ended June 30, 1995 and 1996, respectively, are
not reliable indicators of revenues that might be expected in the future.
COST OF REVENUES
Cost of revenues historically have consisted of the cost of product sales.
For the year ended December 31, 1995 and for the six months ended June 30, 1996,
cost of revenues primarily consisted of network operations costs. Cost of
revenues were $1.8 million, $1.2 million and $5.1 million for the years ended
December 31, 1993, 1994 and 1995, respectively. Cost of revenues for the six
months ended June 30, 1995 and 1996 were $1.9 million and $3.5 million,
respectively. The increase in cost of revenues is driven by increasing costs of
providing network services, due primarily to growth in the number of employees
and associated costs necessary for network monitoring operations at customer
sites and at the Company's headquarters, network deployment management, and
customer training. Costs of network services also include the increased
installation, applications and RF engineering staffing at the Company's
headquarters
23
<PAGE>
to support anticipated additional utility contracts. Network services does not
currently generate a profit as the Company has not yet achieved a scale of
services to cover network costs. The Company will incur significant and
increasing costs primarily attributed to network operation and depreciation.
Once a network has been fully installed, costs associated with generating
network revenues will consist primarily of maintaining a monitoring center for
such network, network depreciation and miscellaneous maintenance and operating
expenses.
OPERATING EXPENSES
Operating expenses, consisting of research and development, marketing and
sales, and general and administrative costs, were $8.2 million, $15.5 million
and $33.4 million for the years ended December 31, 1993, 1994 and 1995,
respectively. Operating expenses for the six months ended June 30, 1995 and 1996
were $11.6 million and $21.3 million, respectively. The increase in operating
expenses on a period to period basis is attributable to the Company's rapid
growth and to increasing research and development and marketing and sales
expenditures. The Company expects to continue to spend a significant portion of
its resources on research and development activities for the foreseeable future.
Marketing and sales and general and administrative costs are expected to
increase in the future as the Company signs new service agreements.
RESEARCH & DEVELOPMENT. Research and development expenses are attributable
largely to continuing system software, firmware and equipment development costs,
prototype manufacturing, testing, personnel costs, consulting fees, and
supplies. Research and development costs are expensed as incurred. The Company's
networks include certain software applications which are integral to their
operation. The costs to develop such software have not been capitalized as the
Company believes its software development processes are essentially completed
concurrently with the establishment of technological feasibility of the software
and/or development of the related network hardware. Research and development
expenses were $5.3 million, $9.7 million and $22.4 million for the years ended
December 31, 1993, 1994 and 1995, respectively. Research and development
expenses for the six months ended June 30, 1995 and 1996 were $6.7 million and
$13.0 million, respectively. Research and development spending increases in 1995
and 1996 reflect primarily additions to the Company's engineering staff and
costs associated with development of processes to retrofit utility meters for
use in the CellNet network. Deployment of the Company's first network in 1995
resulted in increased materials used for prototypes, nonrecurring engineering
charges associated with establishing relationships with third-party
manufacturers and rapid changes to the firmware and software utilized in the
CellNet network.
MARKETING & SALES. Marketing and sales expenses consist principally of
compensation, including commissions paid to sales and marketing personnel,
travel, advertising, trade show and other promotional costs. Marketing and sales
expenses were $1.4 million, $3.3 million and $4.2 million for the years ended
December 31, 1993, 1994 and 1995, respectively. Marketing and sales expenses for
the six months ended June 30, 1995 and 1996 were $1.9 million and $2.9 million,
respectively.
GENERAL & ADMINISTRATIVE. General and administrative expenses include
compensation paid to general management and administrative personnel, recruiting
costs, travel, and communications and other general administrative expenses,
including fees for professional services. General and administrative expenses
were $1.5 million, $2.6 million and $6.8 million for the years ended December
31, 1993, 1994 and 1995, respectively. General and administrative expenses for
the six months ended June 30, 1995 and 1996 were $2.9 million and $5.4 million,
respectively.
INTEREST INCOME AND EXPENSE
Prior to June 1995 the Company funded its liquidity needs primarily from the
issuance of equity securities. In June and November 1995, the Company issued and
sold a total of $325.0 million aggregate principal amount at maturity of Senior
Discount Notes and Warrants to purchase 1,300,000 shares of Common Stock
("Warrants") for proceeds, net of issuance costs, of $169.9 million.
Accordingly, the Company has earned interest income on the invested proceeds
from the Senior Discount Notes and Warrants and has incurred significant
interest expense from the amortization of the original issue discount on such
debt.
24
<PAGE>
Interest income has been and will continue to be received by the Company
from the short-term investment of proceeds from the issuance of equity and debt
securities pending the use of such proceeds by the Company for operating and
other expenses. In June 1995, the Company began to receive substantially
increased amounts of interest income on the short-term investment of the
proceeds received from the issue and sale of its Senior Discount Notes and
Warrants. Interest income is expected to be highly variable over time as
proceeds from the issue and sale of additional equity and debt securities are
received and as funds are used by the Company in its business. Interest income
for the three years ended December 31, 1993, 1994 and 1995 was $66,000, $555,000
and $4.6 million, respectively. Interest income for the six months ended June
30, 1995 and 1996 was $1.0 million and $3.5 million, respectively.
No interest on the Senior Discount Notes is payable prior to December 15,
2000. Thereafter until maturity in June 2005, interest will be payable
semi-annually in arrears on each December 15 and June 15. The carrying amount of
the Senior Discount Notes accretes from the date of issue and the Company's
interest expense includes such accretion. Interest expense for prior periods is
attributable primarily to capital leases. Interest expense was $198,000,
$101,000 and $9.3 million for the years ended December 31, 1993, 1994 and 1995,
respectively. Interest expense for the six months ended June 30, 1995 and 1996
was $754,000 and $11.3 million, respectively.
PROVISION FOR INCOME TAXES
The Company has not provided for or paid federal income taxes due to the
Company's net losses. A nominal provision has been recorded for various state
minimum income and franchise taxes.
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $82.5 million and $7.3 million available to offset future federal
and California taxable income, respectively. The extent to which the loss
carryforwards can be used to offset future taxable income may be limited,
depending on the extent of ownership changes within any three-year period as
provided in the Tax Reform Act of 1986 and the California Conformity Act of
1987. This Offering is expected to trigger such a limitation. The annual usage
will be limited by the market value of the Company at the closing of this
Offering multiplied by the then current long-term tax exempt interest rate. Such
federal carryforwards expire in 2001 through 2010. Such state carryforwards
expire in 1996 through 2000. Based upon the Company's history of operating
losses and expiration dates of the loss carryforwards, the Company has recorded
a valuation allowance to the full extent of its net deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires significant amounts of capital for research and
development in connection with the development of its proprietary wireless
communications network and related products and services, for investments in the
installation and testing of such networks and for related sales and marketing
and general and administrative expenses. Historically, the Company has satisfied
its liquidity requirements primarily through external financings, including
private placements of equity and debt securities and interest income derived
from the investment of the proceeds of its financing activities. The discussion
in this section excludes the effect of the exercise of warrants to purchase
2,066,485 for expected proceeds of $3.7 million.
In 1993, 1994, 1995 and the first six months of 1996, net cash used in the
Company's operating activities totaled $9.1 million, $14.6 million, $24.6
million and $18.9 million, respectively. Net cash used in operating activities
resulted primarily from cash used to fund net operating losses.
In 1993, 1994 and 1995 and the first six months of 1996, net cash provided
by (used for) the Company's financing activities totaled $16.2 million, $34.0
million, $170.9 million and $(131,000), respectively, including cash provided by
the private sale of the Company's equity securities of $13.4 million, $34.1
million and $1.4 million in 1993, 1994 and 1995, respectively. In June and
November 1995, the Company received an aggregate of $175.8 million of gross
proceeds ($169.9 million in net proceeds) from the private sale of the Senior
Discount Notes and Warrants. During the first six months of 1996, the Company
financed its operations primarily from the proceeds of the offering of the
Senior Discount Notes and Warrants, together with interest income of $3.5
million. As of June 30, 1996, the Company had cash, cash equivalents and short-
term investments totalling $103.0 million.
25
<PAGE>
The Senior Discount Notes were issued at a substantial discount from their
aggregate principal amount at maturity of $325.0 million. Although interest is
not payable on the Senior Discount Notes prior to December 15, 2000, the
carrying amount of such indebtedness will increase as the original issue
discount is amortized through maturity in June 2005. Beginning June 15, 2000,
the Senior Discount Notes will bear interest, payable semi-annually, at a rate
of 13% per annum, with payments commencing December 15, 2000. No principal
payments on the Senior Discount Notes are due prior to maturity in 2005.
In 1993, 1994 and 1995, net cash used for investing activities totaled $3.4
million, $12.8 million and $110.8 million, respectively and in the first six
months of 1996 net cash provided from investing activities was $41.7 million.
The Company's investing activities consisted primarily of purchases of network
components and inventory, the construction and installation of networks,
purchases of property and equipment, and purchases, sales and maturities of
short-term investments. The $41.7 million of net cash provided by investing
activities in the first six months of 1996 was largely attributable to proceeds
of short-term investments. These proceeds exceed investments in short-term
instruments as the Company used the proceeds of short-term investments to fund
its operating activities. The Company shortened the maturity of its portfolio of
short-term investments to less than 90 days, which are classified, accordingly,
as cash equivalents.
Deployments of the Company's wireless communications networks will require
substantial additional capital. In addition, funds will be required for further
enhancements to the system software, firmware, hardware and other equipment to
increase the speed, capacity and functionality of the system, to enhance system
productivity over time and to expand the scope of utility and other network
information services that may be offered on the CellNet system. The Company
currently estimates that funds required for capital expenditures relating to the
buildout of its KCPL and UE networks will be approximately $22.5 million from
June 30, 1996 through year end. Although the Company is currently unable to
predict the amount of expenditures that may be incurred in connection with the
establishment of other networks or the amount of expenditures to be made after
1996 with respect to KCPL and UE, the Company expects that cash used for the
construction and installation of networks and for the purchase of property and
equipment will increase substantially as and when the Company obtains new
services agreements, and that the Company will require additional capital from
external sources. Sources of additional capital may include project or
conventional bank financing, public and private offerings of debt and equity
securities and cash generated from operating activities. The Company expects
that a substantial portion of its future financing will be at the subsidiary
level on a project basis. The Company expects to obtain third party financing
for the construction of wireless networks, based on the projected cash flow
expected to be generated from such projects, after it has entered into a
long-term contract with a utility. The Company expects that the recurring
revenue stream from the long-term services contract will support the
amortization of debt raised for the project involved. The Company does not
anticipate deriving any significant cash from operations for several years.
The Company believes that the net proceeds of the Offering, together with
existing cash, cash equivalents and anticipated interest income and other
revenues, will be sufficient to meet its cash requirements for at least the next
12 months. Thereafter, the Company expects that it will require substantial
additional capital. The extent of additional financing will depend on the
success of the Company's business. The Company expects to incur significant
operating losses and to generate increasingly negative net cash flow during the
next several years while it develops and installs its network communications
systems. There can be no assurance that additional financing will be available
to the Company or, if available, that it can be obtained on terms acceptable to
the Company and within the limitations contained in the Senior Discount Note
Indenture or that may be contained in any additional financing arrangements. The
Senior Discount Note Indenture contains certain covenants that limit the
Company's ability to incur additional indebtedness. Future financings may be
dilutive to existing stockholders. Failure to obtain such financing could result
in the delay or abandonment of some or all of the Company's development and
expansion plans and expenditures, which could limit the ability of the Company
to meet its debt service requirements and could have a material adverse effect
on its business and on the value of the Common Stock. See "Risk Factors --
Substantial Future Capital Needs."
26
<PAGE>
BUSINESS
OVERVIEW
The Company designs, builds, owns and operates innovative wireless networks
capable of providing low-cost real-time status and event monitoring of up to
several million endpoints. The primary application of the Company's network is
to provide NMR services to electric, gas and water utility companies pursuant to
long-term contracts. The Company is currently building wireless networks to
provide NMR services to KCPL and UE covering a total of 1,220,000 meters, of
which more than 105,000 meters were in revenue service as of June 30, 1996.
CellNet also currently provides certain network distribution automation
services, including monitoring and control of power distribution equipment, to
electric utility customers. CellNet's network uses radio devices fitted to
existing utility meters to read and report data from each meter every few
minutes. Through efficient use of radio frequency spectrum, the Company's
networks will have substantial additional capacity to service non-utility
applications such as home security and remote status monitoring of vending
machines and office equipment, and the Company is working with industry leaders
in those markets to encourage further development of such applications.
CellNet believes it has a first-to-market opportunity to offer wireless
communications data services on a commercial scale for utility and selected
non-utility applications. CellNet's network is distinguished by the following
advantages:
- infrastructure and operating costs sufficiently low to permit cost
effective utility meter reading and other fixed point monitoring
applications;
- highly efficient use of spectrum -- the equivalent of approximately a
single voice channel is needed to operate a network;
- proprietary software specifically designed to manage real-time data
collection from up to several million endpoints; and
- open systems approach designed to allow new applications to be added to
the system.
Utilities are under increasing pressure to improve customer service, enhance
their operating efficiency, defer capital spending, and differentiate themselves
from their competitors. The Company offers an outsourced solution which enables
utilities to offer time-of-use pricing plans, peak demand monitoring, real-time
response to billing inquiries, real-time power outage detection, on-demand meter
reads, customized billing functions and distribution automation. The Company
believes its NMR services provide utilities with an effective solution to many
of the demands created by the increased regulatory and competitive pressures
within the utility industry.
The Company is actively targeting those utilities which operate in the 60
largest MSAs, which represent a large majority of the 230 million electric, gas
and water meters in the United States. The Company believes that utilities
operating in these densely populated areas will be the first to experience
heightened competitive and regulatory pressures, and as such, will be most
likely to benefit from the Company's services. These competitive and regulatory
pressures have prompted increased activity among the utilities in the United
States as evidenced by the Company's receipt of 19 requests for proposals
("RFPs") from utilities in the first six months of 1996.
CellNet's proprietary technology enables the Company to make extremely
efficient use of spectrum. As a result, relative to other wireless services, the
Company has been able to acquire frequency at a very low cost, and the Company
had capitalized $762,000 for license fees and related acquisition expenses
attributable to spectrum acquisition costs as of June 30, 1996. The Company has
acquired 50 spectrum licenses in 44 of the top 60 MSAs and believes it will be
able to obtain any additional spectrum at reasonable cost if required. The
Company has focused its spectrum acquisition strategy on these top 60 markets.
See "Risk Factors -- Access to Radio Frequency Spectrum."
27
<PAGE>
The Company believes its spectrum-efficient networks will have substantial
additional capacity to service non-utility applications requiring low-cost
monitoring of fixed endpoints. Potential non-utility applications of the
Company's systems include home security, remote status monitoring of vending
machines, office equipment, parking meters and other equipment, and remote
control of traffic lights. The Company is working with industry leaders such as
Ameritech, Hewlett Packard, Honeywell, Real Time Data, and Interactive
Technologies Inc. to develop such applications. The Company believes that its
utility networks will provide an excellent platform to position the Company as a
leading wholesale provider of wireless communications services for such
non-utility applications.
The Company believes that a significant international market also exists for
its services with more than 600 million electric, gas and water meters outside
of the United States. The Company's strategy is to pursue international markets
through joint ventures. The Company is currently exploring projects with
electric utilities in the U.K., Singapore and Thailand.
CHANGES IN THE ELECTRIC UTILITY INDUSTRY
The energy utility industry is in transition. The traditional utility
structure, consisting of a vertically integrated system operating as a natural
monopoly with rates set in relation to cost, has presented utilities with little
incentive to improve service quality or operating efficiency. Similar to the
regulatory evolution that has already taken place in the transportation and
telecommunications industries, customer demands and regulatory mandates by
Federal, state and local governments are forcing utilities to transform
themselves from regulated monopolies into competitive enterprises. While
regulatory initiatives vary from state to state, many involve a shift from
rate-of-return ratemaking, in which a utility's rates are determined by its
return on assets, to performance-based ratemaking, in which a utility's rates
and profitability are based upon its cost, efficiency and service quality. The
gas utility industry has already been transformed. Today, commercial and
industrial customers can negotiate to purchase gas directly from producers or
brokers, while utilities are required to provide transportation of such gas to
customers' facilities.
The restructuring of the electric utility industry is underway. This
restructuring is focused on opening the electric power production industry, in
certain markets, to full competition in the next few years, and ultimately
providing customers access to multiple suppliers. Federal legislation, such as
the National Energy Policy Act of 1992 (the "EP Act"), has eased restrictions on
independent power producers in an effort to increase competition in the
wholesale electric power generation market. As a result, the construction of
cogeneration facilities and independent power production facilities has been
increasing, creating lower cost alternatives for large commercial and industrial
customers. Further, the EP Act authorized the Federal Energy Regulatory
Commission ("FERC") to mandate utilities to transport and deliver, or "wheel"
energy for the supply of bulk power to wholesale, but not retail, customers. In
order to facilitate the transition to increased competition in the wholesale
power markets made possible by the EP Act, in March 1995 FERC issued a Notice of
Proposed Rulemaking that would require utilities to (i) establish open access to
all wholesale sellers and buyers, (ii) offer power transmission service
comparable to what they provide themselves and (iii) take power transmission
service under the same tariffs offered to other buyers and sellers.
The EP Act granted individual states the sole authority to mandate the
wheeling of electric power to retail customers. Recently, regulatory and
legislative activity at the state level regarding retail wheeling has increased
dramatically. California is the furthest along in implementing retail wheeling,
and pursuant to the California Public Utility Commission's plan (which is still
subject to legislative approval), utilities will be required to offer an initial
group of customers the ability to choose their electricity supplier in 1998,
with all customers having this ability by 2003. Regulators in New York,
Massachusetts, Michigan, New Hampshire and Vermont have all ordered utilities to
file restructuring plans which would address, among other competitive issues, a
schedule for implementing retail wheeling over the next several years. Other
states are in various stages of considering the implementation of retail
wheeling, both at legislative and regulatory levels.
28
<PAGE>
The trend from rate-of-return towards performance-based ratemaking, the
movement towards retail wheeling and heightened competition are leading many
utilities to implement initiatives in the following areas:
INCREASE OPERATING EFFICIENCIES. Utilities are seeking to reduce operating
costs through increased automation and improved information processing. In
particular, many utilities have focused on the inefficiencies of the traditional
once-a-month drive-by or walk-by meter reading process. In addition to the
direct expense of monthly meter reading, manual processes create significant
indirect expenses. These include responding to customer billing service
inquiries and complaints, meter reading errors, missed meter reads, special
appointment meter reads to determine and correct errors, and service calls to
discontinue and to initiate service. Utilities are also seeking to improve
detection of energy theft, which is estimated to cost many millions of dollars
per year.
DEFER CAPITAL EXPENDITURES. Utilities must build plant capacity to meet the
anticipated peak demand for energy on a daily and seasonal basis with an
operating margin to respond to extraordinary demand peaks caused by extreme
weather conditions. However, power plant expansions are costly and, under
performance-based ratemaking, investments in such capacity might not be fully
compensated by ratemaking authorities. Reducing peak demand allows utilities to
defer or avoid additional plant construction or costly peak power generation
with standby power generating facilities. Unlike phone companies, which offer
time-of-use rates to discourage consumption during peak periods, utilities are
currently unable to implement time-of-use plans for any but their largest
customers due to inadequate real-time information about customer usage.
IMPROVE SERVICE QUALITY. In response to the emerging competitive
environment, utilities are seeking to improve and differentiate their services
by offering their customers different billing plans, remote move in/ move out
meter reading, multi-location bill aggregation and other innovations. In
addition, utilities are seeking to respond to regulatory and public pressure to
improve their ability to detect and respond to power outages.
To implement time-of-use pricing and other sophisticated pricing plans,
retail wheeling, real-time power outage detection and the other services
described above, electric utilities will require extremely accurate and timely
data regarding energy consumption by customers. However, adequate automated
systems have not been available. Some utilities have simplified and automated
the manual meter reading process to a limited degree through the use of
hand-held and drive-by meter reading equipment, commonly referred to as
automated meter reading ("AMR"). An AMR device polls meters on a meter reading
route and downloads periodic consumption data, usually monthly. Periodic meter
readings, even when "automated" by such equipment, do not provide the necessary
data to implement these regulatory and competitive initiatives.
THE CELLNET SOLUTION
CellNet designed, developed and is now commercially deploying in scale the
first wireless data communications network designed to provide high-volume
real-time status and event monitoring of up to several million endpoints. Since
the primary application of the network is to provide NMR services to utilities,
the network has been designed to meet the utility industry's cost requirements,
information needs and rigorous design specifications. CellNet's network uses
radio transmitters fitted to existing meters to read and report data from each
meter every few minutes. CellNet uses inexpensive radio devices and proprietary
software in its networks, deploys certain network components primarily on
utility power poles, and requires minimal frequency spectrum to operate its
system. As a result, the Company believes that for large scale installations it
will be able to provide basic NMR services at a cost to the utility of less than
$1 per month per meter.
CellNet's system enables utilities to better serve their customers by
offering enhanced services such as:
- time-of-use and demand energy rates;
- real-time response to billing inquiries;
- real-time power outage detection, location and notification;
- remote verification of "power on" and outage restoration;
29
<PAGE>
- on-demand meter reads;
- customer-selected billing dates and consolidated, multi-location billing;
- automatic move in/move out meter reading;
- distribution automation; and
- Internet access to consumption, rate and billing information.
In addition, CellNet's system allows utilities to respond effectively to
regulatory changes, reduce costs, defer capital spending and enhance their
operating efficiencies, thereby deriving benefits in the following areas:
RESPOND EFFECTIVELY TO REGULATORY INITIATIVES. If retail wheeling is
adopted, consumers will contract to buy electricity from specific power
providers, but all such power providers will supply electricity to the local
electrical network which will distribute power to all consumers. Monthly meter
reading allows power providers to determine aggregate usage, but not to
determine time of use, a critical requirement to implement retail wheeling. By
providing real-time data on each consumer's power usage, CellNet enables
utilities to effectively implement retail wheeling and avoid the installation of
time-of-use meters across their services territories, which could cost more than
$150-$200 each.
REDUCE CAPITAL INVESTMENTS. CellNet's NMR services will enable utilities to
adopt time-of-use billing plans, which can be used to motivate consumers to
shift discretionary consumption to off-peak periods. Reducing peak demand may
enable utilities to defer or avoid costly plant construction. In addition, by
contracting with CellNet to build and maintain the wireless network, the
utilities avoid both the technological risk and capital outlay of developing and
deploying NMR systems.
REDUCE OPERATING COSTS AND ENHANCE OPERATING EFFICIENCIES. Through
automation, CellNet's wireless data network helps utilities to reduce the direct
and indirect operating costs associated with manual meter reading. In addition,
CellNet's network enables distribution automation capabilities which include
monitoring and control of power distribution equipment as well as meters. Using
the CellNet network, utilities can manage many aspects of the delivery of
electricity including the ability to detect power outages, monitor and control
circuit breakers, monitor the load on transformers, control circuits to isolate
faults on feeder power lines, and switch automatically among capacitor banks to
produce constant voltage levels. As a result, problems may be detected earlier
and solved more quickly, operations become more reliable and service fleets may
be more efficiently deployed and dispatched as outages can be more readily
pinpointed within the utility's service territory. Such capabilities also enable
a utility to reduce energy theft through quick detection of meter tampering.
RESPOND TO COMPETITIVE PRESSURES. CellNet's networks enable utilities to
profile their customers' power usage and to enhance and differentiate service
offerings through innovative billing plans and other improvements. In addition,
utilities may elect to provide non-utility services connected with the CellNet
network, as such services are developed. These services could enable utilities
to obtain new revenue sources and, through bundling such applications, further
differentiate their services.
BUSINESS STRATEGY
The Company intends to deploy and operate a series of wireless data
communications networks pursuant to long-term contracts with utility company
customers and to earn recurring revenues by providing NMR services to the
utilities and by using the network to support a variety of non-utility
applications. Principal elements of CellNet's strategy are to (i) focus on
utility markets, (ii) promote development of non-utility applications, (iii)
form strategic alliances, (iv) pursue international expansion and (v) outsource
a substantial portion of its manufacturing and installation activities.
FOCUS ON UTILITY MARKETS
The Company is initially targeting those utilities which operate in the 60
largest MSAs, which represent a large majority of the 230 million electric, gas
and water meters in the United States. The Company believes that utilities
operating in these densely populated areas will be the first to experience
heightened competitive
30
<PAGE>
and regulatory pressures, and as such, will have the greatest need to adopt NMR.
These MSAs also offer the greatest potential markets for non-utility
applications. The Company is also pursuing selected utilities outside of the top
60 MSAs.
PROMOTE DEVELOPMENT OF NON-UTILITY APPLICATIONS
Through the efficient use of spectrum, each CellNet network will have excess
capacity after serving all of a utility's NMR and distribution automation
requirements. The Company will seek to use the network's excess capacity to
support non-utility services that would benefit from the availability of a
low-cost wireless network and that would be offered by CellNet's corporate
clients, including a utility or its affiliates. The Company is working with
leading manufacturers and applications developers in order to promote the
development of products and services capable of using the CellNet networks.
Potential applications include the following:
- security services for home security, fire alarm and personal safety
devices;
- remote status monitoring for vending, postage, change and commercial
washing machines, office and factory equipment, and intelligent home
devices, such as remote control thermostats; and
- intelligent transportation systems for traffic lights, parking meters and
toll booths.
The Company believes that its low monthly network service prices will
substantially increase the likelihood of market acceptance of existing
applications and enable potential new applications. Wireless home security
systems are an example of an existing application that might achieve greater
market penetration if equipment and service costs were reduced by using a
CellNet network. CellNet is working with Interactive Technologies, Inc., a
leading provider of wireless home security systems, to develop an affordable
security system that would communicate over the CellNet network. Additionally,
remote monitoring of vending machines would substantially reduce the cost of
servicing those machines. Real Time Data ("RTD") has developed a vending machine
monitoring device which tracks product sales and inventory. RTD and the Company
have been working together to integrate RTD's devices with the Company's
networks and expect to begin commercial trials within twelve months.
FORM STRATEGIC ALLIANCES
The Company is forming strategic alliances with leading companies and
certain utilities to promote the development and joint marketing of
complementary products or services for utility applications and the development
of non-utility applications whose traffic would be carried on the CellNet
network. CellNet is currently working with the following leading companies.
AMERITECH AND WISCONSIN ELECTRIC POWER COMPANY. The Company is working with
Ameritech and its partner Wisconsin Electric Power Company on the development
and joint marketing of a high-end, two-way, in-home terminal for remote control
of home security, lighting, environmental and other home systems.
GENERAL ELECTRIC ("GE"). GE and the Company have entered into a non-binding
memorandum of understanding ("MOU") to jointly market to utilities, on a
non-exclusive basis, automated NMR solutions that incorporate both parties'
products. GE has installed CellNet radio devices on new GE meters on a trial
basis.
HEWLETT-PACKARD ("HP"). The Company and HP are working on a number of
projects for cooperative marketing of utility applications such as systems
integration, data storage, transformer load analysis, energy theft analysis,
power quality measurement, and equipment and status monitoring. The
non-exclusive relationship, pursuant to a non-binding MOU, provides for joint
marketing, technology exchange and joint proposals to utilities.
HONEYWELL. Honeywell has entered into a non-binding MOU with the Company
relating to the creation of "smart communicating thermostats" that would serve
as the key elements to a home-based energy management system. The parties also
plan to collaborate on identifying other in-home automation products that could
leverage Honeywell's extensive line of environment control products with
CellNet's wireless communications networks.
31
<PAGE>
INTERACTIVE TECHNOLOGIES INC. ("ITI"). The Company has entered into an
agreement with ITI, a leading provider of wireless, in-home security systems, to
develop moderately-priced security systems based on ITI's existing security
devices and CellNet's wireless technology.
RTD. RTD, a developer of remote vending machine monitoring systems, has
entered into an agreement with the Company to integrate its vending machine
monitoring system with the Company's wireless network technology.
PURSUE INTERNATIONAL EXPANSION
With more than 600 million utility meters located outside of the United
States and with comparable opportunities to use the CellNet system for utility
and non-utility applications, the international market offers significant
additional opportunities for the Company. Although the Company has concentrated
almost all of its efforts to date on the domestic market, the Company has begun
exploring international market opportunities. The Company has undertaken limited
market investigations in a number of countries including the U.K., Singapore and
Thailand, and continues to receive numerous inquiries from utilities and others
expressing interest in the deployment of the CellNet system outside of the
United States. The Company's strategy is to pursue these markets through joint
ventures with local utilities and other partners that would facilitate the
adoption of CellNet's system. In considering international expansion
opportunities for its system, the Company expects that its targeted markets will
be characterized by (i) a well-developed utility infrastructure, (ii) demand for
low-cost monitoring, (iii) a progressive regulatory climate favoring increased
efficiency, customer service and competitive access and (iv) well-capitalized,
established and reliable local partners.
The Company's principal international activity to date has been in the
United Kingdom, where deregulation and privatization initiatives have resulted
in open market competition in a pattern which may be duplicated elsewhere. The
Company believes that the CellNet system can be adapted for use in the United
Kingdom with appropriate modifications to the system's radio devices and other
system equipment. The Company is seeking to obtain spectrum licenses with the
assistance of local regional electric companies ("RECs") and others, and has
initiated discussions with a number of RECs for the deployment of pilot and
full-scale NMR systems.
OUTSOURCE SUBSTANTIAL MANUFACTURING AND INSTALLATION ACTIVITIES
The Company outsources a substantial portion of its manufacturing and
installation activities. In this manner, CellNet leverages the size and
capabilities of key suppliers to take advantage of manufacturing economies of
scale, reduce component pricing through bulk purchasing, and have access to
manufacturing capacity and resources to meet highly variable production
requirements. The Company will retain overall construction responsibility but
intends to rely on local subcontractors for installation, primarily those who
have long working relationships with the utility company. The Company believes
that outsourcing installation activities will reduce the start-up time and the
Company's investment risk for each project.
WIRELESS COMMUNICATIONS INDUSTRY OVERVIEW
CellNet operates within the wireless communications industry, which includes
personal communications services ("PCS"), specialized mobile radio ("SMR"),
microwave, cellular (including cellular digital packet data ("CDPD") ), paging
and multiple address radio system ("MAS") segments, among others. The two
principal categories of commercial wireless applications are voice and data
transmission. Within those broad categories, service requirements for specific
applications vary substantially in terms of quality, speed, capacity, mobility,
two-way capability, geographical coverage and cost. In general, products which
provide for greater mobility and capacity are more expensive. As a consequence,
the market for wireless services is segmented, matching specific service
requirements with the most suitable wireless technology. The following chart
illustrates the relative positioning of these applications.
32
<PAGE>
[CHART]
[Graphical representation of the relative positions of segments within the
wireless communications industry based upon two parameters: (i) relative network
capacity to handle data, voice and video applications and (ii) relative user
device mobility ranging from fixed to mobile. The chart suggests that monthly
endpoint cost increases with increasing network capacity and user/device
mobility.]
CellNet's system is designed to utilize small amounts of spectrum and to
provide low-cost, high-volume, real-time monitoring of fixed endpoints. The
Company believes other telecommunications applications or market segments are
not as well suited for use in NMR or similar applications except in limited
cases such as high-use industrial metering, where the increased equipment and
service costs might be justified, or in certain rural applications, where the
installation and operating costs of a fixed network on a per meter basis might
be higher. Competing service applications are therefore expected to be largely
within the segment of the wireless communications market in which CellNet now
operates.
CellNet's network architecture and the nature of the markets that it serves
differ significantly from traditional cellular companies, thereby resulting in
potential advantages for CellNet which include:
LOWER MARKET ADOPTION RISK. CellNet will only construct a network after
entering into a long term relationship with a utility or other client. It
therefore does not need to finance construction of networks in anticipation of
obtaining customers.
LOWER CHURN/PENETRATION RATE. Unlike the customer bases for other wireless,
voice and data service providers where customers can easily switch to a
competitive provider, CellNet's subscriber endpoints do not experience frequent
change or "churn" and the Company gains 100% penetration within its contracted
market. The marketing and administrative costs typically associated with churn,
and the capital risk associated with variable penetration rates, are thus
eliminated. Further, due to inflation escalation clauses in the Company's
services agreements with its customers, the Company believes that the value of
its revenue per endpoint in real terms will likely be maintained over time.
HIGHER CUSTOMER CREDIT QUALITY. CellNet receives its contract service
revenue directly from utilities rather than from individual subscribers. As a
result the Company experiences less credit risk and generally lower billing
expenses than other wireless service providers.
MORE EFFICIENT DEPLOYMENT. Cellular and PCS cell sites are frequently
costly and difficult to obtain. The modularity of the CellNet system and the
efficient size of its components facilitate inexpensive deployment of scalable
networks. The Company's system components have been designed to fit on utility
power poles or,
33
<PAGE>
where necessary, on buildings or other structures. As the electric utility is
its primary customer, CellNet has access to utility poles, transmission towers,
and various properties for deployment. Radio devices, which represent the bulk
of network components, are simply "plugged in" as newly retrofitted meters are
replaced. The MCCs (as defined below) and CellMasters typically take two to five
hours to install, providing a network which can be deployed swiftly and
efficiently. The system is also scalable thereby allowing coverage regardless of
the size of the utility service area.
MORE EFFICIENT SYSTEM DESIGN. Cellular telephone networks are designed for
peak usage with a large percentage of the network underutilized for much of the
day. The CellNet network gathers information from its endpoints consistently
around the clock and therefore does not encounter peak usage problems typically
experienced by cellular providers.
LOWER FREQUENCY COSTS. Cellular, PCS and other two-way wireless systems
typically require a large amount of spectrum which can be very costly to obtain.
Because the Company is able to utilize a small amount of frequency for a wide
metropolitan area (the equivalent of approximately a single cellular voice
channel), it is not subject to the substantial frequency costs associated with
wireless communications companies.
TECHNOLOGY
CellNet's system has been developed specifically to offer real-time,
low-cost, high volume wireless data communications services. Such services
require (i) inexpensive endpoint devices, (ii) the ability to support a wide
range of applications, (iii) reliable, consistent service over a wide area, (iv)
the capacity to handle simultaneous transmission and processing of a large
volume of data, (v) integrated communications and applications support software,
and (vi) efficient use of bandwidth to minimize spectrum acquisition costs.
To meet these cost and data handling requirements, CellNet has designed a
system which uses a two-tiered wireless network hierarchy managed by a central
system control center which collects, concentrates, forwards and manages data
from many fixed endpoints. The elements of this communications hierarchy
include:
- endpoint devices which transmit data relating to the equipment they are
monitoring or controlling such as utility meters;
- MicroCell Controllers ("MCCs") which manage the endpoint devices in their
local coverage area (as part of a local area network or "LAN") and which
collect and process data transmissions from such endpoint devices;
- CellMasters which gather data from MCCs located in a wide coverage area
(as part of a wide area network or "WAN") and which communicate that data
to a central System Controller; and
- a System Controller which manages the entire network and operates the
application gateways for integration with the client's own data systems.
34
<PAGE>
[CHART]
[Schematic diagram of CellNet's wireless data communications system,
illustrating the heirarchy from endpoint radio devices to System Controllers.]
ENDPOINT DEVICES. The subscriber unit of the CellNet system is a relatively
inexpensive low-power radio device which is attached to a stationary data
source, such as a utility meter, to collect and transmit information to an MCC
and typically includes a transceiver or transmitter. The Company has developed
endpoint devices for electric utility applications which may be retrofitted to
each of the four major types of meters presently being used by electric
utilities in the United States. These endpoint devices currently collect time of
use, customer demand and load profile data from an electric meter and transmit
such information to the local area MCC once every few minutes. Electric meter
endpoints are also able to transmit "distress signals" indicating meter
tampering or power outages. The Company is also developing endpoint devices for
gas and water meters, which it expects to introduce by the end of 1996 and 1997,
respectively, and two-way radio devices for more advanced meter-reading
applications. The Company is also working with industry leaders to develop
endpoint devices for non-utility applications. See "-- Business Strategy -- Form
Strategic Alliances."
MICROCELL CONTROLLERS. An MCC is a device which is mounted on a utility
pole or other fixed location in the center of a microcell and which routes data
from all of the endpoints in the microcell to the CellMaster via the WAN. The
number of endpoint devices in each microcell depends on a number of factors,
including topography and population density, but generally each microcell is
expected to cover approximately 175-225 endpoint devices within a one-half mile
diameter. In addition to functioning as a router, the MCC is an intelligent node
in the distributed control system and has a powerful microprocessor which
enables it to perform data storage, packet routing and voltage and power outage
monitoring for endpoint devices in its microcell area. Each MCC also has
extensive network management capabilities which permit new endpoint devices to
be added automatically without interfering with the handling of data from
existing endpoints. This architecture allows CellNet to significantly reduce the
cost of the endpoint device itself and increases the data throughput of the
entire network, as most of the intelligence is provided at the MCC level. The
MCC communicates with the endpoint devices in its microcell in the 902-928 mHz
band, which is an unlicensed portion of spectrum.
35
<PAGE>
CELLMASTERS. A CellMaster communicates with anywhere from 50 to 200 MCCs
over an area typically covering 75 square miles (5 mile radius). Each CellMaster
incorporates network management software which manages traffic scheduling, radio
frequency power controls and signal monitoring. CellMasters are built with fully
redundant hardware, are ruggedly constructed for extreme weather, and can
perform automatic switchovers between system components in case of failure. The
WANs covering specific utility customer service areas are composed of a number
of CellMaster units. A CellMaster communicates with the MCCs using a radio link
in the 928/952 mHz band, which is a licensed portion of spectrum.
RTUS. Remote Terminal Units ("RTUs") monitor and operate equipment at
specific points in a utility's distribution system. CellNet integrates a two-way
radio device into RTU equipment manufactured for a utility by other parties,
which enables remote operation of these RTUs. By providing a means of remote
monitoring and controlling of power distribution equipment, CellNet's system
enables utilities to monitor and control circuit breakers, monitor the load on
transformers, control circuits to isolate faults on feeder power lines, and
switch automatically among capacitor banks to provide constant voltage levels.
SYSTEM CONTROLLERS. The System Controller provides the link from the
CellMasters to the client's corporate data network and serves as the network
management platform. The System Controller consists of a cluster of UNIX-based
workstations operating over a network using standard TCP/IP protocols. Such a
configuration is extremely scaleable as it can be expanded to meet system
requirements simply by adding additional workstations. The System Controller
supports a variety of radio-based and leased line data links to each CellMaster
in the network. These links are redundant for added reliability. At the local
systems operations center, the System Controller provides customized gateways to
existing client data systems. The System Controller enables CellNet's on-site
system operator, who manages the network for CellNet's utility clients, to
manage traffic, monitor performance and configure network devices. As
non-utility applications are deployed, the Company may integrate additional
server devices which will manage such non-utility applications at the System
Controller level.
CellNet's MCC and CellMasters are equipped with back-up batteries and power
supply. CellNet's System Controllers also have available back-up power
capability.
The Company also operates the CellNet Central Operations Room ("CCOR") at
its San Carlos facilities which monitors performance of all regional System
Controllers and is able to assume operations of the regional networks if the
local System Controller experiences a failure. The Company operates a private
national data network to link these regional sites using third-party carrier
services.
SYSTEM SOFTWARE. CellNet believes that one of its key enabling technologies
is the software which facilitates operation of a large-scale NMR system. While
certain "off-the-shelf" networking approaches work well in a wireline
environment with expensive computers and workstations, the ability to operate in
a wireless environment under extreme conditions at low cost has required the
development of a sophisticated network architecture. CellNet's network solution
is based on distributed computing and messaging technologies which enable
intelligence to be decentralized and ensure efficient use of spectrum. The
CellNet Network Operating System ("NOS") is a proprietary system that provides
sophisticated network communication services between the System Controller and
the CellMaster units, RTUs, MCCs and endpoint devices. It is a scaleable system
that has been specifically designed to ultimately handle millions of endpoints
in a single regional network. Extensive real-time diagnostic and network
management features manage traffic, monitor system performance and enable
network configuration as data is collected and delivered to users. The CellNet
NOS is able to maintain fast response times and system capacity by distributing
a significant portion of the network's computing power at the MCC level.
The NOS offers the benefits of incrementally adding processing power as well
as supporting remote operations required for redundancy and backup operations.
As such, an entire regional system can be switched quickly from one System
Controller to another in the event of failure. The CellNet NOS is also able to
segregate network data from multiple non-utility applications and provide such
data to non-utility clients over additional database interfaces. Each CellNet
system is customized with application-specific gateways which enable the
interface between the System Controller and the client's existing corporate data
systems. CellNet has delivered gateways to support the data requirements for
billing automation, electric distribution
36
<PAGE>
automation, customer service call center automation and load management
programs. The flexibility provided by this NOS architecture enables the system
to offer services for many new applications unrelated to NMR services such as
distribution automation and non-utility applications. By building on a general
network capability the Company can extend its services to many other utility and
non-utility services without incurring significant costs of re-designing the
underlying communications architecture. Each new application is added with only
incremental development, mostly focused on application-specific endpoint devices
and system gateways. Furthermore, since its design is independent of the
specific endpoint radio devices, the Company believes that this architecture can
evolve to incorporate future advances in wireline and wireless communications.
The Company has made a substantial commitment to establishing a strong
competitive position having written over 4.5 million lines of software code to
implement its system, a process which required over 150 staff-years of design,
coding and testing and remains a proprietary asset.
EFFICIENT SPECTRUM UTILIZATION. CellNet's network components utilize both
licensed and unlicensed radio frequency bands. The CellNet WAN operates in the
928/952 mHz frequencies which are licensed by the FCC in 25 or 12.5 kHz channel
bandwidths for full duplex operation and point-multipoint data services. CellNet
has developed a proprietary technology, subject to issued and pending patents,
which permits a narrowband radio system to derive 10 subchannels from a single
25 kHz channel. By reusing subchannels in a manner similar to that used by
cellular phone systems, CellNet believes it can grow a system to cover a large
region and expand capacity incrementally as needed. As a result, CellNet is able
to operate its wide area networks in the spectral equivalent of approximately a
single voice channel. CellNet has obtained 50 spectrum licenses in 44 of the top
60 MSAs and believes that it will be able to obtain additional spectrum as
required.
MANUFACTURING AND OPERATIONS
The Company currently outsources the manufacture and assembly of its higher
volume, lower cost equipment such as endpoint radio devices. For instance, Jabil
Circuit Inc. ("Jabil"), one of the largest electronic equipment subcontractors
in the United States, is assembling endpoint radio devices for electric meters
for the Company. CellNet's supply strategy is to leverage the size and
capabilities of Jabil and other key suppliers to take advantage of manufacturing
economies of scale, reduce component pricing through bulk purchasing and have
access to manufacturing capacity and resources to meet highly variable product
requirements.
CellNet presently focuses its limited internal manufacturing resources on
final assembly and testing of its lower volume, more complex equipment including
System Controllers, CellMasters and MCCs. CellNet assembles these network
components, custom configures and tests such components to meet stringent
utility industry field equipment standards. Samples of all products, whether
internally or externally built, are thermally and electrically stress-tested to
measure product quality and reliability. Test results are used both to monitor
production quality and to provide information to CellNet's development
organization for further design enhancements.
CellNet has developed and is continuing to improve a high-volume, low-cost
process to retrofit electric utility meters with endpoint radio devices without
causing a meaningful disruption of service to the utility's customers. The
Company's proprietary retrofit information management system analyzes operating
data, generates reports, and provides this information to utilities for
inclusion in their databases. The Company installs its endpoint radios on both
new and previously installed electric meters at its retrofit facilities in
Kansas City, Missouri. The Company expects that similar regional retrofit
centers will be established as needed to meet the network installation
requirements under new services agreements with utilities, although a retrofit
center can support more than one network deployment.
The Company's reliance on third-party manufacturers, including currently
single manufacturers for radio devices and for printed circuit boards, involves
a number of additional risks, including the absence of guaranteed capacity and
reduced control over delivery schedules, quality assurance, production yields
and costs. The Company relies on sole and limited source vendors and
subcontractors for certain subassemblies
37
<PAGE>
and components which involves certain risks, including the possibility of
shortages and reduced control and delivery schedules, manufacturing capability,
quality and cost. See "Risk Factors -- Dependence on Third-Party Manufacturers"
and "-- Exposure to Component Shortages."
SYSTEM DEPLOYMENT AND OPERATION
For each of its network deployments, the Company provides full
implementation services to its clients, including system design, site selection,
frequency licensing, equipment installation, software modification, systems
integration and project management.
The modular design of the CellNet system and the efficient size of its
components facilitate inexpensive deployment of scalable networks. Most of the
system components have been designed to fit on utility power poles or, where
necessary, on buildings or other structures. The majority of the network is
simply "plugged in" as the newly retrofitted meters are replaced. The MCCs and
CellMasters take typically two to five hours each to install, providing a
network which can be deployed swiftly and efficiently. The system is also
scalable, thereby allowing adequate coverage regardless of the size of the
utility service area.
Field engineering teams are responsible for the installation and deployment
of all of the Company's networks. Once a services contract has been signed,
CellNet places a local project manager in charge of the installation. The
project manager hires local personnel, coordinates activities with various
departments within the utility, and draws on CellNet's corporate staff to
perform specialized services. CellNet's corporate staff is responsible for RF
network design, system software installation and integration, training of local
systems administration personnel, FCC licensing requirements, and remote systems
monitoring. CellNet's local personnel are responsible for RF engineering and
site testing, site selection, routine software administration and maintenance,
selection and training of subcontractors, coordination of meter retrofitting,
materials handling, and office administration. During the two to four-year
installation phase of each project, local personnel for the project numbers from
five to nine people, depending on the size and anticipated speed of each
deployment. Meter changeout and system equipment installations are generally
carried out by subcontractors.
Following system deployment, a system management team of typically eight to
ten CellNet personnel (for deployments the size of KCPL and UE) will remain on
site for the duration of the contract to handle day-to-day operations and
routine utility requests. This group will be supported by CellNet's headquarters
or regional offices, if any, that will provide 24 hour troubleshooting as well
as additional technical expertise that can be quickly dispatched if needed.
The Company also intends to provide substantial customer support including
on-going field support and critical centralized network support functions
through regional network control centers. Currently, the Company is providing
sophisticated network monitoring from its headquarters in San Carlos,
California.
CURRENT UTILITY SERVICES AGREEMENTS
KANSAS CITY POWER & LIGHT COMPANY. In August 1994, CellNet entered into a
Utility Services Agreement with KCPL (the "KCPL Services Agreement") for the
provision of NMR and other data communications services over a network to be
built, installed and operated by CellNet. KCPL is paying CellNet for certain
installation costs based upon the number of meters in revenue service, and
monthly service fees based on the number of meters in service being used to bill
customers. The KCPL Services Agreement covers approximately 420,000 meters
within KCPL's service territory. CellNet is obligated to provide certain NMR
services, including basic meter reading, time-of-use, demand, connect/disconnect
(move in/move out), load profile and real-time reading, as well as outage and
tampering notification and certain other distribution automation services.
CellNet retains ownership of its network system and all related equipment. KCPL
retains ownership of its meters, RTUs and all metering and other data collected
from KCPL's equipment. Upon the third anniversary following complete deployment
of the system, KCPL will have the option to purchase from CellNet the radio
transmitters and transceivers attached to KCPL's meters and RTUs at prices
intended to allow CellNet to fully recover its then unamortized endpoint (meter
and RTU radio device) costs based upon agreed prices for such equipment.
38
<PAGE>
The term of the KCPL Services Agreement is 20 years. KCPL has the right to
terminate the KCPL Services Agreement on its eighth, eleventh, fourteenth and
seventeenth anniversary, subject to six-months prior written notice and to the
making of specified termination payments intended to allow CellNet to recover
its then unamortized endpoint (meter and radio RTU device) costs based upon
agreed prices for such equipment. KCPL can also terminate the KCPL Services
Agreement for cause in the event of a material and continuing failure on
CellNet's part to meet agreed NMR performance standards on a consistent basis
over agreed time periods, subject to certain rights to cure any such failure.
CellNet is entitled to install and operate its network equipment on KCPL's
property under joint use arrangements. The cost of obtaining any necessary third
party installation sites will be shared equally by the parties. CellNet may use
the network to provide services to third parties both during and after the term
of the KCPL Services Agreement.
UNION ELECTRIC COMPANY. In August 1995, CellNet entered into a Utility
Services Agreement with UE (the "UE Services Agreement") for the provision of
data communications services over the Company's network for all electric meters
within defined limits of UE's service area. UE is paying CellNet for certain
installation costs and monthly service fees based on the number of installed
meters and RTUs. The UE Services Agreement now covers approximately 800,000
electric meters within such territory. CellNet is obligated to provide certain
NMR services, including basic meter reading, demand, load profile, connect/
disconnect, time-of-use and real-time reading, as well as outage and other
notification services. During the term of the UE Services Agreement, UE has the
option to acquire certain gas NMR services from CellNet and receive an expanded
scope of electric NMR services. CellNet retains ownership of its network system
and all related equipment. UE retains ownership of its meters, RTUs and all
metering and other data collected from UE's equipment.
CellNet is entitled to install its network equipment on UE's property
without cost provided the use of such sites is exclusively for the provision of
services to UE. The cost of obtaining any necessary third party sites will be
shared equally by the parties. CellNet may use the network to provide services
to third parties for a period of 30 years subject to the payment to UE of
reasonable rental rates. The term of the UE Services Agreement is 20 years with
an option on UE's part to extend it for two additional periods of 5 years each
under substantially similar terms. UE has the right to terminate the UE Services
Agreement on its seventh, twelfth and seventeenth anniversary subject to
six-months prior written notice and to the making of specified termination
payments intended to allow CellNet to recover its then unamortized endpoint
(meter and radio RTU devices) costs based upon agreed prices for such equipment.
UE can also terminate the UE Services Agreement for cause in the event of a
material and continuing failure on CellNet's part to meet agreed NMR performance
standards on a consistent basis over agreed time periods, subject to certain
rights to cure any such failure.
SALES AND MARKETING
The Company has organized its sales and marketing efforts based on utility
and non-utility network applications. For its utility segment, the Company's
initial target market includes utilities in the 60 largest MSAs in the U.S.
which represent a large majority of the meters in the United States. The Company
is also pursuing selected utilities outside the top 60 MSAs. Given the strategic
nature of the Company's utility products, sales cycles typically extend up to 18
months and involve the solicitation, consultation and approval of decision
makers across key divisions within each potential utility. The Company has a
sales and marketing organization of 23 persons, including six dedicated sales
representatives with a mix of utility and information technology sales
backgrounds, several of whom have extensive experience in the electric utility
industry. Regional sales professionals are supported by corporate specialists in
the areas of metering, systems integration, and deployment.
The Company has established a team of market managers for the development of
new business opportunities. This team develops the business concept that is
enabled by CellNet's services, pursues market research to validate these
concepts, and identifies potential alliances that will be required to create the
products and services themselves. This team is composed of individuals with
backgrounds in cellular and wireless marketing, product management, and consumer
products. The Company intends to seek joint venture partners to pursue
international markets.
39
<PAGE>
CellNet's sales approach addresses the utility's need to prepare for the
future competitive environment by reducing costs, meeting present and future
regulatory requirements, and enhancing customer service. CellNet intends to show
sustained commitment to the utility by entering into long-term performance-based
contracts, typically exceeding ten years. While the sales cycle for utilities is
lengthy, it results in the signing of long-term service contracts covering
thousands and potentially several million endpoints, providing both significant
recurring revenue and the opportunity to offer additional non-utility services.
The Company intends to concentrate its marketing efforts for non-utility
applications on industry-leading providers of products and services that would
benefit from the Company's low-cost wireless network. The Company is working
with leading manufacturers and applications developers to promote and develop
products and services that utilize the Company's networks. See "-- Business
Strategy -- Promote Development of Non-Utility Applications." The Company
expects that the manufacturers and developers of such products and services
would market them to end users.
PROPRIETARY RIGHTS
CellNet relies on a combination of trade secret protection, copyrights,
patents, trademarks and confidentiality and licensing agreements to establish
and protect its proprietary rights.
CellNet's WAN radio system has been developed using advanced digital signal
processing techniques and an RF system architecture that enables CellNet to
create a complete digital cellular system in a single 25 kHz voice channel. This
technology is based on narrowband modulation and compression of many subchannels
into a single channel. Extremely stable frequency control is required to
preserve system performance. The system of frequency control is the subject of
several issued and pending patents claims. In addition, the efficiency of the
frequency protocol utilized by the CellMaster is determined in part by its
ability to recover short burst transmissions from an RTU or MCC. The
CellMaster's burst data recovery process is also the subject of several issued
and pending patents claims.
The spread spectrum radio technology utilized in the CellNet LAN has been
licensed to CellNet by Axonn Corporation and an affiliate of Axonn (together,
"Axonn"). The Axonn spread spectrum technology is a patented, low-cost radio
system which offers the price / performance relationships that the Company
believes are required for a commercially-feasible telemetry network. Under its
licenses from Axonn, CellNet has acquired an exclusive right to use Axonn spread
spectrum technology in the utility distribution and service market and an
exclusive right to provide services for other applications outside the utility
market through the CellNet system architecture. CellNet's right to provide fire
and security applications based upon Axonn's technology is nonexclusive.
CellNet has developed a proprietary, patent-pending approach to transmitting
metering information which allows the LAN to accumulate time of use, demand and
load profile data. CellNet's protocols and data transmission methods are
incorporated in its proprietary firmware. During the development and test
deployments of the CellNet WAN and LAN radio systems, the Company has
accumulated substantial information regarding cellular and microcellular radio
systems. This information is being used to develop modeling and planning tools
which assist CellNet in the deployment and operation of complex RF systems. The
Company has written over 4.5 million lines of software code to implement its
system, a process which required over 150 staff-years of design, coding and
testing and remains a proprietary asset.
The Company's success will depend in part on its ability to maintain
copyright and patent protection for its products, to preserve its trade secrets
and to operate without infringing the proprietary rights of third parties. See
"Risk Factors -- Uncertainty of Protection of Copyrights, Patents and
Proprietary Rights."
RESEARCH AND DEVELOPMENT
The Company has steadily increased its research and development efforts over
the past several years and expects to continue to spend a significant portion of
its resources on these activities for the foreseeable future. The Company spent
$5.3 million, $9.7 million, $22.4 million and $13.0 million for research and
development in 1993, 1994, 1995 and the six months ended June 1996,
respectively. The Company presently employs more than 85 software and hardware
engineers and other professional staff in these efforts and contracts with a
number of highly-specialized outside consultants for additional services as
required. The
40
<PAGE>
focus of the Company's research and development efforts in the past has been on
the development of the radio hardware, spread spectrum radio protocols, System
Controllers, intelligent base stations (CellMasters and MCCs), extensive
software code, database capacity and other elements required for a flexible,
high-capacity wireless data communications network capable of processing data
from several million endpoints on a real-time basis at a low cost. The Company
expects that the focus of future research and development will be to make
further enhancements to the system software, firmware, hardware and other
equipment to increase the speed, capacity and functionality of the system, to
lower the cost of system equipment over time and, working with other companies,
to expand the scope of utility and non-utility services that may be offered on
the system. The Company's future success will depend, in part, on the Company's
success in these development projects which will require continued substantial
investments. See "Risk Factors -- Technological Performance and Buildout of the
System."
As part of the Company's research and development efforts, the Company has
worked closely with current and potential customers in conducting pilot trials
and jointly developing system specifications and requirements.
COMPETITION
The emerging market for utility network automation systems, and the
potential market for other applications accessible once a common infrastructure
is in place, have led electronics, communications and utility product companies
to begin development of various systems, some of which currently compete, and
others of which may in the future compete, with the CellNet system. The Company
believes its only significant direct competitor in the marketplace at the
present time is Itron, Inc. ("Itron"), an established manufacturer and seller of
hand-held and drive-by automated meter reading equipment to utilities. Itron has
announced the development of its Genesis-TM- system, a radio network similar to
the Company's for meter reading purposes and is presently offering that system
in the marketplace. The Company believes Itron has signed at least two contracts
with utilities for the commercial installation of its Genesis-TM- system.
Metricom, Inc. a provider primarily of subscriber-based, wireless data
communications for users of portable and desktop computers, First Pacific
Networks, a provider primarily of bandwidth efficient wireline communications
technology, and Lucent Technologies are examples of companies whose technology
might be adapted for NMR and who may become direct competitors of the Company in
the future. Schlumberger is developing a fixed network system or application in
cooperation with Motorola for meter reading as well. Schlumberger, Lucent
Technologies and First Pacific Networks either have conducted or are in the
process of conducting pilot trials of utility network automation systems.
Established suppliers of equipment, services and technology to the utility
industry such as Asea Brown Boveri and General Electric could expand their
current product and service offerings in the marketplace so as to compete
directly with the Company, although they have not yet done so. Many of the
Company's present and potential future competitors have significantly greater
financial, marketing, technical and manufacturing resources, name recognition
and experience than the Company. There may be many potential alternative
solutions to the Company's NMR services. The Company's competitors may be able
to respond more quickly to new or emerging technologies and changes in customer
requirements, or devote greater resources to the development, promotion and sale
of their products and services than the Company. While CellNet believes its
technology is widely regarded as competitive at the present time, there can be
no assurance that the Company's competitors will not succeed in developing
products or technologies that are better or more cost effective. In addition,
current and potential competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties, thereby
increasing their ability to address the needs of the Company's prospective
customers. Accordingly, it is possible that new competitors or alliances among
current and new competitors may emerge and rapidly gain significant market
share. In addition, if the Company achieves significant success it could draw
additional competitors into the market. Traditional providers of wireless
services may in the future choose to enter the Company's markets. However, such
telecommunications applications are not well suited for use in NMR or similar
applications given certain technical challenges and economic costs such as high
embedded spectrum costs. Such existing and future competition could materially
adversely affect the pricing for the Company's services and the Company's
ability to sign long-term
41
<PAGE>
contracts and maintain existing agreements with utilities. There can be no
assurance that the Company will be able to compete successfully against current
and future competitors, and any failure to do so would have a material adverse
effect on the Company's business, operating results, financial condition and
cash flow.
The Company believes the principal competitive factors for NMR services
include price, quality of service, system functionality, reliability, and ease
of installation. The Company believes it competes favorably in these areas. In
particular, the Company believes that it has developed the first commercially
deployed, large-scale network-based NMR system capable of simultaneously
collecting, processing, transporting and sharing data from thousands of
endpoints on an efficient and timely basis.
REGULATION
The Company's network equipment uses radio spectrum, and as such, is subject
to regulation by the FCC. In addition, CellNet intends to provide services as a
private carrier. This status allows services to be provided pursuant to
individual contracts without being subject to many of the statutory requirements
and FCC and state regulations that govern the provision of common carrier
services. The Company's network equipment uses both licensed radio spectrum
allocated for MAS operations in the 928/952 MHz band, and unlicensed spectrum in
the 902-928 MHz band. In order to obtain a license to operate the Company's
network equipment in the 928/952 MHz band, license applicants may need to obtain
a waiver of various sections of the FCC's rules. Although the Company has
obtained such waivers for its licensed systems routinely in the past, and
expects the required waivers to be granted on a routine basis in the future,
there can be no assurance that the Company will be able to obtain such waivers
on a timely basis or to obtain them at all. In addition, as the amount of
spectrum in the 928/952 MHz band is limited, issuance of these licenses is
contingent upon the availability of spectrum in the area(s) for which the
licenses are requested. The
Company might not be able to obtain licenses to the spectrum it needs in every
area in which it has prospective customers. The FCC's rules, subject to a number
of limited exceptions, permit third parties such as CellNet to operate on
spectrum licensed to utilities to provide other services. The Company plans to
use these provisions of the FCC's rules to expand its CellNet system. The FCC
has the authority to amend its rules at any time and such changes could have a
material adverse effect on the Company's spectrum utilization strategy. The FCC
requires that licensees of MAS frequencies construct a minimum configuration of
their system and initiate service within one year after authorization, or risk
forfeiture of the license. The one-year deadline may be extended for good cause,
although there is no assurance in any given case that the FCC will grant such an
extension. The Company is responding by selectively building out transmission
capacity in some areas where it does not yet have utility telecommunications
service contracts and may permit licenses to lapse in certain areas.
No license is needed to operate the Company's equipment utilizing the
902-928 MHz band, although the equipment must be certified by the Company and
the FCC as being compliant with certain FCC restrictions on radio frequency
emissions designed to protect licensed services from objectionable interference.
While the Company believes it has obtained all required certifications for its
products, the FCC could modify the limits imposed on such products or otherwise
impose new authorization requirements, and in either case, such changes could
have a material adverse impact on the Company's business. The FCC recently
completed a new rulemaking proceeding designed to better accommodate the
cohabitation in the 902-928 MHz band of existing licensed services with newly
authorized and expanded uses of licensed systems, and existing and newly
designed unlicensed devices like those used by the Company. In this proceeding,
the FCC expressly recognized the rights of such unlicensed services to operate
under certain delineated operating parameters even if the potential for
interference to the licensed operations exists. The Company's systems will
operate within those specified parameters. The FCC retains the right to modify
those rules or to allow for other uses of this spectrum that might create
interference to the Company's systems, in either case with a material adverse
impact on the Company's business or operations in these frequency bands.
While the Company intends to offer non-utility services as a private carrier
and in accordance with FCC Rules, each such service offering would need to be
reviewed relative to these rules. The FCC's rules currently prohibit the use of
the MAS frequencies on which the Company is operating its systems for the
42
<PAGE>
provision of common carrier service offerings. In the event that it is
determined that a particular service offering does not comply with the rules,
the Company may be required to restructure such offering or to access other
frequencies for the purpose of providing such service. There can be no
assurances that the Company will gain access to such other frequencies. Future
interpretation of regulations by the FCC or changes in the regulation of the
Company's industry by the FCC or other regulatory bodies or legislation by
Congress could have a material adverse effect on the Company's operations.
EMPLOYEES
As of June 30, 1996, CellNet had 446 employees, including 88 in product
development, 229 in materials and manufacturing, 33 in sales and marketing, 65
in field service and support, and 31 in administration. None of the Company's
employees is currently represented by a labor union. The Company believes that
its relationship with its employees is good.
PROPERTIES
The Company's administrative, sales and marketing, product development and
production facilities are located in San Carlos, California, where the Company
leases approximately 66,000 square feet under an agreement which expires on
December 31, 2000. The Company will require additional space to meet its
currently anticipated requirements for expansion and is presently negotiating
for additional space near its present office complex. A subsidiary of the
Company leases approximately 30,000 square feet of factory and warehouse space
in Kansas City, Missouri where meter retrofit operations are carried out. The
Company anticipates that it will be able to acquire additional space as required
for its operations on acceptable terms. The Company's principal executive
offices are located at 125 Shoreway Road, San Carlos, California 94070. Its
telephone number is (415) 508-6000.
LITIGATION
Although the Company has been granted federal registration of its "CellNet"
trademark, another company has filed a petition for cancellation in an attempt
to challenge such registration and if such challenge were successful, the
Company could lose its registration and could be required to adopt a new
trademark and possibly a new or modified corporate name. CellNet could encounter
similar challenges in the future. See "Risk Factors -- Uncertainty of Protection
of Copyrights, Patents and Proprietary Rights."
The Company has no other pending litigation.
43
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of the Company as of June 30, 1996.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --------- -----------------------------------------------------------------------
<S> <C> <C>
John M. Seidl............... 57 President, Chief Executive Officer and Director
Cree A. Edwards............. 39 Vice President, Business Development
Robert A. Hayes............. 44 Vice President, Development
James J. Jennings........... 49 Vice President, Sales and Marketing
Larsh M. Johnson............ 38 Vice President and Chief Technology Officer
Paul G. Manca............... 37 Vice President and Chief Financial Officer
Philip H. Mallory........... 56 Vice President and General Manager, Services and Operations
David L. Perry.............. 55 Vice President, General Counsel, Secretary and Chief Administrative
Officer
Paul M. Cook................ 72 Chairman of the Board
Neal M. Douglas(2).......... 37 Director
William C. Edwards(2)....... 67 Director
William Hart(2)............. 56 Director
Brian Kwait................. 35 Director
Nancy E. Pfund(1)........... 40 Director
Paul J. Salem(1)............ 32 Director
Henry B. Sargent(1)......... 62 Director
</TABLE>
- ---------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
JOHN M. SEIDL became President, Chief Executive Officer and a director of
the Company in September 1994. From January 1989 through December 1992, Mr.
Seidl served as a director of MAXXAM, Inc., an aluminum, forest products and
real estate concern, and Chairman and Chief Executive Officer of Kaiser Aluminum
Corporation. From September 1990 through December 1992 Mr. Seidl also served as
President of MAXXAM, Inc. Previously, Mr. Seidl was Executive Vice President,
from July 1985 to May 1986, and President and Chief Operating Officer, from May
1986 to January 1989, of Enron Corp., an energy company. Mr. Seidl is also a
director of St. Mary Land and Exploration Company and several privately-held
companies. He received a B.S. degree in Engineering from the United States
Military Academy, and M.P.A. and Ph.D. degrees in Political Economy from Harvard
University.
CREE A. EDWARDS is a co-founder of the Company and has served as Vice
President, Business Development since January 1994. Mr. Edwards was President of
the Company from October 1984 to February 1990 and Executive Vice President of
the Company from February 1990 to January 1994. Prior to founding CellNet in
1984, Mr. Edwards was an Area Sales Manager for Octel Communications
Corporation, a voice processing manufacturer, from September 1984 to September
1985, and a Major Accounts Manager for the General Electric Information Services
Company from March 1983 to September 1984. He received a B.A. degree in
Economics from the University of California at Davis.
ROBERT A. HAYES joined the Company in January 1993 as Vice President,
Special Assistant to the President. He became Vice President, Software
Development in March 1994 and was named Vice President, Development in January
1995. From February 1991 to December 1992, Mr. Hayes held a number of
44
<PAGE>
positions with Everex Systems, Inc. ("Everex"), a computer hardware
manufacturer, including Vice President of Manufacturing, Vice President of
Quality and Service, Manager of the Network Division and Group Manager of
Service. Everex filed for Chapter 11 bankruptcy protection in January 1993. Mr.
Hayes received B.S. and M.C.E. degrees in Civil Engineering from Rice
University.
JAMES J. JENNINGS joined the Company in August 1994 and has served as Vice
President, Sales and Marketing since that time. From April 1988 until July 1994,
Mr. Jennings was a Vice President of Octel Communications Corporation, a voice
processing manufacturer, where he served in a variety of domestic and
international sales, marketing and business development capacities. Mr. Jennings
served as an officer in the United States Army from 1968 to 1975. Mr. Jennings
holds a B.S. degree in Engineering from the United States Military Academy and
an M.B.A. degree from the University of San Francisco.
LARSH M. JOHNSON is a co-founder of the Company and has served as Vice
President, Product Development from October 1984 to December 1994 and, since
January 1995, as Vice President and Chief Technology Officer. While at CellNet
and prior to co-founding the Company in 1984, he was a self-employed product
design consultant from May 1983 to June 1985 and Director of Product Development
at Interactive Communications Corporation, a video systems company, from
February 1984 to June 1985. Mr. Johnson was an Engineering Manager at Digital
Optics Corporation, a company specializing in electro-optical systems, from
March 1981 to April 1983 and an electrical engineer at Systems Control
Corporation, a computer hardware company, from June 1980 to April 1981. He
received B.S. and M.S. degrees in Mechanical Engineering from Stanford
University.
PAUL G. MANCA joined the Company in May 1995 as Vice President and Chief
Financial Officer. From March 1993 to May 1995, he was the Managing Director and
Group Head of the Communications Group at BZW/Barclays Bank. Mr. Manca joined
BZW/Barclays Bank as Vice President, Merchant Banking Division in February 1987.
From June 1980 to February 1987, Mr. Manca was employed in the corporate finance
group of the Canadian Imperial Bank of Commerce. He received a B.A. degree in
Economics from the University of California, Berkeley and an M.B.A. degree in
Finance from Golden Gate University.
PHILIP H. MALLORY joined the Company in January 1995 as Vice President and
General Manager, Services. In June 1996, he assumed the additional duties of
Vice President, Operations. From June 1992 to January 1995, Mr. Mallory held
various positions at CAE-Link Corporation, a defense contractor, including
Director of Strategic Planning, Director - Product Management and Director -
Department of Defense Marketing. Mr. Mallory served as a career officer in the
United States Army from June 1961 to August 1991, attaining the rank of Major
General prior to his retirement. During his army career he held a number of
posts, including Commanding General of the 2nd Armored Division, NATO Advisor to
the Secretary of Defense, and the Commanding General of the 7th Army Training
Command. Mr. Mallory received a B.S. degree in Engineering from the United
States Military Academy and an M.S. degree in Engineering - Applied Science from
the University of California, Davis. Mr. Mallory also attended the Industrial
College of the Armed Forces in Washington, D.C., where he attained the
equivalent of a master's degree in Resource Management.
DAVID L. PERRY joined the Company in November 1994 as Vice President,
General Counsel and Secretary, and was appointed Chief Administrative Officer in
February 1996. From January 1992 through November 1994, Mr. Perry was engaged as
an attorney in private practice. From January 1984 through December 1991, Mr.
Perry was Vice President and General Counsel of Kaiser Aluminum Corporation.
From August 1969 through December 1983, Mr. Perry served in a variety of
capacities in Kaiser Aluminum's Law Department. Mr. Perry received a B.A. degree
from Amherst College and a J.D. degree from the Boalt Hall School of Law,
University of California, Berkeley.
PAUL M. COOK has been a director of the Company since August 1990. Mr. Cook
became Chief Executive Officer of the Company in August 1990, and assumed the
additional title of President in 1992. He relinquished the positions of
President and Chief Executive Officer in September 1994. Since June 1995, Mr.
Cook has been the Chief Executive Officer and Chairman of the Board of DIVA
Systems Corp., a company developing video-on-demand products. Until his
retirement in April 1990, Mr. Cook was Chief Executive Officer of Raychem
Corporation, a plastics and insulation manufacturer, which he founded in
45
<PAGE>
1957. Mr. Cook is Chairman of the Board of SRI International, a director of
Raychem Corporation and a director of Chemfab Corporation. He received a B.S.
degree from the Massachusetts Institute of Technology.
NEAL M. DOUGLAS has been a director of the Company since October 1993. Since
January 1993 he has been a general partner of AT&T Ventures Company, L.P. ("AT&T
Ventures"). From May 1989 to January 1993, he was a partner of New Enterprise
Associates, another venture capital firm. Mr. Douglas also serves as a director
of two privately held companies.
WILLIAM C. EDWARDS has been a director of the Company from October 1985 to
April 1986 and has been a director continuously since March 1991. Since October
1968 he has been a general partner of Bryan & Edwards, an investment
partnership. Mr. Edwards also serve as a director of Western Atlas, Inc. and two
privately held companies.
WILLIAM HART has been a director of the Company since October 1992. He has
been a general partner of Technology Partners, a venture capital firm, since its
founding in 1979. Mr. Hart also serves as a director of Trimble Navigation,
Ltd., Silicon Gaming, Inc. and several privately held corporations.
BRIAN KWAIT has been a director of the Company since October 1995. Mr. Kwait
has been a principal at Odyssey Partners, L.P. ("Odyssey"), a private investment
firm, since August 1989. He currently serves as a director of The Scotsman
Group, Inc. and one privately held company.
NANCY E. PFUND has been a director of the Company since January 1991. Since
December 1989, she has been an employee of Hambrecht & Quist Group ("H&Q"), an
investment banking firm. Ms. Pfund is a general partner of H&Q Environmental
Principals. She serves as a director of Gensym Corp.
PAUL J. SALEM has been a director of the Company since January 1996. Mr.
Salem has been a vice president of Providence Ventures Inc., an investment
management firm, since June 1992. From August 1991 to June 1992, Mr. Salem was
an associate at Morgan Stanley & Co. Incorporated, an investment banking firm.
Mr. Salem serves as a director of several privately held companies.
HENRY B. SARGENT has been a director of the Company since January 1996. Mr.
Sargent has been President, Chief Executive Officer and a director of El Dorado
Investment Company ("El Dorado"), a venture capital firm, for more than the past
five years. From May 1987 to June 1995, he was also Executive Vice President,
Chief Financial Officer and a director of Pinnacle West Capital Corp., an
electric utility holding company. Mr. Sargent currently serves as a director of
Pinnacle West Capital Corp., Arizona Public Service Co., Megafood Stores, Inc.
and several privately held companies.
William C. Edwards is the father of Cree A. Edwards. There are no other
family relationships among the directors or executive officers of the Company.
BOARD OF DIRECTORS
The Company's Bylaws authorize a Board of Directors that can range in size
from six to 11 directors, with the number of directors presently set at ten. The
Company currently has nine directors and one vacancy. All directors hold office
until the next annual meeting of stockholders or until their successors have
been elected. Officers of the Company serve at the discretion of the Board of
Directors. Under the terms of the Shareholders' Agreement among the Company and
the holders of % of the issued and outstanding shares of capital stock of the
Company (after giving effect to the issuance of the Shares offered hereby), the
Company agreed to set the authorized number of directors on the Board of
Directors at ten, and the stockholders party thereto have agreed to elect the
following persons to the Board of Directors: (i) one candidate selected by H&Q,
currently Nancy E. Pfund; (ii) one candidate selected by El Dorado, currently
Henry B. Sargent; (iii) Paul M. Cook; (iv) one candidate selected by Banner
Partners, currently William C. Edwards; (v) one candidate selected by AT&T
Ventures, currently Neal M. Douglas; (vi) one candidate selected by Odyssey,
currently Brian Kwait; (vii) one candidate selected by Providence Media Partners
L.P., currently Paul J. Salem; (viii) one candidate selected by Kleiner,
Perkins, Caufield & Byers, which position is currently vacant; and (ix) the
Chief Executive Officer of the Company, currently John M. Seidl. The foregoing
voting obligations terminate upon the closing of this Offering. Following this
Offering, the Company will continue to be obligated to nominate for election as
directors the persons designated by the parties to the Shareholders' Agreement
for as long as such parties continue to hold not less than 350,000
46
<PAGE>
shares of Common Stock (as such number may be adjusted from time to time for
stock splits, consolidations or other similar events). The parties to the
Shareholders' Agreement have also agreed to take such action as is necessary to
retain the right of cumulative voting in the election of directors and to
maintain a Board of Directors of not less than eight directors until August 15,
1997. See "Risk Factors -- Shareholders' Agreement" and "Description of Capital
Stock -- Common Stock."
DIRECTORS' COMPENSATION
The Company does not pay any compensation to directors for serving in that
capacity, nor does it reimburse directors for expenses incurred in attending
board meetings. Under the terms of the Shareholders' Agreement, the Company has
agreed to reimburse the directors elected pursuant to the Shareholders'
Agreement for such expenses following the closing of this Offering for so long
as such persons continue to serve as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of three
non-employee directors, Mr. Edwards, Chairman, and Messrs. Douglas and Hart. The
Compensation Committee makes recommendations to the Board of Directors
concerning salaries and incentive compensation for employees of and consultants
to the Company. Mr. Edwards is the father of Cree A. Edwards, an executive
officer of the Company. No interlocking relationship exists between the
Company's Board of Directors or Compensation Committee and the board of
directors or compensation committee of any other party, nor has any such
relationship existed in the past. Entities affiliated with Messrs. Edwards,
Douglas and Hart have entered into financing arrangements with the Company from
time to time. See "Certain Transactions."
AUDIT COMMITTEE
The Audit Committee of the Board of Directors consists of three non-employee
directors, Ms. Pfund, Chair, and Messrs. Salem and Sargent. The Audit Committee
reviews the nature, scope and results of the independent audit of the Company,
the Company's accounting principles and internal accounting controls and other
matters relating to the relationship of the independent auditors with the
Company.
EXECUTIVE COMPENSATION
The following table sets forth certain information for the year ended
December 31, 1995 regarding the compensation of the Company's Chief Executive
Officer and each of the other four most highly compensated executive officers
whose annual compensation (salary and bonus) for services rendered in all
capacities to the Company during the year ended December 31, 1995 exceeded
$100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION COMPENSATION(1)
- -------------------------------------------------------- ---------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
John M. Seidl .......................................... $ 300,000 $ 135,000 -- $ 1,237
President and Chief Executive Officer
James J. Jennings ...................................... 175,060 -- -- 902
Vice President, Sales and Marketing
Robert A. Hayes ........................................ 165,000 10,000 -- 872
Vice President, Development
Larsh M. Johnson ....................................... 165,000 -- -- 872
Vice President and Chief Technology Officer
Philip H. Mallory ...................................... 138,654 -- $ 50,000(2) 762
Vice President and General Manager, Services and
Operations
</TABLE>
- ---------
(1) Represents premium payments made by the Company for life insurance,
accidental death and dismemberment, and long-term disability policies.
(2) Represents a relocation allowance.
47
<PAGE>
OPTION GRANTS IN LAST YEAR. The Company made no stock option grants or
restricted stock awards during the year ended December 31, 1995 to the Named
Executive Officers. However, during 1995 the Company did permit the Named
Executive Officers to exercise unvested, previously-granted stock options to
purchase shares of restricted stock with vesting terms comparable to the vesting
terms of the options exercised.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES The
following table sets forth, for each of the Named Executive Officers, the shares
acquired and the value realized on each exercise of stock options during the
year ended December 31, 1995 and the year-end number and value of exercisable
and unexercisable options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY OPTIONS
SHARES OPTIONS AT 12/31/95(#)(2) AT 12/31/95($)(1)(2)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#)(2) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John M. Seidl.................. 400,000 $ 1,000,000 0 0 $ 0 $ 0
James J. Jennings.............. 90,000 225,000 0 0 0 0
Robert A. Hayes................ 0 0 54,500 60,500 143,150 147,350
Philip H. Mallory.............. 85,000 170,000 0 0 0 0
Larsh M. Johnson............... 110,329 248,158 53,095 86,976 148,576 190,427
</TABLE>
- ---------
(1) Calculated by determining the difference between the fair value of the
securities underlying the option on December 31, 1995 (which, for purposes
of this table, is assumed to equal the fair value of the Company's Common
Stock as last determined during fiscal 1995 on October 11, 1995 by the
Company's Board of Directors, or $3.00 per share), and the exercise price
(ranging from $0.10 to $1.00 per share).
(2) From December 1994 through August 1995 the Company issued and sold pursuant
to the early exercise of previously-granted options, an aggregate of 885,329
shares of restricted Common Stock to Messrs. Seidl, Jennings, Mallory and
Johnson at prices ranging from $0.10 to $1.00 per share, with the purchase
prices of such shares equal to the original exercise prices of such options.
Such shares of restricted stock were purchased with cash or by delivery of
promissory notes by such Named Executive Officers to the Company. See
"Certain Transactions." The loans represented by such promissory notes are
full recourse, bear interest at rates ranging from 6.04% to 7.92% per annum
and mature on the fifth anniversary of such note. Each such promissory note
is secured by the shares of Common Stock purchased with the proceeds of the
loans. These shares are subject to repurchase by the Company at the original
price paid per share upon the purchaser's cessation of service prior to the
vesting of such shares. This repurchase right lapsed and the purchaser
vested as to a certain percentage of the shares on the date of purchase and
the repurchase right will lapse and the purchaser will vest in the balance
of the shares in a series of equal quarterly or annual installments in
accordance with the vesting schedule of the exercised options. Information
with respect to the shares of restricted stock purchased by such Named
Executive Officers is set forth below:
<TABLE>
<CAPTION>
NUMBER OF
RESTRICTED NUMBER OF VALUE OF
SHARES UNVESTED SHARES UNVESTED SHARES
NAME PURCHASED(#) AT 12/31/95(#) AT 12/31/95($)
- ----------------------------------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
John M. Seidl............................ 600,000 375,000 $ 1,125,000
James J. Jennings........................ 90,000 58,500 175,500
Philip H. Mallory........................ 85,000 63,750 191,250
Larsh M. Johnson......................... 110,329 58,579 175,737
</TABLE>
INCENTIVE STOCK PLANS
1992 STOCK OPTION PLAN. The Company's 1992 Stock Option Plan (the "1992
Plan") was adopted by the Board of Directors and approved by the Company's
stockholders in September 1992. A total of 3,000,000 shares of Common Stock are
reserved for issuance under the 1992 Plan. As of June 30, 1996, 1,687,874 shares
of Common Stock had been issued upon exercise of stock options, and options to
purchase an aggregate of 1,208,321 shares were outstanding at a weighted average
exercise price of $.4323 per share, of
48
<PAGE>
which 678,863 shares were vested. In connection with the adoption of the 1994
Plan described below, the 1992 Plan was terminated and no additional options may
be granted thereunder. Options previously granted under the 1992 Plan will
continue to be governed by the provisions of such plan.
1994 STOCK PLAN. The Company's 1994 Stock Plan (the "1994 Plan") was
adopted by the Board of Directors in December 1994 and approved by the
stockholders in June 1995. Options granted under the 1994 Plan may be incentive
stock options, nonstatutory stock options or stock purchase rights. Employees
(including employee directors) and consultants (including nonemployee directors)
are eligible for nonstatutory stock options and stock purchase rights, and only
employees are eligible for incentive stock options under the 1994 Plan. The 1994
Plan is administered by the Board of Directors or a committee thereof. The plan
administrator has the authority to determine the fair market value of the
shares, select the employees and consultants to whom options and stock purchase
rights may be granted, determine the number of shares covered by each option and
stock purchase right granted, and determine the term, exercise price and vesting
schedule of options granted under the 1994 Plan.
A total of 1,500,000 shares of Common Stock are reserved for issuance under
the 1994 Plan. As of June 30, 1996, 268,916 shares of Common Stock had been
issued upon exercise of stock options, options to purchase an aggregate of
681,247 shares were outstanding at a weighted average exercise price of $2.6978
per share, of which 79,106 shares were vested, and 549,837 shares remained
available for future issuance under the 1994 Plan.
In the event of a merger of the Company with or into another corporation or
a sale of substantially all of the Company's assets, the 1992 Plan and the 1994
Plan each provides that options issued under such plans will be assumed, or an
equivalent option substituted, by the successor corporation. If the successor
corporation does not agree to such assumption or substitution, the option will
vest in full and become exercisable.
1996 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1996 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
July 1996 and will be submitted to the stockholders for approval in September
1996. A total of 600,000 shares of Common Stock are reserved for issuance under
the Purchase Plan. Under the Purchase Plan, the Company will withhold a
specified percentage of each salary payment to participating employees over
certain offering periods. Any employee who is then employed for at least 20
hours per week by the Company (or any majority-owned subsidiary designated by
the Board of Directors from time to time), and who does not own 5% or more of
the total combined voting power or value of all classes of the capital stock of
the Company or of any such subsidiary, is eligible to participate in the
Purchase Plan. Unless the Board of Directors shall determine otherwise, each
offering period will run for six months, from November 1 to April 30 and from
May 1 to October 31, except that the first offering period will commence on the
date of this Prospectus and end on April 30, 1997. The price at which Common
Stock may be purchased under the Purchase Plan is equal to 85% of the fair
market value of the Common Stock on the first or last day of the applicable
offering period, whichever is lower.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company entered into an employment agreement with Mr. Jennings in July
1994. The agreement provides for an annual base salary of $175,060 and certain
performance-based bonuses to be determined by the Company's President. As part
of the agreement, the Company granted to Mr. Jennings an option to purchase
90,000 shares of the Company's Common Stock at $0.50 per share, with 10% vesting
six months from the date of hire and the remainder vesting at a rate of 5% per
quarter. If Mr. Jennings is terminated by the Company without cause at any time,
he will receive his annual base salary and benefits for an additional twelve
months, and 40% of any unvested shares of restricted stock held by Mr. Jennings
will become vested as of the date of termination.
Each of the Named Executive Officers are parties to an Employee Severance
Agreement with the Company which provides for accelerated vesting of their
respective stock options and for the lapse of the Company's rights to repurchase
unvested stock under all restricted stock purchase agreements upon the
occurrence of certain events following a change of control of the Company. These
events will occur if: (i) the Named Executive Officer's stock option agreement
or restricted stock purchase agreement is terminated without such officer's
consent, or if the terms of such agreements are not assumed by any successor to
the
49
<PAGE>
Company; (ii) the Named Executive Officer does not receive identical securities
or consideration, upon such officer's exercise of options or restricted stock
purchases, as other shareholders are receiving as part of such change of
control; (iii) six months have elapsed following the change of control, so long
as the Named Executive Officer remains employed by the Company; or (iv) the
Named Executive Officer is terminated or constructively terminated following the
change of control.
LIMITATIONS ON DIRECTORS' LIABILITIES AND INDEMNIFICATION
The Company has adopted provisions in its Restated Certificate of
Incorporation that eliminate the personal liability of its directors for
monetary damages arising from breach of their fiduciary duties in certain
circumstances and authorize the Company to indemnify its directors and officers,
in each case to the fullest extent permitted by Delaware law. Such limitations
of liability do not apply to liabilities arising under the Federal securities
laws and do not affect the availability of equitable remedies such as injunctive
relief or rescission.
The Company's Bylaws provide that the Company will indemnify its directors
and officers to the fullest extent permitted by Delaware law, including under
circumstances in which indemnification is otherwise discretionary under Delaware
law. The Company has entered into indemnification agreements providing for the
foregoing with its directors and executive officers. These indemnification
agreements may require the Company, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as officers or directors and to advance their expenses
(including expenses of counsel) incurred as a result of any proceeding against
them as to which they could be indemnified.
At present, there is no pending litigation or proceeding involving a
director or officer of the Company where indemnification is required or
permitted, nor is the Company aware of any threatened litigation or proceeding
that may result in a claim for such indemnification.
50
<PAGE>
CERTAIN TRANSACTIONS
Since January 1, 1993, the Company has sold shares of Preferred Stock
convertible into an aggregate of 7,352,443 shares of Common Stock in a series of
private financings. In October 1993 and December 1993, shares of Series BB
Preferred Stock convertible into 3,489,845 shares of Common Stock were sold at
an as-converted price of $4.75 per share. In connection with such sales, the
Company also issued warrants to acquire 766,888 shares of Series BB Preferred
Stock at an exercise price of $4.75 per share. In August 1994, shares of Series
CC Preferred Stock convertible into 3,215,768 shares of Common Stock were sold
at an as-converted price of $9.64 per share. In December 1994 and February 1995,
shares of Series DD Preferred Stock convertible into 646,830 shares of Common
Stock were sold at an as-converted price of $9.64 per share. The purchasers of
the Series BB Preferred Stock, Series CC Preferred Stock and Series DD Preferred
Stock included the following 5% or more stockholders, directors and entities
affiliated with directors.
<TABLE>
<CAPTION>
SHARES OF
SERIES BB
SHARES OF PREFERRED STOCK (1) PREFERRED
----------------------------------- STOCK UNDERLYING
NAME SERIES BB SERIES CC SERIES DD WARRANTS (2)
- -------------------------------------------------------- ---------- ---------- ----------- ------------------
<S> <C> <C> <C> <C>
DIRECTORS AND ENTITIES AFFILIATED WITH DIRECTORS
Paul and Marcia Cook Living Trust
(Paul M. Cook)......................................... 63,340 10,373 -- 19,002
AT&T Ventures (Neal M. Douglas)......................... 631,580 48,842 -- 126,316
Entities affiliated with William C. Edwards............. 191,840 31,122 1,321 56,002
Technology Partners West Fund IV, L.P.
(William Hart)......................................... 44,730 10,373 417 13,419
Odyssey Partners, L.P. (Brian Kwait).................... 1,450,660 112,184 -- 290,132
Entities affiliated with Hambrecht & Quist
(Nancy E. Pfund)....................................... 213,585 35,794 1,520 48,343
Pfund Polakoff Family Trust (Nancy E. Pfund)............ 2,025 -- -- 426
Providence Media Partners L.P. (Paul J. Salem).......... -- 1,037,344 44,044 --
Entities affiliated with Henry B. Sargent............... 161,245 -- -- 41,623
OTHER 5% OR MORE STOCKHOLDERS
Entities affiliated with Acorn Ventures, Inc............ 289,570 231,463 9,827 68,468
</TABLE>
- ---------
(1) Each share of Preferred Stock will automatically convert into one share of
Common Stock upon the closing of this Offering.
(2) Each warrant to purchase Series BB Preferred Stock is exercisable at a price
of $4.75 per share and will expire immediately prior to the closing of this
Offering. This Prospectus assumes that all of such warrants will be
exercised and that the shares of Series BB Preferred Stock issuable upon
such exercise will automatically convert into shares of Common Stock upon
the closing of this Offering.
Between April 28, 1993 and September 13, 1993, Acorn Ventures, Inc.
("Acorn") (a principal stockholder of the Company), Cree A. Edwards (an
executive officer of the Company), entities affiliated with William C. Edwards
("Edwards Entities") (a director of the Company; the Edwards Entities are
principal stockholders of the Company), the Paul and Marcia Cook Living Trust
("Cook Trust") (a principal stockholder of the Company and an affiliate of Paul
M. Cook, Chairman of the Board of Directors of the Company), entities affiliated
with H&Q (affiliates of Nancy E. Pfund, a director of the Company), and entities
affiliated with Henry B. Sargent ("Sargent Entities") (a director of the
Company; the Sargent Entities are principal stockholders of the Company) loaned
the Company $500,000, $133,230, $711,100, $297,355, $265,300 and $579,490,
respectively, pursuant to promissory notes due on demand after October 1, 1993
and bearing interest at the rate of 4% per annum. In connection with the sale of
the Series BB Preferred Stock, the outstanding balance of principal and accrued
interest under such promissory notes was converted into shares of Series BB
Preferred Stock at a conversion price of $4.75 per share and warrants to
purchase 0.3 shares of Series BB Preferred Stock for each share of Series BB
Preferred Stock issued upon conversion of the promissory notes and accrued
interest, such that the Company issued and sold to Acorn, Cree A.
51
<PAGE>
Edwards, the Edwards Entities, the Cook Trust, H&Q and the Sargent Entities
105,540, 28,380, 151,480, 63,340, 56,470 and 123,600 shares, respectively, of
Series BB Preferred Stock and warrants to purchase 31,662, 8,514, 45,444,
19,002, 16,941 and 37,080 shares, respectively, of Series BB Preferred Stock.
On September 29, 1993, the Company issued and sold 200,000 shares of Common
Stock to Acorn, a stockholder of the Company, at a price per share of $0.10.
These shares were granted as part of a transaction in which Acorn was required
to perform consulting services for the Company. These shares were subject to
repurchase by the Company until such rights lapsed in September 1995.
On June 14, 1995, the Company issued and sold 100,000 shares of Common Stock
to Acorn at a price per share of $1.00. Acorn paid cash for the shares. These
shares are subject to repurchase by the Company which right lapses over a
five-year period commencing in December 1994. On August 25, 1995, the terms of
the Company's agreement with Acorn were amended to provide for accelerated
release of such shares from the Company's repurchase option upon termination
other than for cause.
On December 27, 1994 and January 27, 1995, the Company issued and sold
200,000 shares and 400,000 shares, respectively, of Common Stock to Mr. Seidl,
its President and Chief Executive Officer, at a price of $0.50 per share based
on the early exercise of previously-granted options with an equivalent exercise
price. In connection with the sale of such shares, the Company loaned Mr. Seidl
$300,000. The loans are full recourse, bear interest at the rate of 7.74% per
annum in the case of $100,000 of principal and at the rate of 7.92% per annum in
the case of $200,000 of principal, are due on the earlier of termination of Mr.
Seidl's employment or December 26, 1999 and January 25, 1999, respectively, and
are secured by the shares of Common Stock purchased with the proceeds of such
loans.
On July 21, 1995, the Company issued and sold 85,000 shares of Common Stock
to Mr. Mallory, an executive officer of the Company, at a price of $1.00 per
share, based on the early exercise of a previously-granted option with an
equivalent exercise price. In connection with the sale of such shares, the
Company loaned Mr. Mallory $85,000. The loan is full recourse, bears interest at
the rate of 6.28% per annum, is due on the earlier of termination of Mr.
Mallory's employment or July 21, 2000 and is secured by the shares of Common
Stock purchased with the proceeds of such loan.
On July 31, 1995, the Company issued and sold 90,000 shares of Common Stock
to Mr. Manca, an executive officer of the Company at a price of $1.00 per share
based on the early exercise of a previously-granted option with an equivalent
exercise price. In connection with the sale of such shares, the Company loaned
Mr. Manca $90,000. The loan is full recourse, bears interest at the rate of
6.28% per annum, is due on the earlier of termination of Mr. Manca's employment
or July 31, 2000 and is secured by the shares of Common Stock purchased with the
proceeds of such loan.
On August 1, 1995, the Company issued and sold 22,555 shares of Common Stock
to Ronald W. Goodall, a former executive officer of the Company who resigned in
1996, at a price of $0.10 per share, based on the early exercise of a
previously-granted option with an equivalent exercise price. On August 1, 1995,
the Company also issued and sold 72,000, 55,000 and 20,000 shares of Common
Stock to Messrs. Jennings, Johnson and Goodall, respectively, each an executive
officer of the Company, at a price of $.50 per share based on the early exercise
of previously-granted options with equivalent exercise prices. On August 1,
1995, the Company also issued and sold 77,704, 25,000 and 55,329 shares of
Common Stock to Messrs. Edwards, Goodall and Johnson, respectively, each an
executive officer of the Company, at a price of $1.00 per share, based on the
early exercise of previously-granted options with an equivalent exercise price.
In connection with the sale of shares, the Company loaned Messrs. Goodall,
Jennings, Johnson and Edwards $37,255, $36,000, $82,829 and $77,704,
respectively. The loans are full recourse, bear interest at the rate of 6.04%
per annum, are due on the earlier of termination or August 1, 2000 and are
secured by the shares of Common Stock purchased with the proceeds of such loans.
The amounts of outstanding indebtedness, including interest, on the loans to
executive officers described above as of June 30, 1996, which were the largest
aggregate amount of indebtedness owed by each of the officers at any time, were
as follows: Mr. Seidl, $334,315.40, Mr. Mallory, $90,060.13, Mr. Manca,
$95,202.94, Mr. Jennings, $37,995.68, Mr. Johnson, $87,420.68, Mr. Edwards,
$82,011.57 and Mr. Goodall,
52
<PAGE>
$39,135.83. The terms (including the terms of the promissory notes) of the sale
of shares of Common Stock by the Company to Messrs. Seidl, Mallory, Manca,
Jennings, Johnson, Edwards and Goodall were unanimously approved by the Board of
Directors of the Company. The shares were issued upon the early exercise of
unvested options and are subject to repurchase by the Company at the original
price paid per share upon such executive officer's termination of employment
prior to vesting in such shares. The repurchase rights lapse and the shares vest
at the same rate as the prior vesting schedule of the exercised options. See
"Management -- Executive Compensation." The sales price of each sale was the
fair market value of the Company's Common Stock on the original date of grant of
each option to purchase Common Stock, as determined by the Board of Directors of
the Company.
53
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 30, 1996, and as adjusted to
reflect the sale of shares offered hereby by (i) each person who is known by the
Company to own beneficially more than five percent of the Common Stock, (ii)
each of the Named Executive Officers, (iii) each of the Company's directors and
(iv) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES PERCENT BENEFICIALLY
BENEFICIALLY OWNED (1)(2)
OWNED (1) ------------------------
------------ BEFORE AFTER
BENEFICIAL OWNER NUMBER OFFERING OFFERING
- ------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Odyssey Partners, L.P. (3) .................................................... 1,852,976 12.2%
31 West 52nd Street
New York, NY 10019
Providence Media Partners L.P ................................................. 1,081,388 7.2
50 Kennedy Plaza
Providence, R.I. 02903
Paul M. Cook (4) .............................................................. 1,066,044 7.0
PM Cook Associates
Bldg. IR-242
333 Ravenswood Avenue
Menlo Park, CA 94025
Banner Partners (5) ........................................................... 1,018,956 6.8
3000 Sand Hill Road
Bldg. 1, Suite 190
Menlo Park, CA 94025
William C. Edwards (6) ........................................................ 947,114 6.3
3000 Sand Hill Road
Bldg. 1, Suite 190
Menlo Park, CA 94025
Acorn Ventures, Inc. (7) ...................................................... 877,700 5.8
11400 S.E. Sixth Street, Suite 120
Bellevue, WA 98004
AT&T Ventures Company, L.P. (8) ............................................... 806,738 5.4
3000 Sand Hill Road
Bldg. 4, Suite 235
Menlo Park, CA 94025
El Dorado Investment Company (9) .............................................. 801,576 5.4
400 E. Van Buren, Suite 750
Phoenix, AZ 85004
John M. Seidl.................................................................. 600,000 4.0
Robert A. Hayes (10)........................................................... 68,000 *
James J. Jennings.............................................................. 90,000 *
Larsh M. Johnson (11).......................................................... 208,134 1.4
Philip H. Mallory.............................................................. 85,000 *
Neal M. Douglas (12)........................................................... 806,738 5.4
William Hart (13).............................................................. 499,457 3.3
Brian Kwait (14)............................................................... 1,852,976 12.2
Nancy E. Pfund (15)............................................................ 683,601 4.6
Paul J. Salem (16)............................................................. 1,081,388 7.2
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT BENEFICIALLY
BENEFICIALLY OWNED (1)(2)
OWNED (1) ------------------------
------------ BEFORE AFTER
BENEFICIAL OWNER NUMBER OFFERING OFFERING
- ------------------------------------------------------------------------------- ------------ ----------- -----------
Henry B. Sargent (17).......................................................... 886,433 5.9%
<S> <C> <C> <C>
All directors and executive officers as a group (16 persons) (18).............. 9,784,836 61.6
</TABLE>
- ---------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage of
ownership of that person, shares of Common Stock subject to options or
warrants held by that person that are currently exercisable or exercisable
within 60 days of June 30, 1996 are deemed outstanding. Such shares,
however, are not deemed outstanding for the purpose of computing the
percentage ownership of each other person. The persons named in this table
have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to community property
laws where applicable and except as indicated in the other footnotes to this
table.
(2) Percentage of beneficial ownership before the Offering is based on
14,941,055 shares of Common Stock outstanding as of June 30, 1996 and gives
effect to the automatic conversion of all outstanding shares of Preferred
Stock into Common Stock. Percentage of beneficial ownership after the
Offering is based on shares of Common Stock then outstanding and
assumes the exercise of warrants to purchase 2,066,485 shares of Common
Stock effective upon the closing of this Offering.
(3) Includes 290,132 shares issuable upon the exercise of warrants held by
Odyssey, of which 290,132 are assumed to be exercised upon the closing of
this Offering.
(4) Consists of 822,815 shares beneficially owned by the Paul and Marcia Cook
Living Trust, dated April 21, 1992, 60,000 shares beneficially owned by two
trusts of which Mr. Cook is trustee, 164,070 shares issuable upon the
exercise of options exercisable within 60 days of June 30, 1996, 19,002
shares issuable upon the exercise of warrants held by the Paul and Maria
Cook Living Trust, dated April 21, 1992, all of which are assumed to be
exercised upon the closing of this Offering, and 157 shares issuable upon
the exercise of warrants held by Mr. Cook.
(5) Includes 29,829 shares issuable upon the exercise of warrants held by
Banner Partners, of which 29,619 are assumed to be exercised upon the
closing of this Offering.
(6) Consists of 494,564 shares, 134,596 shares, and 288,770 shares beneficially
owned by Banner Partners, Banner Partners/Minaret, Carson, a partnership,
and certain members of Mr. Edwards's family and certain foundations and
trusts of which Mr. Edwards is a trustee, respectively. Also consists of
14,195 shares, 3,729 shares, and 10,540 shares issuable upon the exercise of
warrants held by Banner Partners, Banner Partners/Minaret, Carson, and such
family members, foundations and trusts, respectively, of which an aggregate
of 47,617 are assumed to be exercised upon the closing of this Offering. Mr.
Edwards, a director of the Company, is a general partner of Banner Partners,
and may be deemed to be a beneficial owner of shares held by such family
members, foundations and trusts.
(7) Includes 68,468 shares issuable upon the exercise of warrants held by
Acorn, all of which are assumed to be exercised upon the closing of this
Offering.
(8) Includes 126,316 shares issuable upon the exercise of warrants held by AT&T
Ventures, all of which are assumed to be exercised upon the closing of this
Offering.
(9) Includes 25,468 shares issuable upon the exercise of warrants held by El
Dorado, of which 25,341 are assumed to be exercised upon the closing of this
Offering.
(10) Consists of 68,000 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1996 held by Mr. Hayes.
(11) Includes 61,325 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1996 held by Mr. Johnson.
55
<PAGE>
(12) Consists of 806,738 shares beneficially owned by AT&T Ventures. Mr.
Douglas, a director of the Company, is a general partner of AT&T Ventures
and may be deemed to be the beneficial owner of such shares. Mr. Douglas
disclaims beneficial ownership of the shares except to the extent of his
proportionate partnership interest therein.
(13) Consists of 485,968 shares beneficially owned by Technology Partners West
Fund IV, L.P. and 13,489 shares issuable upon the exercise of warrants held
by Technology Partners West Fund IV, L.P., of which 13,419 are assumed to be
exercised upon the closing of this Offering. Mr. Hart, a director of the
Company, is a general partner of Technology Partners and may be deemed to be
the beneficial owner of such shares. Mr. Hart disclaims beneficial ownership
of the shares except to the extent of his proportionate partnership interest
therein.
(14) Consists of 1,852,976 shares beneficially owned by Odyssey. Mr. Kwait, a
director of the Company, is a principal of Odyssey and may be deemed to be
the beneficial owner of such shares. Mr. Kwait disclaims beneficial
ownership of the shares except to the extent of his proportionate
partnership interest therein.
(15) Consists of 5,625 shares beneficially owned by the Pfund Polakoff Family
Trust Dated February 18, 1993, 88,945 shares beneficially owned by H&Q
Group, 517,944 shares beneficially owned by H&Q Environmental Technology
Fund and 22,230 shares beneficially owned by the Hambrecht 1980 Revocable
Trust. Also consists of 369 shares issuable upon the exercise of warrants
held by the Pfund Polakoff Family Trust Dated February 18, 1993, 6,959
shares issuable upon the exercise of warrants held by H&Q Group, 39,736
shares issuable upon the exercise of warrants held by H&Q Environmental
Technology Fund and 1,793 shares issuable upon the exercise of warrants held
by the Hambrecht 1980 Revocable Trust, of which 48,712 are assumed to be
exercised upon the closing of this Offering. Ms. Pfund, a director of the
Company, is a general partner of the H&Q Environmental Technology Fund and
an employee of H&Q Group and may deemed to be the beneficial owner of such
shares. Ms. Pfund disclaims beneficial ownership of the shares held by H&Q
Group, H&Q Environmental Technology Fund and the Hambrecht 1980 Revocable
Trust except to the extent of her proportionate interest therein.
(16) Consists of 1,081,388 shares beneficially owned by Providence Media
Partners L.P. Mr. Salem, a director of the Company, is a limited partner of
Providence Ventures, L.P., the general partner of the general partner of
Providence Media Partners L.P., and is a vice president of Providence
Ventures, Inc. and may be deemed to be beneficial owner of such shares. Mr.
Salem disclaims beneficial ownership of the shares except to the extent of
his proportionate partnership interest therein.
(17) Consists of 2,105 shares beneficially owned by Mr. Sargent, 776,108 shares
beneficially owned by El Dorado and 66,470 shares beneficially owned by
Sundance Capital Corporation. Also consists of 421 shares issuable upon the
exercise of warrants held by Mr. Sargent, 25,468 shares issuable upon the
exercise of warrants held by El Dorado and 15,861 shares issuable upon the
exercise of warrants held by Sundance Capital Corporation, of which 41,202
are assumed to be exercised upon the closing of this Offering. Mr. Sargent,
a director of the Company, is President of El Dorado and a principal of
Anderson & Wells Investment Companies, which manage Sundance Capital
Corporation, and may be deemed to be the beneficial owners of such shares.
Mr. Sargent disclaims beneficial ownership of the shares held by El Dorado
and Sundance Capital Corporation.
(18) Includes 941,337 shares issuable upon the exercise of options and warrants
exercisable within 60 days of June 30, 1996.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this Offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock and 15,000,000 shares
of Preferred Stock after giving effect to the automatic conversion of all
outstanding shares of Preferred Stock into Common Stock and the amendment and
restatement of the Company's Certificate of Incorporation. Prior to this
Offering, there has been no public market for the Company's Common Stock. The
following summary of certain provisions of the Common Stock and Preferred Stock
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of the Company's Restated Certificate of Incorporation which
is included as an exhibit to the Registration Statement of which this Prospectus
is a part, and by the provisions of applicable law.
COMMON STOCK
As of June 30, 1996, there were 17,007,540 shares of Common Stock
outstanding which were held of record by 285 stockholders, as adjusted to
reflect the automatic conversion of all outstanding shares of Preferred Stock
into shares of Common Stock upon the closing of this Offering and the
issuance of 2,066,485 shares of Common Stock upon the assumed exercise of
certain outstanding warrants on the closing of this Offering.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders, except that, in the election of
directors, the holders are entitled to cumulative voting. Under terms of the
Shareholders' Agreement, the Company is obligated to nominate for election those
persons designated by the parties to the Shareholders' Agreement for as long as
the entities having the right to select such persons continue to hold not less
than 350,000 shares of Common Stock, as appropriately adjusted for stock splits,
consolidations or similar events. The parties to the Shareholders' Agreement
have also agreed to take such action as is necessary to retain the right of
cumulative voting in the election of directors and to maintain a Board of
Directors of not less than eight directors until August 15, 1997. See "Risk
Factors -- Shareholders' Agreement" and "Management -- Board of Directors."
Subject to preferences that may be applicable to any outstanding series of
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available for that purpose. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior distribution rights of
Preferred Stock, if any, then outstanding. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of Common Stock are fully paid and non-assessable, and the shares of Common
Stock offered hereby will, upon the closing of this Offering, be fully paid and
non-assessable.
PREFERRED STOCK
Effective upon the closing of this Offering, the Company will be authorized
to issue 15,000,000 shares of undesignated Preferred Stock, none of which will
be outstanding. The Board of Directors will have the authority, without further
action by the stockholders, to issue the undesignated Preferred Stock in one or
more series, to fix the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued shares of undesignated Preferred Stock
and to fix the number of shares constituting any series and the designation of
such series. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders, may discourage bids for the Company's Common Stock
at a premium over the market price of the Common Stock and may adversely affect
the market price of and the voting and other rights of the holders of Common
Stock. At present, the Company has no plans to issue any Preferred Stock.
WARRANTS
Upon the closing of this Offering, the Company will have outstanding
warrants to purchase an aggregate of 26,305 shares of Common Stock, after giving
effect to an assumed exercise of warrants to purchase 2,066,485 shares of Common
Stock. Such outstanding warrants consist of warrants to purchase 25,000 shares
of Common Stock at an exercise price of $4.00 per share (the "$4.00 Warrants"),
warrants to purchase an
57
<PAGE>
aggregate of 150 shares of Common Stock at an exercise price of $40.00 per share
(the "$40.00 Warrants") and warrants to purchase an aggregate of 1,155 shares of
Common Stock at an exercise price of $253.84 per share (the "$253.84 Warrants").
15,000 of the $4.00 Warrants are currently exercisable, and the remaining 10,000
$4.00 Warrants will become exercisable in equal increments on August 21, 1996
and 1997. The $4.00 Warrants will expire on February 24, 1999. The $40.00
Warrants are currently exercisable and will expire in equal increments in
September 1996 and February 1997. The $253.84 warrants are currently exercisable
and will expire at various dates in September 1996 and December 1996.
In addition, the Company has outstanding warrants to purchase an aggregate
of 1,300,000 shares of Common Stock at an exercise price of $0.01 per share (the
"Note Warrants"), which Note Warrants were issued in connection with the
issuance of the Senior Discount Notes, and warrants to purchase an aggregate of
766,485 shares of Series BB Preferred Stock at an exercise price of $4.75 per
share (the "Preferred Warrants"), which Preferred Warrants were issued in
connection with the issuance of the Series BB Preferred Stock. The Note Warrants
will expire 90 days after the closing date of this Offering and the Preferred
Warrants will expire immediately prior to the closing of this Offering. This
Prospectus assumes that each of the Note Warrants and Preferred Warrants will be
exercised upon the closing of this Offering.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
After this Offering, the holders of shares of Common Stock and
warrants to purchase shares of Common Stock and their transferees will
be entitled to certain rights with respect to the registration of such shares
under the Securities Act pursuant to the Shareholders' Agreement. Under the
Shareholders' Agreement, if the Company proposes to register any of its
securities under the Securities Act, the holders are entitled to notice of such
proposed registration and the opportunity to include their shares therein,
subject to certain conditions and limitations including the right of the
underwriters of an offering to limit the number of shares included in such
registration to 25% of the total number of shares to be registered in certain
circumstances. The holders may also require that the Company file up to two
registration statements under the Securities Act with respect to underwritten
public offerings of their shares at any time beginning 180 days after the date
of this Prospectus. Furthermore, the holders may require the Company to register
their shares on Form S-3 when such form becomes available to the Company. In
addition, holders who purchased Series CC Preferred Stock are entitled to
initiate two separate demand registrations with respect to an underwritten
public offering of the shares of Common Stock issuable upon conversion of the
Series CC Preferred Stock at any time beginning 180 days after the date of this
Prospectus, subject to certain other conditions and limitations. Other holders
may participate in such registration, provided that in the event of an
underwriter's cutback, the number of shares of securities that may be included
in such registration would be subject to certain allocations. The Company will
pay certain expenses in connection with the exercise of the foregoing rights.
All registration rights will terminate as to any holder upon the later to occur
of (i) one year after this Offering or (ii) such time as such holder may sell
all his or her shares under Rule 144 in any three month period.
The Company is required to cause the offer and sale of the 1,300,000 shares
of Common Stock issuable upon exercise of the Note Warrants (the "Note Warrant
Shares") to be registered under the Securities Act prior to the date of this
Prospectus subject to a 90-day lock-up agreement as discussed below . In
addition, the holders of Note Warrant Shares will be entitled to certain rights
with respect to the registration of such shares for resale to the public. Under
a Warrant Registration Rights Agreement dated June 15, 1995, as supplemented on
November 21, 1995 (the "Warrant Registration Rights Agreement"), after this
Offering the holders of Note Warrants may require, subject to the provisions of
certain lockup agreements, that the Company file up to three registration
statements under the Securities Act with respect to the Note Warrant Shares.
Furthermore, the holders may require the Company to register the Note Warrant
Shares on a Form S-3 when such form becomes available to the Company, subject to
certain conditions and limitations. If the Company proposes to register any of
its securities under the Securities Act, either for its own account or for the
account of other security holders, the holders of the Note Warrant Shares are
entitled to notice of such registration and are entitled to include their shares
therein, subject to certain conditions and limitations including the right of
underwriters of an offering to limit the number of shares included in such
registration in certain circumstances. The Company will pay certain expenses in
connection with the expenses of the
58
<PAGE>
foregoing rights. The holders of the Note Warrant Shares are subject to a
lock-up agreement for 90 days following the closing of this Offering. The
registration rights of the holders of the Note Warrant Shares terminate when
such shares may be sold without limitation pursuant to Rule 144 under the
Securities Act.
RIGHT OF FIRST REFUSAL
Under the Shareholders' Agreement, holders who purchased Series CC Preferred
Stock have a right of first refusal to purchase, at the same price and on the
same general terms, a pro rata portion of equity securities that the Company
proposes to issue in certain transactions, including equity securities proposed
to be issued to any public or private utility or an affiliate of such utility,
and have a right of first refusal to purchase a pro rata portion of any equity
securities that any subsidiary of the Company proposes to issue to any public or
private utility or an affiliate of such utility if the subsidiary's business is
unrelated to the market area of such utility or if such securities are
convertible into equity securities of the Company. Such pro rata portion is
based on the ratio of the number of shares of Common Stock held by such holder
to the total number of shares of Common Stock outstanding, including shares of
Common Stock issuable upon the exercise of "in the money" options and warrants,
at the time of issuance of such equity securities. This right of first refusal
terminates three years after the closing date of this Offering.
OTHER RIGHTS
Under the Shareholders' Agreement, the investors in Series CC Preferred
Stock have the right to co-invest on similar terms and conditions in any foreign
investments, partnerships, or joint ventures involving the Company which include
financing from purely financial (as compared to strategic) investors. The co-
investment rights terminate three years after the closing date of this Offering.
Under the Shareholders' Agreement, in the event that any holder of shares of
the Company's equity securities who is a party to such agreement intends to
transfer (other than to an affiliate) any such shares to a buyer who owns or
will acquire as a result of the sale voting stock equal to 20% or more of the
Company's outstanding equity securities, the parties to the Shareholders'
Agreement will have the right to sell a pro rata portion of their shares to the
buyer in such transaction. In the event that any holder of shares of the
Company's equity securities who is a party to the Shareholders' Agreement
intends to acquire (other than from an affiliate) additional voting stock, and
such holder owns or will acquire as a result of such purchase 20% or more of the
Company's voting stock, the parties to the Shareholders' Agreement also have the
right to sell to such purchasing holder a pro rata portion of the voting stock
proposed to be acquired in such transaction. This co-sale right terminates three
years after the closing date of this Offering.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the date the person became an interested stockholder, unless (with
certain exceptions) the "business combination" or the transaction in which the
person became an interested stockholder is approved in a prescribed manner.
Generally, a "business combination" includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the stockholder.
Generally, an "interested stockholder" is a person who, together with affiliates
and associates, owns (or within three years prior, did own) 15% or more of a
corporation's voting stock. The existence of this provision would be expected to
have an anti-takeover effect with respect to transactions not approved in
advance by the Board of Directors, including discouraging attempts that might
result in a premium over the market price for the shares of Common Stock held by
stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York.
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this Offering, the Company will have
shares of Common Stock outstanding, after giving effect to the assumed exercise
of warrants to purchase 2,066,485 shares of Common Stock. Of these shares, the
shares sold in this Offering will be freely tradable without
restriction under the Securities Act, unless held by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act. The
remaining shares of Common Stock held by existing stockholders were
issued and sold by the Company in reliance on exemptions from the registration
requirements of the Securities Act and are "restricted" securities within the
meaning of Rule 144 under the Securities Act ("Restricted Shares"). Restricted
Shares may be sold in the public market only if registered, or pursuant to an
exemption from registration such as Rules 144, 144(k) or 701 under the
Securities Act. Sales of the Restricted Shares in the public market, or the
availability of such shares for sale, could adversely affect the market price of
the Common Stock.
All of the Company's directors, officers and holders of five percent or more
of the Common Stock, and certain other stockholders, have entered into lockup
agreements under which they have agreed not to offer, sell, or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into Common Stock owned by
them for a period of 180 days after the date of this Prospectus, without the
prior written consent of Morgan Stanley & Co. Incorporated. The Company has
entered into a similar agreement, except that the Company may grant options and
issue shares of Common Stock under its current stock option and stock purchase
plans and pursuant to other currently outstanding options. The holders of
1,300,000 Note Warrant Shares have entered into similar agreements which are
applicable for a period of 90 days after the date of this Prospectus, and the
holders of shares of Common Stock issued or issuable upon exercise of
options granted under the 1992 Plan have entered into similar agreements which
are applicable for a period of 120 days after the date of this Prospectus. See
"Underwriters."
Upon expiration of the applicable lockup agreements, approximately
such shares of Common Stock will become eligible for immediate
public resale, subject in some cases to the limitations imposed by Rule 144. The
remaining approximately shares held by existing stockholders will
become eligible for public resale at various times beginning 180 days after the
date of this Prospectus and subject to the provisions of Rule 144. In addition,
approximately shares of Common Stock and shares subject to
vested options will be available for sale in the public market subject to the
provisions of Rule 701.
The holders of approximately of the shares outstanding
immediately following the completion of this Offering and shares of
Common Stock issuable upon exercise of outstanding warrants and their permitted
transferees are entitled to certain registration rights with respect to such
shares upon the expiration of the lockup agreements described above. The number
of shares sold in the public market could increase if such registration rights
are exercised. See "Description of Capital Stock -- Registration Rights of
Certain Holders." In addition, as of June 30, 1996, 1,889,568 shares were
subject to outstanding options. All of these shares are subject to the lockup
agreements described above. As soon as practicable after this Offering, the
Company intends to file a Registration Statement on Form S-8 covering shares
issuable under the Company's 1992 Plan and 1994 Plan (including shares subject
to then outstanding options under such plans), and under the Company's Purchase
Plan, thus permitting the resale of such shares by non-affiliates in the public
market without restriction under the Securities Act after expiration of the
applicable lock-up agreements. See "Management -- Incentive Stock Plans." The
Company is also required to cause the offer and sale of the 1,300,000 Note
Warrant Shares to be registered under the Securities Act prior to the date of
this Prospectus.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years (including the holding period of any prior owner, except an
affiliate) is entitled to sell within any three-month period commencing 90 days
after the date of this Prospectus, a number of shares that does not exceed the
greater of (i) one percent of the number of shares of Common Stock then
outstanding (approximately shares immediately after this
60
<PAGE>
Offering) or (ii) the average weekly trading volume of the Common Stock during
the four calendar weeks preceding the required filing of a Form 144 with respect
to such sale. Sales under Rule 144 are generally subject to certain manner of
sale provisions and notice requirements and to the availability of current
public information about the Company. Under Rule 144(k), a person who is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least three years, is entitled to sell such shares without having to
comply with the manner of sale, public information, volume limitation or notice
provisions of Rule 144. Under Rule 701 under the Securities Act, employees,
directors or consultants who purchase shares upon exercise of options granted
prior to the effective date of this Offering are entitled to sell such shares
commencing 90 days after the effective date of this Offering in reliance on Rule
144, without having to comply with the holding period requirements of Rule 144
and, in the case of non-affiliates, without having to comply with the public
information, volume limitation or notice provisions of Rule 144.
The Securities and Exchange Commission has recently proposed reducing the
initial Rule 144 holding period to one year and the Rule 144(k) holding period
to two years. There can be no assurance as to when or whether such rule changes
will be enacted. If enacted, such modifications will have a material effect on
the times when shares of the Company's Common Stock become eligible for resale.
Prior to this Offering, there has been no public market for the Common Stock
and no prediction can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.
61
<PAGE>
UNDERWRITERS
Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement") , the U.S.
Underwriters named below, for whom Morgan Stanley & Co. Incorporated, Cowen &
Company, Montgomery Securities and Smith Barney Inc. are acting as U.S.
Representatives, and the International Underwriters named below, for whom Morgan
Stanley & Co. International Limited, Cowen & Company, Montgomery Securities and
Smith Barney Inc. are acting as International Representatives, have severally
agreed to purchase, and the Company has agreed to sell to them severally, the
respective number of shares of Common Stock set forth opposite the names of each
Underwriter below.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated................................................................
Cowen & Company..................................................................................
Montgomery Securities............................................................................
Smith Barney Inc.................................................................................
-------------
Subtotal.....................................................................................
-------------
International Underwriters:
Morgan Stanley & Co. International Limited.......................................................
Cowen & Company..................................................................................
Montgomery Securities............................................................................
Smith Barney Inc.................................................................................
-------------
Subtotal.....................................................................................
-------------
Total....................................................................................
-------------
-------------
</TABLE>
The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters," and the U.S. Representatives and the
International Representatives are collectively referred to as the
"Representatives." The Underwriting Agreement provides that the obligations of
the Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all of the shares of Common Stock offered hereby (other than those
covered by the U.S. Underwriters' over-allotment option described below) if any
such shares are taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (a)
it is not purchasing any U.S. Shares (as defined herein) for the account of
anyone other than a United States or Canadian Person (as defined herein) and (b)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any U.S. Shares or distribute any prospectus relating to the U.S. Shares outside
of the United States or Canada or to anyone other than a United States or
Canadian Person. Pursuant to the Agreement between U.S. and International
Underwriters, each International Underwriter has represented and agreed that,
with certain exceptions: (i) it is not purchasing any International Shares (as
defined herein) for the account of any United States or Canadian Person and (ii)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any International Shares or distribute any prospectus relating to the
International Shares in the United States or in any province or territory of
Canada or to any United States or Canadian Person. The foregoing limitations do
62
<PAGE>
not apply to stabilization transactions or to certain other transactions
specified in the Agreement between U.S. and International Underwriters. As used
herein, "United States or Canadian Person" means any national or resident of the
United States or of any province or territory of Canada, or any corporation,
pension, profit-sharing or other trust or other entity organized under the laws
of the United States or Canada or of any political subdivision thereof (other
than a branch located outside the United States and Canada of any United States
or Canadian Person) and includes any United States or Canadian branch of a
person who is otherwise not a United States or Canadian Person. All shares of
Common Stock to be purchased by the U.S. Underwriters and the International
Underwriters are referred to herein as the "U.S. Shares" and the "International
Shares," respectively.
Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of any
number of shares of Common Stock to be purchased pursuant to the Underwriting
Agreement as may be mutually agreed. The per share price of any shares sold
shall be the Price to Public set forth on the cover page hereof, in United
States dollars, less an amount not greater than the per share amount of the
concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of common stock, directly or indirectly, in any
province or territory of Canada in contravention of the securities laws thereof
and has represented that any offer of Common stock in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
shares of Common Stock a notice stating in substance that, by purchasing such
Common Stock, such dealer represents and agrees that it has not offered or sold,
and will not offer or sell, directly or indirectly, any of such Common Stock in
any province or territory of Canada or to, or for the benefit of, any resident
of any province or territory of Canada in contravention of the securities laws
thereof and that any offer of Common Stock in Canada will be made only pursuant
to an exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer is made, and that such dealer will
deliver to any other dealer to whom it sells any of such Common Stock a notice
to the foregoing effect.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and during the period of six months after the date hereof will not offer
to sell any shares of Common Stock to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
business or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995 (the "U.K. Regulations"); (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the U.K. Regulations (to the extent applicable) with
respect to anything done by it in relation to the shares of Common Stock offered
hereby in, from or otherwise involving the United Kingdom; and (iii) it has only
issued or passed on and will only issue or pass on to any person in the United
Kingdom any document received by it in connection with the issue of the shares
of Common Stock, other than any document which consists of, or is a part of,
listing particulars, supplementary listing particulars or any other document
required or permitted to be published by listing rules under Article IV of the
Financial Services Act 1986, if that person is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995, or is a person to whom the document may otherwise
lawfully be issued or passed on.
The Underwriters initially propose to offer part of the shares of Common
Stock offered hereby directly to the public at the Price to Public set forth on
the cover page of this Prospectus and part to certain dealers at a price that
represents a concession not in excess of $ per share under the Price
to Public. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to other Underwriters or to
certain other dealers. After the initial offering of the shares of Common Stock,
the offering price and other selling terms may from time to time be varied by
the Representatives.
63
<PAGE>
Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to additional shares of Common Stock at the
Price to Public set forth on the cover page hereof, less underwriting discounts
and commissions. To the extent such option is exercised, each U.S. Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares of Common Stock as the number set
forth next to such U.S. Underwriter's name in the preceding table bears to the
total number of U.S. Shares offered by the U.S. Underwriters hereby.
The Company and each of its officers, directors and certain other
stockholders have agreed that without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, they will not (i)
register for sale, make any demand for or extend any right with respect to such
registration, issue, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are now owned or are acquired after the date of this Prospectus) or
(ii) enter into any swap or similar agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise for a
period of 180 days after the date of this Prospectus, other than (x) the shares
of Common Stock to be sold hereunder, (y) any shares of Common Stock issued by
the Company upon the exercise of options issued pursuant to the Company's 1992
Plan or 1994 Plan, pursuant to the Company's Purchase Plan or upon exercise of
outstanding warrants and (z) the issuance of additional options to purchase
shares of Common Stock pursuant to the Company's 1994 Plan. The holders of
substantially all remaining shares have entered into agreements restricting the
sale or other disposition of Common Stock which are applicable for a periods of
90 to 180 days after the date of this Prospectus. See "Shares Eligible for
Future Sale."
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed 5% of the total number of shares of Common
Stock offered by them.
Smith Barney Inc. acted as the initial purchaser of the Senior Discount
Notes and received customary compensation in connection therewith.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
between the Company and the Representatives. Among the factors to be considered
in determining the initial public offering price will be the future prospects of
the Company and its industry in general; sales, earnings and certain other
financial and operating information of the Company in recent periods; and
certain ratios and market prices of securities and certain financial and
operating information of companies engaged in activities similar to those of the
Company. The estimated initial public offering price range set forth on the
cover page of this Preliminary Prospectus is subject to change as a result of
market conditions and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. As of the date of this Prospectus, certain members of Wilson
Sonsini Goodrich & Rosati, Professional Corporation and investment partnerships
of which such persons are partners beneficially own 10,264 shares of the
Company's Common Stock. Certain legal matters in connection with this Offering
will be passed upon for the Underwriters by Shearman & Sterling, New York, New
York.
64
<PAGE>
EXPERTS
The consolidated financial statements as of December 31, 1994 and 1995 and
for each of the three years in the period ended December 31, 1995 included in
this Prospectus and the related financial statement schedule appearing elsewhere
in this Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act, of
which this Prospectus forms a part, with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its public
reference facilities in New York, New York and Chicago, Illinois, at prescribed
rates. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the site is
http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent auditors
and with quarterly reports containing unaudited financial information for each
of the first three quarters of each fiscal year.
65
<PAGE>
GLOSSARY
<TABLE>
<CAPTION>
TERM DEFINITION
- -------------------------------- --------------------------------------------------------------------------------
<S> <C>
APPLICATIONS Software programs that enable computers to perform tasks such as, in the case of
utility applications, metering, load management, load research, and distribution
automation.
AUTOMATED METER READING ("AMR") Use of hand-held or drive-by automated meter reading equipment.
BANDWIDTH The amount of message traffic a given medium can accommodate at one time.
Bandwidth may refer to analog or digital data. Digital data bandwidth is
expressed in bits per second (bps) or baud (number of discrete conditions or
signal elements per second).
CAPACITY For electric utility purposes, a measure (in watts) of the ability to produce,
transport or store electricity at any instant (not over time).
CELLMASTER The communications gateway between the System Controller and the MCCs and RTUs.
The CellMaster can connect to the System Controller via modem over a leased line
or via privately-owned communications media such as microwave channels or fiber
optic transmission lines. CellNet's 9QPR cellular radio provides the connection
between the CellMaster and the MCCs and RTUs.
CELLNET-REGISTERED TRADEMARK- CellNet's wireless data communications system, which provides NMR services,
SYSTEM control and monitoring of the power distribution network, and other services.
CellNet concurrently supports multiple utility applications, including
distribution automation and demand-side management.
CELLULAR DIGITAL PACKET DATA A method of transmitting data over a cellular communications network using
("CDPD") underutilized radio frequency or pauses in voice communication. It is expected
that CDPD will be available this year from major cellular operators such as
McCaw Cellular.
DATABASE MANAGEMENT SYSTEM The software that supports long-term storage and retrieval of computer data.
DEMAND For electric utility purposes, the rate at which electric energy is delivered to
or used by a system, part of a system, or piece of equipment at a given instant,
or averaged over a designated period. Measured in kilowatts.
DISTRIBUTION AUTOMATION ("DA") Any program used by an electric utility to monitor, coordinate and operate
distribution components in a real-time mode from remote locations.
DISTRIBUTION NETWORK The utility's wiring grid between the substation and customer sites.
GATEWAY The connection between two networks. CellNet uses a gateway to connect a SCADA
system to other computers for billing and other applications.
LEASED LINE A dedicated telephone line connecting two or more fixed locations. CellNet will
use a leased line to connect a CellMaster and System Controller. A leased line
can also be called a "private line".
</TABLE>
G-1
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION
- -------------------------------- --------------------------------------------------------------------------------
<S> <C>
LOAD For electric utility purposes, the amount of electric power delivered or
required at any specific point or points of a system.
LOAD CONTROL The capability to manage electric power consumption by controlling the use of
equipment and appliances. Typically used by a utility to avoid either a brownout
or the necessity of generating high-cost electricity.
LOAD PROFILE A record of a customer's electricity use over time in discrete intervals.
Utility companies use this data to analyze consumption, to calculate demand or
time-of-use data and to detect power theft and meter tampering.
LOCAL AREA NETWORK ("LAN") In the CellNet system, the LAN connects MCCs to radios in endpoint devices.
NETWORK METER READING ("NMR") Fully-automated meter reading on a network.
NETWORK OPERATING SYSTEM ("NOS") A Network Operating System is the software that supports the operation of
distributed applications with communications, database capabilities, and common
Applications Programming Interfaces (APIs).
NODE In the CellNet's system, a node is an internet addressable, responsive,
computer-based subsystem (for example, a System Controller workstation or a MCC)
that is able to take part in internetworking activities.
OBJECT-ORIENTED An adjective that describes a method of software analysis, design, and/or
programming that facilitates sophisticated problem-solving. Object-oriented
systems are flexible and maintainable because of their natural way of handling
user-oriented systems and consistent, powerful, underlying representation for
what is to be built and how it will be built. The CellNet system is built on an
object-oriented, distributed infrastructure.
PACKET A block of data preceded by, and perhaps followed by, one or more bytes of
information specific to the communications service (a communications protocol)
used to transmit the packet.
PERSONAL COMMUNICATIONS SERVICES Digital wireless communications services which are expected to use a microcell
("PCS") technology and operate at a higher frequency than cellular systems.
PROTOCOL Rules and conventions that govern communication between OSI model layers and, in
the CellNet system, subsystems for functions such as format, timing, sequencing,
and error control.
REMOTE TERMINAL UNIT ("RTU") Device typically used to monitor and control components of a utility's
distribution network. The RTU combines digital and analog inputs, which are used
to obtain detailed information about the distribution equipment being monitored.
An RTU can sense remotely such things as current, temperature and power factor.
RF Radio Frequency
</TABLE>
G-2
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION
- -------------------------------- --------------------------------------------------------------------------------
<S> <C>
SPECIALIZED MOBILE RADIO A two way radio service operating in the 800-900 megahertz band. FCC
("SMR")/EXTENDED SPECIALIZED restrictions on use of this bandwidth for taxi dispatchers and similar vehicle
MOBILE RADIO ("ESMR") "fleet" operators have been relaxed allowing holders of these frequency licenses
to expand into cellular-like services. The largest operator to date is Nextel
Communications.
SPREAD SPECTRUM A modulation technique in which a signal is broadcast over a range of
frequencies to minimize noise and interference.
TIME-OF-USE ("TOU") Time-of-use metering allows a utility to bill electric power usage at different
rates, according to the time that the power was consumed.
WIDE AREA NETWORK ("WAN") In the CellNet system the WAN connects the CellMasters to the MCCs in a given
service area.
</TABLE>
G-3
<PAGE>
CELLNET DATA SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)................. F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and the six
months ended June 30, 1995 and 1996 (unaudited)........................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1996 (unaudited)................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and the six
months ended June 30, 1995 and 1996 (unaudited)........................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
CellNet Data Systems, Inc.:
We have audited the accompanying consolidated balance sheets of CellNet Data
Systems, Inc. and subsidiaries (the "Company") as of December 31, 1994 and 1995,
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of CellNet Data Systems, Inc. and
subsidiaries at December 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 9, 1996
(April 11, 1996 as to the last sentence of the
second paragraph of Note 5 and
June 26, 1996 as to Note 10)
F-2
<PAGE>
CELLNET DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------- JUNE 30, JUNE 30,
1994 1995 1996 1996
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(NOTE 1)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................................ $ 12,503 $ 48,018 $ 70,730 $ 74,384
Short-term investments................................... 12,005 95,779 32,237 32,237
Accounts receivable...................................... 703 2,118 1,904 1,904
Prepaid expenses and other............................... 248 940 886 886
Network components and inventory......................... 2,146 11,664 12,569 12,569
Networks in progress..................................... 1,333 12,602 29,850 29,850
Property -- net.......................................... 2,871 7,539 9,129 9,129
Debt issuance costs -- net............................... -- 5,646 5,348 5,348
--------- --------- ----------- -----------
Total assets........................................... $ 31,809 $ 184,306 $ 162,653 $ 166,307
--------- --------- ----------- -----------
--------- --------- ----------- -----------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Accounts payable......................................... $ 2,050 $ 7,241 $ 6,329 $ 6,329
Accrued compensation and related benefits................ 402 1,353 735 735
Accrued liabilities...................................... 889 981 990 990
Senior discount notes -- 13%............................. -- 182,528 194,720 194,720
Capital lease obligations................................ 546 820 793 793
--------- --------- ----------- -----------
Total liabilities...................................... 3,887 192,923 203,567 203,567
--------- --------- ----------- -----------
Commitments and Contingencies (Notes 1 and 9)
Series CC redeemable convertible preferred stock -- no
par value; 3,215,768 shares designated and outstanding
and none on a pro forma basis; aggregate liquidation
value of $31,000,000.................................... 29,486 29,486 29,486 --
--------- --------- ----------- -----------
Stockholders' equity (deficit):
Convertible preferred stock -- no par value; 15,000,000
shares authorized; shares outstanding, 1994:
9,008,518; 1995: 9,136,675; 1996: 9,137,078; no shares
outstanding on a pro forma basis; aggregate
liquidation value of $27,812,000...................... 25,990 27,195 27,196 --
Common stock -- no par value; 50,000,000 shares
authorized; shares outstanding: 1994, 1,358,083; 1995,
2,517,131; 1996, 2,588,209 and 17,007,540 on a pro
forma basis........................................... 26,790 27,608 27,636 90,947
Notes receivable from sale of common stock............. (284) (866) (866 ) (866 )
Warrants............................................... 10 2,984 2,984 9
Accumulated deficit.................................... (54,065) (95,021) (127,334 ) (127,334 )
Net unrealized loss on short-term investments.......... (5) (3) (16 ) (16 )
--------- --------- ----------- -----------
Total stockholders' deficit.......................... (1,564) (38,103) (70,400 ) (37,260 )
--------- --------- ----------- -----------
Total liabilities and stockholders' deficit.............. $ 31,809 $ 184,306 $ 162,653 $ 166,307
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
CELLNET DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- ----------------------
1993 1994 1995 1995 1996
--------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales........................................ $ 1,757 $ 1,447 $ 1,663 $ 938 $ 127
Network service revenues............................. -- -- 35 -- 244
Other revenues....................................... -- 204 428 353 49
--------- ---------- ---------- ---------- ----------
Total revenues..................................... 1,757 1,651 2,126 1,291 420
--------- ---------- ---------- ---------- ----------
Costs and expenses:
Cost of product sales................................ 1,840 1,191 1,294 598 109
Cost of network operations........................... -- -- 3,835 1,333 3,374
Research and development............................. 5,262 9,693 22,380 6,735 13,009
Marketing and sales.................................. 1,447 3,257 4,201 1,946 2,924
General and administrative........................... 1,450 2,583 6,805 2,874 5,412
--------- ---------- ---------- ---------- ----------
Total costs and expenses........................... 9,999 16,724 38,515 13,486 24,828
--------- ---------- ---------- ---------- ----------
Loss from operations................................... (8,242) (15,073) (36,389) (12,195) (24,408)
Other income (expense):
Interest income...................................... 66 555 4,590 860 3,458
Interest expense..................................... (198) (101) (9,320) (754) (11,264)
Other -- net......................................... (16) (13) 166 (31) (97)
--------- ---------- ---------- ---------- ----------
Total other income (expense)........................... (148) 441 (4,564) 75 (7,903)
--------- ---------- ---------- ---------- ----------
Loss before income taxes............................... (8,390) (14,632) (40,953) (12,120) (32,311)
Provision for income taxes............................. 1 2 3 1 2
--------- ---------- ---------- ---------- ----------
Net loss............................................... $ (8,391) $ (14,634) $ (40,956) $ (12,121) $ (32,313)
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
Pro forma net loss per share........................... $ (2.48) $ (0.72) $ (1.86)
---------- ---------- ----------
---------- ---------- ----------
Shares used in computing pro forma net loss per
share................................................. 16,538 16,878 17,371
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
CELLNET DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NET
CONVERTIBLE NOTES UNREALIZED
PREFERRED STOCK COMMON STOCK RECEIVABLE LOSS ON
------------------ ------------------ FROM SALE ACCUMULATED SHORT-TERM
SHARES AMOUNT SHARES AMOUNT OF STOCK WARRANTS DEFICIT INVESTMENTS TOTAL
--------- ------- --------- ------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1,
1993...................... 4,244,858 $4,181 447,746 $26,616 $ -- $ 9 $ (31,040) $-- $ (234)
Sales of Series AA
preferred stock (less
issuance costs of $8)..... 755,142 747 -- -- -- -- -- -- 747
Exercise of stock
options................... -- -- 443,309 46 -- -- -- -- 46
Conversion of subordinated
debt ($3,242) and accrued
interest ($32) into Series
BB preferred stock and
warrants.................. 689,190 3,274 -- -- -- -- -- -- 3,274
Sale of Series BB preferred
stock and warrants (less
issuance costs of $504)... 2,748,020 12,549 -- -- -- -- -- -- 12,549
Sales of Series BB
preferred stock for notes
receivable................ 52,635 250 -- -- (250) -- -- -- --
Sale of common stock (less
issuance costs of $1)..... -- -- 200,200 19 -- -- -- -- 19
Sale of stock warrants..... -- -- -- -- -- 1 -- -- 1
Net loss................... -- -- -- -- -- -- (8,391) -- (8,391)
--------- ------- --------- ------- ---------- -------- ----------- ----------- --------
BALANCES, December 31,
1993...................... 8,489,845 21,001 1,091,255 26,681 (250) 10 (39,431) -- 8,011
Exercise of stock options
and restricted stock
purchase.................. -- -- 266,828 109 (100) -- -- -- 9
Sale of Series DD preferred
stock (net of issuance
costs of $10)............. 518,673 4,989 -- -- -- -- -- -- 4,989
Collection of notes
receivable................ -- -- -- -- 66 -- -- -- 66
Net unrealized loss on
short-term investments.... -- -- -- -- -- -- -- (5) (5)
Net loss................... -- -- -- -- -- -- (14,634) -- (14,634)
--------- ------- --------- ------- ---------- -------- ----------- ----------- --------
BALANCES, December 31,
1994...................... 9,008,518 25,990 1,358,083 26,790 (284) 10 (54,065) (5) (1,564)
Sale of Series DD preferred
stock (net of issuance
costs of $31)............. 128,157 1,205 -- -- -- -- -- -- 1,205
Exercise of stock options
and restricted stock
purchases................. -- -- 1,159,048 818 (628) -- -- -- 190
Common stock warrants
issued in connection with
senior discount notes..... -- -- -- -- -- 2,974 -- -- 2,974
Collection of notes
receivable................ -- -- -- -- 46 -- -- -- 46
Net unrealized gain on
short-term investments.... -- -- -- -- -- -- -- 2 2
Net loss................... -- -- -- -- -- -- (40,956) -- (40,956)
--------- ------- --------- ------- ---------- -------- ----------- ----------- --------
BALANCES, December 31,
1995...................... 9,136,675 27,195 2,517,131 27,608 (866) 2,984 (95,021) (3) (38,103)
Exercise of stock options
and warrants*............. 403 1 71,078 28 -- -- -- -- 29
Net unrealized loss on
short-term investments*... -- -- -- -- -- -- -- (13) (13)
Net loss*.................. -- -- -- -- -- -- (32,313) -- (32,313)
--------- ------- --------- ------- ---------- -------- ----------- ----------- --------
BALANCES, June 30, 1996*... 9,137,078 $27,196 2,588,209 $27,636 $ (866) $2,984 $(127,334) $ (16) $(70,400)
--------- ------- --------- ------- ---------- -------- ----------- ----------- --------
--------- ------- --------- ------- ---------- -------- ----------- ----------- --------
</TABLE>
- ------------
*Unaudited
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
CELLNET DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (8,391) $ (14,634) $ (40,956) $ (12,121) $ (32,313)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization............................. 699 992 2,295 917 2,257
Amortization of discount on 13% senior notes.............. -- -- 9,665 -- 12,192
Amortization of debt issuance costs....................... -- -- 256 17 298
Deferred rent............................................. (115) (43) (46) 22 21
Loss (gain) on disposition of property.................... 1 2 57 14 (15)
Changes in:
Accounts receivable..................................... (293) (282) (1,415) 208 214
Prepaid expenses and other.............................. (93) (126) (692) (668) 54
Network components and inventory........................ (574) (1,260) -- -- --
Accounts payable........................................ 348 1,389 5,191 2,394 (912)
Accrued compensation and related benefits............... -- -- 951 268 (618)
Accrued liabilities..................................... (673) (676) 138 496 (12)
--------- --------- --------- --------- ---------
Net cash used for operating activities................ (9,091) (14,638) (24,556) (8,453) (18,834)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Network components and inventory............................ -- -- (9,518) (3,597) (905)
Networks in progress........................................ -- (1,333) (11,269) (2,467) (17,482)
Purchase of property........................................ (535) (2,436) (6,222) (3,009) (3,478)
Other assets................................................ 73 -- -- -- --
Purchase of short-term investments.......................... (2,962) (12,548) (285,802) (41,890) (263,980)
Proceeds from sales and maturities of short-term
investments................................................ -- 3,500 202,030 14,317 327,522
--------- --------- --------- --------- ---------
Net cash provided by (used for) investing
activities........................................... (3,424) (12,817) (110,781) (36,646) 41,677
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of senior discount notes and related stock
warrants................................................... -- -- 175,837 125,894 --
Cash paid for debt issuance costs........................... -- -- (5,902) (4,034) --
Subordinated debt borrowings................................ 3,242 350 -- -- --
Repayment of debt obligations............................... (403) (511) (524) (313) (160)
Proceeds from sale of preferred stock....................... 13,296 34,122 1,205 1,205 1
Proceeds from sale of common stock.......................... 66 9 190 14 28
Collection of notes receivable from sale of common stock.... -- 66 46 46 --
--------- --------- --------- --------- ---------
Net cash provided by (used for) financing
activities........................................... 16,201 34,036 170,852 122,812 (131)
--------- --------- --------- --------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS......................... 3,686 6,581 35,515 77,713 22,712
CASH AND CASH EQUIVALENTS, Beginning of period................ 2,236 5,922 12,503 12,503 48,018
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, End of period...................... $ 5,922 $ 12,503 $ 48,018 $ 90,216 $ 70,730
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of subordinated debt and accrued interest into
preferred stock............................................ $ 3,274 $ 353 $ -- $ -- $ --
Acquisition of property under capital leases................ $ 17 $ 232 $ 798 $ 348 $ 133
Sale of common stock for notes receivable................... $ 250 $ 100 $ 628 $ 200 $ --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................... $ 166 $ 101 $ 113 $ 44 $ 56
Cash paid for income taxes.................................. $ 1 $ 2 $ 3 $ 1 $ 2
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(Information as of and for the Six Months Ended June 30, 1995 and 1996 is
Unaudited)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS -- Since 1993, CellNet Data Systems, Inc. and
subsidiaries (the "Company") has focused substantially all of its resources and
efforts on the development of the CellNet wireless data communication system to
provide automated network meter reading and other services to the utility
industry and to providers of non-utility services. The Company's primary
activities since 1993 have included research and development, prototype product
development, field testing, commercial network installation, and provision of
wireless data communication services, in connection with the development and
deployment of its CellNet wireless data communication system.
The Company is in the process of rolling out its network installation for
Kansas City Power & Light Company and commenced the roll-out of its network
installation for Union Electric Company in the first quarter of 1996. Management
plans to significantly increase operations through the roll-out of additional
installations for other utility companies and intends to fund these operations
through additional debt and equity financing arrangements.
The Company provides its services to utility companies under long-term
contracts by which the Company is obligated to provide meter reading and related
services over the term of the contract. The length of the contracts vary and can
include renewal options under which the Company's commitments under the contract
could exceed 20 years, although there is no assurance that such options would be
exercised, or that contract termination clauses would not be exercised.
CONSOLIDATION -- The accompanying consolidated financial statements include
the accounts of CellNet Data Systems, Inc. and its wholly-owned subsidiaries.
All material intercompany accounts and transactions are eliminated in
consolidation.
FINANCIAL STATEMENT ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses during the reporting period. Such estimates
include the level of the allowance for potentially uncollectible accounts
receivable, reserves for network components and inventory that are obsolete,
slow moving or nonsalable, evaluation of network assets for impairment, accrued
liabilities and a valuation allowance for net deferred tax assets. Actual
results could differ from these estimates.
CASH EQUIVALENTS -- Cash equivalents are highly liquid debt instruments
acquired with an original maturity of three months or less. The recorded
carrying amounts of the Company's cash and cash equivalents approximate their
fair market value.
SHORT-TERM INVESTMENTS -- Short-term investments represent debt and equity
securities which are stated at fair value. All short-term investments are
classified as available-for-sale. Any temporary difference between an
investment's amortized cost and its market value is recorded as a separate
component of stockholders' deficit until such gains or losses are realized.
Gains or losses on the sale of securities are computed using the specific
identification method.
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities," in
1994. The adoption of this standard did not have a significant effect in the
Company's financial position or results of operations.
CUSTOMER CONCENTRATION AND CONCENTRATION OF CREDIT RISK -- Financial
instruments that potentially subject the Company to credit risk consist
principally of cash and cash equivalents, short-term investments and accounts
receivable. The Company sells its products and services to, and installs its
networks primarily for utility companies in the United States. To reduce credit
risk related to accounts receivable, the Company
F-7
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
periodically evaluates its customers' financial condition. Collateral is
generally not required. Reserves are maintained for credit losses, but the
Company historically has not experienced any significant losses related to
individual customers or groups of customers in any particular geographical area.
Three customers accounted for 37%, 36% and 18% of revenues for the year ended
December 31, 1993. Two customers accounted for 34% and 26% of accounts
receivable at December 31, 1994, and three customers accounted for 58%, 14% and
10% of revenues for the year ended December 31, 1994. Two customers accounted
for 60% and 20% of accounts receivable at December 31, 1995 and two customers
accounted for 64% and 29% of revenues for year ended December 31, 1995. Two
customers accounted for 45% and 38% of accounts receivable at June 30, 1996 and
one customer accounted for 73% of revenues for the six months ended June 30,
1996.
The Company invests in a variety of financial instruments such as commercial
paper, debt securities of the U.S. government, foreign debt securities and
preferred stock. The Company's policy limits the amount of credit exposure with
any one financial instrument or commercial issuer. All such instruments are
rated by Standard and Poors as A- or higher. The Company also places its
investments for safekeeping with high-credit-quality financial institutions.
NETWORK COMPONENTS AND INVENTORY -- Network components and inventory are
stated at the lower of cost (first-in, first-out method) or market. At December
31, 1995 and June 30, 1996, such network components and inventory consisted
primarily of purchased and in process materials to be included in the Company's
installed networks. Once the assembly process is complete, the inventory item is
transferred to a particular network location and included in networks in
progress.
NETWORKS IN PROGRESS -- Networks in progress, which are stated at cost,
include both equipment assembled at the Company and systems partially installed
at customer sites. Interest is capitalized using the Company's cost of capital
until the point in the installation process at which each network begins
generating revenue. Accordingly, $458,000 of interest was capitalized during
1995 and $983,000 of interest was capitalized for the six months ended June 30,
1996. Depreciation is computed on a straight-line basis over the shorter of the
estimated useful lives of the network assets or the expected minimum period of
revenue generation under the related contract (estimated to be approximately ten
years).
PROPERTY -- Property is stated at cost. Depreciation and amortization are
computed on a straight-line basis over estimated useful lives of three to five
years or the capital lease term, if shorter.
DEBT ISSUANCE COST is comprised of debt issue costs associated with the
Senior Discount Notes (see Note 5). These costs are capitalized and amortized
using the effective interest method over the lives of the related debt.
RECENTLY ISSUED ACCOUNTING STANDARDS -- In October 1995, the Financial
Accounting Standards Board (FASB) issued SFAS No. 123, "Accounting for
Stock-Based Compensation." The new standard defines a fair value method of
accounting for stock options and other equity instruments. The new standard
permits companies to continue to account for equity transactions with employees
under existing accounting rules but requires disclosure in a note to the
financial statements of the pro forma net income as if the Company had applied
the new method of accounting. The Company intends to follow the disclosure
alternative for its employee stock plans at December 31, 1996. Adoption of the
new standard will not impact reported earnings and will have no effect on the
Company's cash flows.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets to be Disposed Of," which became effective January 1, 1996.
This statement requires the Company to review
F-8
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recovered.
Implementation did not have a material impact on the Company's financial
statements.
REVENUE RECOGNITION -- Network service revenue, associated with installed
networks, is recognized in the period of service. Product sales are recognized
upon product shipment. Estimated warranty costs are recorded at the time the
product sales are recognized.
RESEARCH AND DEVELOPMENT -- Research and development costs are expensed as
incurred. The Company's networks include certain software applications which are
integral to their operation. The costs to develop such software have not been
capitalized as the Company believes its software development processes are
essentially completed concurrent with the establishment of technological
feasibility of the software and/or development of the related network hardware.
FOREIGN CURRENCY TRANSLATION -- The functional currency of the Company's
U.K. subsidiary is the U.S. dollar. Accordingly, all monetary assets and
liabilities are translated at the current exchange rate at the end of the
period, nonmonetary assets and liabilities are translated at historical rates
and operating expenses are translated at average exchange rates in effect during
the period. Transaction gains and losses, which are included in other income
(expense) in the accompanying consolidated statements of operations, have not
been significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The recorded carrying amounts of the
Company's financial instruments, namely cash and cash equivalents and short-term
investments, approximate their fair value. The estimated fair value of the
Company's Senior Discount Notes was $179,563,000 at December 31, 1995 and
$212,469,000 at June 30, 1996. The fair values of cash equivalents and
short-term investments are based on quoted market prices and the estimated fair
value of the Senior Discount Notes is based on information provided by the
initial purchaser of the original notes.
PRO FORMA NET LOSS PER SHARE -- Pro forma net loss per share is computed
using the weighted average number of common and common equivalent shares
outstanding during the period. Common equivalent shares include preferred stock
and certain warrants (using the "if converted" method) and stock options and the
remaining warrants (using the treasury stock method). Common equivalent shares
are excluded from the computation if their effect is anti-dilutive, except that,
pursuant to the Securities and Exchange Commission's Staff Accounting Bulletins
and staff policy, such computations include all common and common equivalent
shares issued within the 12 months preceding the initial filing date as if they
were outstanding for all periods presented. In addition, all outstanding
preferred stock that converts and all warrants that are assumed to be exercised
in connection with the proposed offering are included in the computation as
common equivalent shares even when the effect is anti-dilutive.
UNAUDITED INTERIM FINANCIAL INFORMATION -- The unaudited interim financial
information as of June 30, 1996 and for the six months ended June 30, 1995 and
1996 has been prepared on the same basis as the audited financial statements. In
the opinion of management, such unaudited information includes all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of this interim information. Operating results for the six months ended June 30,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996.
UNAUDITED PRO FORMA INFORMATION -- Unaudited pro forma information reflects
the conversion of each of the outstanding shares of Series CC redeemable
convertible preferred stock into one share of common stock, the conversion of
each of the outstanding shares of Series AA, BB and DD convertible preferred
stock into one share of common stock, the assumed exercise and conversion of
each of the outstanding warrants to
F-9
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
purchase Series BB preferred stock into one share of common stock, and the
assumed exercise of each of the outstanding warrants issued in connection with
the Company's Senior Discount Notes (see Notes 5 and 7) for one share of common
stock, upon the closing of the initial public offering as contemplated by this
Prospectus.
2. SHORT-TERM INVESTMENTS
The fair value and the amortized cost of short-term investments at December
31, 1994 and 1995 and June 30, 1996 are presented as follows. Fair values are
based on quoted market prices obtained from the Company's broker. All of the
Company's short-term investments are classified as available-for-sale, since the
Company intends to sell them as needed for operations. The following tables
present the unrealized holding gains and losses related to each category of
investment security (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------------
UNREALIZED
AMORTIZED LOSS ON MARKET
COST INVESTMENT VALUE
----------- ---------- ---------
<S> <C> <C> <C>
Equity securities................................................... $ 6,001 $ (1) $ 6,000
Corporate debt securities........................................... 3,509 (4) 3,505
Debt securities of states of the United States and political
subdivisions of the states......................................... 2,500 -- 2,500
----------- ---------- ---------
Total............................................................... $ 12,010 $ (5) $ 12,005
----------- ---------- ---------
----------- ---------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------
UNREALIZED UNREALIZED
AMORTIZED LOSS ON GAIN ON MARKET
COST INVESTMENT INVESTMENT VALUE
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Auction-rate preferred stock........................... $ 19,803 $ (3) $ -- $ 19,800
Corporate debt securities.............................. 64,664 -- -- 64,664
Debt securities of states of the United States and
political subdivisions of the states.................. 3,000 -- -- 3,000
Debt securities issued by United States government
agencies.............................................. 4,647 -- 2 4,649
Foreign debt securities................................ 3,668 (2) -- 3,666
----------- ---------- ---------- ---------
Total.................................................. $ 95,782 $ (5) $ 2 $ 95,779
----------- ---------- ---------- ---------
----------- ---------- ---------- ---------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------
UNREALIZED UNREALIZED
AMORTIZED LOSS ON GAIN ON MARKET
COST INVESTMENT INVESTMENT VALUE
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Auction-rate preferred stock........................... $ 22,800 $ -- $ -- $ 22,800
Corporate debt securities.............................. 9,453 (16) -- 9,437
----------- ---------- ---------- ---------
Total.................................................. $ 32,253 $ (16) $ -- $ 32,237
----------- ---------- ---------- ---------
----------- ---------- ---------- ---------
</TABLE>
F-10
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
2. SHORT-TERM INVESTMENTS (CONTINUED)
The final maturity periods of short-term investments at December 31, 1995
were as follows (in thousands):
<TABLE>
<CAPTION>
MARKET VALUE
-----------------------------------------------------
ONE TO GREATER
WITHIN FIVE THAN 10 NO
ONE YEAR YEARS YEARS MATURITY TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Auction-rate preferred stock............................... $ -- $ -- $ -- $ 19,800 $ 19,800
Corporate debt securities.................................. 17,064 10,000 28,400 9,200 64,664
Debt securities of states of the United States and
political subdivisions of the states...................... -- -- 3,000 -- 3,000
Debt securities issued by United States government
agencies.................................................. 4,649 -- -- -- 4,649
Foreign debt securities.................................... 3,666 -- -- -- 3,666
--------- --------- --------- --------- ---------
Total.................................................. $ 25,379 $ 10,000 $ 31,400 $ 29,000 $ 95,779
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The final maturity periods of short-term investments at June 30, 1996 were
as follows (in thousands):
<TABLE>
<CAPTION>
MARKET VALUE
---------------------------------------------------------
ONE TO GREATER
WITHIN ONE FIVE THAN 10 NO
YEAR YEARS YEARS MATURITY TOTAL
----------- --------- ----------- --------- ---------
Auction-rate preferred stock................. $ -- $ -- $ 22,800 $ -- $ 22,800
<S> <C> <C> <C> <C> <C>
Corporate debt securities.................... 9,437 -- -- -- 9,437
----------- --------- ----------- --------- ---------
$ 9,437 $ -- $ 22,800 $ -- $ 32,237
----------- --------- ----------- --------- ---------
----------- --------- ----------- --------- ---------
</TABLE>
All short-term investments with a final maturity exceeding one year have
provisions requiring their repurchase at par at the option of the holder and for
adjustment to market rates of interest on at least an annual basis. The Company
treats such investments as having a maturity of one year or less for purposes of
compliance with investment limitations provided in the Senior Discount Note
Indenture (see Note 5).
3. PROPERTY
Property consists of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
Manufacturing equipment and tools............................... $ 1,363 $ 4,870 $ 6,403
<S> <C> <C> <C>
Office furniture and equipment.................................. 3,639 4,111 5,712
Engineering equipment........................................... 1,639 2,119 2,604
--------- --------- -----------
Total........................................................... 6,641 11,100 14,719
Accumulated depreciation and amortization....................... (3,770) (3,561) (5,590)
--------- --------- -----------
Total........................................................... $ 2,871 $ 7,539 $ 9,129
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-11
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
4. ACCRUED LIABILITIES
Accrued liabilities consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
Accrued contractual obligations..................................... $ 325 $ 273 $ 315
<S> <C> <C> <C>
Deferred revenue.................................................... 210 190 192
Warranty reserve.................................................... 130 15 14
Other............................................................... 224 503 469
--------- --------- -----------
Total............................................................... $ 889 $ 981 $ 990
--------- --------- -----------
--------- --------- -----------
</TABLE>
5. SENIOR DISCOUNT NOTES
In 1995, the Company received $175,837,000 in gross proceeds from the
issuance of $325,000,000 aggregate principal amount at maturity of its 13%
Senior Discount Notes due June 15, 2005 and related warrants to purchase
1,300,000 shares of common stock at $0.01 per share (the Notes and Common Stock
Warrants). Aggregate proceeds of $2,974,000 were attributed to the Common Stock
Warrants. Commencing December 15, 2000, interest will be payable on the Notes
semi-annually in arrears on each December 15 and June 15 at the rate of 13% per
annum.
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on and after June 15, 2000 at specified redemption prices for the
relevant year of redemption, plus accrued and unpaid interest to the date of
redemption. In addition, the Company may redeem in cash at its option at any
time prior to June 15, 1998 up to 25% of the aggregate principal amount of the
Notes at 113% of the accreted value thereof on the date of redemption plus
accrued and unpaid interest, if any, from the proceeds of a public equity
offering (as defined). There are no sinking fund requirements. In the event of a
change of control (as defined), each holder of the Notes has the option to
require the Company to repurchase such holder's Notes at 101% of the accreted
value thereof on the date of repurchase (if prior to June 15, 2000) or 101% of
the aggregate principal face amount thereof, plus accrued and unpaid interest,
if any, to the repurchase date (if on or after June 15, 2000). The Notes rank
senior in right of payment to all existing and future subordinated indebtedness
of the Company and pari passu with all existing and future senior indebtedness
of the Company. The Indenture pursuant to which the Senior Discount Notes were
issued contains certain covenants that, among other things, limit the ability of
the Company to make dividend payments, make investments, repurchase outstanding
shares of stock, prepay other debt obligations, incur additional indebtedness,
effect asset dispositions, engage in sale and leaseback transactions,
consolidate, merge or sell all or substantially all of the Company's assets,
engage in transactions with affiliates, or effect certain transactions by its
restricted subsidiaries (as defined). At December 31, 1995, a portion of the
Company's short-term investments had been made in corporate debt securities and
auction-rate preferred stock in amounts which exceeded the investment
limitations under the Indenture. The Company was otherwise in compliance with
the financial covenants of the Indenture at December 31, 1995. The Company
subsequently adjusted its investment portfolio to bring it into compliance with
such limitations within the period provided by the Indenture.
6. SERIES CC REDEEMABLE CONVERTIBLE PREFERRED STOCK
In conjunction with the proposed initial public offering of the Company's
common stock, all outstanding shares of Series CC redeemable convertible
preferred stock will automatically convert into common stock upon the closing of
the offering (see Note 1).
F-12
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
6. SERIES CC REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
At December 31, 1995 and June 30, 1996, 3,215,768 shares of Series CC
redeemable convertible preferred stock were designated and outstanding. Each
share is convertible into one share of common stock, subject to adjustments for
events of dilution. In addition to converting upon an initial public offering,
the Series CC redeemable convertible preferred stock is also automatically
convertible into common stock upon the election of the holders of more than 60%
of the outstanding shares of such series, or at such time as fewer than 500,000
shares remain outstanding. Each share has the same voting rights as the number
of shares of common stock into which it is convertible.
Holders are entitled to noncumulative dividends of $0.964 per share or, in
the event of liquidation or merger, liquidation distributions of $9.64 per share
in preference to all convertible preferred stock. The holders of Series CC
preferred stock have the right of first refusal to purchase a pro rata portion
of preferred or common stock the Company proposes to issue to any public or
private utility. Further, the holders of Series CC preferred stock have the
right of first refusal to purchase a pro rata portion of any preferred or common
stock that any subsidiary of the Company proposes to issue to any public or
private utility if the subsidiary's business is unrelated to the market area of
such utility or if such securities are convertible into common or preferred
stock of the Company. The right of first refusal terminates three years after an
initial public offering.
Under a Put Agreement dated August 15, 1994 (the Put Agreement), the holders
of Series CC preferred stock, acting as a group representing not less than 25%
of the outstanding Series CC preferred stock, have the right to "put" those
shares to the Company after May 12, 2001 (Investor Put) at the higher of $9.64
per share or the fair market value at the time of exercise of the Investor Put
(the Redemption Price). The Investor Put will be extinguished in the event of an
initial pubic offering by the Company of its common stock in which the net
proceeds to the Company are at least $20 million, in the event of the sale of
the Company or if not exercised by November 13, 2002. In the event the Investor
Put is not completed by the Company for any reason within six months after the
right is exercised then (a) the Redemption Price shall increase annually from
the date the Investor Put was exercised at a rate of 15% for the first year, and
five additional percentage points for each year thereafter (pro rated for any
partial year), and (b) the holders of Series CC preferred stock shall have the
right to initiate a separate demand registration at the Company's expense only
for the holders of shares with rights under the Investor Put. In the event the
fair market value of the Series CC preferred stock exceeds $96.40 (as adjusted
for any stock split, stock dividend, or other combinations or reclassifications)
per share at the time the Investor Put is exercised, the amount payable to the
holders of the Series CC preferred stock who participate in the Investor Put may
be paid 50% at closing and the balance, plus interest at the prime rate, on the
first anniversary of the closing. The Company's obligations under the Put
Agreement will be suspended for such time that performance of such obligations
would result in a breach of, a default, or an event of default under the
Indenture governing the Company's Senior Discount Notes or would otherwise
result in a violation of law.
F-13
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (DEFICIT)
CONVERTIBLE PREFERRED STOCK -- In conjunction with the proposed initial
public offering of the Company's common stock, all outstanding shares of
convertible preferred stock will automatically convert into common stock upon
the closing of the offering (See Note 1). At December 31, 1995, convertible
preferred stock consists of:
<TABLE>
<CAPTION>
AMOUNT (NET OF
ISSUE ISSUANCE LIQUIDATION
DESIGNATED OUTSTANDING PRICE COSTS) PREFERENCE
---------- ----------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Series AA...................................... 5,000,000 5,000,000 $ 1.00 $ 4,928,000 $ 5,000,000
Series BB...................................... 4,256,733 3,489,845 4.75 16,073,000 16,577,000
Series DD...................................... 647,923 646,830 9.64 6,194,000 6,235,000
---------- ----------- -------------- -------------
9,904,656 9,136,675 $ 27,195,000 $ 27,812,000
---------- ----------- -------------- -------------
---------- ----------- -------------- -------------
</TABLE>
Significant terms of the convertible preferred stock are as follows:
- Each share is convertible into one share of common stock, subject to
adjustments for events of dilution. Shares of Series AA, BB and DD
preferred stock will automatically be converted into common stock upon
completion of a public offering with net proceeds in excess of $20 million
and at a price equal to or greater than $4.00, $12.00 ($24.10 after
January 1, 1997) and $19.28 ($24.10 after January 1, 1997) per common
share, respectively (see Note 1). Each series of preferred stock is also
automatically convertible into common stock upon the election of the
holders of more than 50% of the outstanding shares of such series, or at
such time as fewer than 500,000 shares (1,000,000 shares in the case of
Series AA preferred stock) of such series (as adjusted for stock splits,
stock dividends and combinations) remain outstanding.
- Each share has the same voting rights as the number of shares of common
stock into which it is convertible.
- Holders of preferred stock are entitled to noncumulative dividends or, in
the event of liquidation or merger, distributions in the order of
preference shown as follows:
<TABLE>
<CAPTION>
NON-CUMULATIVE LIQUIDATION
DIVIDENDS PER DISTRIBUTION
SHARE PER SHARE
--------------- -------------
<S> <C> <C>
Series BB....................................................... $ 0.475 $ 4.75
Series AA....................................................... $ 0.100 $ 1.00
Series DD....................................................... $ 0.964 $ 9.64
</TABLE>
- Each series of preferred stock must receive their full dividend before the
next series receives any dividends. Additionally, any dividends exceeding
these minimum amounts are shared between the common and preferred shares
on a pro-rata basis.
- Each series of preferred stock must receive their full preferential
amounts before the next series receives any liquidation distributions.
Additionally, any funds available for distribution in excess of these
minimum amounts, plus $0.50 per share for common stock, is to be
distributed ratably among the holders of the common, redeemable
convertible preferred and convertible preferred stock.
- The holders of at least 5,000 shares of Series AA or BB preferred stock
have the right of first refusal to purchase their pro rata portion of
certain issues of preferred or common stock of the Company on the same
terms and conditions as the Company offers such securities to other
investors, subject to certain conditions and limitations. The right of
first refusal of all holders terminates upon the registered public
offering of the Company's common stock with net proceeds of at least $20
million.
F-14
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
COMMON STOCK -- At December 31, 1995 and June 30, 1996, the Company had
reserved shares of common stock for issuance as follows:
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
31, 1995 1996
---------- -----------
Conversion of preferred stock.......................... 12,352,443 12,352,846
<S> <C> <C>
Issuance under stock option plans...................... 2,630,815 2,559,737
Issuance upon exercise of common stock warrants........ 1,326,916 1,326,691
Issuance upon exercise and conversion of Series BB
preferred stock warrants.............................. 766,888 766,485
---------- -----------
Total.................................................. 17,077,062 17,005,759
---------- -----------
---------- -----------
</TABLE>
WARRANTS -- At December 31, 1995, the following warrants to purchase stock
were outstanding:
Warrants to purchase 1,155 shares of common stock at $253.84 per share are
exercisable and expire at various dates through December 9, 1996, or, with
notice from the Company immediately prior to (a) the closing of a firm
committment underwritten initial public offering of the Company's securities,
(b) the merger of the Company into or with another corporation in which the
Company is not the survivor and the stockholders of the Company own less than
50% of the voting securities of the surviving corporation, or (c) the sale,
transfer or lease of all or substantially all of the assets of the Company.
Warrants to purchase 375 shares (150 shares at June 30, 1996) of common
stock at $40.00 per share, are exercisable and expire at various dates through
February 6, 1997, or, with notice from the Company immediately prior to (a) the
merger of the Company into or with another corporation in which the stockholders
of the Company hold less than 50% of the voting securities of the surviving
corporation or its parent; (b) the sale, conveyance or disposition of all or
substantially all of the assets of the Company, or (c) the liquidation,
dissolution or winding up of the Company.
Warrants to purchase 25,000 shares of common stock at $4.00 per share become
exercisable over a five-year period at the rate of 20% per year commencing
August 21, 1992, subject to certain conditions. The purchase right may not be
exercised prior to either (a) February 24, 1998, (b) the effective date of a
registration statement filed by the Company for an initial public offering of
its common stock, (c) five days prior to the merger of the Company with or into
another corporation as a result of which the stockholders of the Company hold
less than 50% of the equity securities of the surviving corporation or its
parent, or (d) five days prior to a sale, conveyance or disposition of all or
substantially all of the assets of the Company. The warrants expire on February
24, 1999, or, with written notice from the Company, two days prior to (a) the
merger of the Company with or into a corporation as a result of which the
stockholders of the Company hold less than 50% of the equity securities of the
surviving corporation or its parent (unless the securities received are freely
tradable and listed on a national securities exchange or on the Nasdaq National
Market), (b) the sale, conveyance or disposition of all or substantially all of
the assets of the Company, or (c) the liquidation, dissolution or winding up of
the Company.
In connection with the sale of Series BB preferred stock in 1993 certain
purchasers were granted warrants to purchase an additional 766,888 shares
(766,485 shares at June 30, 1996) of Series BB preferred stock at $4.75 per
share. The warrants are exercisable from the date of grant through the earlier
of (a) September 30, 1998 or (b) with written notice from the Company,
immediately prior to (i) the closing of a firm committment underwritten initial
public offering of the Company's securities (see Note 1), (ii) the merger of the
Company into or with another corporation in which the Company is not the
survivor and the stockholders of the Company hold less than 50% of the voting
securities of the surviving corporation, or (iii) the sale, transfer or lease of
all or substantially all of the assets of the Company.
F-15
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Warrants to purchase 1,300,000 shares of common stock at $0.01 per share
were granted in connection with the issuance and sale in 1995 of the Company's
Senior Discount Notes (see Note 5). The warrants expire on the earliest to occur
of (a) June 15, 2005, (b) 90 days after a change of control of the Company (as
defined) (see Note 1), and (c) 90 days after the consummation of a public equity
offering of the Company (as defined). The warrants may be exercised on the
earliest to occur of (a) the seventh day prior to a change of control of the
Company (as defined), (b) the consummation of a public equity offering (as
defined), or (c) 90 days prior to expiration.
STOCK OPTION PLANS -- The Company has stock option plans (the Plans) under
which shares are reserved for issuance to officers, directors, employees and
consultants. Under the Plans, both incentive and nonstatutory stock options to
purchase common stock may be granted or restricted common stock may be sold at
prices not less than the fair market value of the common stock at the date of
grant. The fair market value and terms of exercise are determined by the Board
of Directors. Options outstanding at December 31, 1995 generally become
exercisable ratably over five years, commencing six months from the date of the
individual's employment or the date of grant and expire ten years from the date
of grant. At December 31, 1995, there were 913,500 shares available for future
grants under the Plans.
A summary of stock option activity under the Plans on a combined basis is as
follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------
NUMBER OF
SHARES PRICE PER SHARE
----------- ----------------
<S> <C> <C>
Balances, January 1, 1994......................................................... 809,217 $ 0.10 to $0.50
Granted........................................................................... 2,223,925 0.50 to 1.00
Exercised......................................................................... (266,828) 0.50 to 1.00
Cancelled......................................................................... (146,000) 0.50 to 1.00
-----------
Balances, December 31, 1994 2,620,314 0.10 to 1.00
Granted........................................................................... 257,300 1.00 to 3.00
Exercised......................................................................... (1,159,048) 0.10 to 1.00
Cancelled......................................................................... (81,749) 0.10 to 3.00
-----------
Balances, December 31, 1995 1,636,817 0.10 to 3.00
Granted*.......................................................................... 371,655 3.50 to 6.00
Exercised*........................................................................ (71,078) 3.00 to 6.00
Cancelled*........................................................................ (47,826) 1.00 to 4.00
-----------
Balances, June 30, 1996*.......................................................... 1,889,568 $ 0.10 to $6.00
-----------
-----------
</TABLE>
- ---------
* Unaudited
RESTRICTED STOCK -- Certain officers, employees and consultants exercised
unvested stock options with cash or full recourse notes. The related shares of
common stock are subject to repurchase as they continue to vest in accordance
with the terms of the original stock option. The related notes bear interest at
rates ranging from 6.04% to 7.92% and are due in 1999 through 2000. At December
31, 1995, 923,578 outstanding shares of such stock were subject to repurchase at
the original exercise price (844,454 shares at June 30, 1996).
F-16
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
8. INCOME TAXES
No federal income taxes were provided in 1993, 1994, 1995 or for the six
months ended June 30, 1996 due to the Company's net losses. The provisions for
income taxes for these periods represent various state minimum income and
franchise taxes. The provision for income taxes differs from the amount computed
by applying the federal statutory income tax rate to the loss before income
taxes as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS
------------------------------- ENDED JUNE
1993 1994 1995 30, 1996
--------- --------- --------- -----------
Taxes computed at federal statutory rate............. 35.0% 35.0% 35.0% 35.0%
<S> <C> <C> <C> <C>
State income taxes, net of federal effect............ 4.5 4.5 4.5 4.5
Research tax credits................................. 2.8 3.1 1.0 0.6
Change in valuation allowance........................ (42.2) (42.5) (40.4) (40.0)
--------- --------- --------- -----------
Total provision...................................... 0.1% 0.1% 0.1% 0.1%
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
The tax effects of temporary differences that give rise to deferred taxes
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
Deferred tax assets:
<S> <C> <C> <C>
Expenses not currently deductible for tax purposes......... $ 1,504 $ 2,182 $ 1,995
Senior discount note interest.............................. -- 3,817 8,274
Tax net operating loss and credit carryforwards............ 18,939 30,910 40,723
Research and development expenses capitalized for tax
purposes.................................................. 1,991 3,645 2,044
--------- --------- -----------
Total deferred tax assets.................................... 22,434 40,554 53,036
Valuation allowance on deferred tax assets................... (22,434) (40,554) (53,036)
--------- --------- -----------
Net deferred income taxes.................................... $ -- $ -- $ --
--------- --------- -----------
--------- --------- -----------
</TABLE>
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $82,500,000 and $7,300,000 available to offset future federal and
California taxable income, respectively. The extent to which the loss
carryforwards can be used to offset future taxable income may be limited,
depending on the extent of ownership changes within any three-year period as
provided in the Tax Reform Act of 1986 and the California Conformity Act of
1987. Such federal carryforwards expire in 2001 through 2010. Such state
carryforwards expire in 1996 through 2000.
Equity issuances in April 1991 triggered such a limitation on loss
carryforwards. At that time, the Company had federal net operating loss
carryforwards of approximately $10,500,000. As of December 31, 1995,
approximately $4,000,000 of this net operating loss remains limited to an annual
usage of approximately $1,400,000 for federal income tax purposes. Any
significant stock issuances after December 31, 1995 will likely result in
another such ownership change. The annual limitation for utilization of the net
operating losses and tax credit carryforwards incurred up to the point of change
will be equal to the fair market value of the Company immediately before such
change multiplied by the then current long-term tax exempt interest rate.
The Company has capitalized approximately $59,400,000 of research and
development expenditures for California purposes which are available for
amortization in future years. Realization of the deferred tax assets associated
with these expenditures is contingent upon the amount of income or loss
apportioned to
F-17
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
8. INCOME TAXES (CONTINUED)
California during the subject amortization periods. Research and development tax
credit carryforwards of approximately $1,800,000 and $900,000 are also available
to offset future federal and California income taxes payable, respectively.
A valuation allowance has been recorded against tax assets for which
realization is uncertain. Based upon the Company's history of operating losses
and the expiration dates of the loss carryforwards, the Company has recorded a
valuation allowance to the full extent of its net deferred tax assets.
9. CONTINGENCIES AND COMMITMENTS
The industry in which the Company operates is characterized by frequent
litigation regarding patent and other intellectual property rights. The Company
is party to a trademark claim. Although the ultimate outcome of this matter is
not presently determinable, management believes that its resolution will not
have a material effect on the Company's financial position or results of
operations.
At December 31, 1994 and 1995 and June 30, 1996, equipment with a net book
value of $456,000, $854,000 and $822,000 (net of accumulated amortization of
$1,495,000, $372,000 and $536,000, respectively), has been leased under capital
leases.
The Company leases its manufacturing and office facilities under a
noncancelable operating lease which expires in December 2000. Deferred rent
results from the difference between facilities rent expense recognized on the
straight-line basis over the term of the lease as compared to the contractual
payments made.
Future minimum annual rental payments under capital and operating leases are
as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING DECEMBER 31, LEASES LEASES
- ----------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
1996..................................................................................... $ 360 $ 1,087
1997..................................................................................... 315 1,059
1998..................................................................................... 158 1,040
1999..................................................................................... 91 1,046
2000..................................................................................... 54 1,081
Thereafter............................................................................... -- 749
----------- -----------
Total minimum lease payments............................................................. 978 $ 6,062
-----------
-----------
Amount representing interest............................................................. (158)
-----------
Present value of minimum lease payments.................................................. $ 820
-----------
-----------
</TABLE>
Facilities rent expense was $245,000, $421,000, $901,000, and $599,000 for
1993, 1994, 1995 and for the six months ended June 30, 1996, respectively. Rent
expense is net of sublease income of $296,000 and $175,000 in 1993 and 1994,
respectively.
10. SUBSEQUENT EVENTS
On June 26, 1996, the Company's stockholders approved the reincorporation of
the Company in Delaware.
* * * * *
F-18
<PAGE>
[COMPANY LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 59,483
NASD filing fee................................................. 17,750
Nasdaq National Market listing fee.............................. 50,000
Printing and engraving costs.................................... *
Legal fees and expenses......................................... *
Accounting fees and expenses.................................... *
Blue Sky fees and expenses...................................... *
Transfer Agent and Registrar fees............................... *
Directors and Officers insurance coverage premiums.............. *
Miscellaneous expenses.......................................... *
---------
Total..................................................... $ *
---------
---------
</TABLE>
- ---------
*To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 7 of the Registrant's Restated Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permissible under
Delaware law.
Article 6 of the Registrant's Bylaws provides for the indemnification of
officers, directors, employees and agents of the corporation if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to the best interest of the corporation, and, with respect to any criminal
action or proceeding the indemnified party had no reason to believe his conduct
was unlawful.
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
The Registrant has entered into indemnification agreements with its
directors and executive officers, and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors, and by the Registrant of the Underwriters, for
certain liabilities arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1, 1993, the Registrant has issued and sold (without payment
of any selling commission to any person except as noted below) the following
unregistered securities:
(1) From inception of each respective plan, the Registrant issued and
sold an aggregate of 1,956,790 shares of Common Stock to employees,
directors and consultants at prices ranging from an aggregate of $0.10 to
$6.00, upon exercise of incentive stock options under the Registrant's 1992
Stock Option Plan and 1994 Stock Plan, or as stock purchases in connection
with their employment with or services to the Company.
(2) In October 1993 and December 1993, the Registrant issued 2,963,530
and 526,315 shares of Series BB Preferred Stock, respectively, and warrants
to purchase 661,625 and 105,263 shares of
II-1
<PAGE>
Series BB Preferred Stock, respectively, to a group of 73 investors for an
aggregate purchase price of $16,576,763.75. The Company paid placement fees
of $419,783 to Hambrecht & Quist in connection with these issuances.
(3) In August 1994, the Registrant issued and sold 3,215,768 shares of
Series CC Preferred Stock, respectively, to a group of 28 investors for an
aggregate purchase price of $31,000,003.52. The Company paid placement fees
of $639,805 to Barclay's Bank and $615,853 to Toronto Dominion Bank in
connection with these issuances.
(4) From December 1994 to February 1995, the Registrant issued and sold
an aggregate of 646,830 shares of Series DD Preferred Stock to a group of 25
investors for an aggregate cash purchase price of $6,235,441.20.
(5) In June 1995 and December 1995, the Registrant sold 235,000 units
and 90,000 units consisting of $235,000,000 and $90,000,000 principal amount
at maturity, respectively, of 13% Senior Discount Notes due 2005 and
warrants to purchase 940,000 shares and 360,000 shares, respectively, of
Common Stock of the Company at an exercise price of $.01 per Warrant. The
Company paid placement fees of $4,220,085 to Smith Barney Inc. and
$1,050,000 to Toronto Dominion Bank in connection with these issuances.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act, as transactions by an issuer not involving a public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under such Rule 701. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in such transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1A Restated Certificate of Incorporation.
3.1B* Form of Restated Certificate of Incorporation to be filed upon the closing of the offering
made under this Registration Statement.
3.2 Bylaws.
4.1* Specimen Common Stock Certificate.
4.2 Indenture between the Company and the Bank of New York dated June 15, 1995, including form
of Senior Discount Note.
4.3 Warrant Agreement between the Company and the Bank of New York dated June 15, 1995,
including form of Warrant.
4.4 Notes Registration Rights Agreement dated June 15, 1995 by and between the Company and Smith
Barney Inc.
4.5 Warrants Registration Rights Agreement dated June 15, 1995 by and between the Company and
Smith Barney Inc.
4.6 First Supplemental Indenture between the Company and the Bank of New York dated November 21,
1995.
4.7 First Supplemental Warrant Agreement between the Company and the Bank of New York dated
November 21, 1995.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------
<C> <S>
4.8 First Supplemental Notes Registration Rights Agreement dated November 21, 1995 by and
between the Company and Smith Barney Inc.
4.9 First Supplemental Warrants Registration Rights Agreement dated November 21, 1995 by and
between the Company and Smith Barney Inc.
4.10 Form of Warrant to purchase shares of Series BB Preferred Stock.
4.11 Warrant Agreement between the Company and Axonn Corporation dated August 12, 1992.
4.12 Form of Warrant Agreement between the Company and Diablo Research Corporation.
4.13 Form of Series E Warrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement for directors and officers.
10.2(a) 1992 Stock Option Plan and forms of agreements thereunder.
10.2(b) 1994 Stock Plan and forms of agreements thereunder.
10.3 1996 Employee Stock Purchase Plan.
10.4 Shareholders' Agreement between the Company and certain shareholders dated August 15, 1994,
as amended by Amendment No. 1 on December 22, 1994, Amendment No. 2 on June 15, 1995 and
Amendment No. 3 on November 21, 1995.
10.5 Lease between the Company and WDT Shoreway dated April 6, 1989 for the Company's San Carlos
headquarters.
10.6 Restricted Stock Purchase Agreement between the Company and John Seidl dated December 27,
1994.
10.7 Restricted Stock Purchase Agreement between the Company and James Jennings dated August 1,
1995.
10.8 Restricted Stock Purchase Agreement between the Company and Philip Mallory dated July 21,
1995.
10.9 Restricted Stock Purchase Agreement between the Company and Larsh Johnson dated August 1,
1995.
10.10+ License Agreement between the Company and Axonn Corporation dated August 21, 1992, as
amended by an Addendum and a Second Addendum, each dated November 8, 1993.
10.11+ License Agreement between the Company and Axonn Corporation dated March 25, 1996.
10.12+ License Agreement between the Company and Life Point Systems Limited Partnership dated
August 12, 1994.
10.13 Agreement between the Company and James Jennings dated July 11, 1994.
10.14 Form of Employee Severance Agreement
10.15 Purchase Agreement between the Company and Smith Barney Inc. dated June 15, 1995.
10.16 Purchase Agreement between the Company and Smith Barney Inc. dated November 21, 1995.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------
<C> <S>
10.17 Form of Promissory Note between the Company and certain officers of the Company in
connection with the purchase of restricted stock.
11.1 Statement regarding computation of per share earnings.
21.1 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent and Report on Schedule.
23.3 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule
</TABLE>
- ---------
* To be filed by amendment.
+ Confidential treatment requested as to a portion of this exhibit.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
The following financial statement schedule is filed as part of this
Registration Statement:
Schedule II -- Valuation and Qualifying Accounts and Reserves.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Carlos State of
California on the 2nd day of August, 1996.
CELLNET DATA SYSTEMS, INC.
By: /s/ JOHN M. SEIDL
-----------------------------------
John M. Seidl,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John M. Seidl and Paul G. Manca and each of them,
his attorneys-in-fact, each with the power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------- ------------------
<C> <S> <C>
/s/ JOHN M. SEIDL President, Chief Executive Officer
------------------------------------------- and Director (Principal Executive August 2, 1996
(John M. Seidl) Officer)
/s/ PAUL G. MANCA Vice President and Chief Financial
------------------------------------------- Officer (Principal Financial and August 2, 1996
(Paul G. Manca) Accounting Officer)
/s/ PAUL M. COOK
------------------------------------------- Chairman of the Board, Director August 2, 1996
(Paul M. Cook)
/s/ NEAL M. DOUGLAS
------------------------------------------- Director August 2, 1996
(Neal M. Douglas)
/s/ WILLIAM C. EDWARDS
------------------------------------------- Director August 2, 1996
(William C. Edwards)
/s/ WILLIAM HART
------------------------------------------- Director August 2, 1996
(William Hart)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------- ------------------
<C> <S> <C>
/s/ BRIAN KWAIT
------------------------------------------- Director August 2, 1996
(Brian Kwait)
/s/ NANCY E. PFUND
------------------------------------------- Director August 2, 1996
(Nancy E. Pfund)
/s/ PAUL J. SALEM
------------------------------------------- Director August 2, 1996
(Paul J. Salem)
/s/ HENRY B. SARGENT
------------------------------------------- Director August 2, 1996
(Henry B. Sargent)
</TABLE>
II-6
<PAGE>
SCHEDULE II
CELLNET DATA SYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
ADDITIONS (DEDUCTIONS):
BALANCE AT CHARGED TO DEDUCTIONS: TRANSFERS
BEGINNING OF COSTS AND WRITE-OFFS OF BETWEEN BALANCE AT
YEAR EXPENSES ACCOUNTS ACCOUNTS END OF YEAR
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts receivable
Year ended December 31:
1993....................................... $ 60 $ -- $ -- $ (1) $ 59
1994....................................... 59 -- (34) -- 25
1995....................................... 25 -- -- -- 25
Warranty reserves
Year ended December 31:
1993....................................... $ 495 $ 315 $ -- $ (110) $ 700
1994....................................... 700 20 (564) (26) 130
1995....................................... 130 16 (85) (46) 15
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- --------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1A Restated Certificate of Incorporation............................................
3.1B* Form of Restated Certificate of Incorporation to be filed upon the closing of the
offering made under this Registration Statement.
3.2 Bylaws...........................................................................
4.1* Specimen Common Stock Certificate.
4.2 Indenture between the Company and the Bank of New York dated June 15, 1995,
including form of Senior Discount Note..........................................
4.3 Warrant Agreement between the Company and the Bank of New York dated June 15,
1995, including form of Warrant.................................................
4.4 Notes Registration Rights Agreement dated June 15, 1995 by and between the
Company and Smith Barney Inc....................................................
4.5 Warrants Registration Rights Agreement dated June 15, 1995 by and between the
Company and Smith Barney Inc....................................................
4.6 First Supplemental Indenture between the Company and the Bank of New York dated
November 21, 1995...............................................................
4.7 First Supplemental Warrant Agreement between the Company and the Bank of New York
dated November 21, 1995.........................................................
4.8 First Supplemental Notes Registration Rights Agreement dated November 21, 1995 by
and between the Company and Smith Barney Inc....................................
4.9 First Supplemental Warrants Registration Rights Agreement dated November 21, 1995
by and between the Company and Smith Barney Inc.................................
4.10 Form of Warrant to purchase shares of Series BB Preferred Stock..................
4.11 Warrant Agreement between the Company and Axonn Corporation dated August 12,
1992............................................................................
4.12 Form of Warrant Agreement between the Company and Diablo Research Corporation....
4.13 Form of Series E Warrant.........................................................
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement for directors and officers.....................
10.2(a) 1992 Stock Option Plan and forms of agreements thereunder........................
10.2(b) 1994 Stock Plan and forms of agreements thereunder...............................
10.3 1996 Employee Stock Purchase Plan................................................
10.4 Shareholders' Agreement between the Company and certain shareholders dated August
15, 1994, as amended by Amendment No. 1 on December 22, 1994, Amendment No. 2 on
June 15, 1995 and Amendment No. 3 on November 21, 1995..........................
10.5 Lease between the Company and WDT Shoreway dated April 6, 1989 for the Company's
San Carlos headquarters.........................................................
10.6 Restricted Stock Purchase Agreement between the Company and John Seidl dated
December 27, 1994...............................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- --------------------------------------------------------------------------------- ---------
<C> <S> <C>
10.7 Restricted Stock Purchase Agreement between the Company and James Jennings dated
August 1, 1995..................................................................
10.8 Restricted Stock Purchase Agreement between the Company and Philip Mallory dated
July 21, 1995...................................................................
10.9 Restricted Stock Purchase Agreement between the Company and Larsh Johnson dated
August 1, 1995..................................................................
10.10+ License Agreement between the Company and Axonn Corporation dated August 21,
1992, as amended by an Addendum and a Second Addendum, each dated November 8,
1993............................................................................
10.11+ License Agreement between the Company and Axonn Corporation dated March 25,
1996............................................................................
10.12+ License Agreement between the Company and Life Point Systems Limited Partnership
dated August 12, 1994...........................................................
10.13 Agreement between the Company and James Jennings dated July 11, 1994.............
10.14 Form of Employee Severance Agreement.............................................
10.15 Purchase Agreement between the Company and Smith Barney Inc. dated June 15,
1995............................................................................
10.16 Purchase Agreement between the Company and Smith Barney Inc. dated November 21,
1995............................................................................
10.17 Form of Promissory Note between the Company and certain officers of the Company
in connection with the purchase of restricted stock.............................
11.1 Statement regarding computation of per share earnings............................
21.1 Subsidiaries of the Registrant...................................................
23.1 Independent Auditors' Consent and Report on Schedule.............................
23.3 Consent of Counsel (included in Exhibit 5.1).....................................
24.1 Power of Attorney (see page II-5)................................................
27.1 Financial Data Schedule..........................................................
</TABLE>
- ---------
* To be filed by amendment.
+ Confidential treatment requested as to a portion of this exhibit.
<PAGE>
CELLNET DATA SYSTEMS, INC.
RESTATED CERTIFICATE OF INCORPORATION
CellNet Data Systems, Inc., a corporation organized and existing under and
by virtue of the Delaware General Corporation Law, hereby certifies as follows:
1. The name of this corporation is CellNet Data Systems, Inc. and the
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 7, 1993.
2. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware, this Restated Certificate of
Incorporation restates and further integrates and further amends the provisions
of this corporation's Certificate of Incorporation.
3. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as set forth in Schedule A attached hereto.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed under the seal of the corporation this ____ day of ______, 1996.
CELLNET DATA SYSTEMS, INC.
By:
------------------------------
John M. Seidl, President and
Chief Executive Officer
ATTEST:
- ----------------------------
David L. Perry, Secretary
<PAGE>
SCHEDULE A
RESTATED CERTIFICATE OF INCORPORATION
OF
CELLNET DATA SYSTEMS, INC.
FIRST. The name of the corporation is CellNet Data Systems, Inc. (the
"Corporation").
SECOND. The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware
19801. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. This Corporation is authorized to issue two classes of shares,
designated "Common Stock," $0.001 par value and "Preferred Stock," $0.001 par
value, respectively. The number of shares of Common Stock authorized to be
issued is fifty million (50,000,000) and the number of shares of Preferred Stock
authorized to be issued is fifteen million (15,000,000), five million
(5,000,000) of which shall be designated as "Series AA Preferred Stock," four
million two hundred fifty-six thousand seven hundred thirty-three (4,256,733) of
which shall be designated as "Series BB Preferred Stock," three million two
hundred fifteen thousand seven hundred sixty-eight (3,215,768) of which shall be
designated as "Series CC Preferred Stock" and six hundred forty-six thousand
eight hundred thirty (646,830) of which shall be designated as "Series DD
Preferred Stock."
The Board of Directors shall have the authority to issue the balance of the
authorized but undesignated Preferred Stock from time to time in one or more
series and to fix the number of shares of such series and to determine the
designation of any such series and to determine or alter the powers,
preferences, rights, qualifications, limitations or restrictions granted to or
imposed upon any wholly unissued series. The Board of Directors, within the
limits and restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series, may
increase or decrease (but not below the number of shares in any such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
The powers, preferences, rights, qualifications, limitations or
restrictions granted to or imposed upon the Series AA, Series BB, Series CC and
Series DD Preferred Stock are as follows:
(a) DIVIDENDS.
(1) Subject to the rights of series of Preferred Stock which may
from time to time come into existence, the holders of outstanding Series AA,
Series BB, Series CC and Series DD Preferred Stock shall be entitled to
receive in any fiscal year, if, when and as declared by the Board of
Directors, out of any assets at the time legally available therefor,
distributions (as defined below) in cash at the rate of $0.10 per share of
Series AA Preferred Stock per annum, $0.475 per share of Series BB Preferred
Stock per annum,
-2-
<PAGE>
$0.964 per share of Series CC Preferred Stock per annum and $0.964 per share of
Series DD Preferred Stock per annum. Distributions may be declared or paid upon
shares of Common Stock in any fiscal year of the Corporation only if
distributions shall have been paid or declared and set apart upon all shares of
Series AA, Series BB, Series CC and Series DD Preferred Stock in the full annual
amount set forth above for such fiscal year. No distributions shall be declared
or paid upon the Series AA Preferred in any fiscal year unless distributions
shall have been paid or declared and set apart upon all shares of Series BB and
Series CC Preferred Stock in the full amount set forth above for each fiscal
year. No distributions shall be declared or paid upon the Series BB Preferred
Stock in any fiscal year unless distributions shall have been paid or declared
and set apart upon all shares of Series CC Preferred Stock in the full amount
set forth above for each fiscal year. No distributions shall be declared or
paid upon the Series DD Preferred Stock in any fiscal year unless distributions
shall have been paid or declared and set apart upon all shares of Series AA,
Series BB and Series CC Preferred Stock in the full amount set forth above for
each fiscal year. After payment of the distribution preference for the
Series AA, Series BB, Series CC, and Series DD Preferred Stock stated above, any
additional distributions shall be distributed on a pro rata basis to the holders
of Common Stock, Series AA, Series BB, Series CC and Series DD Preferred Stock
based upon the number of shares held by each holder on an as-converted into
Common Stock basis. The right to such distributions on Series AA, Series BB,
Series CC and Series DD Preferred Stock shall not be cumulative, and no right
shall accrue to holders of Series AA, Series BB, Series CC and Series DD
Preferred Stock by reason of the fact that distributions on said shares are not
declared in any prior year, nor shall any undeclared or unpaid dividend bear or
accrue interest.
(2) For purposes of this Section (a), unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property whether by
way of dividend or otherwise, payable other than in Common Stock, directly or
indirectly in respect of or the purchase or redemption of shares of this
Corporation (other than repurchases at cost of Common Stock held by officers,
directors, employees or consultants of this Corporation upon termination of
their employment or services pursuant to agreements providing for such
repurchase) for cash or property, including any such transfer, purchase or
redemption by a subsidiary of this Corporation.
(b) PREFERENCE ON LIQUIDATION.
(1) Subject to the rights of series of Preferred Stock which may from
time to time come into existence (subject to the limitations of subsection
(b)(1)(i) below), in the event of any voluntary or involuntary liquidation
(whether complete or partial), dissolution or winding up of the Corporation, the
assets available for distribution, after satisfaction of all obligations to
purchase, redeem or retire any outstanding capital stock, shall be distributed
in accordance with the following:
(i) The holders of shares of Series CC Preferred Stock then
outstanding shall be entitled to be paid, out of the assets of the Corporation
available for distribution to its stockholders, whether from capital, surplus or
earnings, before any payment shall be made in respect of any other series of the
Corporation's Preferred Stock or the Corporation's Common Stock, an amount equal
to $9.64 per share of Series CC Preferred Stock plus all declared and unpaid
dividends thereon to the date fixed for distribution for each share of Series CC
Preferred Stock held (the "Series CC Liquidation Value"). If upon liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of the Series CC Preferred Stock the full amounts to which they shall be
entitled pursuant to this subsection (i), then the assets of the Corporation
shall be distributed on a pro rata basis to the holders of the
-3-
<PAGE>
Series CC Preferred Stock, based upon the preferential amounts applicable to the
number of shares of Series CC Preferred Stock then held by each holder. Any
series of Preferred Stock which are Permitted Issuances as defined in
Section (e) may participate on a parity basis with the Series CC Preferred Stock
in a liquidation if the original purchase price per share of Common Stock (or
other securities on an as-converted to Common Stock basis) of such Permitted
Issuance was equal to or greater than the Conversion Price (as defined in
Section (d)) of the Series CC Preferred Stock in effect on the date of such
Permitted Issuance.
(ii) After setting apart or paying in full the preferential
amounts due the holders of the Series CC Preferred Stock, the holders of shares
of Series BB Preferred Stock then outstanding shall be entitled to be paid, out
of the assets of the Corporation available for distribution to its stockholders,
whether from capital, surplus or earnings, before any payment shall be made in
respect of any other series of the Corporation's Preferred Stock (other than the
Series CC Preferred Stock) or the Corporation's Common Stock, an amount equal to
$4.75 per share of Series BB Preferred Stock plus all declared and unpaid
dividends thereon to the date fixed for distribution for each share of Series BB
Preferred Stock held (the "Series BB Liquidation Value"). If upon liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of the Series BB Preferred Stock the full amounts to which they shall be
entitled pursuant to this subsection (ii), then the assets of the Corporation
shall be distributed on a pro rata basis to the holders of the Series BB
Preferred Stock, based upon the preferential amounts applicable to the number of
shares of Series BB Preferred Stock then held by each holder.
(iii) After setting apart or paying in full the preferential
amounts due the holders of the Series BB and Series CC Preferred Stock, the
holders of shares of Series AA Preferred Stock then outstanding shall be
entitled to be paid, out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any payment shall be made in respect of any other series of the
Corporation's Preferred Stock (other than Series BB and Series CC Preferred
Stock) or the Corporation's Common Stock, an amount equal to $1.00 per share of
Series AA Preferred Stock plus all declared and unpaid dividends thereon to the
date fixed for distribution for each share of Series AA Preferred Stock held
(the "Series AA Liquidation Value"). If upon liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of the
Series AA Preferred Stock the full amounts to which they shall be entitled
pursuant to this subsection (iii), then the assets of the Corporation shall be
distributed on a pro rata basis to the holders of the Series AA Preferred Stock,
based upon the number of shares of Series AA Preferred Stock then held by each
holder.
(iv) After setting apart or paying in full the preferential
amounts due the holders of the Series AA, BB, and CC Preferred Stock, the
holders of shares of Series DD Preferred Stock then outstanding shall be
entitled to be paid, out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any payment shall be made in respect of any other series of the
Corporation's Preferred Stock (other than Series AA, Series BB and Series CC
Preferred Stock) or the Corporation's Common Stock, an amount equal to $9.64 per
share of Series DD Preferred Stock plus all declared and unpaid dividends
thereon to the date fixed for distribution for each share of Series DD Preferred
Stock held (the "Series DD Liquidation Value"). If upon liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of the Series DD Preferred Stock the full amounts to which they shall be
entitled pursuant to this subsection (iv), then the assets of the Corporation
shall be distributed on a pro rata basis to the holders of the Series DD
Preferred Stock, based upon the number of shares of Series DD Preferred Stock
then held by each holder.
-4-
<PAGE>
(v) After setting apart or paying in full the preferential
amounts due the holders of the Series AA, Series BB, Series CC and Series DD
Preferred Stock, the holders of the Common Stock then outstanding shall be
entitled to be paid, out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings, an
amount equal to $0.50 per share, plus all declared and unpaid dividends thereon
to the date fixed for distribution. If upon liquidation, dissolution or winding
up of the Corporation, and after setting apart or paying in full the
preferential amounts due the holders of the Series AA, Series BB, Series CC and
Series DD Preferred Stock, the assets of the Corporation remaining available for
distribution to its stockholders shall be insufficient to pay the holders of the
Common Stock the full amounts to which they shall be entitled pursuant to this
subsection (v), then the remaining assets of the Corporation shall be
distributed on a pro rata basis to the holders of the Common Stock, based upon
the preferential amounts applicable to the number of shares of Common Stock then
held by each holder.
(vi) After setting apart or paying in full the preferential
amounts due pursuant to subsections (i), (ii), (iii), (iv) and (v) of this
Section (b)(1), the remaining assets of the Corporation available for
distribution to stockholders, if any, shall be distributed to the holders of
Series AA, Series BB, Series CC and Series DD Preferred Stock and Common Stock
on a pro rata basis, based upon the number of shares of Common Stock then held
by each holder on an as-converted basis.
(vii) The assets available for distribution pursuant to
Section (b) shall be determined by applicable law and prior to payment of any
liquidation preference the Company shall first satisfy its outstanding
obligations concerning rights, if any, which have been exercised to have
purchased, redeemed or otherwise retired any capital stock.
(2) The merger or consolidation of the Corporation into or with
another corporation in which this Corporation shall not survive and the
stockholders of this Corporation shall own less than 50% of the voting
securities of the surviving corporation or its parent or the sale, transfer or
lease (but not including a transfer or lease by pledge or mortgage to a bona
fide lender) of all or substantially all of the assets of the Corporation shall
be deemed, except as otherwise provided for in subsection (b)(3) herein, to be a
liquidation, dissolution or winding up of the Corporation as those terms are
used in this Section (b). In the event of such merger, consolidation or sale of
substantially all of the Company's assets, the holders of shares of Series AA,
Series BB, Series CC and Series DD Preferred Stock shall have the right to
preference upon the distribution of assets as provided in this Section (b), or
alternatively at such holder's election, shall have the right to convert to
shares of Common Stock and receive distribution of assets as holders of Common
Stock as provided in this Section (b).
(3) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Corporation's
assets to another person or other transaction which is effected in such a manner
that holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets (other than solely cash
and/or publicly traded securities) with respect to or in exchange for Common
Stock is referred to herein as an "Organic Change." Prior to the consummation
of any Organic Change, the Corporation shall make appropriate provisions (in
form and substance reasonably satisfactory to each of the holders of a majority
of the Series AA, Series BB, Series CC and Series DD Preferred Stock then
outstanding voting separately) to insure that each of the holders of Series AA,
Series BB, Series CC and Series DD Preferred Stock shall thereafter have the
right to acquire and receive, in lieu of or in addition to (as the case may be)
the shares of Common Stock immediately theretofore acquirable and receivable
upon the
-5-
<PAGE>
conversion of such holder's Series AA, Series BB, Series CC and/or Series DD
Preferred Stock, such shares of stock, securities or assets as such holder would
have received in connection with such Organic Change if such holder had
converted its Series AA, Series BB, Series CC and/or Series DD Preferred Stock
into Common Stock immediately prior to such Organic Change. The Corporation
shall not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor corporation (if other than the Corporation)
resulting from consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form and substance reasonably satisfactory to
the holders of a majority of the Series AA, Series BB, Series CC and Series DD
Preferred Stock then outstanding voting separately), the obligation to deliver
to each such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
(4) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the Corporation shall, within ten
(10) days after the date the Board of Directors approves such action, or twenty
(20) days prior to any stockholders' meeting called to approve such action, or
twenty (20) days after the commencement of an involuntary proceeding, whichever
is earlier, give each holder of shares of Preferred Stock initial written notice
of the proposed action. Such initial written notice shall describe the material
terms and conditions of such proposed action, including a description of the
stock, cash and property to be received by the holders of shares of Preferred
Stock upon consummation of the proposed action and the date of delivery thereof.
If any material change in the facts set forth in the initial notice shall occur,
the Corporation shall promptly give written notice to each holder of shares of
Preferred Stock of such material change.
(5) The Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation before the expiration
of thirty (30) days after the mailing of the initial notice or ten (10) days
after the mailing of any subsequent written notice, whichever is later; provided
that any such 30-day or 10-day period may be shortened upon the written consent
of the holders of all of the outstanding shares of the Preferred Stock voting as
a single class.
(6) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation which will involve the distribution
of assets other than cash, the Corporation shall promptly engage competent
independent appraisers to determine the value of the assets to be distributed to
the holders of shares of Preferred Stock and the holders of shares of Common
Stock (it being understood that with respect to such valuation, the Corporation
shall engage such appraiser as shall be approved by the holders of a majority of
shares of the Corporation's outstanding Common Stock, Series AA, Series BB,
Series CC and Series DD Preferred Stock voting together on an as-converted
basis). The Corporation shall, upon receipt of such appraiser's valuation, give
prompt written notice to each holder of shares of Common Stock, Series AA,
Series BB, Series CC and Series DD Preferred Stock of the appraiser's valuation.
(c) VOTING.
(i) Except as otherwise required by law or as set forth
herein and subject to the rights of series of Preferred Stock which may from
time to time come into existence, the shares of the Series AA, Series BB,
Series CC and Series DD Preferred Stock shall vote together with the shares of
the Corporation's Common Stock at any annual or special meeting of stockholders
of the Corporation, or may act by written consent in the same manner as the
Corporation's Common Stock, upon the following basis: each holder of shares of
Series AA, Series BB, Series CC and Series DD Preferred Stock shall be entitled
to such number of votes for
-6-
<PAGE>
the Series AA, Series BB, Series CC and Series DD Preferred Stock held by him on
the record date fixed for such meeting, or on the effective date of such written
consent, as shall be equal to the whole number of shares of the Corporation's
Common Stock into which his shares of Series AA, Series BB, Series CC and
Series DD Preferred Stock are convertible, in accordance with the terms of this
Certificate of Incorporation, immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
(ii) In the election of directors, one (1) director shall be
elected by the holders of the Series CC Preferred Stock voting as a separate
class and two (2) directors shall be elected by the holders of Series BB
Preferred Stock, voting as a separate class. All other directors shall be
elected by the holders of Series AA, Series BB, Series CC and Series DD
Preferred Stock (collectively, on an as-converted basis) and Common Stock voting
together as a separate class.
(iii) In the election of directors, each holder of
Preferred Stock and Common Stock shall be entitled to as many votes as
shall equal the number of votes entitled to be cast for the election of
directors with respect to each holder's shares of stock multiplied by the
number of directors to be elected by each holder, and may cast all of such
votes for a single director or may distribute such votes among the number of
directors to be elected. Such cumulative voting will be eliminated when and
if CellNet-Delaware is a publicly traded company with more than 800
stockholders of record.
(d) CONVERSION RIGHTS.
(1) Each share of Series AA, Series BB, Series CC and Series DD
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after issuance into fully paid and nonassessable shares of Common Stock
of the Corporation.
(2) Each share of Series AA Preferred Stock shall automatically be
converted into fully paid and non-assessable shares of Common Stock of the
Corporation immediately upon (i) the closing of a sale, pursuant to an effective
registration statement under the Securities Act of 1933, as amended, at any
time, of the Corporation's Common Stock in a firmly underwritten registered
public offering with aggregate net proceeds to the Corporation of at least
twenty million dollars ($20,000,000) and an offering price per share to the
public equal to or greater than $4.00 per share (as adjusted for stock splits,
stock dividends and combination) or (ii) the vote or written consent, in the
manner provided by law, of holders of more than fifty percent (50%) of the total
number of outstanding shares of Series AA Preferred Stock or (iii) at such time
as fewer than 1,000,000 shares of Series AA Preferred Stock remain outstanding
as adjusted for stock splits, stock dividends and combinations. The number of
shares of Common Stock into which each share of Series AA Preferred Stock may be
converted shall be determined by dividing $1.00 by the Conversion Price
determined as hereinafter provided in effect at the time of conversion.
(3) Each share of Series BB Preferred Stock shall automatically be
converted into fully paid and non-assessable shares of Common Stock of the
Corporation immediately upon (i) the closing of a sale, pursuant to an effective
registration statement under the Securities Act of 1933, as amended, at any
time, of the Corporation's Common Stock in a firmly underwritten registered
public offering with aggregate net proceeds to the Corporation of at least
twenty million dollars ($20,000,000) and an offering price per share to the
public equal to or greater than $12.00 per share (as adjusted for stock splits,
stock dividends and combinations) or
-7-
<PAGE>
(ii) the vote or written consent, in the manner provided by law, of holders of
more than fifty percent (50%) of the total number of outstanding shares of
Series BB Preferred Stock or (iii) at such time as fewer than 500,000 shares of
Series BB Preferred Stock remain outstanding (as adjusted for stock splits,
stock dividends and combinations). The number of shares of Common Stock into
which each share of Series BB Preferred Stock may be converted shall be
determined by dividing $4.75 by the Conversion Price determined as hereinafter
provided in effect at the time of conversion.
(4) Each share of Series CC Preferred Stock shall automatically be
converted into fully paid and non-assessable shares of Common Stock of the
Corporation immediately upon (i) the closing of a sale, pursuant to an effective
registration statement under the Securities Act of 1933, as amended, at any
time, of the Corporation's Common Stock in a firmly underwritten registered
public offering with aggregate net proceeds to the Corporation of at least
twenty million dollars ($20,000,000) and an offering price per share to the
public equal to or greater than $19.28 per share (as adjusted for stock splits,
stock dividends and combinations) until January 1, 1997, and thereafter $24.10
per share (as adjusted for stock splits, stock dividends and combinations),
(ii) the vote or written consent, in the manner provided by law, of holders of
at least sixty percent (60%) of the total number of outstanding shares of
Series CC Preferred Stock, or (iii) at such time as fewer than 500,000 shares of
Series CC Preferred Stock remain outstanding (as adjusted for stock splits,
stock dividends and combinations). The number of shares of Common Stock into
which each share of Series CC Preferred Stock may be converted shall be
determined by dividing $9.64 by the Conversion Price determined as hereinafter
provided in effect at the time of conversion.
(5) Each share of Series DD Preferred Stock shall automatically be
converted into fully paid and non-assessable shares of Common Stock of the
Corporation immediately upon (i) the closing of a sale, pursuant to an effective
registration statement under the Securities Act of 1933, as amended, at any
time, of the Corporation's Common Stock in a firmly underwritten registered
public offering with aggregate net proceeds to the Corporation of at least
twenty million dollars ($20,000,000) and an offering price per share to the
public equal to or greater than $19.28 per share (as adjusted for stock splits,
stock dividends and combinations) until January 1, 1997, and thereafter $24.10
per share (as adjusted for stock splits, stock dividends and combinations),
(ii) the vote or written consent, in the manner provided by law, of holders of
at least fifty percent (50%) of the total number of outstanding shares of
Series DD Preferred Stock, or (iii) at such time as fewer than 500,000 shares of
Series DD Preferred Stock remain outstanding (as adjusted for stock splits,
stock dividends and combinations). The number of shares of Common Stock into
which each share of Series DD Preferred Stock may be converted shall be
determined by dividing $9.64 by the Conversion Price determined as hereinafter
provided in effect at the time of conversion.
(6) The Conversion Price per share at which shares of Common Stock
shall be initially issuable upon conversion of any shares of Series AA Preferred
Stock shall be $1.00, subject to adjustment as provided in Section (e) hereof.
(7) The Conversion Price per share at which shares of Common Stock
shall be initially issuable upon conversion of any shares of Series BB Preferred
Stock shall be $4.75, subject to adjustment as provided in Section (e) hereof.
-8-
<PAGE>
(8) The Conversion Price per share at which shares of Common Stock
shall be initially issuable upon conversion of any shares of Series CC Preferred
Stock shall be $9.64, subject to adjustment as provided in Section (e) hereof.
(9) The Conversion Price per share at which shares of Common Stock
shall be initially issuable upon conversion of any shares of Series DD Preferred
Stock shall be $9.64, subject to adjustment as provided in Section (e) hereof.
(10) The holder of any shares of Series AA, Series BB, Series CC or
Series DD Preferred Stock may exercise the conversion rights as to such shares
or any part thereof by delivering to the Corporation during regular business
hours at the office of any transfer agent of the Corporation for the Series AA,
Series BB, Series CC or Series DD Preferred Stock, or at the principal office of
the Corporation or at such other place as may be designated by the Corporation,
the certificate or certificates for the shares to be converted, duly endorsed
for transfer to the Corporation (if required by it), accompanied by written
notice stating that the holder elects to convert such shares. Conversion shall
be deemed to have been effected on the date when such delivery is made, or, if
the conversion is made in connection with a public offering, immediately prior
to the closing of the public offering, and such date is referred to herein as
the "Conversion Date." As promptly as practicable thereafter the Corporation
shall issue and deliver to or upon the written order of such holder, at such
office or other place designated by the holder, a certificate or certificates
for the number of full shares of Common Stock to which such holder is entitled
and a check for cash with respect to any fractional interest in a share of
Common Stock as provided in subsection (11) of this Section (d). The holder
shall be deemed to have become a shareholder of record of the Common Stock
issuable upon such conversion on the applicable Conversion Date unless the
transfer books of the Corporation are closed on said date, in which event he
shall be deemed to have become a shareholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date. Upon conversion of only a portion of the
number of shares of Series AA, Series BB, Series CC or Series DD Preferred Stock
represented by a certificate surrendered for conversion, the Corporation shall
issue and deliver to or upon the written order of the holder of the certificate
so surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Series AA, Series BB, Series CC or
Series DD Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(11) No fractional shares of Common Stock or script shall be issued
upon conversion of shares of the Series AA, Series BB, Series CC or Series DD
Preferred Stock. If more than one share of Series AA, Series BB, Series CC or
Series DD Preferred Stock shall be surrendered for conversion at any one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Series AA, Series BB, Series CC or Series DD Preferred Stock so
surrendered. Instead of any fractional shares of Common Stock which would
otherwise be issuable upon conversion of any shares of Series AA, Series BB,
Series CC or Series DD Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fractional interest equal to the fair market value
of such fractional interest as determined by the Corporation's Board of
Directors.
(12) The Corporation shall at all times reserve and keep available,
out of its authorized but unissued Common Stock, solely for the purpose of
effecting the conversion of the Series AA, Series BB, Series CC and Series DD
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all Series AA, Series BB, Series CC and Series DD Preferred Stock
from time to time outstanding.
-9-
<PAGE>
(13) All shares of Common Stock which may be issued upon conversion of
the shares of Series AA, Series BB, Series CC and Series DD Preferred Stock will
upon issuance by the Corporation be validly issued, fully paid and non-
assessable and free from all taxes, liens and charges with respect to the
issuance thereof.
(14) If any event occurs of the type contemplated by the provisions of
Sections (d) and (e) but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights, profit participation rights in debt instruments or other
rights with equity features), then the Corporation's board of directors shall
make an appropriate adjustment in the Conversion Price so as to protect the
rights of the holders of Series AA, Series BB, Series CC and Series DD Preferred
Stock; provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section (d) or decrease the number of
shares of Common Stock issuable upon conversion of each share of Series AA,
Series BB, Series CC or Series DD Preferred Stock.
(15) The Corporation shall take all action as may be necessary to
assure that all such shares of Common Stock issuable upon conversion of the
Series AA, Series BB, Series CC and Series DD Preferred Stock may be so issued
without violation of any applicable law, governmental regulation or any
requirements of any domestic securities exchange upon which shares of the Common
Stock may be listed (except for official notice of issuance which shall be
immediately delivered by the Corporation upon each such issuance).
(16) The issuance of the certificate for shares of Series AA,
Series BB, Series CC and Series DD Preferred Stock upon conversion shall be made
without charge to the holders of such Series AA, Series BB, Series CC and
Series DD Preferred Stock for issuance taxes in respect thereof or other costs
incurred by the Corporation in connection with such conversion and the related
issuance of the shares of Common Stock. Upon conversion of any Series AA,
Series BB, Series CC or Series DD Preferred Stock, the Corporation shall take
all action as necessary in order to insure that the Common Stock issuable with
respect to such conversion shall be validly issued, fully paid and
nonassessable.
(e) ADJUSTMENT OF CONVERSION PRICE OF SERIES AA, SERIES BB, SERIES CC AND
SERIES DD PREFERRED STOCK. The Conversion Price of the Series AA, Series BB,
Series CC and Series DD Preferred Stock from time to time in effect shall be
subject to adjustment from time to time as provided in this Section (e).
(1) SPECIAL DEFINITIONS. For purposes of this Section (e), the
following definitions shall apply:
(i) "OPTIONS" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(ii) "ORIGINAL ISSUE DATE" for the Series BB and Series CC
Preferred Stock shall mean the date on which the first share of Series BB or
Series CC or Series DD Preferred Stock was issued.
(iii) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares (other than the Series AA, Series BB, Series CC and
Series DD Preferred Stock and Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
-10-
<PAGE>
(iv) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares (including reissued shares) of Common Stock issued (or, pursuant to
paragraph (e)(3), deemed to be issued) by the Corporation after the Original
Issue Date, other than:
(A) shares of Common Stock issued upon conversion of
the Series AA, Series BB, Series CC and Series DD Preferred Stock authorized
herein;
(B) shares of Common Stock (including any of such
shares which are repurchased) issued to officers, directors, employees and
consultants of the Corporation pursuant to stock option or purchase plans
approved by a majority of the members of the Board of Directors and any other
shares of Common Stock held by officers, directors, employees and consultants
which are repurchased at cost subsequent to the Original Issue Date;
(C) as a dividend or distribution on Series AA,
Series BB, Series CC or Series DD Preferred Stock or any event for which
adjustment is made pursuant to paragraph (e)(8) or (9) hereof;
(D) shares of Common Stock issued or deemed issued
upon exercise of warrants of the Corporation outstanding as of the Original
Issue Date; or
(E) Options (or shares of Common Stock issued upon
exercise thereof) issued in connection with the issuance of the Senior Notes.
(v) "SENIOR NOTES" shall mean the 13% Senior Discount Notes
due June 15, 2005 issued on June 15, 1995 and issued on November 21, 1995 as
governed by the Indenture between the Corporation and The Bank of New York as
Trustee dated June 15, 1995, as amended on November 21, 1995.
(2) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Conversion Price of the Series BB or Series CC or Series DD Preferred Stock
shall be made in respect of the issuance of Additional Shares of Common Stock
unless the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the applicable
Conversion Price of such series in effect on the date of and immediately prior
to such issue.
(3) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In the event
the Corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record date for
the determination of holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number that would result
in an adjustment pursuant to clause (ii) below) of Common Stock issuable upon
the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of the time of
such issue or, in case such a record date shall have been fixed, as of the close
of business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to paragraph (e)(7) hereof) of such Additional Shares of
Common Stock would be less than the applicable Conversion Price of the Series BB
or Series CC or Series DD Preferred Stock as the case may be in effect on the
date of and immediately prior to such issue, or such record date, as the
-11-
<PAGE>
case may be, and provided further that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(i) no further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(ii) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(iii) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if;
(A) in the case of Convertible Securities or Options
for Common Stock, the only Additional Shares of Common Stock issued were shares
of Common Stock, if any, actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by the Corporation
for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation upon the issue of
the Convertible Securities with respect to which such Options were actually
exercised;
(iv) no readjustment pursuant to clause (ii) or (iii) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date,
or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date; and
(v) in the case of any Options which expire by their terms
not more than 30 days after the date of issue thereof, no adjustment of the
Conversion Price shall be made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in the manner provided in
clause (iii) above.
-12-
<PAGE>
(4) ADJUSTMENT OF CONVERSION PRICE OF SERIES BB PREFERRED STOCK UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event that after the
Original Issue Date this Corporation shall issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to paragraph (e)(3)) without consideration or for a consideration per share less
than the Conversion Price of the Series BB Preferred Stock in effect on the date
of and immediately prior to such issue, then and in such event, such Conversion
Price of the Series BB Preferred Stock shall be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) determined by multiplying
such Conversion Price of the Series BB Preferred, by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Conversion
Price; and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; and provided further that, for the
purposes of this subsection (4), all shares of Common Stock issuable upon
conversion of outstanding Series AA, Series BB, Series CC and Series DD
Preferred Stock and outstanding Convertible Securities or exercise of
outstanding Options shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to
subsection (e)(3), such Additional Shares of Common Stock shall be deemed to be
outstanding.
(5) ADJUSTMENT OF CONVERSION PRICE OF SERIES CC PREFERRED STOCK UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
(i) In the event that after the Original Issue Date this
Corporation shall issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to subsection (e)(3))
without consideration or for a consideration per share less than the Conversion
Price of the Series CC Preferred Stock in effect on the date of and immediately
prior to such issue, then and in such event, such Conversion Price of the
Series CC Preferred Stock shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying such Conversion
Price of the Series CC Preferred Stock, by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Conversion Price; and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common Stock so issued; and provided further that, for the purposes of
this subsection (5), all shares of Common Stock issuable upon conversion of
outstanding Series AA, Series BB, Series CC and Series DD Preferred Stock and
outstanding Convertible Securities or exercise of outstanding Options shall be
deemed to be outstanding, and immediately after any Additional Shares of Common
Stock are deemed issued pursuant to subsection (e)(3), such Additional Shares of
Common Stock shall be deemed to be outstanding.
(ii) Notwithstanding the foregoing, the Conversion Price of
the Series CC Preferred Stock and the number of shares issuable upon conversion
of such Series CC Preferred Stock shall not be adjusted upon any issuance of
Additional Shares of Common Stock to any public or private utility companies
("Permitted Issuances") provided such Permitted Issuances will not result in an
adjustment to the Conversion Price of any other Preferred Stock of the Company,
in which event the appropriate adjustment shall be made under subsection e(5)(i)
above. In the event an adjustment shall be made to the Conversion Price of the
Series CC Preferred Stock as a result of a Permitted Issuance, for purposes of
calculating such adjustment, the only type of consideration
-13-
<PAGE>
that will be counted as having been received by the Corporation for the issuance
of Additional Shares of Common Stock shall be Cash, as defined in subsection
e(7)(i) herein, and tangible personal property with a readily ascertainable fair
market value.
(6) ADJUSTMENT OF CONVERSION PRICE OF SERIES DD PREFERRED STOCK UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event that after the
Original Issue Date this Corporation shall issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to subsection (e)(3)) without consideration or for a consideration per share
less than the Conversion Price of the Series DD Preferred Stock in effect on the
date of and immediately prior to such issue, then and in such event, such
Conversion Price of the Series DD Preferred Stock shall be reduced, concurrently
with such issue, to a price (calculated to the nearest cent) determined by
multiplying such Conversion Price of the Series DD Preferred Stock, by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of shares of Common
Stock which the aggregate consideration received by the Corporation for the
total number of Additional Shares of Common Stock so issued would purchase at
such Conversion Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of such Additional Shares of Common Stock so issued; and provided further
that, for the purposes of this subsection (6), all shares of Common Stock
issuable upon conversion of outstanding Series AA, Series BB, Series CC and
Series DD Preferred Stock and outstanding Convertible Securities or exercise of
outstanding Options shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to
subsection (e)(3), such Additional Shares of Common Stock shall be deemed to be
outstanding.
(7) DETERMINATION OF CONSIDERATION. For purposes of this
Section (e), except as provided in subsection e(5)(ii), the consideration
received by the Corporation for the issue of any Additional Shares of Common
Stock shall be computed as follows:
(i) CASH AND PROPERTY: Except as provided in clause (ii)
below, such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board; provided, however, that no value shall be
attributed to any services performed by any employee, officer or director of the
Corporation; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received with respect to such Additional Shares of Common
Stock, computed as provided in clauses (A) and (B) above, as determined in good
faith by the Board.
(ii) EXPENSES. In the event the Corporation pays or incurs
expenses, commissions or compensation, or allows concessions or discounts to
underwriters, dealers or others performing similar services in connection with
such issue, in an aggregate amount in excess of 10% of the aggregate
consideration received by the Corporation for such issue, as determined in
clause (i) above, consideration shall be computed
-14-
<PAGE>
as provided in clause (i) above after deducting the aggregate amount in excess
of 10% of the aggregate consideration received by the Corporation for the issue.
(iii) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section (e)(3), relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(8) ADJUSTMENTS FOR STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS OR
CONSOLIDATIONS OF COMMON STOCK. In the event the outstanding shares of Common
Stock shall be subdivided (by stock dividend, stock split, or otherwise), into a
greater number of shares of Common Stock, the Series AA, Series BB, Series CC
and Series DD Conversion Prices then in effect shall, concurrently with the
effectiveness of such subdivision, be proportionately decreased. In the event
the outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Series AA, Series BB, Series CC and Series DD Conversion Prices then in
effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(9) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities or assets of the Corporation other than
shares of Common Stock then and in each such event provision shall be made so
that the holders of Series AA, Series BB, Series CC and Series DD Preferred
Stock shall receive upon conversion thereof, in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities or assets of the
Corporation which they would have received had their Series AA, Series BB,
Series CC and Series DD Preferred Stock been converted into Common Stock on the
date of such event and had they thereafter, during the period from the date of
such event to and including the date of conversion, retained such securities or
assets receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section (e) with respect to
the rights of the holders of the Series AA, Series BB, Series CC and Series DD
Preferred Stock.
(10) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If
the Common Stock issuable upon conversion of the Series AA, Series BB, Series CC
and Series DD Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for
-15-
<PAGE>
above), then and in each such event the holder of each share of Series AA,
Series BB, Series CC and Series DD Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization or
reclassification or other change by holders of the number of shares of Common
Stock that would have been subject to receipt by the holders upon conversion of
the Series AA, Series BB, Series CC and Series DD Preferred Stock immediately
before that change, all subject to further adjustment as provided herein.
(11) NO IMPAIRMENT. This Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by this Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section (e) and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series AA, Series BB, Series CC and Series DD Preferred Stock against
impairment.
(12) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series AA, Series BB, Series CC and Series DD
Conversion Price pursuant to this Section (e), this Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series AA, Series BB, Series CC and
Series DD Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based.
(f) STATUS OF CONVERTED STOCK. In case any shares of Series AA,
Series BB, Series CC and Series DD Preferred Stock shall be converted pursuant
to Section (d) hereof, the shares so converted shall resume the status of
authorized but unissued shares of Preferred Stock, undesignated as to series.
(g) CHANGES.
(1) So long as any shares of the Series AA, Series BB, Series CC and
Series DD Preferred Stock are outstanding, the Corporation shall not, without
first obtaining the approval by vote or written consent, in the manner provided
by law, of both (i) the holders of more than fifty percent (50%) of the total
number of shares of Series AA, Series BB, Series CC and Series DD Preferred
Stock outstanding, voting together as a single class; and (ii) the holders of
more than fifty percent (50%) of the total number of shares of Series BB and
Series CC Preferred Stock outstanding, voting together as a single class,
(1) increase the authorized number of shares of Preferred Stock, (2) amend the
Bylaws to change the authorized number of directors or (3) sell all or
substantially all of the Corporation's assets or enter into a merger or
consolidation as a result of which the stockholders of the Corporation shall own
less than 50% of the voting securities of the surviving corporation or its
parent or enter into a liquidation (whether complete or partial) or dissolution
or winding up of the Corporation.
(2) So long as any shares of Series AA Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of more
than fifty percent (50%) of the total number of outstanding shares of Series AA
Preferred Stock, voting separately as a class, (i) alter or change any of the
rights, preferences, privileges or restrictions of the Series AA Preferred
Stock; (ii) amend the provisions of this subsection (g)(2); or (iii) create any
new class or
-16-
<PAGE>
series of shares of Preferred Stock or securities convertible into Preferred
Stock on a parity with or senior to the Series AA or BB Preferred Stock except
with respect to rights which may be granted to such new class or series to share
in participation rights on dividends and on liquidation after the preferences of
the Series AA and Series BB Preferred Stock have been paid.
(3) So long as any shares of Series BB Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of more
than fifty percent (50%) of the total number of outstanding shares of Series BB
Preferred Stock, voting separately as a class, (i) alter or change any of the
rights, preferences, privileges or restrictions of the Series BB Preferred
Stock; (ii) amend the provisions of this subsection (g)(3); (iii) create any new
class or series of shares of Preferred Stock or securities convertible into
Preferred Stock on a parity with or senior to the Series AA or BB Preferred
Stock except with respect to rights which may be granted to such new class or
series to share in participation rights on dividends and upon liquidation after
the preferences of the Series AA and Series BB Preferred Stock have been paid;
or (iv) repurchase, acquire or retire any shares of Series AA Preferred Stock or
Common Stock or any other securities ranking junior to the Series BB Preferred
Stock (other than pursuant to the terms of stock purchase agreements with
employees, officers, directors or consultants of the Corporation providing for
such repurchase at cost in the event of termination), or pay, declare or set
aside funds for the payment of any dividend or other distribution with respect
to any such shares of Series AA Preferred Stock or Common Stock or any other
securities ranking junior to the Series BB Preferred Stock.
(4) So long as any shares of Series CC Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of more
than fifty percent (50%) of the total number of outstanding shares of Series CC
Preferred Stock, voting separately as a class, (i) alter or change any of the
rights, preferences, privileges or restrictions of the Series CC Preferred
Stock; (ii) amend the provisions of this subsection (g)(4); or (iii) create any
new class or series of shares of Preferred Stock or securities convertible into
Preferred Stock or issue any equity securities (including Options or Convertible
Securities) on a parity with or senior to the Series CC Preferred Stock except
with respect to rights which may be granted to such new class or series (A) to
receive a dividend and liquidation preference junior to the Series CC Preferred
Stock initial preferences and thereafter to share in participation rights on
dividends and upon liquidation after the initial preferences of all securities
have been paid or (B) in a Permitted Issuance (as defined in Section (e)),
issued at a price per share of Common Stock or other securities on an
as-converted to Common Stock basis equal to or greater than the Conversion Price
(as defined in Section (d)) of the Series CC Preferred Stock in effect on the
date of issuance of such security to share in liquidation rights on a parity
with the Series CC Preferred Stock; (iv) repurchase, acquire or retire any
shares of Series AA or BB Preferred Stock or Common Stock or any other
securities ranking junior to the Series CC Preferred Stock (other than pursuant
to the terms of stock purchase agreements with employees, officers, directors or
consultants of the Corporation providing for such repurchase at cost in the
event of termination), or pay, declare or set aside funds for the payment of any
dividend or other distribution with respect to any such shares of Series AA or
BB Preferred Stock or Common Stock or any other securities ranking junior to the
Series CC Preferred Stock.
(5) So long as any shares of Series DD Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of more
than fifty percent (50%) of the total number of outstanding shares of Series DD
Preferred Stock, voting separately as a class, (i) alter or change any of the
rights, preferences, privileges or restrictions of the
-17-
<PAGE>
Series DD Preferred Stock; (ii) amend the provisions of this subsection (g)(5);
or (iii) repurchase, acquire or retire any shares of Series DD Preferred Stock
or Common Stock or any other securities ranking junior to the Series DD
Preferred Stock (other than pursuant to the terms of stock purchase agreements
with employees, officers, directors or consultants of the Corporation providing
for such repurchase at cost in the event of termination), or pay, declare or set
aside funds for the payment of any dividend or other distribution with respect
to any securities ranking junior to the Series DD Preferred Stock. So long as
any shares of Series DD Preferred Stock are outstanding, the Corporation shall
not, without first obtaining the approval by vote or written consent, in the
manner provided by law, of the holders of more than fifty percent (50%) of the
total number of outstanding shares of Series AA, BB, CC and DD Preferred Stock,
voting together as a class, create any new class or series of shares of
Preferred Stock or securities convertible into Preferred Stock (x) senior to the
Series AA, BB, CC and DD Preferred Stock, or (y) senior to the Series AA, BB and
DD Preferred Stock, but on a parity with the Series CC Preferred Stock.
(6) In the event the Corporation has consummated a public offering of
its Common Stock in which the net proceeds to the Corporation are at least
twenty million dollars ($20,000,000), and the Series AA or BB or CC or DD
Preferred Stock is entitled under law to a separate class vote on the sale of
all or substantially all of the Corporation's assets, or a merger or
consolidation as a result of which the stockholders of the Corporation shall own
less than 50% of the voting securities of the surviving corporation or its
parent (a "Material Change"), then the Corporation shall also as a condition of
approval of the Material Change obtain the approval of holders of more than
fifty percent (50%) of the Common Stock and Series AA and/or BB and/or CC and/or
DD Preferred Stock which shall vote together with the holders of Common Stock on
an as-converted into Common Stock basis.
(h) REDEMPTION. In the event that the Corporation has consummated a
public offering of its Common Stock in which the net proceeds to the Corporation
are at least twenty million dollars ($20,000,000), and the Series AA or BB or CC
or DD Preferred Stock is entitled under law to a separate class vote on a
Material Change and such vote has been taken and the Material Change has not
been approved by the holders of Preferred Stock but has been approved in the
vote provided for by Section (g)(6), the holders of the Series AA, BB, CC and DD
Preferred Stock agree that the Corporation may, at the option of the Board of
Directors, redeem in whole or in part the Series AA, BB, CC and DD Preferred
Stock held by Holders who shall not have voted in favor of the Material Change
by paying cash therefor a sum per share equal to the Series AA, BB, CC and DD
Liquidation Values, respectively, as defined in Section (b) (the "Redemption
Price"); any such shares of Preferred Stock which may be redeemed in a partial
redemption shall be selected at the discretion of the Board of Directors.
(1) At least fifteen (15) days prior to the date fixed for any
redemption of any Series AA, BB, CC or DD Preferred Stock (the "Redemption
Date"), written notice shall be mailed, to each holder of record (at the close
of the business day next preceding the day on which notice is given) of the
Series AA, BB, CC or DD Preferred Stock to be redeemed, at the address last
shown on the records of the Corporation for such holder or given by the holder
to the Corporation for the purpose of notice or if no such address appears or is
given at the place where the principal executive office of the Corporation is
located, notifying the holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and the date on
which such holder's right to convert to shares of Common Stock terminate, and
calling upon the holder to surrender to the Corporation, in the manner and at
the place designated, his certificate or certificates representing the shares to
be
-18-
<PAGE>
redeemed (the "Redemption Notice"). Except as otherwise provided herein, on or
after the Redemption Date, each holder of Series AA, BB, CC or DD Preferred
Stock to be redeemed shall surrender to the Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable on the date the Material Change occurs, which date shall not be
more than sixty (60) days after the Redemption Date. Payment shall be made to
the order of the person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate shall be canceled. In the
event that less than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
(2) From and after the Redemption Date, unless there shall have been
a default in payment of the Redemption Price, all rights of the holders of such
shares as holders of the Series AA, BB, CC or DD Preferred Stock (except the
right to receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. Subject to the rights of
Preferred Stock which from time to time may come into existence, if the funds of
the Corporation legally available for the redemption of shares of Series AA, BB,
CC or DD Preferred Stock on any Redemption Date are insufficient to redeem the
total number of shares of Series AA, BB, CC or DD Preferred Stock to be redeemed
on such date, those funds which are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of such shares
to be redeemed. The shares of Series AA, BB, CC or DD Preferred Stock not
redeemed shall remain outstanding and entitled to all rights and preferences
provided herein. Subject to the rights of Preferred Stock which from time to
time may come into existence, at any time thereafter when additional funds of
the Company are legally available for the redemption of shares of Series AA, BB,
CC or DD Preferred Stock, such funds will be immediately used to redeem the
balance of the shares which the Corporation has become obligated to redeem on
any Redemption Date but which it has not redeemed.
(3) Each share of Series AA, BB, CC and DD Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and prior to (unless such right has expired, terminated
or is otherwise unavailable as provided in Section (d)) the close of business on
any Redemption Date as may have been fixed in any Redemption Notice with respect
to such share, at the office of the Corporation or any transfer agent for the
Series AA, BB, CC or DD Preferred Stock, in the manner and in the amount as
provided in Section (d) (the "Conversion Rights"). In the event of a call for
redemption of any shares of Series AA, BB, CC or DD Preferred Stock pursuant to
Section (h) hereof, the Conversion Rights shall terminate as to the shares
designated for redemption at the close of business on the Redemption Date,
unless default is made in payment of the Redemption Price.
(i) NOTICE. In case:
(1) the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend, or any other
distribution, payable otherwise than in cash; or
(2) the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to subscribe for or purchase any shares
of stock of any class or to receive any other rights; or
-19-
<PAGE>
(3) there is any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another corporation as a
result of which the stockholders of the Corporation shall own less than 50% of
the voting securities of the surviving corporation or its parent or conveyance
of all or substantially all of the assets of the Corporation to another
corporation; or
(4) there is a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then, and in any such case, the Corporation shall cause to be mailed to the
transfer agent for the Series AA, Series BB, Series CC and Series DD Preferred
Stock, and to the holders of record of the outstanding Series AA, Series BB,
Series CC and Series DD Preferred Stock, at least ten (10) days prior to the
date hereinafter specified, a notice stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or
(y) such reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place and the date, if any
is to be fixed, as of which holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
FIFTH. The Board of Directors of the Corporation is expressly authorized
to make, alter or repeal the Bylaws of the Corporation.
SIXTH. Elections of directors need not be by written ballot except and to
the extent provided in the Bylaws of the Corporation.
SEVENTH. (a) To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(b) The Corporation shall indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he, his testator or intestate is or was a director,
officer or employee of the Corporation or any predecessor of the Corporation or
serves or served any other enterprise as a director, officer or employee at the
request of the Corporation or any predecessor to the Corporation.
(c) Neither any amendment nor repeal of this Article SEVENTH,
nor the adoption of any provision of the Corporation's Certificate of
Incorporation inconsistent with this Article SEVENTH, shall eliminate or reduce
the effect of this Article SEVENTH in respect of any matter occurring, or any
action or proceeding accruing or arising or that, but for this Article SEVENTH,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
<PAGE>
BYLAWS
OF
CELLNET DATA SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - CORPORATE OFFICES..................................................1
1.1 REGISTERED OFFICE....................................................1
1.2 OTHER OFFICES........................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS..........................................1
2.1 PLACE OF MEETINGS....................................................1
2.2 ANNUAL MEETING.......................................................1
2.3 SPECIAL MEETING......................................................1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.....................................2
2.6 QUORUM...............................................................2
2.7 ADJOURNED MEETING, NOTICE............................................3
2.8 VOTING...............................................................3
2.9 WAIVER OF NOTICE.....................................................3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING..............................................................4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE, VOTING, GIVING
CONSENTS.............................................................4
2.12 PROXIES..............................................................5
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE................................5
ARTICLE III - DIRECTORS........................................................6
3.1 POWERS...............................................................6
3.2 NUMBER OF DIRECTORS..................................................6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS............................................................6
3.4 RESIGNATION AND VACANCIES............................................7
3.5 PLACE OF MEETINGS, MEETINGS BY TELEPHONE.............................8
3.6 FIRST MEETINGS.......................................................8
3.7 REGULAR MEETINGS.....................................................8
3.8 SPECIAL MEETINGS, NOTICE.............................................8
3.9 QUORUM...............................................................9
3.10 WAIVER OF NOTICE.....................................................9
3.11 ADJOURNED MEETING, NOTICE............................................9
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING...................10
3.13 FEES AND COMPENSATION OF DIRECTORS..................................10
3.14 APPROVAL OF LOANS TO OFFICERS.......................................10
3.15 REMOVAL OF DIRECTORS................................................10
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
ARTICLE IV - COMMITTEES.......................................................11
4.1 COMMITTEES OR DIRECTORS.............................................11
4.2 COMMITTEE MINUTES...................................................12
4.3 MEETINGS AND ACTION OF COMMITTEES...................................12
ARTICLE V - OFFICERS..........................................................12
5.1 OFFICERS............................................................12
5.2 ELECTION OF OFFICERS................................................12
5.3 SUBORDINATE OFFICERS................................................13
5.4 REMOVAL AND RESIGNATION OF OFFICERS.................................13
5.5 VACANCIES IN OFFICES................................................13
5.6 CHAIRMAN OF THE BOARD...............................................13
5.7 PRESIDENT...........................................................13
5.8 VICE PRESIDENT......................................................14
5.9 SECRETARY...........................................................14
5.10 TREASURER...........................................................15
5.11 ASSISTANT SECRETARY.................................................15
5.12 ASSISTANT TREASURER.................................................15
5.13 AUTHORITY AND DUTIES OF OFFICERS....................................15
ARTICLE VI - INDEMNITY........................................................16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS...........................16
6.2 INDEMNIFICATION OF OTHERS...........................................16
6.3 INSURANCE...........................................................16
ARTICLE VII - RECORDS AND REPORTS.............................................17
7.1 MAINTENANCE AND INSPECTION OF RECORDS...............................17
7.2 INSPECTION BY DIRECTORS.............................................18
7.3 ANNUAL STATEMENT TO STOCKHOLDERS....................................18
7.4 REPRESENTATION OF SHARES OR OTHER CORPORATIONS......................18
ARTICLE VIII - GENERAL MATTERS................................................18
8.1 CHECKS..............................................................18
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS....................19
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
8.3 STOCK CERTIFICATES, PARTLY PAID SHARES..............................19
8.4 SPECIAL DESIGNATION ON CERTIFICATES.................................20
8.5 LOST CERTIFICATES...................................................20
8.6 CONSTRUCTION; DEFINITIONS...........................................20
8.7 DIVIDENDS...........................................................20
8.8 FISCAL YEAR.........................................................21
8.9 TRANSFER OF STOCK...................................................21
8.10 STOCK TRANSFER AGREEMENTS...........................................21
8.11 REGISTERED STOCKHOLDERS.............................................21
ARTICLE IX - AMENDMENTS.......................................................22
ARTICLE X - DISSOLUTION.......................................................22
ARTICLE XI - CUSTODIAN........................................................23
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.........................23
11.2 DUTIES OF CUSTODIAN.................................................23
<PAGE>
BYLAWS
OF
CELLNET DATA SYSTEMS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is Corporation Trust Center.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the Second
Tuesday of December in each year at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected
and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the (i)
board of directors, (ii) chairman of the board, (iii) president or (iv) one or
more stockholders holding shares in the aggregate entitled to cast not less than
ten (10%) of the votes at that meeting.
<PAGE>
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting so
long as that time is not less than fifteen (15) nor more than sixty (60) days
after the receipt of the request. If the notice is not given within five (5)
days after receipt of the request, then the person or persons in this paragraph
of this Section 2.3 shall be construed as limiting, fixing or affecting the time
when a meeting of stockholders called by action of the board of directors may be
held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose of purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than forty-five (45) days, or if after the
-2-
<PAGE>
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock, or of any class or classes or of a series or series thereof,
who elects to cumulate votes shall be entitled to as many votes as equals the
number of votes which (absent this provision as to cumulative voting) he would
be entitled to cast for the election of directors with respect to his shares of
stock multiplied by the number of directors to be elected by him, and he may
cast all of such votes for a single director or may distribute them among the
number to be voted for, or for any two or more of them, as he may see fit.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented
-3-
<PAGE>
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
-4-
<PAGE>
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than six (6)
nor more than eleven (11). The exact number of directors shall be ten (10)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the stockholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
certificate of incorporation or by an amendment to this bylaw duly adopted by
the vote or written consent of the holders of the majority of the stock issued
and outstanding and entitled to vote or by resolution of the majority of the
board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
-5-
<PAGE>
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the corporation.
When one or more directors so resigns and the resignation is effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means
-6-
<PAGE>
of which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
-7-
<PAGE>
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
-8-
<PAGE>
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with
-9-
<PAGE>
such changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
-10-
<PAGE>
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
-11-
<PAGE>
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
-12-
<PAGE>
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
executive officers against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "executive officer" of the corporation includes any person (i) who
is or was a director or executive officer of the corporation, (ii) who is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was a director or executive officer of a corporation which was a predecessor
corporation of the corporation or a director or officer of another enterprise at
the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
officers, employees and agents (other than directors and executive officers)
against expenses (including attorneys' fees), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or executive officer) includes any person
(i) who is or was an employee or agent of the corporation, (ii) who is or was
serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was an employee or agent of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
-13-
<PAGE>
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
-14-
<PAGE>
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
-15-
<PAGE>
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
-16-
<PAGE>
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.10 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.11 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
-17-
<PAGE>
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall
have attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
-18-
<PAGE>
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
-19-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CELLNET DATA SYSTEMS, INC.,
as Issuer
and
THE BANK OF NEW YORK,
as Trustee
------------
INDENTURE
Dated as of June 15, 1995
------------
$235,000,000
Aggregate Principal Amount At Maturity
13% Senior Discount Notes due 2005
Series B 13% Senior Discount Notes due 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture Indenture
Act Section Section
- --------------- ----------
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10;
11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . 10.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1). . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 10.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . 4.07; 4.08;
10.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(2). . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(3). . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . 10.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 10.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence). . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2). . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . 9.05
317(a)(1). . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . 10.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . 10.01
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Incorporation by Reference of TIA. . . . . . . . . . . 34
Section 1.03 Rules of Construction. . . . . . . . . . . . . . . . . 35
ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating. . . . . . . . . . . . . . . . . . . . 35
Section 2.02 Execution and Authentication; Aggregate
Principal Amount . . . . . . . . . . . . . . . . . . 36
Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . 37
Section 2.04 Paying Agent To Hold Assets in Trust . . . . . . . . . 38
Section 2.05 Noteholder Lists . . . . . . . . . . . . . . . . . . . 39
Section 2.06 Transfer and Exchange. . . . . . . . . . . . . . . . . 39
Section 2.07 Replacement Notes. . . . . . . . . . . . . . . . . . . 40
Section 2.08 Outstanding Notes. . . . . . . . . . . . . . . . . . . 40
Section 2.09 Treasury Notes . . . . . . . . . . . . . . . . . . . . 41
Section 2.10 Temporary Notes. . . . . . . . . . . . . . . . . . . . 41
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . 41
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . 42
Section 2.13 CUSIP Number . . . . . . . . . . . . . . . . . . . . . 42
Section 2.14 Deposit of Monies. . . . . . . . . . . . . . . . . . . 43
Section 2.15 Restrictive Legends. . . . . . . . . . . . . . . . . . 43
Section 2.16 Book-Entry Provisions for Global Security. . . . . . . 45
Section 2.17 Special Transfer Provisions. . . . . . . . . . . . . . 47
Section 2.18 Liquidated Damages Under Registration
Rights Agreement . . . . . . . . . . . . . . . . . . 50
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . 51
Section 3.02 Selection of Notes To Be Redeemed. . . . . . . . . . . 51
Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . 52
Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . 53
Section 3.05 Deposit of Redemption Price. . . . . . . . . . . . . . 53
Section 3.06 Notes Redeemed in Part . . . . . . . . . . . . . . . . 53
ARTICLE FOUR
COVENANTS
-i-
<PAGE>
Page
----
Section 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . 54
Section 4.02 Maintenance of Office or Agency. . . . . . . . . . . . 54
Section 4.03 Corporate Existence. . . . . . . . . . . . . . . . . . 55
Section 4.04 Payment of Taxes and Other Claims. . . . . . . . . . . 55
Section 4.05 Maintenance of Properties and Insurance. . . . . . . . 55
Section 4.06 Compliance Certificate; Notice of Default. . . . . . . 56
Section 4.07 Compliance with Laws . . . . . . . . . . . . . . . . . 57
Section 4.08 SEC Reports and Other Information. . . . . . . . . . . 57
Section 4.09 Waiver of Stay, Extension or Usury Laws. . . . . . . . 59
Section 4.10 Limitation on Restricted Payments. . . . . . . . . . . 59
Section 4.11 Limitation on Transactions with Affiliates . . . . . . 63
Section 4.12 Limitation on Indebtedness and Preferred Stock . . . . 65
Section 4.13 Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries . . . 66
Section 4.14 Limitation on Designation of Restricted and
Unrestricted Subsidiaries. . . . . . . . . . . . . . 67
Section 4.15 Change of Control. . . . . . . . . . . . . . . . . . . 69
Section 4.16 Limitation on Asset Sales. . . . . . . . . . . . . . . 71
Section 4.17 Limitation on Preferred Stock of Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . 76
Section 4.18 Limitation on Liens. . . . . . . . . . . . . . . . . . 76
Section 4.19 Limitation on Sale and Leaseback Transactions. . . . . 77
Section 4.20 Limitation on Consolidation, Merger, Etc. of
Restricted Subsidiaries. . . . . . . . . . . . . . . 77
Section 4.21 Calculation of Original Issue Discount . . . . . . . . 78
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of Assets . . . . . . . 78
Section 5.02 Successor Corporation Substituted. . . . . . . . . . . 80
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default. . . . . . . . . . . . . . . . . . . 81
Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . 83
Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . 84
Section 6.04 Waiver of Past Defaults. . . . . . . . . . . . . . . . 84
Section 6.05 Control by Majority. . . . . . . . . . . . . . . . . . 85
Section 6.06 Limitation on Suits. . . . . . . . . . . . . . . . . . 85
Section 6.07 Rights of Holders To Receive Payment . . . . . . . . . 86
Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . 86
Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . 87
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . 87
Section 6.11 Undertaking for Costs. . . . . . . . . . . . . . . . . 88
ARTICLE SEVEN
-ii-
<PAGE>
Page
----
TRUSTEE
Section 7.01 Duties of Trustee. . . . . . . . . . . . . . . . . . . 88
Section 7.02 Rights of Trustee. . . . . . . . . . . . . . . . . . . 90
Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . 91
Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . 91
Section 7.05 Notice of Default. . . . . . . . . . . . . . . . . . . 92
Section 7.06 Reports by Trustee to Holders. . . . . . . . . . . . . 92
Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . 92
Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . 94
Section 7.09 Successor Trustee by Merger, Etc.. . . . . . . . . . . 95
Section 7.10 Eligibility; Disqualification. . . . . . . . . . . . . 95
Section 7.11 Preferential Collection of Claims Against
Company. . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of Company's Obligations . . . . . . . . . 96
Section 8.02 Application of Trust Money . . . . . . . . . . . . . . 98
Section 8.03 Repayment to the Company . . . . . . . . . . . . . . . 98
Section 8.04 Reinstatement. . . . . . . . . . . . . . . . . . . . . 99
Section 8.05 Acknowledgment of Discharge by Trustee . . . . . . . . 99
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders . . . . . . . . . . . . . . 100
Section 9.02 With Consent of Holders. . . . . . . . . . . . . . . . 101
Section 9.03 Compliance with TIA. . . . . . . . . . . . . . . . . . 102
Section 9.04 Revocation and Effect of Consents. . . . . . . . . . . 102
Section 9.05 Notation on or Exchange of Notes . . . . . . . . . . . 103
Section 9.06 Trustee To Sign Amendments, Etc. . . . . . . . . . . . 104
ARTICLE TEN
MISCELLANEOUS
Section 10.01 TIA Controls . . . . . . . . . . . . . . . . . . . . . 104
Section 10.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . 104
Section 10.03 Communications by Holders with Other Holders . . . . . 105
Section 10.04 Certificate and Opinion as to Conditions Precedent . . 106
Section 10.05 Statements Required in Certificate or Opinion. . . . . 106
Section 10.06 Rules by Trustee, Paying Agent, Registrar. . . . . . . 107
Section 10.07 Legal Holidays . . . . . . . . . . . . . . . . . . . . 107
Section 10.08 Governing Law. . . . . . . . . . . . . . . . . . . . . 107
Section 10.09 No Adverse Interpretation of Other Agreements. . . . . 107
Section 10.10 No Recourse Against Others . . . . . . . . . . . . . . 107
-iii-
<PAGE>
Page
----
Section 10.11 Successors . . . . . . . . . . . . . . . . . . . . . . 108
Section 10.12 Duplicate Originals. . . . . . . . . . . . . . . . . . 108
Section 10.13 Severability . . . . . . . . . . . . . . . . . . . . . 108
Section 10.14 Independence of Covenants. . . . . . . . . . . . . . . 108
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Exhibit A - Form of Initial Note . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Form of Exchange Note. . . . . . . . . . . . . . . . . . B-1
Exhibit C - Form of Certificate To Be Delivered
in Connection with Transfers to Non-QIB
Accredited Investors . . . . . . . . . . . . . . . . C-1
Exhibit D - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant
to Regulation S. . . . . . . . . . . . . . . . . . . D-1
Exhibit E - Form of Tax Sharing Agreement. . . . . . . . . . . . . . E-1
Note: This Table of Contents shall not, for any purpose,
be deemed to be part of the Indenture.
-iv-
<PAGE>
INDENTURE, dated as of June 15, 1995, between CellNet Data Systems,
Inc., a California corporation (the "COMPANY"), and The Bank of New York, a New
York banking corporation, as Trustee (the "TRUSTEE").
The Company has duly authorized the creation of an issue of 13% Senior
Discount Notes due 2005 (the "INITIAL NOTES") and Series B 13% Senior Discount
Notes due 2005 to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement (the "EXCHANGE NOTES" and, together with the
Initial Notes, the "NOTES") and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary
to make the Notes, when duly issued and executed by the Company, and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding agreement of the Company, have been
done.
Each party hereto agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCRETED VALUE" means, with respect to any Note, as of any date of
determination prior to December 15, 2000, the sum of (a) $532.726 and (b) the
portion of the excess of the principal amount of each Note over the amount which
shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis at the rate of 13% per annum, compounded semi-annually
on each June 15 and December 15 from the Issue Date through the date of
determination.
"ACQUIRED INDEBTEDNESS" of any Person means Indebtedness of another
Person and any of such other Person's Subsidiaries existing at the time such
other Person becomes a Subsidiary of such Person or at the time it merges or
consolidates with such Person or any of such Person's Subsidiaries or is assumed
by such Person or any Subsidiary of such Person in connection with the
acquisition of assets from such other Person and in each case not Incurred by
such Person or any Subsidiary of such Person or such other Person in connection
with, or in anticipation or contemplation of, such other Person becoming a
Subsidiary of such Person or such acquisition, merger or consolidation.
"AFFILIATE" means, when used with reference to any Person, (i) any
other Person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, the referent Person or such other Person, as
the case may be, or (ii) any director, officer or partner of such Person or any
Person specified in clause (i) above. For the purposes of this definition, the
<PAGE>
-2-
term "CONTROL" when used with respect to any specified Person means the power to
direct or cause the direction of management or policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "AFFILIATED," "CONTROLLING" and "CONTROLLED" have
meanings correlative of the foregoing. Neither Smith Barney Inc. nor any of its
Affiliates shall be deemed to be an Affiliate of the Company or of any of its
Subsidiaries or Affiliates. No Wholly Owned Restricted Subsidiary of the
Company shall be deemed to be an Affiliate of the Company or of any of its
Wholly Owned Restricted Subsidiaries.
"AFFILIATE TRANSACTION" has the meaning provided in Section 4.11.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"AGENT MEMBERS" has the meaning provided in Section 2.16.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be merged with or into the
Company or any Subsidiary of the Company, or (b) the acquisition by the Company
or any Subsidiary of the Company of assets of any Person comprising a division
or line of business of such Person or all or substantially all of the assets of
any Person.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other disposition for value (for purposes of this
definition, each a "DISPOSITION") by the Company or by any of its Restricted
Subsidiaries (including, without limitation, pursuant to any Sale and Leaseback
Transaction or any merger or consolidation of any Restricted Subsidiary of the
Company with or into another Person (other than the Company or any Qualified
Restricted Subsidiary) whereby such Restricted Subsidiary shall cease to be a
Restricted Subsidiary of the Company) to any Person of (i) any property or
assets of the Company or of any Restricted Subsidiary of the Company to the
extent that any such disposition is not in the ordinary course of business of
the Company or such Restricted Subsidiary or (ii) any Capital Stock of any
Restricted Subsidiary of the Company, other than (1) any issuance and sale of
Preferred Stock of a Restricted Subsidiary pursuant to clause (xi) of the
definition of Permitted Indebtedness, (2) any disposition to the Company,
(3) any disposition to any Qualified Restricted Subsidiary, (4) any disposition
made in accordance with Section 4.10, (5) any Lien to the extent that such Lien
is granted in compliance with Section 4.18, (6) any transaction or series of
related transactions consummated in accordance with Section 5.01 (except as
otherwise provided in the last paragraph of subsection (a) of Section 4.16),
(7) any transaction or series of related transactions for fair market value
resulting in net cash proceeds to the Company or such Restricted Subsidiary of
less than $10,000,000 in any fiscal year of the Company, (8) the sale or
discount, in each case without recourse (direct or indirect), of accounts
receivable arising in the ordinary course of
<PAGE>
-3-
business of the Company or such Restricted Subsidiary, as the case may be, but
only in connection with the compromise or collection thereof, (9) disposals or
replacements of obsolete or worn out equipment in the ordinary course of
business of the Company or such Restricted Subsidiary, as the case may be,
(10) the factoring of accounts receivable arising in the ordinary course of
business of the Company or such Restricted Subsidiary, as the case may be,
pursuant to customary business terms, (11) the licensing in the ordinary course
of business of the Company or such Restricted Subsidiary, as the case may be, of
the use of the Company's or any of such Restricted Subsidiaries' intellectual
property or FCC Licenses, (12) any transfer of equipment in the ordinary course
of business from the Company or any Restricted Subsidiary to any other
Subsidiary of the Company or (13) the disposition to any Restricted Subsidiary
of contracts in respect of Qualified Projects entered into by the Company (not
previously entered into by any Restricted Subsidiary).
"AUTHENTICATING AGENT" has the meaning provided in Section 2.02.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, as to (a) any corporate Person, the board
of directors of such Person or any duly authorized committee thereof, (b) any
partnership, limited liability company or comparably organized Person which is
ultimately controlled by a corporate general partner, managing member or other
corporation, the "Board of Directors" of such corporation as specified in clause
(a) of this definition and (c) any partnership, limited liability company or
comparably organized Person which is ultimately controlled by individuals, such
controlling individuals.
"BOARD RESOLUTION" means, with respect to any Person, a duly adopted
resolution of the Board of Directors.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person, and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the discounted
rental stream payable by such Person that is required to be classified and
accounted for as a capital lease obligation under GAAP and, for purposes of this
definition, the amount of such obligation at any date shall be the capitalized
amount of such obligation at such date, determined in accordance with GAAP. The
final maturity of any such obligation shall be the date of the last
<PAGE>
-4-
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without penalty.
"CASH EQUIVALENTS" mean (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit, Eurodollar deposits, or bankers' acceptances
maturing within one year from the date of acquisition thereof issued by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $500,000,000; (v) repurchase agreements and reverse repurchase
agreements maturing within one year from the date entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in mutual funds and money market accounts investing at least 90% of the funds in
Investments of the types described in the foregoing clauses (i) through (v).
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events (whether or not approved by the Board of Directors of the
Company):
(i) the Company consolidates with or merges with or into another
Person or the Company or any of its Subsidiaries, directly or indirectly,
sells, assigns, conveys, transfers, leases or otherwise disposes of, in one
transaction or a series of related transactions, all or substantially all
of the property or assets of the Company and its Subsidiaries (determined
on a consolidated basis) to any Person or group of related Persons for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable (a "GROUP OF PERSONS"), or any Person consolidates with, or
merges with or into, the Company (whether or not in compliance with the
terms of this Indenture), in any such event pursuant to a transaction in
which immediately after the consummation thereof the Persons owning Voting
Stock of the Company having greater than 50% of the total voting power of
the outstanding Voting Stock of the Company immediately prior to the
consummation of such transaction shall cease to own, directly or
indirectly, the Voting Stock of the surviving or transferee entity or of
the Company having greater than 50% of the total voting power of the
outstanding Voting Stock of such Person; or
<PAGE>
-5-
(ii) the approval by the holders of Capital Stock of the Company of
any Plan of Liquidation (whether or not otherwise in compliance with the
provisions of this Indenture); or
(iii) any Person or Group of Persons either (1) is or becomes, by
purchase, tender offer, exchange offer, open market purchases, privately
negotiated purchases or otherwise, the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire at the time of
determination, whether such right is exercisable immediately or after the
passage at the time of determination of 90 days or less), directly or
indirectly, of Voting Stock of the Company having greater than 50% of the
total voting power of the outstanding Voting Stock of the Company (for the
purpose of this clause (iii), such Person or Group of Persons will be
deemed to "beneficially own" (determined as aforesaid) any Voting Stock of
a corporation (the "SPECIFIED CORPORATION") held by any other corporation
(the "PARENT CORPORATION") if such Person or Group of Persons "beneficially
owns," directly or indirectly, Voting Stock of such parent corporation
having a majority of the voting power of the outstanding Voting Stock of
such parent corporation) or (2) otherwise has the ability to elect,
directly or indirectly, a majority of the members of the Board of Directors
of the Company; PROVIDED, HOWEVER, that for purposes of this clause (iii),
a Person shall not be deemed the beneficial owner of any securities in
respect of which beneficial ownership by such Person arises solely as a
result of a revocable proxy delivered in response to a proxy or consent
solicitation that is made pursuant to, and in accordance with applicable
law for a shareholder meeting, or, if the Company is at the time required
to file reports under Section 13 or 15 of the Exchange Act, the Exchange
Act and is not then reportable on Schedule 13D (or any successor schedule,
form or report) under the Exchange Act; or
(iv) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors
or whose nomination for election by the stockholders of the Company was
approved by a vote of a majority of the directors of the Company then still
in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the
Company then in office.
For purposes of the foregoing definition of Change of Control, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or
series of related transactions) of all or substantially all of the properties or
assets of one or more Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company,
<PAGE>
-6-
shall be deemed to be the transfer of all or substantially all of the properties
and assets of the Company.
"CHANGE OF CONTROL OFFER" has the meaning provided in Section 4.15.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning provided in
Section 4.15.
"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"COMPANY" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to this Indenture and
thereafter means such successor.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income of such
Person for such period, PLUS (ii) to the extent that any of the following shall
have been taken into account in determining such Consolidated Net Income,
(A) all income taxes of such Person and its Restricted Subsidiaries paid or
accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or taxes
attributable to sales or dispositions of assets outside the ordinary course of
business), (B) Consolidated Interest Expense for such Person for such period,
(C) amortization expense (including the amortization of deferred financing
charges) and depreciation expense for such Person and its Restricted
Subsidiaries for such period, and (D) other non-cash items (other than non-cash
interest) reducing Consolidated Net Income for such Person and its Restricted
Subsidiaries for such period, other than any non-cash item for such period that
requires the accrual of or a reserve for cash charges for any future period and
other than any non-cash charge for such period constituting an extraordinary
item of loss, LESS (iii) (A) all non-cash items increasing Consolidated Net
Income for such Person and its Restricted Subsidiaries for such period and
(B) all cash payments during such period relating to non-cash items that were
added back in determining Consolidated EBITDA in any prior period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, the sum of, without duplication, (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, as determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
PROVIDED, HOWEVER, that there shall be excluded therefrom (a) net after-tax
gains
<PAGE>
-7-
and losses from all sales or other dispositions of assets outside the ordinary
course of business, (b) net after-tax extraordinary or nonrecurring gains or
losses, (c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of such
Person or is merged or consolidated with such Person or any Restricted
Subsidiary, (d) the cumulative effect of a change in accounting principles,
(e) any net income of any other Person if such other Person is not a Restricted
Subsidiary and is accounted for by the equity method of accounting, except that
such Person's equity in the net income of any such other Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such other Person during such period to such Person
or a Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution to a Restricted Subsidiary, to the
limitation that such amount so paid to a Restricted Subsidiary shall be excluded
to the extent that such amount could not at that time be paid to the Company or
a Qualified Restricted Subsidiary due to the restrictions set forth in
clause (f) below (regardless of any waiver of such conditions)), (f) any net
income of any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, by contract, operation of law, pursuant to
its charter or otherwise on the payment of dividends or the making of
distributions by such Restricted Subsidiary to such Person, except that (A) such
Person's equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash that could have been paid or distributed during such period to
such Person or a Qualified Restricted Subsidiary as a dividend or other
distribution (provided that such ability is not due to a waiver of such
restriction) and (B) such Person's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income, (g) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date, (h) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued), and (i) in the case of a successor to such Person
by consolidation or merger or as a transferee of such Person's assets, any net
income or loss of the successor corporation prior to such consolidation, merger
or transfer of assets.
"CONSOLIDATED TOTAL INDEBTEDNESS" shall mean, with respect to any
Person, on any date, without duplication, the aggregate outstanding principal
amount of Indebtedness of such Person and its Restricted Subsidiaries.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEBT TO CASH FLOW RATIO" means, as to any Person, the ratio of
(i) the Consolidated Total Indebtedness of such Person as of the date of
calculation (the "DETERMINATION DATE") to (ii) the product of (A) the
Consolidated EBITDA of such Person for the full fiscal quarter for which
<PAGE>
-8-
financial information is available ending not more than 135 days prior to the
transaction or event giving rise to the need to calculate the Debt to Cash Flow
Ratio (such fiscal quarter, the "MEASUREMENT PERIOD") and (B) four.
For purposes of this definition, the Consolidated Total Indebtedness
of the Person as of the Determination Date shall be adjusted as if the
Indebtedness giving rise to the need to perform such calculation had been
Incurred and the proceeds therefrom had been applied on the Determination Date.
For purposes of calculating Consolidated EBITDA of the Company for the
Measurement Period immediately prior to the relevant Determination Date, (I) any
Person that is a Restricted Subsidiary on such Determination Date (or would
become a Restricted Subsidiary on such Determination Date in connection with the
transaction that requires the determination of such ratio) will be deemed to
have been a Restricted Subsidiary at all times during such Measurement Period,
(II) any Person that is not a Restricted Subsidiary on such Determination Date
(or would cease to be a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such ratio)
will be deemed not to have been a Restricted Subsidiary at any time during such
Measurement Period and (III) if the Company or any Restricted Subsidiary shall
have in any manner (x) acquired (including through an Asset Acquisition or the
commencement of activities constituting such operating business) or (y) disposed
of (including by way of an Asset Sale or the termination or discontinuance of
activities constituting such operating business) of any operating business
during the Measurement Period or after the end of such Measurement Period and on
or prior to the Determination Date, such calculation will be made on a PRO FORMA
basis in accordance with GAAP as if, in the case of an Asset Acquisition or the
commencement of activities constituting such operating business, all such
transactions had been consummated on the first day of such Measurement Period
and, in the case of an Asset Sale or termination or discontinuance of activities
constituting such operating business, all such transactions had been consummated
prior to the first day of such Measurement Period; PROVIDED, HOWEVER, that such
PRO FORMA adjustment shall not give effect to the Consolidated EBITDA of any
acquired Person to the extent that such Person's net income would be excluded
pursuant to clause (f) of the definition of Consolidated Net Income.
"DEFAULT" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEPOSITORY" means The Depository Trust Company, its nominees and
successors.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, is required to be
redeemed or is redeemable (at the option of the holder thereof) at any time
prior to the earlier of the repayment of all Notes or the stated maturity of the
Notes
<PAGE>
-9-
or is exchangeable for Indebtedness at any time prior to the earlier of the
repayment of all Notes or the stated maturity of the Notes.
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"EXCHANGE NOTES" has the meaning provided in the preamble to this
Indenture.
"FAIR MARKET VALUE" or "FAIR VALUE" means, with respect to any asset
or property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between an informed and willing seller and an informed
and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair market value shall be determined
by the Board of Directors of the Company acting in good faith and shall be
evidenced by a Board Resolution (certified by the Secretary or Assistant
Secretary of the Company) delivered to the Trustee; PROVIDED, HOWEVER, that if
(A) the aggregate non-cash consideration to be received by the Company or any of
its Subsidiaries from any Asset Sale shall reasonably be expected to exceed
$5,000,000 or (B) the net worth of any Restricted Subsidiary to be designated as
an Unrestricted Subsidiary shall reasonably be expected to exceed $10,000,000,
in each case, upon completion of the transaction occasioning such calculation,
then fair market value shall be determined by an Independent Financial Advisor.
"FCC LICENSE" means an authorization that has been duly granted by the
Federal Communications Commission approving the control and use of specified
frequencies by the licensed Person.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GLOBAL NOTE" has the meaning provided in Section 2.01.
"GUARANTEE" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement
<PAGE>
-10-
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); PROVIDED, HOWEVER, that the term "GUARANTEE" shall not include (a)
endorsements for collection or deposit in the ordinary course of business, or
(b) commitments to make Permitted Investments in Restricted Subsidiaries. The
term "GUARANTEE" used as a verb has a corresponding meaning.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Registrar's books.
"INCUR" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "INCURRENCE," "INCURRED," "INCURRABLE" and "INCURRING" shall have meanings
correlative to the foregoing).
"INDEBTEDNESS" means with respect to any Person, without duplication,
whether contingent or otherwise, (i) any obligation for money borrowed, (ii) any
obligation evidenced by bonds, debentures, notes, or other similar instruments,
(iii) reimbursement obligations in respect of letters of credit or other similar
instruments, (iv) any obligation to pay the deferred purchase price of property
or services including Capitalized Lease Obligations, (v) the maximum fixed
redemption or repurchase price of Disqualified Capital Stock, (vi) indebtedness
of others of the types described in clauses (i) through (v) above, secured by a
lien on the assets of such Person or its Restricted Subsidiaries, valued, in
such cases where the recourse thereof is limited to such assets, at the lesser
of the principal amount of such Indebtedness or the fair market value of the
subject assets, (vii) indebtedness of others of the types described in
clauses (i) through (v) above, guaranteed by such Person or its Restricted
Subsidiaries and (viii) all obligations of such Person under Interest Swap
Obligations; PROVIDED, HOWEVER, that the amount of any Indebtedness at any date
shall be the outstanding balance of all unconditional obligations and the
maximum liability of any contingent obligations at such date. Notwithstanding
the foregoing, "INDEBTEDNESS" shall not be construed to include trade payables,
credit on open account, accrued liabilities or daylight overdrafts. For
purposes hereof, the "MAXIMUM FIXED REDEMPTION OR REPURCHASE PRICE" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock. The amount outstanding at any time of any Indebtedness issued with
original issue discount is the full amount of such Indebtedness less the
remaining unamortized portion
<PAGE>
-11-
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal,
investment banking or consulting firm of nationally recognized standing that is,
in the reasonable and good faith judgment of the Board of Directors of the
Company, qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"INITIAL NOTES" has the meaning provided in the preamble to this
Indenture.
"INITIAL PURCHASER" means Smith Barney Inc.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"INTEREST PAYMENT DATE" means the stated maturity of an installment of
interest on the Notes.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" by any Person means any direct or indirect (i) loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property or assets (valued at the fair market value
thereof as of the date of transfer) to other Persons or payments for property or
services for the account or use of other Persons, or otherwise); (ii) purchase
or acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidences of Indebtedness issued by any other Person (whether by merger,
consolidation, amalgamation or otherwise and whether or not purchased directly
from the issuer of such securities or evidences of Indebtedness);
(iii) guarantee or assumption of any Indebtedness or any other obligation of any
other Person (except for an assumption of Indebtedness for which the assuming
Person receives consideration at the time of such assumption in the form of
property or assets with a fair market value at least equal to the principal
amount of the Indebtedness assumed); (iv) the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or other
beneficial ownership of any Person; and (v) all other items that would be
classified as investments
<PAGE>
-12-
(including, without limitation, purchases of assets outside the ordinary course
of business) on a balance sheet of such Person prepared in accordance with GAAP.
Notwithstanding the foregoing, the purchase or acquisition of any securities of
any other Person solely with Qualified Capital Stock shall not be deemed to be
an Investment. Investments shall exclude extensions of trade credit and
advances to customers and suppliers to the extent made in the ordinary course of
business on ordinary business terms. The amount of any non-cash Investment
shall be the fair market value of such Investment, as determined conclusively in
good faith by management of the Company unless the fair market value of such
Investment exceeds $5,000,000, in which case the fair market value shall be
determined conclusively in good faith by the Board of Directors of the Company
at the time such Investment is made. The amount of any Investment shall not be
adjusted for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"ISSUE DATE" means June 15, 1995, the date of original issuance of the
Notes.
"LEGAL HOLIDAY" has the meaning provided in Section 10.07.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance (including without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any option or other agreement to sell, and any filing of or
agreement to give, any security interest).
"MATERIAL SUBSIDIARY" means, at any date of determination, any
Subsidiary of the Company which together with its Subsidiaries and each
Defaulting Subsidiary (as defined below) either (A) had assets which, as of the
date of the Company's most recent quarterly consolidated balance sheet,
constituted at least 25% of the Company's total assets on a consolidated basis
as of such date, in each case determined in accordance with GAAP, or (B) had
EBITDA for the 12-month period ending on the date of the Company's most recent
quarterly consolidated statement of income which constituted at least 25% of the
Company's Consolidated EBITDA (such calculation of Consolidated EBITDA of the
Company for the purposes of this definition to be calculated without giving
effect to clause (f) of the definition of Consolidated Net Income) for such
period in each case as determined in accordance with GAAP. "DEFAULTING
SUBSIDIARY" means any Subsidiary of the Company with respect to which an event
described under clause (iv), (v), (vii), (viii) or (ix) of Section 6.01 has
occurred and is continuing, determined as if the references to the words
"Material Subsidiary" in each such clause were a reference to the words
"Subsidiary of the Company" therein.
"MATURITY DATE" means June 15, 2005.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
<PAGE>
-13-
"NET CASH PROCEEDS" mean, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries from
such Asset Sale, net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, brokerage, legal, accounting
and investment banking fees and sales commissions), (b) taxes paid or payable
after taking into account any reduction in tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness (other than any intercompany Indebtedness) that is required by the
terms thereof to be repaid or pledged as cash collateral, or the holders of
which otherwise have a contractual claim which is legally superior to that of
the Holders (including a restriction on transfer) to the proceeds of the subject
assets, in connection with such Asset Sale and (d) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary of the Company, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"NET EQUITY PROCEEDS" mean (a) in the case of any sale by the Company
of Qualified Capital Stock of the Company, the aggregate net proceeds received
by the Company, after payment of expenses, commissions and the like (including,
without limitation, brokerage, legal, accounting and investment banking fees and
commissions) incurred in connection therewith, and (b) in the case of any
exchange, exercise, conversion or surrender of any outstanding Indebtedness of
the Company or any Restricted Subsidiary of the Company for or into shares of
Qualified Capital Stock of the Company, the amount of such Indebtedness (or, if
such Indebtedness was issued at an amount less than the stated principal amount
thereof, the accrued amount thereof as determined in accordance with GAAP) as
reflected in the consolidated financial statements of the Company prepared in
accordance with GAAP as of the most recent date next preceding the date of such
exchange, exercise, conversion or surrender (plus any additional amount required
to be paid by the holder of such Indebtedness to the Company or to a Qualified
Restricted Subsidiary of the Company upon such exchange, exercise, conversion or
surrender and less any and all payments made to the holders of such
Indebtedness, and all other expenses incurred by the Company in connection
therewith), in the case of each of (a) and (b) above to the extent consummated
after the Issue Date; PROVIDED, HOWEVER, that Net Equity Proceeds shall not
include or be deemed to include (A) the exchange, exercise, conversion or
surrender of any Indebtedness outstanding or Incurred on the Issue Date that is
subordinated (whether pursuant to its terms or by operation of law) to the
Notes, (B) any Net Equity Proceeds from a Public Equity Offering to the extent
utilized to redeem the Notes and (C) the issuance of equity of the Company
(including, without limitation, any warrants to acquire equity) as a unit with
the Notes on the Issue Date.
<PAGE>
-14-
"NET PROCEEDS OFFER" has the meaning provided in Section 4.16.
"NET PROCEEDS OFFER AMOUNT" has the meaning provided in Section 4.16.
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning provided in
Section 4.16.
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning provided in
Section 4.16.
"NON-U.S. PERSON" means a person who is not a U.S. person, as defined
in Regulation S.
"NOTES" mean the Initial Notes and the Exchange Notes treated as a
single class of securities, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to this Indenture.
"OBLIGATIONS" mean all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"OFFERING MEMORANDUM" means the Confidential Private Placement
Offering Memorandum dated June 14, 1995 of the Company relating to the offering
of the Notes.
"OFFICER" means, with respect to any Person, the Chairman of the Board
of Directors, the Chief Executive Officer, the President, any Vice President,
the Chief Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors serving
in a similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise complying with
the requirements of Sections 10.04 and 10.05, as they relate to the making of an
Officers' Certificate.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of
Sections 10.04 and 10.05, as they relate to the giving of an Opinion of Counsel.
"PAYING AGENT" has the meaning provided in Section 2.03.
"PAYMENT RESTRICTION" has the meaning provided in Section 4.13.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:
<PAGE>
-15-
(i) Indebtedness Incurred by the Company under the Initial Notes and
the Exchange Notes and any Refinancing Indebtedness Incurred to Refinance
such Indebtedness;
(ii) Indebtedness Incurred by the Company under revolving credit and
letter of credit facilities and any Refinancing Indebtedness Incurred to
Refinance such Indebtedness to the extent that the aggregate principal
amount at any time outstanding of such Indebtedness and any such
Refinancing Indebtedness does not exceed $25,000,000;
(iii) Indebtedness of the Company and its Subsidiaries outstanding on
the Issue Date and reflected in the financial statements set forth in the
Offering Memorandum as in effect on the Issue Date reduced by the amount
of any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereon and any Refinancing
Indebtedness Incurred to Refinance such Indebtedness;
(iv) Indebtedness of the Company or of any Restricted Subsidiary of
the Company under Interest Swap Obligations; PROVIDED, HOWEVER, that such
Interest Swap Obligations are entered into to protect the Company or such
Subsidiary from fluctuations in interest rates on Indebtedness Incurred in
accordance with this Indenture (as determined in good faith by a senior
financial officer of the Company), to the extent the notional principal
amount of such Interest Swap Obligation does not exceed the principal
amount of the Indebtedness to which such Interest Swap Obligation relates;
(v) additional Indebtedness Incurred by the Company or by any of its
Restricted Subsidiaries and any Refinancing Indebtedness Incurred to
Refinance such Indebtedness to the extent that the aggregate principal
amount at any time outstanding of such Indebtedness and any such
Refinancing Indebtedness does not exceed the greater of (x) $25,000,000 and
(y) the product of (I) Consolidated EBITDA of the Company for the most
recently ended fiscal quarter for which financial statements are available
ending not more than 135 days prior to the date of determination and
(II) four;
(vi) Indebtedness of a direct or indirect Restricted Subsidiary to the
Company for so long as such Indebtedness is held by the Company or a direct
or indirect Qualified Restricted Subsidiary in each case subject to no Lien
held by any Person other than the Company or a Qualified Restricted
Subsidiary of the Company; PROVIDED, HOWEVER, that if as of any date any
Person other than the Company or a direct or indirect Qualified Restricted
Subsidiary owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such date shall be deemed the Incurrence of
Indebtedness not constituting Permitted Indebtedness under this clause (vi)
by the issuer of such Indebtedness;
<PAGE>
-16-
(vii) Indebtedness of the Company or of a direct or indirect
Restricted Subsidiary to any direct or indirect Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or by a
direct or indirect Qualified Restricted Subsidiary in each case subject to
no Lien held by any Person other than the Company or a Qualified Restricted
Subsidiary; PROVIDED, HOWEVER, that (a) any Indebtedness of the Company to
any direct or indirect Subsidiary of the Company is unsecured and evidenced
by an intercompany promissory note that, other than in the case of a
foreign Restricted Subsidiary, is subordinated to the Company's obligations
under this Indenture and the Notes, and (b) if as of any date any Person
other than the Company or a direct or indirect Qualified Restricted
Subsidiary owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such date shall be deemed the Incurrence of
Indebtedness not constituting Permitted Indebtedness under this clause
(vii) by the issuer of such Indebtedness;
(viii) (A) Indebtedness of any corporation that becomes a Restricted
Subsidiary after the Issue Date which Indebtedness existed at the time such
corporation becomes a Restricted Subsidiary; PROVIDED, HOWEVER, that (a)
such Indebtedness was not Incurred as a result of or in connection with or
anticipation of such corporation becoming a Restricted Subsidiary, (b)
immediately before and immediately after giving effect to such corporation
becoming a Restricted Subsidiary, the Company could Incur at least $1.00 of
additional Indebtedness in accordance with the Debt to Cash Flow Ratio test
of paragraph (b) of Section 4.12 and (c) such Indebtedness is without
recourse to the Company or to any of its Subsidiaries or to any of their
respective properties or assets other than the Person becoming a Restricted
Subsidiary or its properties and assets and (B) any Refinancing
Indebtedness Incurred to Refinance such Indebtedness;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business;
PROVIDED, HOWEVER, that such Indebtedness is extinguished within three
Business Days of its Incurrence;
(x) (A) Indebtedness Incurred or Preferred Stock issued by any
Restricted Subsidiary, the proceeds of which will be used to finance
Qualified Projects; PROVIDED, HOWEVER, that no such Indebtedness may,
except as permitted by clause (xi) below of this definition and by
Section 4.20, be Incurred directly or indirectly by any other Restricted
Subsidiary in respect of such Indebtedness pursuant to a guarantee, pledge
of assets, assumption or otherwise or as a result of or pursuant to the
merger or consolidation of any other Restricted Subsidiary with or into the
Restricted Subsidiary Incurring the Indebtedness pursuant to this clause
(x) and (B) any Refinancing Indebtedness Incurred to Refinance such
Indebtedness;
<PAGE>
-17-
(xi) Indebtedness Incurred by any Restricted Subsidiary pursuant to a
guarantee or assumption in respect of any Indebtedness of any other
Restricted Subsidiary Incurred by such other Restricted Subsidiary pursuant
to clause (x) of this definition (including Refinancing Indebtedness
Incurred pursuant to subclause (B) thereof); PROVIDED, HOWEVER, that no
such Indebtedness (including Refinancing Indebtedness Incurred pursuant to
subclause (B) of clause (x) of this definition) of such other Restricted
Subsidiary may be guaranteed or otherwise assumed pursuant to this clause
(xi) unless either (1) at the time of such guarantee or assumption the Debt
to Cash Flow Ratio of the Company is less than or equal to 6.0 to 1.0 or
(2) at the time of such guarantee or assumption (after giving effect
thereto) the total contribution to the Consolidated EBITDA of the Company
(such Consolidated EBITDA to be calculated for purposes of this clause (xi)
without giving effect to clause (f) of the definition of Consolidated Net
Income) for the most recently ended fiscal quarter for which financial
information is available ending not more than 135 days prior to the date of
determination of the Restricted Subsidiaries which have Incurred
Indebtedness or issued Preferred Stock pursuant to clause (x) of this
definition (which such Indebtedness or Preferred Stock is outstanding at
the time of determination) and of the Restricted Subsidiaries which have
guaranteed or otherwise assumed such outstanding Indebtedness pursuant to
this clause (xi) (which such guarantee or assumption is in effect) is not
in excess of 25% of such Consolidated EBITDA; and
(xii) Indebtedness in respect of Cash Equivalents pursuant to clause
(v) of the definition thereof.
"PERMITTED INVESTMENTS" mean, without duplication, each of the
following:
(a) Investments in cash (including deposit accounts with major
commercial banks) and Cash Equivalents;
(b) Investments by the Company or by any Restricted Subsidiary in any
Person that is or will become immediately after such Investment a direct or
indirect Wholly Owned Restricted Subsidiary; PROVIDED, HOWEVER, that
(A) for purposes of calculating at any date the aggregate amount of
Investments made since the Issue Date under Section 4.10, such Investment
shall be a Permitted Investment only so long as any such Subsidiary in
which the Investment has been made meets the conditions set forth in this
clause (b), (B) no such Investment may be made in any Restricted Subsidiary
by the Company pursuant to a guarantee or other assumption of such
Restricted Subsidiary's Indebtedness, (C) no such Investment may be made in
any Restricted Subsidiary by another Restricted Subsidiary pursuant to a
guarantee or other assumption of such Restricted Subsidiary's Indebtedness
unless permitted by clause (xi) of the definition of Permitted Indebtedness
and (D) no Investment of properties, assets or contracts (other than cash
capital contributions and hardware
<PAGE>
-18-
and equipment) may be made in any Wholly Owned Restricted Subsidiary that
is not (or will not be as a result of or in connection with or in
anticipation of the transaction in question) a Qualified Restricted
Subsidiary unless at the time of such Investment either (x) the Debt to
Cash Flow Ratio of the Company is less than or equal to 6.0 to 1.0 or (y)
the total contribution to the Consolidated EBITDA of the Company (such
Consolidated EBITDA to be calculated for purposes of this subclause (D) of
this clause (b) without giving effect to clause (f) of the definition of
Consolidated Net Income) for the most recently ended fiscal quarter for
which financial information is available ending not more than 135 days
prior to the date of determination of the Restricted Subsidiaries which are
not Qualified Restricted Subsidiaries is not in excess of 25% of such
Consolidated EBITDA;
(c) any Investments in the Company by any Subsidiary of the Company;
PROVIDED, HOWEVER, that any Indebtedness evidencing such Investment is
subordinated, pursuant to a written agreement, to the Company's obligations
in respect of the Notes and this Indenture;
(d) Investments consisting of non-cash consideration made or held by
the Company or by its Subsidiaries as a result of an Asset Sale made in
compliance with Section 4.16;
(e) Investments existing on the Issue Date;
(f) loans and advances to employees and officers of the Company and
the Restricted Subsidiaries made in the ordinary course of business in an
aggregate amount outstanding at any time not to exceed $1,000,000 for all
Investments pursuant to this clause (f);
(g) accounts receivable created or acquired in the ordinary course of
business of the Company or any Restricted Subsidiary and on ordinary
business terms;
(h) Investments arising from transactions by the Company or any
Restricted Subsidiary with trade creditors or customers in the ordinary
course of business (including any such Investment received pursuant to any
plan of reorganization or similar arrangement pursuant to the bankruptcy
or insolvency of such trade creditors or customers or otherwise in
settlement of a claim);
(i) additional Investments in an aggregate amount outstanding at any
time not to exceed $10,000,000 for all Investments pursuant to this clause
(i);
(j) Investments in joint ventures, partnerships, or other business
ventures in an aggregate amount outstanding at any time not to exceed
$15,000,000 for all Investments pursuant to this clause (j);
<PAGE>
-19-
(k) Investments consisting of (i) licensing or sublicensing of FCC
Licenses or intellectual property of the Company or any Restricted
Subsidiary in the ordinary course of business, (ii) the transfer of
equipment from the Company or any Restricted Subsidiary to any other
Subsidiary in the ordinary course of business, and (iii) the sharing or
contribution of services of employees among any one or more of the Company
and its Subsidiaries in the ordinary course of business;
(l) loans in the ordinary course of business to employees of the
Company to purchase Capital Stock of the Company pursuant to the terms of
employee stock benefit plans; and
(m) the sale, conveyance, transfer, lease, assignment or other
disposition to any Restricted Subsidiary of contracts in respect of
Qualified Projects entered into by the Company (not previously entered into
by any Restricted Subsidiary).
"PERMITTED LIENS" mean, without duplication, each of the following:
(i) pledges or deposits by such Person under worker's compensation
laws, unemployment insurance laws or similar legislation (other than the
Employee Retirement Income Security Act of 1974, as amended), or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public statutory obligations of such Person or deposits
to secure surety or appeal bonds to which such Person is a party, or
deposits as security for contested taxes or import duties or for the
payment of rent;
(ii) Liens imposed by law, such as landlords', carriers',
warehousemen's and mechanics' Liens or bankers' Liens incurred in the
ordinary course of business for sums which are not yet due or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate provision has been made;
(iii) Liens for taxes not yet subject to penalties for non-payment or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, if adequate reserve, as may be
required by generally accepted accounting principles, shall have been made
therefor;
(iv) Liens in favor of issuers of surety bonds or appeal bonds issued
pursuant to the request of and for the account of such Person in the
ordinary course of its business;
(v) Liens to support trade letters of credit issued in the ordinary
course of business;
<PAGE>
-20-
(vi) survey exceptions, encumbrances, easements or reservations of, or
rights of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other
restrictions on the use of real property;
(vii) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(viii) Liens in favor of the Company or any Qualified Restricted
Subsidiary;
(ix) Liens securing Acquired Indebtedness Incurred in accordance with
Section 4.12; PROVIDED, HOWEVER, that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the Incurrence of such Acquired
Indebtedness by the Company and were not granted as a result of, in
connection with or in anticipation of, the Incurrence of such Acquired
Indebtedness by the Company and (B) such Liens do not extend to or cover
any property or assets of the Company or of any of its Subsidiaries other
than the property or assets that secured the Acquired Indebtedness prior to
the time such Indebtedness became Acquired Indebtedness of the Company and
are no more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the Incurrence of such Acquired Indebtedness by the
Company;
(x) Liens granted by the Company or by any Restricted Subsidiary to
secure Indebtedness Incurred in accordance with this Indenture which
Indebtedness represents all or part of the purchase price of assets or
property acquired or constructed in the ordinary course of business after
the Issue Date from a Person that is not an Affiliate of the Company;
PROVIDED, HOWEVER, that (A) the aggregate amount of Indebtedness secured by
such Liens shall not exceed the fair market value (or, if less, the cost)
of the assets or property so acquired or constructed and (B) such Liens
shall not encumber any other assets or property of the Company or of any
Restricted Subsidiary (except proceeds, products, attachments and
accessions) and shall attach to such assets or property within 120 days of
the acquisition of such assets or property;
(xi) Liens on the assets or property of a Person that becomes a
Restricted Subsidiary after the Issue Date to the extent that such Liens
are existing at the time such Person became a Restricted Subsidiary and
were not granted as a result of, in connection with or in anticipation of
such Person becoming a Restricted Subsidiary; PROVIDED, HOWEVER, that (A)
the Indebtedness (if any) secured thereby is Incurred in accordance with
this Indenture and (B) such Liens do not extend to or cover any assets or
property of the Company or of any Restricted Subsidiary, other than the
assets or property so acquired (together with proceeds and products thereof
and attachments and accessions thereto);
<PAGE>
-21-
(xii) Liens to secure Capitalized Lease Obligations, including in
respect of Sale and Leaseback Transactions of property or assets to the
extent consummated in compliance with Section 4.12; PROVIDED, HOWEVER, that
such Liens do not extend to or cover any property or assets of the Company
or of any Restricted Subsidiary, other than the property or assets subject
to such Capitalized Lease Obligations;
(xiii) Liens in respect of Refinancing Indebtedness Incurred to
Refinance any of the Indebtedness set forth in clauses (ix), (x), (xi),
(xii) above and clauses (xviii), (xx), (xxi) and (xxii) below; PROVIDED,
HOWEVER, that such Liens in respect of such Refinancing Indebtedness (A)
are no less favorable to the Holders in any material respect and are not
more favorable to the lienholders in any material respect with respect to
such Liens than the Liens in respect of the Indebtedness being Refinanced
and (B) do not extend to or cover any properties or assets of the Company
or of any Restricted Subsidiary, other than the property or assets that
secured the Indebtedness being Refinanced;
(xiv) Liens to the extent granted or existing in respect of specific
items of inventory or other goods and proceeds thereof of any Person
securing such Person's Obligations in respect of bankers' acceptances
arising in the ordinary course of business if and to the extent issued or
created for the account of such Person to facilitate the purchase,
shipment, or storage of such specific items of inventory or other goods;
(xv) Liens in favor of the Trustee for the benefit of the Noteholders
arising under Section 4.18(A) hereof;
(xvi) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the
Company or any Restricted Subsidiary if and to the extent arising in the
ordinary course of business, including rights of offset and set-off;
(xvii) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xviii) Liens existing on the Issue Date to the extent and in the
manner existing on the Issue Date;
(xix) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of real or personal
property that are otherwise permitted under the Indenture and under which
the Company or any Restricted Subsidiary is a lessee;
(xx) Liens on property or assets of a Restricted Subsidiary securing
Indebtedness Incurred by such Restricted Subsidiary in accordance with
clause (x) of the definition of Permitted Indebtedness; PROVIDED,
<PAGE>
-22-
HOWEVER, that such Liens do not extend to or cover any property or assets
of the Company or of any Restricted Subsidiary other than the property or
assets of such Restricted Subsidiary;
(xxi) Liens on property or assets of any Restricted Subsidiary that
has Incurred Indebtedness pursuant to clause (xi) of the definition of
Permitted Indebtedness securing such Indebtedness; PROVIDED, HOWEVER, that
such Liens do not extend to or cover any other property or assets of the
Company or any other Restricted Subsidiary;
(xxii) Liens on property or assets of the Company (other than the
capital stock of its Subsidiaries) securing Indebtedness Incurred under
clause (ii) of the definition of Permitted Indebtedness; PROVIDED, HOWEVER,
that such Liens do not extend to or cover any property or assets of any
Subsidiary of the Company; and
(xxiii) Liens consisting of pledges of the Capital Stock of
Subsidiaries of the Company securing Indebtedness Incurred pursuant to
clauses (x) and (xi) of the definition of Permitted Indebtedness.
"PERMITTED STOCK REPURCHASE" means (1) the repurchase, redemption,
retirement or acquisition of Capital Stock, or warrants, options or rights to
acquire such Capital Stock, of the Company that is at the time of such
repurchase, redemption, retirement or acquisition held by an employee, officer
or director of the Company or any Subsidiary of the Company or a permitted
transferee or affiliate of such employee, officer or director pursuant to any
equity subscription agreement, stockholders' agreement, stock option agreement
or similar agreement, to the extent that such repurchase, redemption, retirement
or acquisition is effected upon the death, retirement or other termination of
such employee, officer or director and (2) the payment of any Indebtedness of
the Company issued to any such Person in connection with any such repurchase,
redemption, retirement or acquisition.
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"PHYSICAL NOTES" has the meaning provided in Section 2.01.
"PLAN OF LIQUIDATION" means, with respect to any Person, a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of such Person otherwise
than as an entirety or substantially as an entirety and (ii) the distribution of
all or substantially all of the proceeds of such sale, lease, conveyance or
other disposition and all or substantially all of the remaining assets of such
Person to holders of Capital Stock of such Person.
<PAGE>
-23-
"PREFERRED STOCK" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"PRINCIPAL" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the
Notes in the form set forth in Section 2.15.
"PROCEEDS PURCHASE DATE" has the meaning provided in Section 4.16.
"PRODUCTIVE ASSETS" mean assets (including assets owned directly or
indirectly through Capital Stock) of a kind used or usable in the businesses of
the Company and the Restricted Subsidiaries as they are conducted on the date of
the Asset Sale.
"PRO FORMA" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company in consultation with its independent public
accountants.
"PUBLIC EQUITY OFFERING" means a primary public offering (whether or
not underwritten, but excluding any offering pursuant to Form S-4 or S-8 under
the Securities Act) of Capital Stock (other than Disqualified Capital Stock) of
the Company pursuant to an effective registration statement under the Securities
Act.
"PUBLIC MARKET" means any time after (x) a Public Equity Offering has
been consummated and (y) at least 30% of the total issued and outstanding Common
Stock of the Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 promulgated
under the Securities Act.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"QUALIFIED INTERCOMPANY INDEBTEDNESS" means any Indebtedness of a
Restricted Subsidiary Incurred and outstanding in accordance with clauses (vi)
and (vii) of the definition of Permitted Indebtedness (but only so long as such
Indebtedness would qualify as Permitted Indebtedness under such clause (vi) or
(vii)).
<PAGE>
-24-
"QUALIFIED INTERCOMPANY PREFERRED STOCK" means Preferred Stock of a
Subsidiary of the Company for so long as such Preferred Stock is owned and held
by the Company or a Qualified Restricted Subsidiary of the Company and in each
case not subject to any Lien held by any Person other than the Company or a
Qualified Restricted Subsidiary of the Company.
"QUALIFIED PROJECTS" mean projects for the development, manufacturing,
installation, operation, ownership, servicing, management or marketing of the
Company's wireless data communications systems, or activities reasonably related
or incidental thereto.
"QUALIFIED RESTRICTED SUBSIDIARY" means any Wholly Owned Restricted
Subsidiary of the Company which has not Incurred, and will not Incur in
connection with the transaction for which the relevant determination is being
made, any Indebtedness other than Qualified Intercompany Indebtedness or issued
any Preferred Stock other than Qualified Intercompany Preferred Stock and which
Subsidiary is not, and will not in connection with the transaction for which the
relevant determination is being made become, subject to any Payment Restriction.
"RECORD DATE" means the Record Dates specified in the Notes; PROVIDED,
HOWEVER, that if any such date is a Legal Holiday, the Record Date shall be the
first day immediately preceding such specified day that is not a Legal Holiday.
"REDEMPTION DATE," when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
"REDEMPTION PRICE," when used with respect to any Note to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Notes.
"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "REFINANCED" and "REFINANCING"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means (A) any Indebtedness Incurred by the
Company to Refinance Indebtedness of the Company or of the Restricted
Subsidiaries or (B) any Indebtedness Incurred by any Restricted Subsidiary to
Refinance Indebtedness Incurred by such Restricted Subsidiary; PROVIDED,
HOWEVER, that such Indebtedness so Incurred to Refinance such other Indebtedness
(the "EXISTING INDEBTEDNESS") (1) is not in an aggregate principal amount as of
the date of the consummation of such proposed Refinancing in excess of (or if
such Indebtedness being Incurred to Refinance the Existing Indebtedness is
issued with original issue discount, at an original issue price not in excess
of) the sum of (i) the aggregate principal amount outstanding of the Existing
Indebtedness
<PAGE>
-25-
(PROVIDED, HOWEVER, that (a) if such Existing Indebtedness was issued with
original issue discount, in excess of the accreted amount of such Existing
Indebtedness (as determined in accordance with GAAP) as of the date of such
proposed Refinancing, (b) if such Existing Indebtedness was Incurred pursuant to
a revolving credit facility or any other agreement providing a commitment for
subsequent borrowings, with a maximum commitment under the agreement governing
the Indebtedness proposed to be Incurred not in excess of the maximum commitment
amount under such Existing Indebtedness and (c) any amount of such Existing
Indebtedness owned or held by the Company or any of its Subsidiaries shall not
be deemed to be outstanding for the purposes hereof) as of the date of such
proposed Refinancing, PLUS (ii) the amount of any premium required to be paid
under the terms of the instrument governing such Existing Indebtedness and PLUS
(iii) the amount of reasonable expenses incurred by the Company or such
Subsidiary in connection with such Refinancing and (2) does not have (I) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Existing Indebtedness or (II) a final maturity earlier than the
final maturity of the Existing Indebtedness; PROVIDED, FURTHER, HOWEVER, that
(x) if such Existing Indebtedness is Indebtedness of the Company, then such
Indebtedness proposed to be Incurred to Refinance the Existing Indebtedness
shall be Indebtedness solely of the Company (it being understood that if such
Indebtedness is secured by a pledge of the Capital Stock of Subsidiaries of the
Company, such Indebtedness Incurred to Refinance the Existing Indebtedness may
likewise be secured), (y) if such Existing Indebtedness is subordinate or junior
to the Notes, then such Indebtedness proposed to be Incurred to Refinance the
Existing Indebtedness shall be subordinate to the Notes at least to the same
extent and in the same manner as the Existing Indebtedness and (z) such
Indebtedness proposed to be Incurred to Refinance the Existing Indebtedness is
not Incurred more than three months prior to the complete retirement and
defeasance of the Existing Indebtedness with the proceeds thereof.
"REGISTRAR" has the meaning provided in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated on or about the Issue Date between the Company and the Initial
Purchaser for the benefit of themselves and the Holders as the same may be
amended from time to time in accordance with the terms thereof.
"REGULATION S" means Regulation S under the Securities Act.
"RESTRICTED PAYMENT" has the meaning provided in Section 4.10.
"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; PROVIDED, HOWEVER, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is
not designated to be an Unrestricted Subsidiary pursuant to Section 4.14 hereof.
<PAGE>
-26-
"RULE 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group and its successors.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party providing for
the leasing pursuant to a capitalized lease to the Company or a Subsidiary of
any property, whether owned by the Company or any Subsidiary at the Issue Date
or later acquired, which has been or is to be sold or transferred by the Company
or such Subsidiary to such Person or to any other Person by whom funds have been
or are to be advanced on the security of such Property.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"SUBSIDIARY", with respect to any Person, means (i) any corporation, a
majority of whose voting stock (defined as any class or classes of capital stock
having voting power under ordinary circumstances to elect a majority of the
Board of Directors) is owned, directly or indirectly, by the Company, by one or
more Subsidiaries, or by the Company and one or more Subsidiaries and (ii) any
other person (other than a corporation) in which the Company, one or more
Subsidiaries, or the Company and one or more Subsidiaries, directly or
indirectly, has at least a majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement to be entered
into between the Company and its Subsidiaries in the form attached hereto as
EXHIBIT E.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except
as otherwise provided in Section 9.03.
"TRUST OFFICER" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture, or in the case of a
successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. GOVERNMENT OBLIGATIONS" mean direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
<PAGE>
-27-
"U.S. LEGAL TENDER" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. PHYSICAL NOTES" has the meaning provided in Section 2.01.
"UNRESTRICTED SUBSIDIARY" means a Subsidiary of the Company created
after the Issue Date and so designated by a resolution of the Board of Directors
of the Company pursuant to Section 4.14 hereof.
"VOTING STOCK" means, with respect to any Person, securities of any
class or classes of Capital Stock of such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Wholly Owned Subsidiary
of the Company that is a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than directors'
qualifying shares) which normally have the right to vote in the election of
directors are owned by such Person or any wholly owned Subsidiary of such
Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Holder or a Noteholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
<PAGE>
-28-
"OBLIGOR" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP as in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) any reference to a statute, law or regulation means that statute,
law or regulation as amended and in effect from time to time and includes
any successor statute, law or regulation; PROVIDED, HOWEVER, that any
reference to the Bankruptcy Law shall mean the Bankruptcy Law as applicable
to the relevant case.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING.
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of EXHIBIT A hereto. The
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of EXHIBIT B hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. Each Note shall be
dated the date of its issuance and shall show the date of its authentication.
<PAGE>
-29-
The terms and provisions contained in the Notes, annexed hereto as
EXHIBITS A AND B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in EXHIBIT A (the "GLOBAL NOTE"), deposited
with the Trustee, as custodian for the Depository, duly executed by the Company
and authenticated by the Trustee as hereinafter provided and shall bear the
legend set forth in Section 2.15. The aggregate principal amount of the Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in EXHIBIT A (the "OFFSHORE
PHYSICAL NOTES"). Notes offered and sold to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) shall be issued, and Notes offered and sold in reliance on Rule 144A may be
issued, in the form of permanent certificated Notes in registered form, in
substantially the form set forth in EXHIBIT A (the "U.S. PHYSICAL NOTES"). The
Offshore Physical Notes and the U.S. Physical Notes are sometimes collectively
herein referred to as the "PHYSICAL NOTES."
SECTION 2.02. EXECUTION AND AUTHENTICATION;
AGGREGATE PRINCIPAL AMOUNT.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $235,000,000 and (ii) Exchange
Notes from time to time for issue only in exchange for a like principal amount
<PAGE>
-30-
of Initial Notes, in each case upon a written order of the Company. Such order
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated, whether the Notes are to be Initial Notes or
Exchange Notes and whether the Notes are to be issued as Physical Notes or a
Global Note or such other information as the Trustee may reasonably request.
The aggregate principal amount of Notes outstanding at any time may not exceed
$235,000,000, except as provided in Section 2.07.
The Trustee may appoint an authenticating agent (the "AUTHENTICATING
AGENT") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company or with any Affiliate of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof except to
the extent necessary to make interest payments on the Notes in additional Notes
in accordance with Section 4.01 hereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("REGISTRAR"), (b) Notes may be presented or surrendered for payment
("PAYING AGENT") and (c) notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The term
"PAYING AGENT" includes any additional Paying Agent. The Company may act as its
own Paying Agent, except that for the purposes of payments on the Notes pursuant
to Sections 4.15 and 4.16, neither the Company nor any Affiliate of the Company
may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. Any of
<PAGE>
-31-
the Registrar, the Paying Agent or any other agent may resign upon 30 days'
notice to the Company.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, or interest on, the Notes (whether such assets have been
distributed to it by the Company or any other obligor on the Notes), and the
Company and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes or to exchange such Notes for an
equal principal amount of Notes of other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; PROVIDED, HOWEVER, that the Notes
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Company or the Registrar or co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's or co-Registrar's request. No service
charge shall be made for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges or
transfers
<PAGE>
-32-
pursuant to Sections 2.10, 3.06, 4.15, 4.16 or 9.05, in which event the Company
shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Notes may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry system.
SECTION 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder must provide an indemnity bond or other indemnity of reasonable tenor,
sufficient in the reasonable judgment of both the Company and the Trustee, to
protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Note is replaced. Every replacement Note shall constitute an
additional obligation of the Company.
SECTION 2.08. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
BONA FIDE purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
<PAGE>
-33-
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company or an Affiliate shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered. The Company shall notify the Trustee, in writing, when it or, to
the Company's knowledge, any of its Affiliates repurchases or otherwise acquires
Notes, of the aggregate principal amount of such Notes so repurchased or
otherwise acquired.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company considers appropriate for temporary Notes and so indicates in
the Officers' Certificate. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate upon receipt of a written order of
the Company pursuant to Section 2.02 definitive Notes in exchange for temporary
Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose, in its customary manner, of all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07, the Company may not
issue new Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which special record date shall be the fifteenth day next
<PAGE>
-34-
preceding the date fixed by the Company for the payment of defaulted interest or
the next succeeding Business Day if such date is not a Business Day. The
Company shall notify the Trustee in writing of the amount of defaulted interest
proposed to be paid on each Note and the date of the proposed payment (a
"DEFAULT INTEREST PAYMENT DATE"), and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such defaulted interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such defaulted interest as provided in this Section;
PROVIDED, HOWEVER, that in no event shall the Company deposit monies proposed to
be paid in respect of defaulted interest later than 11:00 a.m. of the proposed
Default Interest Payment Date. At least 15 days before the subsequent special
record date, the Company shall mail (or cause to be mailed) to each Holder, as
of a recent date selected by the Company, with a copy to the Trustee, a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest, and interest payable on such defaulted interest, if any,
to be paid. Notwithstanding the foregoing, any interest which is paid prior to
the expiration of the 30-day period set forth in Section 6.01(1) shall be paid
to Holders as of the regular record date for the Interest Payment Date for which
interest has not been paid. Notwithstanding the foregoing, the Company may make
payment of any defaulted interest in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number, and, if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; PROVIDED, HOWEVER, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company
shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. DEPOSIT OF MONIES.
Prior to 11:00 a.m. New York City time on each Interest Payment Date,
Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds
Offer Payment Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control
Payment Date and Net Proceeds Offer Payment Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Maturity Date, Redemption Date, Change of Control
Payment Date and Net Proceeds Offer Payment Date, as the case may be.
<PAGE>
-35-
SECTION 2.15. RESTRICTIVE LEGENDS.
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "PRIVATE PLACEMENT LEGEND") on the
face thereof until after the third anniversary of the Issue Date, unless
otherwise agreed by the Company and the Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT
WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE
ISSUER, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR REGISTRAR),
(D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
<PAGE>
-36-
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE.
SECTION 2.16. BOOK-ENTRY PROVISIONS
FOR GLOBAL SECURITY.
(a) The Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depository ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any Agent of the Company or the Trustee as the absolute owner of the Global Note
<PAGE>
-37-
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the Global Note if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
<PAGE>
-38-
SECTION 2.17. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND
NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the third
anniversary of the Issue Date (PROVIDED, HOWEVER, that neither the Company
nor any Affiliate of the Company has held any beneficial interest in such
Note, or portion thereof, at any time on or prior to the third anniversary
of the Issue Date) or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the
proposed transferee has delivered to the Registrar a certificate
substantially in the form of EXHIBIT C hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed transferor has delivered to the
Registrar a certificate substantially in the form of EXHIBIT D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
written instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
<PAGE>
-39-
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global Note
in an amount equal to the principal amount of the Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the third anniversary of the Issue
Date (provided, however, that neither the Company nor any Affiliate of the
Company has held any beneficial interest in such Note, or portion thereof, at
any time prior to or on the third anniversary of the Issue Date), or (ii) there
is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to
the Company and the Trustee to the effect that neither such legend nor the
related restrictions on transfer are required in order to maintain compliance
with the provisions of the Securities Act.
(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable written notice
to the Registrar.
(e) TRANSFERS OF NOTES HELD BY AFFILIATES. Any certificate
(i) evidencing a Note that has been transferred to an Affiliate of the Company
within three years after the Issue Date, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
<PAGE>
-40-
respect thereof, for so long as such Note is held by such Affiliate, or
(ii) evidencing a Note that has been acquired from an Affiliate (other than by
an Affiliate) in a transaction or a chain of transactions not involving any
public offering, shall, until three years after the last date on which the
Company or any Affiliate of the Company was an owner of such Note, in each case,
bear a legend in substantially the following form, unless otherwise agreed by
the Company (with written notice thereof to the Trustee):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT
WILL NOT WITHIN THREE YEARS AFTER THE LAST DATE AS OF WHICH THE ISSUER
OR ANY AFFILIATE OF THE ISSUER WAS AN OWNER OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER, OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN THREE YEARS AFTER THE LAST DATE AS OF WHICH THE ISSUER
OR ANY AFFILIATE OF THE ISSUER WAS AN OWNER OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
<PAGE>
-41-
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
SECTION 2.18. LIQUIDATED DAMAGES UNDER
REGISTRATION RIGHTS AGREEMENT.
Under certain circumstances, the Company shall be obligated to pay
certain liquidated damages to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Paragraph 6 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01
at least 60 days before the Redemption Date (unless a shorter notice period
shall be satisfactory to the Trustee, as evidenced in a writing signed on behalf
of the Trustee), together with an Officers' Certificate stating that such
redemption shall comply with the conditions contained herein and in the Notes.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If fewer than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not listed on a national securities exchange, by lot or by
such method as the Trustee shall deem fair and appropriate; PROVIDED, HOWEVER,
that if the Notes are redeemed pursuant to subparagraph (b) of Paragraph 6 of
the Notes, the Notes shall be redeemed solely on a PRO RATA basis. If the Notes
are listed on any national securities exchange, the Company shall notify the
Trustee of the requirements of such exchange in respect of any redemption. The
Trustee shall make the selection from the Notes outstanding and not previously
called for redemption and shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the
<PAGE>
-42-
principal amount thereof to be redeemed. Notes in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of Notes
that have denominations larger than $1,000. Provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail to each Holder whose Notes are to be redeemed, with a copy to the
Trustee and any Paying Agent. At the Company's request, the Trustee shall give
the notice of redemption in the Company's name and at the Company's expense.
The Company shall provide such notices of redemption to the Trustee at least
five days before the intended mailing date.
Each notice for redemption shall identify (including the CUSIP number)
the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price plus accrued
interest, if any, upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Note, a new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
and
<PAGE>
-43-
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such partial
redemption.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price plus accrued interest thereon to the Redemption Date, but
installments of interest, the maturity of which is on or prior to the Redemption
Date, shall be payable to Holders of record at the close of business on the
relevant record dates referred to in the Notes.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before the Redemption Date and in accordance with Section 2.14,
the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price plus accrued interest, if any, of all Notes to be
redeemed on that date. The Paying Agent shall promptly return to the Company
any U.S. Legal Tender so deposited which is not required for that purpose,
except with respect to monies owed as obligations to the Trustee pursuant to
Article Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Notes to be redeemed will cease to accrue on and after
the applicable Redemption Date, whether or not such Notes are presented for
payment.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
<PAGE>
-44-
(a) The Company shall pay the principal of and interest on the Notes
on the dates and in the manner provided in the Notes and in this Indenture.
(b) An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
the Company or any of its Affiliates) holds, prior to 11:00 a.m. New York City
time on that date, U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture or the Notes.
(c) The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Notes plus 2% per annum. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.
(d) Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 10.02.
SECTION 4.03. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done, at its own cost and expense, all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate
existence of each of its Subsidiaries in accordance with the respective
organizational documents of each such Subsidiary and the material rights
(charter and statutory) and franchises of the Company and each such Subsidiary;
PROVIDED, HOWEVER, that the Company shall not be required to preserve, with
respect to itself, any material right or franchise and, with respect to any of
its Subsidiaries, any such existence, material right or franchise, if the Board
of Directors of the Company shall determine in good faith that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
the Subsidiaries, taken as a whole.
<PAGE>
-45-
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all material lawful claims
for labor, materials and supplies that, if unpaid, might by law become a Lien
upon the property of it or any of its Subsidiaries; PROVIDED, HOWEVER, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate negotiations or
proceedings properly instituted and diligently conducted for which adequate
reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. MAINTENANCE OF PROPERTIES
AND INSURANCE.
(a) The Company shall, and shall cause each of its Subsidiaries to,
maintain all properties used or useful in the conduct of its business in good
working order and condition (subject to ordinary wear and tear) and make all
necessary repairs, renewals, replacements, additions, betterments and
improvements thereto and actively conduct and carry on its business; PROVIDED,
HOWEVER, that nothing in this Section 4.05 shall prevent the Company or any of
its Subsidiaries from discontinuing the operation and maintenance of any of its
properties, if such discontinuance is (i) in the ordinary course of business
pursuant to customary business terms or (ii) in the good faith judgment of the
Board of Directors or other governing body of the Company or the Subsidiary, as
the case may be, desirable in the conduct of their respective businesses and is
not disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the good faith judgment of the
Company, are adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the good faith judgment of the Company, for
companies similarly situated in the industry.
SECTION 4.06. COMPLIANCE CERTIFICATE;
NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 105 days after
the end of the Company's fiscal year, a certificate signed by the Chairman of
the Board of Directors, the Chief Executive Officer, the President or any Vice
President and by the Chief Financial Officer, Treasurer or any Assistant
<PAGE>
-46-
Treasurer or the Secretary or any Assistant Secretary of the Company (PROVIDED,
HOWEVER, that one of such signatories shall be the Company's principal executive
officer, principal financial officer or principal accounting officer), as to
such Officers' knowledge of the Company's compliance with all conditions and
covenants under this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and in the event any Default of the
Company exists, such Officers shall specify the nature of such Default. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.08 shall be accompanied by a written
report of the Company's independent certified public accountants (who shall be
a firm of established national reputation) stating (A) that their audit
examination has included a review of the terms of this Indenture and the Notes
as they relate to accounting matters, and (B) whether, in connection with their
audit examination, any Default or Event of Default has come to their attention
and if such a Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; PROVIDED, HOWEVER, that,
without any restriction as to the scope of the audit examination, such
independent certified public accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 10.02 hereof,
by registered or certified mail or by facsimile transmission followed by hard
copy by registered or certified mail an Officers' Certificate specifying such
event, notice or other action within five Business Days of its becoming aware of
such occurrence.
SECTION 4.07. COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as could not singly or in the
aggregate reasonably be expected to have a material adverse effect on the
financial condition, business, prospects or results of operations of the Company
and its Subsidiaries taken as a whole.
<PAGE>
-47-
SECTION 4.08. SEC REPORTS AND OTHER INFORMATION.
(a) After such time as the Company is required to effect an Exchange
Offer or otherwise register the resale of the Notes pursuant to the Registration
Rights Agreement or the Notes become eligible for resale pursuant to Rule 144(k)
under the Securities Act, the Company (at its own expense) shall file with the
SEC and shall file with the Trustee within 15 days after it files them with the
SEC copies of the quarterly and annual reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) to be filed pursuant to
Section 13 or 15(d) of the Exchange Act (without regard to whether the Company
is subject on or after such time to the requirements of such Section 13 or 15(d)
of the Exchange Act). Upon qualification of this Indenture under the TIA, the
Company shall also comply with the provisions of TIA Section 314(a).
(b) The Company shall, at the Company's expense, cause an annual
report for each fiscal year and a quarterly report for each fiscal quarter each
containing the financial information substantially similar to that which would
be required to be filed by the Company pursuant to Section 13 of the Exchange
Act if it were then subject to the reporting requirements of Section 13 of the
Exchange Act to be mailed by first class mail to each beneficial owner of Notes
(whether or not the Company is then subject to such reporting requirements of
the Exchange Act) it being understood that any discussion of financial condition
and results of operations need only be a summary of such items. In addition
(and without duplication) at the Company's expense, the Company shall cause an
annual report if furnished by it to stockholders generally and each quarterly or
other financial report if furnished by it to stockholders generally to be filed
with the Trustee and mailed to the Holders at their addresses appearing in the
register of Notes maintained by the Registrar at the time of such mailing or
furnishing to stockholders. If the Trustee (at the Company's request and
expense) is to mail the foregoing information to the Holders, the Company shall
supply such information to the Trustee at least five Business Days prior
thereto.
(c) During the period beginning on the latest date of the original
issuance of any of the Notes or the date any Note was acquired from the Company
or any Affiliate of the Company after the Issue Date and ending on the date that
is three years from such latest date, the Company covenants and agrees that it
shall, during any period in which it is not subject to Section 13 or 15(d) under
the Exchange Act or not filing the reports and other information required
thereby when so subject, make available to any Holder or beneficial owner of
Notes which continue to be Restricted Securities in connection with any sale
thereof and any prospective purchaser of Notes from such Holder or beneficial
owner the information required pursuant to Rule 144A(d)(4) under the Securities
Act upon the request of any Holder or beneficial owner of the Notes and it will
take such further action as any Holder or beneficial owner of such Notes may
reasonably request, all to the extent required from time to time to enable such
Holder or beneficial owner to sell its Notes without registration under the
Securities Act within the limitation of the exemption provided by Rule 144A.
<PAGE>
-48-
SECTION 4.09. WAIVER OF STAY, EXTENSION
OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, (i) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
solely in Qualified Capital Stock of the Company) on shares of the Company's
Capital Stock to holders of such Capital Stock, (ii) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Company or of any
direct or indirect parent or Affiliate of the Company, or any warrants, rights
or options to acquire shares of any class of such Capital Stock, other than any
such Capital Stock owned by the Company or by a Qualified Restricted Subsidiary,
(iii) make any principal payment on, or purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company that is subordinate or junior in right of payment to
the Notes (other than any such Indebtedness owing to a Qualified Restricted
Subsidiary to the extent such Indebtedness is not subject to any Lien held by
any Person other than the Company or a Qualified Restricted Subsidiary), or
(iv) make any Investment (other than Permitted Investments) (each of the
foregoing prohibited actions set forth in clauses (i), (ii), (iii) and (iv)
being referred to as a "RESTRICTED PAYMENT"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto, (I) a Default or
an Event of Default has occurred and is continuing or would result therefrom, or
(II) the Company is not, or would not be, able to Incur at least $1.00 of
additional Indebtedness in accordance with subclause (I)(B)(2) of paragraph (b)
of Section 4.12, or (III) the aggregate amount of Restricted Payments (including
such proposed Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined reasonably and in good faith by the Board of
Directors of the Company) exceeds or would exceed the sum of:
(1) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such
<PAGE>
-49-
loss) of the Company during the period (treating such period as a single
accounting period) beginning on the first day subsequent to the Issue Date
and ending on the last day of the most recent fiscal quarter of the Company
ending immediately prior to the date of the making of such Restricted
Payment for which financial statements are available ending not more than
135 days prior to the date of determination, PLUS
(2) 100% of the aggregate Net Equity Proceeds received by the Company
from any Person (other than from a Subsidiary of the Company) from the
issuance and sale of Qualified Capital Stock of the Company subsequent to
the Issue Date and on or prior to the date of the making of such Restricted
Payment (excluding (A) any Qualified Capital Stock of the Company paid as a
dividend on any Capital Stock of the Company or of any of its Subsidiaries
and (B) any Qualified Capital Stock of the Company with respect to which
the purchase price thereof has been financed directly or indirectly using
funds (x) borrowed from the Company or from any of its Subsidiaries, unless
and until and to the extent such borrowing is repaid, or (y) contributed,
extended, guaranteed or advanced by the Company or by any of its
Subsidiaries (including, without limitation, in respect of any employee
stock ownership or benefit plan)), PLUS
(3) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, repayments of loans or
advances, or other transfers (including the fair market value of non-cash
property transferred), in each case to the Company or to any Qualified
Restricted Subsidiary from Unrestricted Subsidiaries (but without
duplication of any such amount included in calculating Consolidated Net
Income of the Company), or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries (in each case valued as provided in Section 4.14
hereof), not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary and which was treated as a
Restricted Payment hereunder, PLUS
(4) 100% of the aggregate cash received by the Company subsequent to
the Issue Date and on or prior to the date of the making of such Restricted
Payment upon the exercise of options or warrants (whether issued prior to
or after the Issue Date) to purchase Qualified Capital Stock of the
Company, PLUS
(5) without duplication of any amount included pursuant to clause (3)
above, an amount equal to the lesser of the cost or net cash proceeds
received by the Company upon the sale or other disposition of any
Investment made after the Issue Date which had been treated as a Restricted
Payment (but without duplication of any amount included in calculating
Consolidated Net Income of the Company).
<PAGE>
-50-
(b) Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph shall not prohibit:
(1) the payment of any dividend or the making of any distribution
within 60 days after the date of declaration of such dividend or
distribution if the making thereof would have been permitted on the date of
declaration; PROVIDED, HOWEVER, that such dividend shall be deemed to have
been made as of its date of declaration or the giving of such notice for
purposes of this clause (1);
(2) the acquisition of Capital Stock of the Company or warrants,
rights or options to acquire Capital Stock of the Company either (i) solely
in exchange for shares of Qualified Capital Stock of the Company or
warrants, rights or options to acquire Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of
shares of Qualified Capital Stock of the Company or warrants, rights or
options to acquire Qualified Capital Stock of the Company; PROVIDED,
HOWEVER, that no Default or Event of Default shall have occurred and be
continuing at the time of such Restricted Payment pursuant to this clause
(2) and would not result therefrom;
(3) the acquisition of Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company or for
Refinancing Indebtedness, or (ii) through the application of net proceeds
of a substantially concurrent sale for cash (other than to a Subsidiary of
the Company) of (A) shares of Qualified Capital Stock of the Company or
warrants, rights or options to acquire Qualified Capital Stock of the
Company or (B) Refinancing Indebtedness; PROVIDED, HOWEVER, that no Default
or Event of Default shall have occurred and be continuing at the time of
such Restricted Payment pursuant to this clause (3) and would not result
therefrom;
(4) the repurchase, redemption, retirement or defeasance of Preferred
Stock issued in accordance with clause (xi) of the definition of Permitted
Indebtedness by the issuer thereof if and to the extent required by the
terms of such Preferred Stock;
(5) Permitted Stock Repurchases by the Company; PROVIDED, HOWEVER,
that the aggregate amount expended for all such Permitted Stock Repurchases
by the Company shall not exceed $1,000,000 in any fiscal year; PROVIDED,
FURTHER, HOWEVER, that no Default or Event of Default shall have occurred
and be continuing at the time of such Restricted Payment pursuant to this
clause (5) and would not result therefrom; and
(6) the payment of any amounts in respect of Capital Stock of any
Person organized as a partnership, limited liability company, or similar
<PAGE>
-51-
entity, to the extent (A) of capital contributions made to such Person by
holders of its Capital Stock other than the Company or any Restricted
Subsidiary and (B) necessary to permit the holders of such Capital Stock to
pay taxes in respect thereof; PROVIDED, FURTHER, HOWEVER, that no Default
or Event of Default shall have occurred and be continuing at the time of
such Restricted Payment pursuant to clause (A) of this subsection (6) or
would result therefrom.
(c) In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date, amounts expended pursuant to clauses (1), (2), (3)
(other than with respect to Refinancing Indebtedness) and (5) of paragraph (b)
of this Section 4.10 shall, in each case, be included in such calculation and,
if such Restricted Payment is a Restricted Payment described in clause (i) or
(ii) of paragraph (a) of this Section 4.10, then in addition, in determining the
aggregate amount of Restricted Payments made since the Issue Date, amounts
expended as aforesaid, PLUS amounts expended pursuant to clauses (i) and (j) of
the definition of Permitted Investments shall, in each case, be included in such
calculation.
(d) Not later than the date of making any Restricted Payment in
excess of $2,000,000 individually or in the aggregate with all other Restricted
Payments made since the previous certification, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment complies
with this Indenture and setting forth in reasonable detail the basis upon which
the required calculations were computed (upon which information the Trustee may
conclusively rely without any investigation whatsoever), which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
SECTION 4.11. LIMITATION ON TRANSACTIONS
WITH AFFILIATES.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, enter into or permit or suffer to exist
any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with or for the benefit of any of its Affiliates (an
"AFFILIATE TRANSACTION"), other than any Affiliate Transaction that is on terms
that are fair and reasonable and no less favorable to the Company or such
Restricted Subsidiary than those that might reasonably have been obtained at
such time in a comparable transaction or series of related transactions on an
arm's-length basis from a Person that is not such an Affiliate; PROVIDED,
HOWEVER, that for any Affiliate Transaction involving value of $10,000,000 or
more, a majority of the disinterested members of the Board of Directors of the
Company (and of such Restricted Subsidiary, as the case may be) shall, prior to
the consummation of such Affiliate Transaction, have reasonably and in good
faith determined, as evidenced by a Board Resolution, that such Affiliate
Transaction meets the requirements of the foregoing clause; PROVIDED, FURTHER,
HOWEVER, that for any
<PAGE>
-52-
Affiliate Transaction involving value of $25,000,000 or more, the Board of
Directors of the Company (and of such Restricted Subsidiary, as the case may be)
shall have received, prior to the consummation thereof, a written opinion from
an Independent Financial Advisor that such Affiliate Transaction is on terms
that are fair to the Company from a financial point of view. The foregoing
restrictions will not apply to (1) reasonable fees and compensation paid to, and
indemnity provided on behalf of, officers, directors, employees or consultants
of the Company or any Restricted Subsidiary as determined in good faith by the
Company's Board of Directors or senior management, (2) any transaction solely
between or among the Company and a Wholly Owned Restricted Subsidiary of the
Company or Wholly Owned Restricted Subsidiaries of the Company to the extent any
such transaction is otherwise in compliance with, or not prohibited by, this
Indenture, (3) any transaction solely between or among Wholly Owned Restricted
Subsidiaries of the Company to the extent that any such transaction is otherwise
in compliance with, or not prohibited by, this Indenture, (4) any transaction
otherwise permitted by the terms of Section 4.10 hereof, (5) the execution and
delivery of or payments made under the Tax Sharing Agreement or in any amendment
thereto or any replacement agreement thereof; PROVIDED, HOWEVER, that such
amendment or replacement is not more disadvantageous to the Holders or the
Company in any material respect than such agreement in the form attached hereto
as EXHIBIT E, (6) the licensing or sublicensing of use of any FCC License or
intellectual property by the Company or any Restricted Subsidiary to any
Affiliate of the Company (other than any Affiliate controlling the Company), (7)
the transfer or assignment of hardware or equipment by the Company or any
Restricted Subsidiary to any Subsidiary of the Company; PROVIDED, HOWEVER, that
the Company and its Restricted Subsidiaries continue to be able to have access,
on terms that are fair and reasonable, to such hardware and equipment to the
extent necessary for the conduct of their respective business, (8) arrangements
between the Company or any of its Restricted Subsidiaries and any Subsidiary of
the Company for the purpose of providing services of employees to such
Subsidiaries, (9) any transaction or series of related transactions between the
Company or any Wholly Owned Restricted Subsidiary on the one hand and any
Restricted Subsidiary on the other to the extent fair and reasonable to the
Company or such Wholly Owned Restricted Subsidiary and to the extent on terms
providing for fair consideration or reasonably equivalent value to the Company
or such Wholly Owned Restricted Subsidiary and (10) the sale, conveyance,
transfer, lease, assignment or other disposition to any Restricted Subsidiary of
contracts in respect of Qualified Projects entered into by the Company (not
previously entered into by any Restricted Subsidiary).
SECTION 4.12. LIMITATION ON INDEBTEDNESS
AND PREFERRED STOCK.
(a) The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness,
including, without limitation, any Acquired Indebtedness, or issue any Preferred
Stock.
<PAGE>
-53-
(b) Notwithstanding the foregoing limitations:
(I) the Company may (A) issue Qualified Capital Stock and (B) Incur
(1) Permitted Indebtedness, (2) Indebtedness (including, without
limitation, Acquired Indebtedness) if, in the case of this subclause
(I)(B)(2), (i) no Default or Event of Default shall have occurred and be
continuing on the date of the proposed Incurrence thereof or would result
as a consequence of such proposed Incurrence and (ii) immediately after
giving PRO FORMA effect to such proposed Incurrence and the receipt and
application of the net proceeds therefrom, the Company's Debt to Cash Flow
Ratio would not exceed 7.0 to 1.0, and (3) Refinancing Indebtedness
Incurred to Refinance any such Indebtedness Incurred pursuant to clause
(I)(B)(2); and
(II) the Restricted Subsidiaries may Incur Indebtedness pursuant to
clauses (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) and (xii) of
the definition of Permitted Indebtedness; PROVIDED, HOWEVER, that, other
than as provided in clause (xi) of the definition of Permitted
Indebtedness, such Indebtedness shall not be Incurred pursuant to any
assumption or guarantee by any Restricted Subsidiary in respect of any
other Restricted Subsidiary's or the Company's Indebtedness.
(c) Any Indebtedness of an entity existing at the time it becomes a
Restricted Subsidiary (whether by merger, consolidation, acquisition of capital
stock or otherwise) shall be deemed to be Incurred as of the date such entity
becomes a Restricted Subsidiary.
(d) The Company shall not, directly or indirectly, in any event Incur
any Indebtedness which by its terms (or by the terms of any agreement governing
such Indebtedness) is subordinated to any other Indebtedness of the Company
unless such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly subordinated to the Notes to the
same extent and in the same manner as such Indebtedness is subordinated to such
other Indebtedness of the Company.
(e) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness which provides
that the holder thereof may (upon notice, lapse of time or both) declare a
default thereon or cause the payment thereof to be accelerated or payable prior
to its final scheduled maturity upon the occurrence of a default with respect to
any Indebtedness of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary).
<PAGE>
-54-
SECTION 4.13. LIMITATION ON DIVIDEND AND
OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock; (b) make loans or advances or pay any
Indebtedness or other obligation owed to the Company or to any Restricted
Subsidiary; (c) transfer any of its property or assets to the Company or to any
Restricted Subsidiary; or (d) guarantee any Indebtedness or any other obligation
of the Company or any Subsidiary of the Company (each such encumbrance or
restriction in clause (a), (b), (c) or (d) a "PAYMENT RESTRICTION"), except for
such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) this Indenture; (3) customary non-assignment provisions of
any contract or lease of any Restricted Subsidiary entered into in the ordinary
course of business of such Restricted Subsidiary; (4) any instrument governing
Acquired Indebtedness Incurred in accordance with this Indenture; PROVIDED,
HOWEVER, that such encumbrance or restriction is not, and will not be,
applicable to any Person, or the properties or assets of any Person, other than
the Person or the property or asset so acquired; (5) agreements existing on the
Issue Date to the extent and in the manner such agreements are in effect on the
Issue Date or in any amendment thereto or any replacement agreement thereof;
PROVIDED, HOWEVER, that such amendment or replacement is not more
disadvantageous to the Holders or the Company in any material respect than any
such agreement as in effect on the Issue Date; (6) restrictions imposed by
Permitted Liens solely to the extent such Liens encumber the transfer or other
disposition of the assets subject to such Liens; (7) any restriction or
encumbrance contained in contracts for the sale of assets to be consummated in
accordance with this Indenture solely in respect of the assets to be sold
pursuant to such contract; (8) Indebtedness or Preferred Stock Incurred or
issued pursuant to clauses (x) and (xi) of the definition of Permitted
Indebtedness; or (9) any encumbrance or restriction contained in Refinancing
Indebtedness Incurred to Refinance the Indebtedness Incurred pursuant to an
agreement referred to in clauses (2), (4), (5) or (8) above; PROVIDED, HOWEVER,
that the provisions relating to such encumbrance or restriction contained in any
such Refinancing Indebtedness are no less favorable to the Company in any
material respect in the good faith judgment of the Board of Directors of the
Company than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4), (5) or (8).
<PAGE>
-55-
SECTION 4.14. LIMITATION ON DESIGNATION OF
RESTRICTED AND UNRESTRICTED
SUBSIDIARIES.
(a) The Board of Directors of the Company may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary or any Restricted
Subsidiary to be an Unrestricted Subsidiary; PROVIDED, HOWEVER, that
(i) immediately after giving effect to such designation (treating such
designation as an Incurrence of the outstanding Indebtedness of any such
Unrestricted Subsidiary), the Company could incur $1.00 of additional
Indebtedness pursuant to subclause (I)(B)(2) of paragraph (b) of Section 4.12,
(ii) no Default or Event of Default shall have occurred and be continuing or
would arise therefrom and (iii) in the case of designation of a Restricted
Subsidiary to be an Unrestricted Subsidiary, such designation is at that time
permitted under Section 4.10 hereof. The Company shall deliver to the Trustee
a certified copy of the Board Resolution of its Board of Directors giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and setting forth in
reasonable detail the underlying calculations. The Board of Directors of the
Company may not change the designation of a Subsidiary of the Company more than
twice in any period of five years.
(b) For purposes of determining compliance with Section 4.10 hereof,
(i) an Investment shall be deemed to have been made at the time any Restricted
Subsidiary is designated as an Unrestricted Subsidiary in an amount
(proportionate to the Company's equity interest in such Subsidiary) equal to the
net worth of such Subsidiary of the Company at the time that such Subsidiary is
designated as an Unrestricted Subsidiary; (ii) at any date the aggregate of all
Restricted Payments made as Investments since the Issue Date shall exclude and
be reduced by an amount (proportionate to the Company's equity interest in such
Subsidiary) equal to the net worth of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary, not to
exceed, in the case of any such redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the amount of Investments previously made by the Company
and the Restricted Subsidiaries in such Unrestricted Subsidiary (in each case
(i) and (ii) "net worth" to be calculated based upon the fair market value of
the assets of such Subsidiary as of any such date of designation); and (iii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer.
(c) Notwithstanding the foregoing, the Board of Directors of the
Company may not designate any Subsidiary of the Company to be an Unrestricted
Subsidiary unless such Subsidiary has been organized or acquired after the Issue
Date or if, after such designation, (x) the Company or any other Restricted
Subsidiary (i) provides credit support for, or a guarantee of, any Indebtedness
or any other obligation (contingent or otherwise) of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness) or (ii)
is directly or indirectly liable for any Indebtedness of such Subsidiary
<PAGE>
-56-
(including by way of recourse only to properties or assets), (y) a default with
respect to any Indebtedness of such Subsidiary (including any right which the
holders thereof may have to take enforcement action against such Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity or (z) such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, any Restricted
Subsidiary which is not a Subsidiary of the Subsidiary to be so designated.
(d) Notwithstanding anything to the contrary herein, all Subsidiaries
of a Restricted Subsidiary will be Restricted Subsidiaries and all Subsidiaries
of an Unrestricted Subsidiary will be Unrestricted Subsidiaries.
SECTION 4.15. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company shall be
required to offer to repurchase (the "CHANGE OF CONTROL OFFER") all or a portion
of each Holder's Notes pursuant to the offer described in paragraph (b) below,
at a purchase price equal to 101% of the Accreted Value thereof on the date of
purchase (if prior to June 15, 2000) or 101% of the aggregate principal face
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase (if on or after June 15, 2000). The Change of Control Offer shall
remain open for at least 20 Business Days and until the close of business on the
second Business Day prior to the Change of Control Payment Date.
In the event of any Change of Control, the Company shall not, and
shall not cause or permit any of its Subsidiaries to, purchase, redeem or
otherwise acquire or retire any Indebtedness of the Company ranking junior or
subordinate to the Notes pursuant to any analogous provisions relating to such
Indebtedness until after the 91st day after the Change of Control Payment Date
(as such date may be extended).
(b) Within 30 days following the date upon which the Change of
Control occurred (the "CHANGE OF CONTROL DATE"), the Company shall send, by
first class mail, a notice to each Holder, with a copy to the Trustee, which
notice shall govern the terms of the Change of Control Offer. The notice to the
Holders shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Change of Control Offer. Such notice
shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered and not withdrawn will be accepted
for payment;
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed, other than as may be required by
law) (the "CHANGE OF CONTROL PAYMENT DATE");
<PAGE>
-57-
(3) that any Note not tendered will continue to accrete or accrue
interest, as the case may be;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrete or accrue interest, as the case may be, after the Change
of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the second Business Day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Notes the Holder
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Notes purchased;
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; PROVIDED, HOWEVER, that each Note purchased (except
Notes issued in payment of interest pursuant to Section 4.01(c)) and each
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent in accordance with Section
2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. Upon receipt by the Paying
Agent of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. Any Notes not so accepted shall
be promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
<PAGE>
-58-
Any amounts remaining after the purchase of Notes pursuant to a Change
of Control Offer shall be returned by the Trustee to the Company.
The Company shall and shall cause its Subsidiaries to comply with all
tender offer rules under state and Federal securities laws, including, but not
limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to
the extent applicable to such offer. To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.15, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.15 by virtue
thereof.
SECTION 4.16. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, consummate an Asset Sale
unless (i) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets sold or otherwise disposed of (as determined in
good faith by the Company's Board of Directors) and (ii) at least 85% of the
consideration received by the Company or such Restricted Subsidiary, as the case
may be, from such Asset Sale shall be cash or Cash Equivalents and is received
at the time of the consummation of any such Asset Sale; PROVIDED, HOWEVER, that
the amount of (x) any liabilities (as shown on the Company's most recent balance
sheet or in the notes thereto) of the Company or any Restricted Subsidiary
(other than (i) Indebtedness subordinate in right of payment to the Notes, (ii)
contingent liabilities, (iii) liabilities or Indebtedness to Affiliates of the
Company and (iv) non-recourse Indebtedness or other non-recourse liabilities)
that are assumed by the transferee of any such assets and (y) to the extent of
the cash received, any notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash within 60 days of receipt, shall
be deemed to be cash for purposes of this provision; PROVIDED, FURTHER, HOWEVER,
that the 85% limitation referred to above shall not apply to any sale, transfer
or other disposition of assets in which the cash portion of the consideration
received therefor, determined in accordance with the foregoing proviso, is equal
to or greater than what the after-tax net proceeds would have been had such
transaction complied with the aforementioned 85% limitation. Upon the
consummation of an Asset Sale, the Company shall apply, or cause such Restricted
Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within
360 days of receipt thereof either (A) to reinvest in Productive Assets, or (B)
to prepay or repay Indebtedness of the Company which ranks PARI PASSU with the
Notes or to prepay or repay any Indebtedness of a Restricted Subsidiary of the
Company (other than any non-recourse Indebtedness) in an amount not to exceed
the product of (A) the amount of such Net Cash Proceeds and (B) a fraction, the
numerator of which is the total aggregate principal amount of such PARI PASSU
Indebtedness or such Indebtedness of Restricted Subsidiaries and the denominator
of which is the aggregate of all such Indebtedness plus the aggregate Accreted
Value (if the Net
<PAGE>
-59-
Proceeds Offer Payment Date is prior to June 15, 2000) or the aggregate
principal amount (if the Net Proceeds Offer Payment Date is on or after June 15,
2000) of the Notes then outstanding. On the 361st day after an Asset Sale or
such earlier date, if any, as the Board of Directors of the Company or of such
Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset
Sale as set forth in clauses (A) and (B) of the preceding sentence (each a "NET
PROCEEDS OFFER TRIGGER DATE"), such aggregate amount of Net Cash Proceeds which
have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (A) and (B) of the preceding sentence (each a "NET PROCEEDS
OFFER AMOUNT") shall be applied by the Company or such Subsidiary to make an
offer to purchase (the "NET PROCEEDS OFFER") on a date (the "NET PROCEEDS OFFER
PAYMENT DATE") not less than 30 nor more than 60 days following the applicable
Net Proceeds Offer Trigger Date, from all Holders on a PRO RATA basis that
amount of Notes equal to the Net Proceeds Offer Amount at a price in cash equal
to 100% of the Accreted Value of the Notes on the Net Proceeds Offer Payment
Date (if prior to June 15, 2000) or 100% of the principal amount thereof (if the
Net Proceeds Offer Payment Date is on or after June 15, 2000) to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
PROVIDED, HOWEVER, that if at any time any non-cash consideration received by
the Company or any Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash,
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this Section 4.16. To the extent that the Accreted Value of Notes on the Net
Proceeds Offer Payment Date (if prior to June 15, 2000) or the aggregate
principal amount of Notes (if the Net Proceeds Offer Payment Date is on or after
June 15, 2000) tendered pursuant to the Net Proceeds Offer is less than the Net
Proceeds Offer Amount, the Company may use any remaining proceeds of such Asset
Sale for general corporate purposes (but subject to the terms of this
Indenture). Upon completion of a Net Proceeds Offer, the Net Proceeds Offer
Amount relating to such Net Proceeds Offer shall be deemed to be zero for
purposes of any subsequent Asset Sale.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less
than $5,000,000, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as
such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Issue Date of the Notes from all Asset
Sales by the Company and its Subsidiaries in respect of which a Net Proceeds
Offer has not been made aggregates at least $5,000,000, at which time the
Company or such Restricted Subsidiary shall apply all Net Cash Proceeds
constituting all Net Proceeds Offer Amounts that have been so deferred to make a
Net Proceeds Offer (each date on which the aggregate of all such deferred Net
Proceeds Offer Amounts is equal to $5,000,000 or more shall be deemed to be a
Net Proceeds Offer Trigger Date).
In connection with any Asset Sale with respect to assets having a book
value in excess of $5,000,000 or as to which it is expected that the
<PAGE>
-60-
aggregate consideration therefor to be received by the Company or any Restricted
Subsidiary will exceed $5,000,000 in value, such transaction or series of
transactions shall be approved, prior to the consummation thereof, by the Board
of Directors of the Company.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01, the successor corporation
shall be deemed to have sold the properties and assets of the Company and its
Subsidiaries not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale; PROVIDED, HOWEVER, that to the extent that the Company is
required to make an offer to repurchase the Notes pursuant to Section 4.15 in
connection with any transaction that would otherwise be within the terms of this
paragraph, the Company need not comply with the provisions of this paragraph.
In addition, the fair market value of such properties and assets of the Company
or its Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds
for purposes of this covenant.
(b) Subject to the deferral of the Net Proceeds Offer Trigger Date
contained in the second paragraph of subsection (a) above, each notice of a Net
Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be
mailed, by first class mail, by the Company not more than 25 days after the Net
Proceeds Offer Trigger Date to all Holders at their last registered addresses as
of a date within 15 days of the mailing of such notice, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Net Proceeds Offer and shall
state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to
Section 4.16 and that all Notes tendered will be accepted for payment;
PROVIDED, HOWEVER, that if the Accreted Value of Notes on the Net Proceeds
Offer Payment Date (if prior to June 15, 2000) or the aggregate principal
amount of Notes (if the Net Proceeds Offer Payment Date is on or after
June 15, 2000) tendered in a Net Proceeds Offer plus accrued interest at
the expiration of such offer exceeds the aggregate amount of the Net
Proceeds Offer, the Company shall select the Notes to be purchased on a PRO
RATA basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000 or multiples thereof
shall be purchased);
(2) the purchase price (including the amount of accrued interest, if
any, or the Accreted Value) and the purchase date (which shall be 20
Business Days from the date of mailing of notice of such Net Proceeds
Offer, or such longer period as required by law) (the "PROCEEDS PURCHASE
DATE");
<PAGE>
-61-
(3) that any Note not tendered will continue to accrue interest or
accumulate Accreted Value, as the case may be;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease to
accrete or accrue interest, as the case may be, after the Proceeds Purchase
Date;
(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the third Business Day prior to the Proceeds
Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Proceeds Purchase Date, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Notes the Holder
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; PROVIDED, HOWEVER, that each Note purchased and each
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof.
On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Notes or portions thereof tendered pursuant to the Net Proceeds
Offer which are to be purchased in accordance with item (b)(1) above,
(ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Notes to be purchased and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price
plus accrued interest, if any. For purposes of this Section 4.16, the Trustee
shall act as the Paying Agent.
The Company shall and shall cause its Subsidiaries to comply with all
tender offer rules under state and Federal securities laws, including, but not
limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to
the extent applicable to such offer. To the extent that the provisions of any
securities laws or regulations conflict with the foregoing provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
foregoing provisions of this Indenture by virtue thereof.
<PAGE>
-62-
SECTION 4.17. LIMITATION ON PREFERRED
STOCK OF RESTRICTED SUBSIDIARIES.
The Company shall not cause or permit any Restricted Subsidiary to
issue any Preferred Stock (other than to the Company or to a Qualified
Restricted Subsidiary) or permit any Person (other than the Company or a
Qualified Restricted Subsidiary) to own or hold any Preferred Stock of any
Restricted Subsidiary; PROVIDED, HOWEVER, that (A) this covenant shall not
prohibit the issuance of any Preferred Stock by any Restricted Subsidiary
pursuant to clause (x) of the definition of Permitted Indebtedness and (B) if as
of any date any Person other than the Company or a Qualified Restricted
Subsidiary owns or holds any Preferred Stock of a Restricted Subsidiary (other
than any Preferred Stock permitted to be issued pursuant to clause (x) of the
definition of Permitted Indebtedness) or holds any Lien in respect of any such
Preferred Stock, such date shall be deemed the date of an issuance of Preferred
Stock by a Restricted Subsidiary that is not in compliance with this Section
4.17.
SECTION 4.18. LIMITATION ON LIENS.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer
to exist or remain in effect any Liens upon any properties or assets of the
Company or of any Restricted Subsidiary whether owned on the Issue Date or
acquired after the Issue Date, or on any income or profits therefrom, or assign
or otherwise convey any right to receive income or profits thereon, other than
(A) Liens granted by the Company on property or assets of the Company securing
Indebtedness of the Company that is permitted under Section 4.12 hereof;
PROVIDED, HOWEVER, that the Company makes or causes to be made effective
provision whereby the Notes will be secured equally and ratably with (or, in the
case of any Indebtedness that is subordinate or junior to the Notes, prior to)
such Liens, (B) Permitted Liens and (C) Cash Equivalents pursuant to clause (vi)
of the definition thereof to the extent the operation of this covenant with
respect to such Investments would cause a violation of the margin rules of the
Board of Governors of the Federal Reserve System.
SECTION 4.19. LIMITATION ON SALE AND
LEASEBACK TRANSACTIONS.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, enter into any Sale and Leaseback
Transaction, except that the Company or any Restricted Subsidiary may enter into
a Sale and Leaseback Transaction if (i) immediately prior thereto, and after
giving effect to such Sale and Leaseback Transaction (the Indebtedness
thereunder being equivalent to the capitalized amount thereof that would appear
on the balance sheet of the Company or such Restricted Subsidiary in accordance
with GAAP) the Company could Incur at least $1.00 of additional secured
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12
hereof above
<PAGE>
-63-
and (ii) the transaction constitutes an Asset Sale effected in accordance with
the requirements of Section 4.16 hereof.
SECTION 4.20. LIMITATION ON CONSOLIDATION,
MERGER, ETC. OF RESTRICTED
SUBSIDIARIES.
The Company shall not, directly or indirectly, cause or permit any
Restricted Subsidiary to, directly or indirectly, merge or consolidate with or
into, or sell, assign, transfer, lease or otherwise dispose of all or
substantially all of such Subsidiary's assets to, any other Restricted
Subsidiary unless, at the time of such merger or consolidation or sale,
assignment, transfer, lease or other disposition (and after giving effect
thereto), (1) the Debt to Cash Flow Ratio of the Company is less than or equal
to 6.0 to 1.0 or (2) the resulting, surviving or transferee Restricted
Subsidiary is a Qualified Restricted Subsidiary or (3) the resulting, surviving
or transferee Restricted Subsidiary is a Restricted Subsidiary that is not a
Qualified Restricted Subsidiary and the total contribution to the Consolidated
EBITDA of the Company (such Consolidated EBITDA to be calculated for purposes of
this Section 4.20 without giving effect to clause (f) of the definition of
Consolidated Net Income) for the most recently ended fiscal quarter for which
financial information is available ending not more than 135 days prior to the
date of determination of such resulting, surviving or transferee Restricted
Subsidiary is not in excess of 25% of such Consolidated EBITDA. In addition,
all such transactions permitted pursuant to this Section 4.20 must also comply
with Article Five.
SECTION 4.21. CALCULATION OF ORIGINAL
ISSUE DISCOUNT.
The Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on outstanding Notes as of
the end of such year.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGER, CONSOLIDATION
AND SALE OF ASSETS.
(a) The Company shall not, in a single transaction or a series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise
<PAGE>
-64-
dispose of) all or substantially all of the Company's and the Company's
Subsidiaries' properties and assets (determined on a consolidated basis for the
Company and the Company's Subsidiaries taken as a whole) whether as an entirety
or substantially as an entirety to any Person or adopt a Plan of Liquidation
unless:
(i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition of the properties and assets of the Company and of the
Company's Subsidiaries substantially as an entirety, or in the case of a
Plan of Liquidation, the Person to which assets of the Company and of the
Company's Subsidiaries have been transferred (x) shall be a corporation
organized and validly existing under the laws of the United States or any
State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and interest on all of
the Notes and the performance of every covenant of the Notes, this
Indenture and the Registration Rights Agreement on the part of the Company
to be performed or observed;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause(i)(2)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness Incurred or anticipated to be
Incurred in connection with or in respect of such transaction), the Company
(in the case of clause (1) of the foregoing clause (i)) or such Person (in
the case of clause (2) thereof) (1) shall not have a Debt to Cash Flow
Ratio greater than 90% of the Debt to Cash Flow Ratio of the Company
immediately prior to such transaction and (2) shall be able to Incur at
least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow
Ratio test of subclause (I)(B)(2) of paragraph (b) of Section 4.12;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness Incurred or anticipated to be Incurred and any Lien
granted in connection with or in respect of the transaction) no Default and
no Event of Default shall have occurred or be continuing; and
(iv) the Company or such Person shall have delivered to the Trustee
(A) an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, sale, assignment, transfer, lease, conveyance,
other disposition or Plan of Liquidation and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, comply with the applicable provisions of this Indenture and
<PAGE>
-65-
that all conditions precedent in this Indenture relating to such
transaction have been satisfied and (B) a certificate from the Company's
independent certified public accountants stating that the Company has made
the calculations required by clause (ii) above in accordance with the
terms of this Indenture and the Notes after the consummation of such
transaction.
Notwithstanding clause (ii)(2) above, (A) any Restricted Subsidiary of
the Company may consolidate with, or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to the Company or to a Qualified Restricted Subsidiary and (B) the
Company or any of its Subsidiaries may consolidate with or merge with or into
any Person that has conducted no business and incurred no Indebtedness or other
liabilities if such transaction is solely for the purpose of effecting a change
in the state of incorporation of the Company or such Subsidiary.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(c) For all purposes of this Indenture and the Notes (including the
provisions of this Section 5.01 and as described in Sections 4.10, 4.14 and
4.18), Subsidiaries of the Company or any surviving or transferee entity will,
upon such transaction or series of transactions, become Restricted Subsidiaries
or Unresricted Subsidiaries as provided pursuant to Section 4.14 and all
Indebtedness, and all Liens on property or assets, of the Company and the
Restricted Subsidiaries immediately prior to such transaction or series of
transactions will be deemed to have been incurred upon such transaction or
series of transactions.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, merger, conveyance, lease or transfer in
accordance with Section 5.01 of this Indenture, the successor Person formed by
such consolidation or into which the Company is merged or to which such
conveyance, lease or transfer is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor had been named as the Company herein and
thereafter (except in the case of a lease) the predecessor corporation will be
relieved of all further obligations and covenants under this Indenture and the
Notes.
<PAGE>
-66-
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
"EVENTS OF DEFAULT", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) the failure to pay interest on any Note for a period of 30 days
or more after such interest becomes due and payable; or the failure to pay
additional interest under the Registration Rights Agreement pursuant to
Section 4 thereof for a period of 30 days or more after such additional
interest become due and payable; or
(ii) the failure to pay the principal or Accreted Value on any Note,
when such principal or Accreted Value becomes due and payable, at maturity,
upon redemption, pursuant to a Net Proceeds Offer, a Change of Control
Offer or otherwise; or
(iii) a default in the observance or performance of any other covenant
or agreement contained in this Indenture, which default continues for a
period of 45 days after the Company receives written notice specifying the
default (and requiring that such default be remedied) from the Trustee or
from Holders of not less than 25% in aggregate principal amount of
outstanding Notes; or
(iv) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Material Subsidiary
(or the payment of which is guaranteed by the Company or any Material
Subsidiary), whether such Indebtedness or guarantee now exists, or is
created after the Issue Date, which default (a) is caused by a failure to
pay at final maturity or when due principal on such Indebtedness within
the grace period provided in such Indebtedness (which failure continues
beyond any applicable grace period) (a "PAYMENT DEFAULT") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so accelerated,
aggregates $5,000,000 or more; or
(v) one or more judgments in an aggregate amount in excess of
$5,000,000 (which are not paid or covered by third-party insurance by
<PAGE>
-67-
financially sound insurers that have not finally disclaimed coverage) being
rendered against the Company or any of its Material Subsidiaries and such
judgment or judgments remain undischarged, or unstayed or unsatisfied for a
period of 60 days after such judgment or judgments become final and non-
appealable; or
(vi) as a consequence of the occurrence or continuation of any event
or condition (other than the passage of time), the Company or any Material
Subsidiary has become obligated to purchase or repay Indebtedness before
its regular maturity or before its regularly scheduled dates of payment in
an aggregate principal amount of at least $5,000,000 or one or more Persons
have the right to require the Company or any Material Subsidiary to
purchase or repay such Indebtedness; or
(vii) the Company or any Material Subsidiary (A) commences a voluntary
case or proceeding under any Bankruptcy Law with respect to itself, (B)
consents to the entry of a judgment, decree or order for relief against it
in an involuntary case or proceeding under any Bankruptcy Law, (C) consents
to the appointment of a Custodian of it or for substantially all of its
property, (D) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it, (E) makes a general assignment for
the benefit of its creditors, or (F) takes any corporate action to
authorize or effect any of the foregoing; or
(viii) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Material Subsidiary in an
involuntary case or proceeding under any Bankruptcy Law, which shall (A)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any Material
Subsidiary, (B) appoint a Custodian of the Company or any Material
Subsidiary or for substantially all of its property or (C) order the
winding-up or liquidation of its affairs; and such judgment, decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(ix) any holder of at least $5,000,000 in aggregate principal amount
of Indebtedness of the Company or any Material Subsidiary shall commence
judicial proceedings to foreclose upon assets of the Company or any
Material Subsidiary having an aggregate fair market value, individually or
in the aggregate, of at least $5,000,000 or shall have exercised any right
under applicable law or applicable security documents to take ownership of
any such assets in lieu of foreclosure.
The Company shall provide an Officers' Certificate to the Trustee
promptly upon any officer of the Company obtaining knowledge of any Default or
Event of Default (PROVIDED, HOWEVER, that pursuant to Section 4.06 such officers
shall provide such certification at least annually whether or not they know of
<PAGE>
-68-
any Default or Event of Default) that has occurred and, if applicable, describe
such Default or Event of Default and the status thereof.
SECTION 6.02. ACCELERATION.
(a) If an Event of Default (other than an Event of Default specified
in clauses (vii) and (viii) of Section 6.01 with respect to the Company) occurs
and is continuing, then and in every such case the Trustee or the Holders of not
less than 25% in aggregate principal amount of the then outstanding Notes may
declare the Accreted Value of (if prior to June 15, 2000) or all the unpaid
principal of, premium, if any, and accrued and unpaid interest on (if on or
after June 15, 2000), all the Notes then outstanding to be due and payable, by a
notice in writing to the Company (and to the Trustee, if given by Holders)
specifying the Event of Default and that it is a "notice of acceleration" (the
"ACCELERATION NOTICE") and upon such declaration the Accreted Value of (if prior
to June 15, 2000) or such principal amount, premium, if any, and accrued and
unpaid interest (if on or after June 15, 2000) will become immediately due and
payable, notwithstanding anything contained in this Indenture or the Notes to
the contrary. If an Event of Default specified in clauses (vii) and (viii) of
Section 6.01 with respect to the Company occurs, the Accreted Value of (if prior
to June 15, 2000) or all unpaid principal of, and premium, if any, and accrued
and unpaid interest on (if on or after June 15, 2000), the Notes then
outstanding will IPSO FACTO become due and payable without any declaration or
other act on the part of the Trustee or any Holder.
(b) After a declaration of acceleration, but before a judgment or
decree of the money due in respect of the Notes has been obtained, the Holders
of not less than a majority in aggregate principal amount of the Notes then
outstanding by written notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and premium, if any, and interest on the Notes which has become due
solely by virtue of such acceleration) have been cured or waived and if the
rescission would not conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the Accreted Value of, principal of or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
<PAGE>
-69-
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, prior to the declaration of
acceleration of the Notes, the Holders of not less than a majority in principal
amount of the outstanding Notes by written notice to the Trustee may on behalf
of all of the Holders waive any past Default or Event of Default and its
consequences, except a Default in the payment of the Accreted Value of,
principal of or interest on any Note as specified in clauses (i) and (ii) of
Section 6.01 or a Default in respect of any term or provision of this Indenture
that may not be modified or amended without the consent of each Holder affected
as provided in Section 9.02. In case of any such waiver, the Company, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder and under the Notes, respectively. This paragraph of this
Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such
Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Notes, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any remedies provided for
in Section 6.03. Subject to Section 7.01, however, the Trustee may refuse to
follow any direction that the Trustee reasonably believes conflicts with any law
or this Indenture that the Trustee determines may be unduly prejudicial to the
rights of another Noteholder, or that may involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction. This
Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such
Section 316(a)(1)(A) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
SECTION 6.06. LIMITATION ON SUITS.
A Noteholder may not pursue any remedy with respect to this Indenture
or the Notes unless:
<PAGE>
-70-
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) Holders of at least 25% in principal amount of the outstanding
Notes make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee indemnity reasonably
satisfactory to the Trustee against any loss, liability or expense to be
incurred in compliance with such request;
(4) the Trustee does not comply with the request within 45 days after
receipt of the request and the offer of satisfactory indemnity; and
(5) during such 45-day period the Holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a direction which,
in the opinion of the Trustee, is inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over such other
Noteholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture or of the Notes,
the right of any Holder to receive payment of the Accreted Value of or the
principal of and interest on a Note, on or after the respective due dates
expressed in such Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
express prior written consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified
in clause (i) or (ii) of Section 6.01 of this Indenture occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Notes for the
whole amount of the Accreted Value of or the principal and accrued interest
remaining unpaid, together with interest on overdue principal and, to the extent
that payment of such interest is lawful, interest on overdue installments of
interest at the rate set forth in Section 4.01 and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
<PAGE>
-71-
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relating to the Company or any
other obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Noteholder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Noteholders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. The Company's payment obligations under this Section 6.09 shall
be secured in accordance with the provisions of Section 7.07 hereunder. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: if the Holders are forced to proceed against the Company
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Notes for
Accreted Value or principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for Accreted Value or principal and interest, respectively; and
Fourth: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Noteholders pursuant to this Section 6.10.
<PAGE>
-72-
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by
a Holder pursuant to Section 6.07, or a suit by a Holder or group of Holders of
more than 10% in principal amount of the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
<PAGE>
-73-
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and
Section 7.02.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or
an Opinion of Counsel, which shall conform to Sections 10.04 and 10.05.
The Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
<PAGE>
-74-
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to
the Company, to examine the books, records, and premises of the Company,
personally or by agent or attorney and to consult with the officers and
representatives of the Company, including the Company's accountants and
attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in compliance with
such request, order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.05 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants
hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates).
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, and it shall not be responsible for any
<PAGE>
-75-
statement of the Company in this Indenture or the Notes other than the Trustee's
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to a Trust Officer, the Trustee shall mail to each Noteholder notice of
the uncured Default or Event of Default within 90 days after such Default or
Event of Default occurs. Except in the case of a Default or an Event of Default
in payment of principal of, or interest on, any Note, including an accelerated
payment, a Default in payment on the Change of Control Payment Date pursuant to
a Change of Control Offer or on the Proceeds Purchase Date pursuant to a Net
Proceeds Offer and a Default in compliance with Article Five hereof, the Trustee
may withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or Trust
Officers in good faith determines that withholding the notice is in the interest
of the Noteholders. The foregoing sentence of this Section 7.05 shall be in
lieu of the proviso to Section 315(b) of the TIA and such proviso to Section
315(b) of the TIA is hereby expressly excluded from this Indenture and and the
Notes, as permitted by the TIA.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 of each year beginning with 1996, the
Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Noteholder a brief report dated as of such date that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Sections 313(b), (c)
and (d).
A copy of each report at the time of its mailing to Noteholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA Section
313(d).
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation for its services as has been agreed to in writing signed by the
Company and Trustee. The Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Company shall reimburse
the Trustee upon request for all reasonable out-of-pocket expenses incurred or
made by it in connection with the performance of its duties under this
Indenture. Such expenses shall include the reasonable fees and expenses of the
Trustee's agents and counsel.
<PAGE>
-76-
The Company shall indemnify each of the Trustee (or any predecessor
Trustee) and its agents, employees, stockholders, Affiliates and directors and
officers for, and hold them harmless against, any and all loss, liability,
damage, claim or expense (including reasonable fees and expenses of counsel),
including taxes (other than taxes based on the income of the Trustee) incurred
by them except for such actions to the extent caused by any negligence, bad
faith or willful misconduct on their part, arising out of or in connection with
the acceptance or administration of this trust including the reasonable costs
and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. At the Trustee's
sole discretion, the Company shall defend the claim and the Trustee shall
cooperate and may participate in the defense; PROVIDED, HOWEVER, that any
settlement of a claim shall be approved in writing by the Trustee.
Alternatively, the Trustee may at its option have separate counsel of its own
choosing and the Company shall pay the reasonable fees and expenses of such
counsel.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(vii) or (viii) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the termination of
this Indenture.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Company and the Trustee and may appoint a successor Trustee.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
<PAGE>
-77-
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; PROVIDED, HOWEVER, that
such corporation shall be otherwise qualified and eligible under this
Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1), (2) and (5). The Trustee (or, in the
case of a corporation included in a bank holding company system, the related
bank holding company) shall have a combined capital and surplus of at least $50
million as set forth in its most recent published annual report of condition.
In addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital
<PAGE>
-78-
requirements of TIA Section 310(a)(2). The Trustee shall comply with TIA
Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA
Section 310 shall apply to the Company, as obligor of the Notes.
SECTION 7.11. PREFERENTIAL COLLECTION OF
CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311 shall apply to the Company, as
obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.07 and the Trustee's and the Paying
Agent's obligations under Sections 8.03 and 8.04 shall survive) when (i) all
outstanding Notes theretofore authenticated and issued have been delivered
(other than destroyed, lost or stolen Notes that have been replaced or paid) to
the Trustee for cancellation and the Company has paid or caused to be paid all
sums payable hereunder or (ii) the Company has called for redemption pursuant to
this Indenture and the Notes all of the Notes under arrangements satisfactory to
the Trustee, the amounts described in Section 8.01(a) below have been deposited,
the conditions in clauses (i) and (ii) of the proviso in Section 8.01(a) have
been satisfied and the Officers' Certificate and Opinion of Counsel described in
Section 8.01(e) have been delivered. In addition, the Company may terminate all
of its obligations under this Indenture if:
(a) The Company irrevocably deposits, or causes to be deposited, with
the Trustee, in trust for the benefit of the Holders pursuant to an
irrevocable trust and security agreement in form and substance reasonably
satisfactory to the Trustee (i) U.S. Legal Tender, (ii) U.S. Government
Obligations or (iii) a combination thereof, in an amount sufficient after
payment of all Federal, state and local taxes or other charges or
assessments in respect thereof payable by the Trustee, which through the
payment of interest and principal will provide, not later than one day
before the due date of payment in respect of the Notes, U.S. Legal Tender
in an amount which, in the opinion of a nationally recognized firm of
<PAGE>
-79-
independent certified public accountants expressed in a written
certification thereof (in form and substance reasonably satisfactory to the
Trustee) delivered to the Trustee, is sufficient to pay the principal of,
premium, if any, and interest on the Notes then outstanding on the dates on
which any such payments are due and payable in accordance with the terms of
this Indenture and of the Notes; PROVIDED, HOWEVER, that (i) the Trustee in
its capacity as trustee of the irrevocable trust, shall pay such money or
the proceeds of such U.S. Government Obligations to the Trustee; (ii) the
Trustee shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of said
principal and interest with respect to the Notes; and (iii) such money or
the proceeds of such U.S. Government Obligations shall have been on deposit
with the Trustee for a period of at least 90 days;
(b) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit and such deposit will not result in
a Default or Event of Default under this Indenture or a breach or violation
of, or constitute a default under, any other instrument to which the
Company or any Subsidiary of the Company is a party or by which it or its
property is bound;
(c) The Company shall have delivered to the Trustee an Opinion of
Counsel from independent counsel reasonably satisfactory to the Trustee or
a tax ruling from the Internal Revenue Service to the effect that the
Holders will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and defeasance and will be subject to
Federal income tax in the same amounts and in the same manner and at the
same time as would have been the case if such deposit and defeasance had
not occurred;
(d) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, such
U.S. Legal Tender or the proceeds of such U.S. Government Obligations will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and
(e) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each in form and substance reasonably
satisfactory to the Trustee, each stating that all conditions precedent
relating to the satisfaction and discharge of this Indenture have been
complied with;
PROVIDED, HOWEVER, that no deposit under clause (a) above shall be effective to
terminate the obligations of the Company under the Notes or this Indenture prior
to 90 days following any such deposit.
Notwithstanding the foregoing paragraph the Company's obligations in
Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.12, Article Three, Sections 4.01, 4.02,
<PAGE>
-80-
4.03, Sections 7.07, 7.08, 8.03 and 8.04 shall survive until the Notes are no
longer outstanding. Thereafter, the Company's obligations in Section 7.07 and
the Trustee's and the Paying Agent's obligations under Sections 8.03 and 8.04
shall survive.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations specified above.
Notwithstanding anything in this Article Eight to the contrary, the
Company's obligations pursuant to Section 7.07 of this Indenture shall not be
discharged until all amounts then due and payable to the Trustee thereunder
shall have been paid.
The Company shall pay any taxes or other expenses incurred by any
trust created pursuant to this Article Eight.
SECTION 8.02. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Section 8.01, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the Accreted
Value of or the principal of and interest on the Notes. The Trustee shall be
under no obligation to invest said U.S. Legal Tender or U.S. Government
Obligations except as it may agree in writing with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
SECTION 8.03. REPAYMENT TO THE COMPANY.
Subject to Section 8.01, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying
Agent shall pay to the Company upon request any money held by them for the
payment of Accreted Value, principal or interest that remains unclaimed for one
year; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any payment, may at the expense of the Company cause to be
published once in a newspaper of general circulation in the City of New York or
mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein which shall be at least 30
days from the date of such publication or mailing any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Noteholders
<PAGE>
-81-
entitled to such money must look to the Company for payment as general creditors
unless an applicable law designates another Person.
SECTION 8.04. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.01 by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to
Section 8.01 until such time as the Trustee or Paying Agent is permitted to
apply all such U.S. Legal Tender or U.S. Government Obligations in accordance
with Section 8.01; PROVIDED, HOWEVER, that if the Company has made any payment
of interest on or principal of any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
SECTION 8.05. ACKNOWLEDGMENT OF DISCHARGE
BY TRUSTEE.
After (i) the conditions of Section 8.01 have been satisfied, (ii) the
Company has paid or caused to be paid all other sums payable hereunder by the
Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i), above, relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture except for those surviving obligations specified in
Section 8.01.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Notes without notice to
or consent of any Noteholder:
(i) to cure any ambiguity, defect or inconsistency; PROVIDED,
HOWEVER, that such amendment or supplement does not adversely affect the
rights of any Holder;
<PAGE>
-82-
(ii) to effect the assumption by a successor Person of all obligations
of the Company under the Notes, this Indenture and the Registration Rights
Agreement in connection with any transaction complying with Article Five of
this Indenture;
(iii) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(iv) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(v) to make any change that would provide any additional benefit or
rights to the Holders;
(vi) to provide for issuance of the Exchange Notes (which will have
terms substantially identical in all material respects to the Initial Notes
except that the transfer restrictions contained in the Initial Notes will
be modified or eliminated, as appropriate), and which will be treated
together with any outstanding Initial Notes, as a single issue of
securities; or
(vii) to make any other change that does not adversely affect the
rights of any Holder under this Indenture;
PROVIDED, HOWEVER, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of not less than a majority in aggregate principal amount of the then
outstanding Notes, may amend or supplement this Indenture or the Notes without
notice to any other Holder. Subject to Section 6.07, the Holder or Holders of
not less than a majority in aggregate principal amount of the then outstanding
Notes may waive compliance by the Company with any provision of this Indenture
or the Notes without notice to any other Holder. No amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, however, shall, without the
prior written consent of each Holder of each Note affected thereby:
(i) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Note;
<PAGE>
-83-
(iii) reduce the principal amount or Accreted Value (or rate of
accretion) of or change or have the effect of changing the fixed maturity
of any Note, or change the date on which any Note may be subject to
redemption or repurchase, or reduce the redemption or repurchase price
therefor;
(iv) make any Note payable in money other than that stated in the
Note;
(v) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Note on or after the due date thereof or to bring suit to enforce such
payment, or permitting holders of not less than a majority in aggregate
principal amount of the Notes to waive Defaults or Events of Default, other
than ones with respect to the payment of principal of or interest on the
Notes; or
(vi) amend, modify or change the obligation of the Company to make or
consummate any Change of Control Offer in the event of a Change of Control
or make or consummate any Net Proceeds Offer in respect of any Asset Sale
that has been consummated, or modify any of the provisions or definitions
with respect thereto, or waive a Default in the performance of any
obligation in respect of any such Change of Control Offer or Net Proceeds
Offer, or consent to a departure from any of the terms of such Change of
Control Offer or Net Proceeds Offer.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; PROVIDED, HOWEVER, that this
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
<PAGE>
-84-
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment, supplement
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence of consent by the Holders of the requisite percentage
in principal amount of outstanding Notes.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (i)
through (viii) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; PROVIDED, HOWEVER, that any such waiver shall not
impair or affect the right of any Holder to receive payment of principal of and
interest on a Note, on or after the respective due dates expressed in such Note,
or to bring suit for the enforcement of any such payment on or after such
respective dates without the consent of such Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
<PAGE>
-85-
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED, HOWEVER, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; PROVIDED, HOWEVER, that this Section
10.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 10.02. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company:
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Telecopier No.: (415) 592-6858
Attn: General Counsel
<PAGE>
-86-
if to the Trustee:
The Bank of New York
101 Barclay Street, 21 West
New York, NY 10286
Attention: Corporate Trust Trustee
Administration
Telecopier Number: (212) 815-5915
Each of the Company and the Trustee by written notice to the other may
designate additional or different addresses for notices to such Person. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if faxed; and five (5)
calendar days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 10.03. COMMUNICATIONS BY HOLDERS
WITH OTHER HOLDERS.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS
TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
<PAGE>
-87-
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with.
SECTION 10.05. STATEMENTS REQUIRED IN
CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.07, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is reasonably necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 10.06. RULES BY TRUSTEE, PAYING
AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Noteholders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 10.07. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 10.08. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
<PAGE>
-88-
CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
SECTION 10.09. NO ADVERSE INTERPRETATION
OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as such,
of the Company or of the Trustee shall not have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creations.
Each Noteholder by accepting a Note waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Notes.
SECTION 10.11. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 10.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 10.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions shall not in any way be affected
or impaired thereby, it being intended that all of the provisions hereof shall
be enforceable to the full extent permitted by law.
SECTION 10.14. INDEPENDENCE OF COVENANTS.
All covenants and agreements in this Indenture and the Notes shall be
given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant shall
<PAGE>
-89-
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-90-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
CELLNET DATA SYSTEMS, INC.
By: /s/ Paul Manca
______________________________________
Name: P. Manca
Title: CFO
THE BANK OF NEW YORK, as Trustee
By: /s/ Vivian Georges
______________________________________
Name: Vivian Georges
Title: Assistant Vice President
<PAGE>
EXHIBIT A
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $450.398; (2) THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT IS $1,199.602; (3) THE ISSUE DATE IS JUNE 15, 1995; AND
(4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 15.04049098%.
CUSIP No.:
CELLNET DATA SYSTEMS, INC.
13% SENIOR DISCOUNT NOTE DUE 2005
No. $
CELLNET DATA SYSTEMS, INC., a California corporation (the "Company",
which term includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of
Dollars, on June 15, 2005.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 2000
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
CELLNET DATA SYSTEMS, INC.
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Dated: Title:
Certificate of Authentication
This is one of the 13% Senior Discount Notes due 2005 referred to in
the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By: ______________________________________
A-1
<PAGE>
Authorized Signatory
Date of Authentication:
A-2
<PAGE>
(REVERSE OF SECURITY)
13% Senior Discount Note due 2005
1. INTEREST. CELLNET DATA SYSTEMS, INC., a California corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate per annum shown above. Cash interest on the Notes will not accrue
prior to June 15, 2000. Interest on the Notes will accrue from the most recent
date on which interest has been paid or, if no interest has been paid, from
June 15, 2000. The Company will pay interest semi-annually in arrears on each
Interest Payment Date, commencing December 15, 2000. Interest will be computed
on the basis of a 360-day year of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York (the
"Trustee") will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of June 15, 1995 (the "Indenture"), between the Company and the
Trustee. This Note is one of a duly authorized issue of Initial Notes of the
Company designated as its 13% Senior Discount Notes due 2005 (the "Initial
Notes"). The Notes are limited in aggregate principal amount to $235,000,000.
The Notes include the Initial Notes and the Exchange Notes, as defined below,
issued in exchange for the Initial Notes pursuant to the Indenture. The
Initial Notes and the Exchange Notes are treated as a single class of securities
under the Indenture. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and said Act for a statement of them. The Notes
are general unsecured obligations of the Company.
A-3
<PAGE>
5. INDENTURE. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time in accordance with its terms.
6. REDEMPTION. (a) OPTIONAL REDEMPTION. The Notes will be
redeemable, at the Company's option, in whole at any time or in part from time
to time, on and after June 15, 2000 at the following redemption prices
(expressed as percentages of the aggregate principal amount) if redeemed during
the twelve-month period commencing on June 15 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
YEAR PERCENTAGE
2000 ............................ 106.500%
2001 ............................ 104.330
2002 ............................ 102.170
2003 and thereafter ............... 100.000
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. In the event
that the Company consummates a Public Equity Offering after which there is a
Public Market, the Company may, at its option, redeem prior to June 15 , 1998,
from the proceeds of such Public Equity Offering received by the Company, up to
25% of the aggregate principal amount of the Notes originally issued at a
redemption price equal to 113% of the Accreted Value plus accrued interest, if
any, to the date of redemption; PROVIDED, HOWEVER, that (1) such redemption may
only be effected to the extent that immediately after such redemption not less
than 75% in aggregate principal amount of the Notes originally issued remain
outstanding (it being expressly agreed that, for purposes of determining whether
this condition is satisfied, Notes owned (beneficially or otherwise) by the
Company or any of its Affiliates shall not be deemed to be outstanding) and (2)
such redemption is effected not more than once and not more than 60 days after
the consummation of such Public Equity Offering.
The Notes are not entitled to the benefit of any sinking fund.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest or accumulate Accreted Value, as the
case may be, from and after such Redemption Date and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price plus
accrued interest, if any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
A-4
<PAGE>
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement among the Company and the Holders of the Initial Notes, the Company
will be obligated upon the occurrence of certain events (which could be as late
as three years after the Issue Date) to consummate an exchange offer pursuant to
which the Holder of this Note shall have the right to exchange this Note for the
Company's Series B 13% Senior Discount Notes due 2005 (the "Exchange Notes"),
which have been registered under the Securities Act, in like principal amount
and having terms identical in all material respects as the Initial Notes. The
Holders of the Initial Notes shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
10. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons, and (except Notes issued as payment of Interest) in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
12. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
14. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for
A-5
<PAGE>
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect the rights of any Holder of a Note.
15. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and the Restricted Subsidiaries to, among other
things, Incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries, issue Preferred Stock of its
Restricted Subsidiaries, and on the ability of the Company and its Subsidiaries
to merge or consolidate with any other Person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the Company's and its
Subsidiaries' assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
16. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
17. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Notes unless it has received indemnity reasonably satisfactory
to it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount of the Notes then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Notes notice of any continuing Default or
Event of Default (except a Default in payment of principal or interest when due,
for any reason or a Default in compliance with Article Five of the Indenture) if
it determines that withholding notice is in their interest.
18. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
19. NO RECOURSE AGAINST OTHERS. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
A-6
<PAGE>
20. AUTHENTICATION. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
21. GOVERNING LAW. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws.
22. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: CellNet Data Systems, Inc., 125 Shoreway
Road, San Carlos, California 94070, Attn: General Counsel.
A-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _____________________________, agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
Dated: __________________ Signed: ____________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: ____________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) June 15, 1998, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer:
A-8
<PAGE>
[CHECK ONE]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED, HOWEVER, that if box (3), (4), (5) or (7)
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in its sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, as amended.
A-9
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.17 of the Indenture shall have been satisfied.
Dated: __________________ Signed: ____________________________
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee: __________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: __________________ ____________________________
NOTICE: To be executed by
an executive officer
A-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: __________________ ____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee: ____________________________________
A-11
<PAGE>
EXHIBIT B
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $450.398; (2) THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT IS $1,199.602; (3) THE ISSUE DATE IS JUNE 15, 1995; AND
(4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 15.04049098%.
CUSIP No.:
CELLNET DATA SYSTEMS, INC.
SERIES B 13% SENIOR DISCOUNT NOTE DUE 2005
No. $
CELLNET DATA SYSTEMS, INC., a California corporation (the "Company",
which term includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of
Dollars, on June 15, 2005.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 2000
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
CELLNET DATA SYSTEMS, INC.
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Dated: Title:
Certificate of Authentication
This is one of the Series B 13% Senior Discount Notes due 2005
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By: ______________________________________
B-1
<PAGE>
Authorized Signatory
Date of Authentication:
B-2
<PAGE>
(REVERSE OF SECURITY)
Series B 13% Senior Discount Note due 2005
1. INTEREST. CELLNET DATA SYSTEMS, INC., a California corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate per annum shown above. Cash interest on the Notes will not accrue
prior to June 15, 2000. Interest on the Notes will accrue from the most recent
date on which interest has been paid or, if no interest has been paid, from
June 15, 2000. The Company will pay interest semi-annually in arrears on each
Interest Payment Date, commencing December 15, 2000. Interest will be computed
on the basis of a 360-day year of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York (the
"Trustee"), will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of June 15, 1995 (the "Indenture"), between the Company and the
Trustee. This Note is one of a duly authorized issue of Exchange Notes of the
Company designated as its Series B 13% Senior Discount Notes due 2005 (the
"Exchange Notes"). The Notes are limited in aggregate principal amount to
$235,000,000. The Notes include the 13% Senior Discount Notes due 2005 (the
"Initial Notes") and the Exchange Notes, issued in exchange for the Initial
Notes pursuant to the Indenture. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and said Act for
a statement of them. The Notes are general unsecured obligations of the
Company.
B-3
<PAGE>
5. INDENTURE. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time in accordance with its terms.
6. REDEMPTION. (a) OPTIONAL REDEMPTION. The Notes will be
redeemable, at the Company's option, in whole at any time or in part from time
to time, on and after June 15, 2000 at the following redemption prices
(expressed as percentages of the aggregate principal amount) if redeemed during
the twelve-month period commencing on June 15 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
YEAR PERCENTAGE
2000 ............................ 106.500%
2001 ............................ 104.330
2002 ............................ 102.170
2003 and thereafter ............... 100.000
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. In the event
that the Company consummates a Public Equity Offering after which there is a
Public Market, the Company may, at its option, redeem prior to June 15, 1998,
from the proceeds of such Public Equity Offering received by the Company, up to
25% of the aggregate principal amount of the Notes originally issued at a
redemption price equal to 113% of the Accreted Value plus accrued interest, if
any, to the date of redemption; PROVIDED, HOWEVER, that (1) such redemption may
only be effected to the extent that immediately after such redemption not less
than 75% in aggregate principal amount of the Notes originally issued remain
outstanding (it being expressly agreed that, for purposes of determining whether
this condition is satisfied, Notes owned (beneficially or otherwise) by the
Company or any of its Affiliates shall not be deemed to be outstanding) and (2)
such redemption is effected not more than once and not more than 60 days after
the consummation of such Public Equity Offering.
The Notes are not entitled to the benefit of any sinking fund.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest or accumulate Accreted Value, as the
case may be, from and after such Redemption Date and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price plus
accrued interest, if any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
B-4
<PAGE>
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons, and (except Notes issued as payment of Interest) in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee
and such Paying Agent with respect to such money shall cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, or comply with Article Five of the Indenture or make any other change
that does not adversely affect the rights of any Holder of a Note.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and the Restricted Subsidiaries to, among other
things, Incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries, issue Preferred Stock of its
Restricted Subsidiaries, and on the ability of the Company and its Subsidiaries
to merge or consolidate with any other Person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the
B-5
<PAGE>
Company's and its Subsidiaries' assets or adopt a plan of liquidation. Such
limitations are subject to a number of important qualifications and exceptions.
Pursuant to Section 4.06 of the Indenture, the Company must annually report to
the Trustee on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Notes unless it has received indemnity reasonably satisfactory
to it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount of the Notes then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Notes notice of any continuing Default or
Event of Default (except a Default in payment of principal or interest when due,
for any reason or a Default in compliance with Article Five of the Indenture) if
it determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
19. AUTHENTICATION. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. GOVERNING LAW. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
B-6
<PAGE>
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: CellNet Data Systems, Inc., 125 Shoreway
Road, San Carlos, California 94070, Attn: General Counsel.
B-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ___________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Dated: __________________ Signed: _______________________________
(Sign exactly as name appears
on the other side of this Note)
Signature Guarantee: ________________________________
B-8
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: _________________ _____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee: _____________________________
B-9
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
___________, ____
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: CellNet Data Systems, Inc. (the "Company")
13% SENIOR DISCOUNT NOTES DUE 2005 (THE "NOTES")
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated June 12, 1995, relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated in the
section entitled "Transfer Restrictions" of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of June 15, 1995 relating to the Notes (the "Indenture") and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Notes within three years after the original issuance
of the Notes, we will do so only (A) to the Company or any subsidiary
thereof, (B) inside the United States in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined
therein), (C) inside the United States to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
C-1
<PAGE>
Regulation D under the Securities Act) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you a
signed letter substantially in the form of this letter, (D) outside the
United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (F) pursuant to an
effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
4. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certification, written
legal opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment, as the case may be.
6. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: ___________________________________
Authorized Signature
C-2
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
PURSUANT TO REGULATION S
______________, ____
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: CellNet Data Systems, Inc. (the "Company")
13% SENIOR DISCOUNT NOTES DUE 2005 (THE "NOTES")
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
D-1
<PAGE>
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:___________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
CELLNET DATA SYSTEMS
TAX ALLOCATION AGREEMENT
This Agreement is made as of January 1, 1995 between CELLNET DATA
SYSTEMS, INC. ("Parent") and CELLNET DATA SERVICES, INC. ("Holding" or
"Subgroup Common Parent").
WHEREAS, each Subgroup Member (as defined in Section 3.1 hereof) is
currently a member of an affiliated group (the "Group") within the meaning of
Section 1504 of the Internal Revenue Code of 1986, as amended, (the "Code")
of which Parent is the common parent corporation; and
WHEREAS, Parent and Holding desire to establish a method for allocating
the consolidated tax liability of the Group among the members of the Group
and for reimbursing Parent for the payment of such liability;
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants contained herein, Parent and Holding hereby agree as
follows:
1. DEFINITIONS. As used in this Agreement, defined terms shall have the
meaning ascribed to such terms herein, unless the context otherwise
requires.
2. CONSOLIDATED FEDERAL INCOME TAX RETURNS. Each Subgroup Member agrees to be
included in, and Parent agrees to file a consolidated Federal income tax
return for each taxable year ("Applicable Period") in which Parent and each
Subgroup Member are eligible to file consolidated returns as an affiliated
group of corporations, as such term is defined in Section 1504 of the Code.
3. COMPUTATIONS.
3.1 For purposes of making the computations described herein Subgroup
Common Parent and all lower (with respect to Subgroup Common Parent)
tier entities (individually and collectively referred to as
"Subsidiary" or "Subsidiaries") in which Subgroup Common Parent has
direct or indirect ownership shall be treated as an affiliated group
of corporations ("Subgroup"), the common parent of which is Subgroup
Common Parent, provided, however, that Subgroup shall only include any
Subsidiary to the extent that such Subsidiary meets the test of
affiliation under Section 1504 of the Code as it would apply to such
Subgroup. Subgroup Common Parent and each Subsidiary which is a
member of the Subgroup shall sometimes be referred to individually as
a "Subgroup Member". A Subsidiary which is a member of the Subgroup
shall, for purposes of this Agreement, continue to be treated as a
member of the Subgroup, notwithstanding any transfer of its stock to
any member of the Group which is not a member of the Subgroup.
<PAGE>
3.2 For each Applicable Period, Parent shall compute an estimated and an
actual Federal income tax liability for Subgroup. For purposes of
computing Subgroup's estimated and actual liabilities, Subgroup shall
be treated as if it were a separate affiliated group of corporations
which had filed a separate consolidated return for each period and all
prior taxable periods (taking into account all limitations which would
be applicable to Subgroup, including Sections 382 and 383 of the
Code), and which was never affiliated with the Group.
4. LIABILITY OF SUBGROUP TO PARENT.
4.1 ESTIMATED LIABILITY. If Parent's good faith calculation under
Section 3.2 hereof with respect to Subgroup results in an estimated
Federal income tax liability for Subgroup with respect to the
Applicable Period, then in that event Subgroup Common Parent shall pay
such computed estimated income tax liability to Parent in such amounts
and at such times as Subgroup Common Parent would have been required
to pay the Internal Revenue Service, if Subgroup were a separate
affiliated group of corporations making separate estimated
consolidated payments of tax and filing a separate consolidated tax
return. Notwithstanding the foregoing, Subgroup Common Parent's
payments of estimated tax through any date (including any date on
which Parent requests an extension of time for filing the Group's
consolidated Federal Income Tax Return) with respect to an Applicable
Period shall not exceed the amount of tax Parent is required to have
paid to the Internal Revenue Service on or before such date.
4.2 ACTUAL LIABILITY.
4.2.1 After the end of each Applicable Period, Parent shall
compute Subgroup's actual liability under Section 3.2
hereof. The provisions of the second sentence of
Section 4.1 hereof shall not limit the Subgroup's actual
liability.
4.2.2 If it is finally determined that Subgroup's actual liability
for the Applicable Period exceeds the amount of Subgroup
Common Parent's estimated tax payments to Parent for such
Applicable Period then, in that event, Subgroup Common
Parent shall pay to Parent the excess of its actual
liability over its estimated tax payments for such
Applicable Period. However, if Subgroup Common Parent's
estimated tax payments to Parent for the Applicable Period
exceed Subgroup's finally determined actual liability, the
excess shall be refunded or applied against Subgroup's
liability for the following Applicable Period, at the option
of Parent.
4.2.3 If Parent's calculation with respect to Subgroup results in
a net operating loss for the Applicable Period that could be
carried back under the principles of Section 3.2 hereof and
Sections 172 and 1502 of the Code and the regulations
thereunder to a prior taxable period or periods of Subgroup
with respect to which Subgroup Common Parent previously made
payments to Parent
-2-
<PAGE>
pursuant to Section 4.1 hereof or Section 4.2.2 hereof,
then, in that event, Parent shall pay Subgroup Common
Parent an amount equal to the tax refund to which
Subgroup Common Parent would have been entitled (but
not in excess of the aggregate amounts previously paid to
Parent under Section 4.1 hereof as adjusted by Section 4.2.2
hereof with respect to the three preceding taxable years,
reduced by the aggregate refunds paid to Subgroup under this
Section 4.2.3 hereof with respect to such years) under the
separate consolidated return principles of Section 3.2
hereof.
4.2.4 If Parent's calculation with respect to Subgroup results in
a net operating loss for any Applicable Period that could
not be carried back under the principles of Section 3.2
hereof and Sections 172 and 1502 of the Code and the
regulations thereunder to a prior taxable period or periods
of Subgroup with respect to which Subgroup Common Parent
previously made payments to Parent pursuant to Section 4.1
hereof or Section 4.2.2 hereof, then, in that event, such
net operation loss shall be a net operating loss carryover
to be used by Parent in computing Subgroup's Federal income
tax liability pursuant to Section 3.2 hereof for future
taxable periods, under the law applicable to net operating
loss carryovers in general, as such law applies to the
relevant taxable period.
4.2.5 Any adjustment other than a net operating loss carryback
described in Section 4.2.3 hereof or a net capital loss or
credit carryback described in Section 4.2.7 hereof, for
whatever reason (including, without limitation, audits or
amended returns), to any item affecting a calculation of tax
liabilities under Section 3.2 hereof and Section 4.2 hereof,
shall be given effect by Parent in redetermining the amount
payable by or due to Subgroup Common Parent pursuant to this
Agreement as if such adjustment were part of the original
determination hereunder, including any interest that would
be due to or from the Internal Revenue Service, under the
separate consolidated return principles of Section 3.2
hereof as a result of such adjustment.
4.2.6 Payments under Sections 4.2.2 and 4.2.3 hereof shall be made
on the date that Parent files the Group's consolidated
Federal income tax return for the taxable year involved.
Payments under Section 4.2.5 hereof shall be made promptly
(not later than seven days) after the final determination of
any adjustment to which Section 4.2.5 hereof relates.
4.2.7 Principles similar to those of Sections 4.2.3 and 4.2.4
hereof shall apply in the case of net capital loss and
credit carryovers.
5. ALLOCATION OF SUBGROUP LIABILITY. Subject to the provisions of Section 7.2
hereof, Subgroup Common Parent may allocate its liability under this
Agreement among members of the Subgroup.
-3-
<PAGE>
6. ELECTIONS. All elections relating to the filing of a consolidated Federal
income tax return which are required or are available (as well as elections
applicable to the computation of Subgroup's estimated and actual
liabilities under Section 3.2 hereof) shall be made by Parent. Each
Subsidiary shall execute such consents and other documents as are necessary
in connection therewith. In making elections applicable to the computation
of Subgroup's estimated and actual liabilities under Section 3.2 hereof,
Parent shall make such elections in a reasonable manner so as to minimize
the tax liability of Subgroup, provided, however, that such elections shall
be consistent with the elections made and positions taken in computing the
Group's actual Federal income tax liabilities for its Federal income tax
returns.
7. LIABILITY FOR TAXES; REFUNDS.
7.1 Parent, as the common parent and agent of the Group, shall be
responsible for and shall pay, any consolidated Federal income tax
liability of the Group and has the sole right to any refunds from the
Internal Revenue Service.
7.2 Notwithstanding any other provision of this Agreement each Subsidiary
shall be jointly and severally liable to Parent for Subgroup Common
Parent's obligations under this Agreement, and all members of the
Group which are not members of the Subgroup shall be jointly and
severally liable to Subgroup Common Parent for Parent's obligations
under this Agreement.
7.3 Except to the extent Subgroup Common Parent or a Subsidiary is
required to make any payment under this Agreement, Parent shall
indemnify each Subgroup Member and hold it harmless against all
Federal income tax liabilities relating to taxable years of such
Subgroup Member during which such Subgroup Member is or was a member
of the Group.
8. RELIANCE ON INCOME PROJECTIONS. For purposes of making the estimated tax
liability computations required by this Agreement, Parent may rely on the
same income and loss projections it generally uses in its overall tax
planning.
9. STATE AND LOCAL INCOME TAX RETURNS. The foregoing principles shall apply
in similar fashion to any consolidated or combined foreign, state or other
local income tax returns which the Group may elect or be required to file.
10. EFFECTIVE TERM OF THIS AGREEMENT. With respect to each Subgroup Member,
this Agreement shall be effective for the Group's 1995 taxable period and
all subsequent taxable periods (excluding any period of time in 1995 in
which such Subgroup Member was not a member of the Group) until the date on
which (i) such Subgroup Member ceases to be a member of the Group under
applicable Federal law, (ii) the Group no longer remains in existence
within the meaning of Treasury Regulation Section 1.1502-75(a), or
(iii) the Group is no longer eligible to file, or is no longer eligible to
join in the filing of, a consolidated return for Federal income tax
purposes. After such date, (i) Parent and such Subgroup Member,
respectively, shall remain
-4-
<PAGE>
fully responsible for any payments either was required to make under
this Agreement in respect of all computations regarding Applicable
Periods during which such Subgroup Member was a member of the Group,
and (ii) all other obligations of such Subgroup Member and Parent
under this Agreement shall terminate unless otherwise agreed.
11. PURPOSE AND EFFECT. This agreement is entered into by the parties solely
in recognition of the mutual benefits resulting from filing a Federal (or
foreign or state or other local) consolidated tax return. The respective
amounts of tax liability allocated to Parent and each Subgroup Member for
purposes of computing such corporations' eaming and profits for Federal (or
foreign or state or other local) income tax purposes may differ from those
determined in accordance with this Agreement. Furthermore, any amount
treated for Federal (or foreign or state or other local) income tax
purposes, on account of such a difference, as a contribution to capital or
a distribution with respect to stock, or a combination thereof, as the case
may be, shall be treated as a contribution to capital, a distribution with
respect to stock, or a combination thereof, solely for Federal (or foreign
or state or other local) income tax purposes.
12. ADDITIONAL PARTIES. Parent and Holding intend to use their best efforts to
procure the adoption and execution of this Agreement by each present and
future Subsidiary. Upon such execution, each Subsidiary shall be a party
hereto in all respects as if such Subsidiary had been an original party
hereto.
13. BINDING AGREEMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Parent and Holding have executed this Agreement by the
authorized officers thereof as of the date first above written.
CELLNET DATA SYSTEMS, INC.
By: _________________________
CELLNET DATA SERVICES, INC.
By: _________________________
-5-
<PAGE>
The undersigned do hereby adopt and agree to become a party to the above
Agreement as of the dates indicated below.
CELLNET DATA SERVICES (KC), INC.
By: ___________________________ Date: January 1, 1995
CN WAN CORP.
By: ___________________________ Date: January 1, 1995
[Others to be added]
-6-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
Dated as of June 15, 1995
Between
CELLNET DATA SYSTEMS, INC.
and
THE BANK OF NEW YORK,
as Warrant Agent
______________________
940,000
Warrants to Purchase Common Stock
No Par Value Per Share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I.
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants. . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Form of Warrant Certificates. . . . . . . . . . . . . . . 2
SECTION 1.03. Execution of Warrant Certificates . . . . . . . . . . . . 2
SECTION 1.04. Authentication and Delivery . . . . . . . . . . . . . . . 3
SECTION 1.05. Temporary Warrant Certificates. . . . . . . . . . . . . . 4
SECTION 1.06. [Intentionally Omitted] . . . . . . . . . . . . . . . . . 4
SECTION 1.07. Registration. . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.08. Registration of Transfers and Exchanges . . . . . . . . . 5
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or
Mutilated Warrant Certificates. . . . . . . . . . . . . 13
SECTION 1.10. Offices for Exercise, etc.. . . . . . . . . . . . . . . . 14
ARTICLE II.
DURATION, EXERCISE OF WARRANTS
AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants. . . . . . . . . . . . . . . . . . . 14
SECTION 2.02. Exercise, Exercise Price, Settle-
ment and Delivery . . . . . . . . . . . . . . . . . . . 15
SECTION 2.03. Cancellation of Warrant Certificates. . . . . . . . . . . 20
SECTION 2.04. Notice of an Exercise Event . . . . . . . . . . . . . . . 20
ARTICLE III.
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights . . . . . . . . . . . . . . . . . . 21
ARTICLE IV.
CERTAIN COVENANTS OF THE COMPANY
-i-
<PAGE>
PAGE
----
SECTION 4.01. Payment of Taxes. . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.02. Qualification Under the Securities Laws . . . . . . . . . 22
SECTION 4.03. Rules 144 and 144A. . . . . . . . . . . . . . . . . . . . 23
ARTICLE V.
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Rate; Notices. . . . . . . . . . . 23
SECTION 5.02. Fractional Shares . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.03. Certain Distributions . . . . . . . . . . . . . . . . . . 30
ARTICLE VI.
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.02. Conditions of Warrant Agent's
Obligations . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.03. Resignation and Appointment of
Successor . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII.
MISCELLANEOUS
SECTION 7.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.02. Notices and Demands to the Company
and Warrant Agent . . . . . . . . . . . . . . . . . . . 38
SECTION 7.03. Addresses for Notices to Parties and
for Transmission of Documents . . . . . . . . . . . . . 38
SECTION 7.04. Notices to Holders. . . . . . . . . . . . . . . . . . . . 39
SECTION 7.05. Applicable Law. . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.06. Persons Having Rights Under Agreement . . . . . . . . . . 39
SECTION 7.07. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.08. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.09. Inspection of Agreement . . . . . . . . . . . . . . . . . 40
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate To Be Delivered Upon
-ii-
<PAGE>
PAGE
----
Exchange or Registration of
Transfer of Warrants
EXHIBIT C - Transferee Letter of Representation
-iii-
<PAGE>
PAGE
----
INDEX OF DEFINED TERMS
DEFINED TERM SECTION
- ------------ -------
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01(o)
Cashless Exercise. . . . . . . . . . . . . . . . . . . . . . . . . 2.02(c)
Cashless Exercise Ratio. . . . . . . . . . . . . . . . . . . . . . 2.02(c)
Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Current Market Value . . . . . . . . . . . . . . . . . . . . . . . 5.01(o)
Definitive Warrants. . . . . . . . . . . . . . . . . . . . . . . . 1.02
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03
Distribution Rights. . . . . . . . . . . . . . . . . . . . . . . . 5.03
Election To Exercise . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01(n)
Exercisability Date. . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
Exercise Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(d)
Exercise Event . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
Exercise Price Per Share . . . . . . . . . . . . . . . . . . . . . 2.02(c)
Exercise Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
Expiration Date. . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
Global Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . 1.02
Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Independent Financial Expert . . . . . . . . . . . . . . . . . . . 5.01(n)
Initial Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Officers' Certificate. . . . . . . . . . . . . . . . . . . . . . . 1.08(f)
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02
Public Equity Offering . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
Public Market. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
Registrar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.07
Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . 6.02(e)
Resale Restriction Termination Date. . . . . . . . . . . . . . . . 1.08
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . 1.08
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.01
Time of Determination. . . . . . . . . . . . . . . . . . . . . . . 5.01(n)
-iv-
<PAGE>
PAGE
----
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Warrant Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Warrant Agent Office . . . . . . . . . . . . . . . . . . . . . . . 1.10
Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . Recitals
Warrant Exercise Office. . . . . . . . . . . . . . . . . . . . . . 2.02(b)
Warrant Register . . . . . . . . . . . . . . . . . . . . . . . . . 1.07
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
-v-
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT ("AGREEMENT"), dated as of June 15, 1995 by CELLNET
DATA SYSTEMS, INC., a California corporation (together with any successor
thereto, the "COMPANY"), and THE BANK OF NEW YORK, a New York banking
corporation, not in its individual capacity but solely as warrant agent (with
any successor Warrant Agent, the "WARRANT AGENT").
WHEREAS, the Company has entered into a purchase agreement dated
June 15, 1995 with Smith Barney Inc. (the "INITIAL PURCHASER") in which the
Company has agreed to sell to the Initial Purchaser 235,000 units (the "UNITS")
consisting in the aggregate of (i) $235,000,000 aggregate principal amount at
maturity of 13% Senior Discount Notes due 2005 (the "NOTES") of the Company to
be issued under an indenture dated as of June 15, 1995 (the "INDENTURE"),
between the Company and The Bank of New York, as trustee (in such capacity, the
"TRUSTEE"), and (ii) 940,000 Warrants (the "WARRANTS" and the certificates
evidencing the Warrants being hereinafter referred to as "WARRANT
CERTIFICATES"), each representing the right to purchase initially one share of
Common Stock, no par value per share, of the Company (the "COMMON STOCK"),
subject to adjustment in accordance with the terms hereof; and
WHEREAS, the Company desires the Warrant Agent as warrant agent to
assist the Company in connection with the issuance, exchange, cancellation,
replacement and exercise of the Warrants, and in this Agreement wishes to set
forth, among other things, the terms and conditions on which the Warrants may be
issued, exchanged, cancelled, replaced and exercised;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
<PAGE>
-2-
SECTION 1.01. ISSUANCE OF WARRANTS. Warrants comprising part of the
Units shall be originally issued in connection with the issuance of the Units.
Each Warrant Certificate shall evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to such holder of the Warrant) one
(1) fully paid and non-assessable share of the Company's Common Stock (the
shares purchasable upon exercise of a Warrant being hereinafter referred to as
the "SHARES" and, where appropriate, such term shall also mean the other
securities or property purchasable and deliverable upon exercise of a Warrant as
provided in Article V) at the price specified herein and therein, in each case
subject to adjustment as provided herein and therein.
SECTION 1.02. FORM OF WARRANT CERTIFICATES. The Warrant Certificates
will initially be issued either in global form (the "GLOBAL WARRANTS"),
substantially in the form of EXHIBIT A hereto (including footnote 1 thereto) or
in registered form as definitive Warrant certificates (the "DEFINITIVE
WARRANTS"). The Warrant Certificates evidencing the Global Warrants or the
Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in EXHIBIT A attached hereto. Such Global
Warrants shall represent such of the outstanding Warrants as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a Global Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Warrants represented thereby shall be made by the Warrant Agent and Depositary
(as defined below) in accordance with instructions given by the holder thereof.
The Depository Trust Company shall act as the Depositary with respect to the
Global Warrants until a successor shall be appointed by the Company and the
Warrant Agent. Upon written request, a Warrant holder may
<PAGE>
-3-
receive from the Warrant Agent Definitive Warrants as set forth in Section 1.08
hereof.
SECTION 1.03. EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed on behalf of the Company by the chairman of its
Board of Directors, its president or any vice president and attested by its
secretary or assistant secretary, under its corporate seal. Such signatures may
be the manual or facsimile signatures of the present or any future such
officers. The seal of the Company may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such person was not such an officer.
SECTION 1.04. AUTHENTICATION AND DELIVERY. Subject to the
immediately following paragraph, Warrant Certificates shall be authenticated by
manual signature and dated the date of authentication by the Warrant Agent and
shall not be valid for any purpose unless so authenticated and dated. The
Warrant Certificates shall be numbered and shall be registered in the Warrant
Register (as defined in Section 1.07 hereof).
<PAGE>
-4-
Upon the receipt by the Warrant Agent of a written order of the
Company, which order shall be signed by the chairman of its Board of Directors,
its president or any vice president and attested by its secretary or assistant
secretary, and shall specify the amount of Warrants to be authenticated, whether
the Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may reasonably request,
without any further action by the Company, the Warrant Agent is authorized, upon
receipt from the Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.03 hereof, to authenticate
the Warrant Certificates and deliver them. Such authentication shall be by a
duly authorized signatory of the Warrant Agent (although it shall not be
necessary for the same signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who authenticated such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
authenticated on behalf of the Warrant Agent by such persons as, at the actual
time of authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates shall
be in substantially the form set forth in ANNEX A hereto.
SECTION 1.05. TEMPORARY WARRANT CERTIFICATES. Pending the
preparation of definitive Warrant Certificates, the Company may execute, and the
Warrant Agent shall authenticate and deliver, temporary Warrant Certificates,
which are printed, lithographed, typewritten or otherwise produced,
substantially of the tenor of
<PAGE>
-5-
the definitive Warrant Certificates in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Warrant Certificates may determine, as evidenced by
their execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 1.10 hereof.
Subject to the provisions of Section 4.01 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall authenticate and deliver in exchange therefor, one or more definitive
Warrant Certificates representing in the aggregate a like number of Warrants.
Until so exchanged, the holder of a temporary Warrant Certificate shall in all
respects be entitled to the same benefits under this Agreement as a holder of a
definitive Warrant Certificate.
SECTION 1.06. [Intentionally Omitted]
SECTION 1.07. REGISTRATION. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated by the Company
from time to time as a person authorized to register the transfer and exchange
of the Warrants is hereinafter called, individually and collectively, the
"REGISTRAR". The Company hereby initially appoints the Warrant Agent as
Registrar. Upon written notice to the Warrant Agent and any acting Registrar,
the Company may appoint a successor Registrar for such purposes.
<PAGE>
-6-
The Company will at all times designate one person (who may be the
Company and who need not be a Registrar) to act as repository of a master list
of names and addresses of the holders of Warrants (the "WARRANT REGISTER"). The
Warrant Agent will act as such repository unless and until some other person is,
by written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall cause each
Registrar to furnish to such repository, on a current basis, such information as
to all registrations of transfer and exchanges effected by such Registrar, as
may be necessary to enable such repository to maintain the Warrant Register on
as current a basis as is practicable.
SECTION 1.08. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE WARRANTS. When Definitive
Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of Definitive
Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
1.08 hereof for such transactions are met; PROVIDED, HOWEVER, that the
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Company and the Warrant Agent,
duly executed by the holder thereof or by his attorney, duly
authorized in writing; and
(y) in the case of Warrants the offer and sale of which have not been
registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT") and are presented for
<PAGE>
-7-
transfer or exchange prior to (x) the date which is three years after the later
of the date of original issue and the last date on which the Company or any
affiliate of the Company was the owner of such Warrant, or any predecessor
thereto and (y) such later date, if any, as may be required by any subsequent
change in applicable law (the "RESALE RESTRICTION TERMINATION DATE"), such
Warrants shall be accompanied, in the sole discretion of the Company, by the
following additional information and documents, as applicable, however, it being
understood that the Warrant Agent need not determine which clause (A) through
(D) below is applicable:
(A) if such Warrant is being delivered to the Warrant Agent by a
holder for registration in the name of such holder, without
transfer, a certification from such holder to that effect (in
substantially the form of EXHIBIT B hereto); or
(B) if such Warrant is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification
to that effect (in substantially the form of EXHIBIT B hereto);
or
(C) if such Warrant is being transferred to an institutional
"accredited investor" within the meaning of subparagraphs (a)(1),
(a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities Act,
delivery of a Certificate of Transfer in the form of EXHIBIT C
hereto and an opinion of counsel and/or other information
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
<PAGE>
-8-
(D) if such Warrant is being transferred in reliance on another
exemption from the registration requirements of the Securities
Act, a certification to that effect (in substantially the form of
EXHIBIT B hereto) and an opinion of counsel reasonably acceptable
to the Company to the effect that such transfer is in compliance
with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE WARRANT FOR A BENEFICIAL
INTEREST IN A GLOBAL WARRANT. A Definitive Warrant may not be exchanged for a
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Warrant Agent, together with:
(A) certification, substantially in the form of EXHIBIT B hereto,
that such Definitive Warrant is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act; and
(B) written instructions directing the Warrant Agent to make, or to
direct the Depositary to make, an endorsement on the Global
Warrant to reflect an increase in the aggregate amount of the
Warrants represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Shares represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall authenticate a new Global Warrant in the appropriate amount.
<PAGE>
-9-
(c) TRANSFER AND EXCHANGE OF GLOBAL WARRANTS. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL WARRANT FOR A
DEFINITIVE WARRANT.
(i) Any person having a beneficial interest in a Global Warrant may upon
request exchange such beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written instructions or such
other form of instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any person having a beneficial
interest in a Global Warrant and upon receipt by the Warrant Agent of
a written order or such other form of instructions as is customary for
the Depositary or the person designated by the Depositary as having
such a beneficial interest containing registration instructions and,
in the case of any such transfer or exchange prior to the Resale
Restriction Termination Date, the following additional information and
documents, however, it being understood that the Warrant Agent need
not determine which clause (A) through (D) below is applicable:
(A) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially
the form of EXHIBIT B hereto); or
(B) if such beneficial interest is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities
Act) in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with
Rule 144 or Regulation S under the Securities Act
<PAGE>
-10-
or pursuant to an effective registration statement under the
Securities Act, a certification to that effect from the
transferee or transferor (in substantially the form of EXHIBIT B
hereto); or
(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning of
subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under
the Securities Act, delivery of a Certificate of Transfer in the
form of EXHIBIT C hereto and an opinion of counsel and/or other
information satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(D) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect from the
transferee or transferor (in substantially the form of EXHIBIT B
hereto) and an opinion of counsel from the transferee or
transferor reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act,
then the Warrant Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Warrant Agent, the aggregate amount of the Global Warrant to be
reduced and, following such reduction, the Company will execute and,
upon receipt of an authentication order in the form of an Officers'
Certificate (as defined), the Warrant Agent will authenticate and
deliver to the transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial interest in a
Global Warrant pursuant to this Section 1.08(d) shall be registered in
such names and in such authorized denominations as the Depositary,
pursuant to
<PAGE>
-11-
instructions from its direct or indirect participants or otherwise,
shall instruct the Warrant Agent in writing. The Warrant Agent shall
deliver such Definitive Warrants to the persons in whose names such
Warrants are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL WARRANTS.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) AUTHENTICATION OF DEFINITIVE WARRANTS IN
ABSENCE OF DEPOSITARY. If at any time:
(i) the Depositary for the Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the
Global Warrant and a successor Depositary for the Global Warrant is
not appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants
under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must be
the principal executive officer, principal financial officer or principal
accounting officer) (an "OFFICERS' CERTIFICATE") requesting the authentication
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
(g) LEGENDS.
<PAGE>
-12-
(i) Except as permitted by the following paragraph (ii), each Warrant
Certificate evidencing the Global Warrants and the Definitive Warrants
(and all Warrants issued in exchange therefor or substitution thereof)
shall bear a legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS
THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR SECURITY) ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPHS (a)(1), (a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
<PAGE>
-13-
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT IN ITS
SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF A WRITTEN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE
COMPANY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE WARRANT AGENT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
(ii) Upon any sale or transfer of a Warrant pursuant to Rule 144 under the
Securities Act in accordance with Section 1.08 hereof or under an effective
registration statement under the Securities Act:
(A) in the case of any Warrant that is a Definitive Warrant, the
Warrant Agent shall permit the holder thereof to exchange such
Warrant for a Definitive Warrant that does not bear the legends
set forth above and rescind any related restriction on the
transfer of such Warrant; and
(B) any such Warrant represented by a Global Warrant shall not be
subject to the provisions set forth in (i) above (such sales or
transfers being subject only to the provisions of Section 1.08(c)
hereof); PROVIDED, HOWEVER, that with respect to any request for
an exchange of a Warrant that is represented by a Global Warrant
for a Definitive Warrant that does not bear the legends set forth
above, which request is made in reliance upon Rule 144 under the
Securities Act, the holder thereof shall certify in writing to
the Warrant Agent that such request is being made pursuant to
Rule 144 under the
<PAGE>
-14-
Securities Act (such certification to be
substantially in the form of EXHIBIT B hereto).
(h) CANCELLATION AND/OR ADJUSTMENT OF A GLOBAL WARRANT. At such time
as all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF DEFINITIVE
WARRANTS.
(i) To permit registrations of transfers and exchanges, the Company
shall execute, at the Warrant Agent's request, and the Warrant Agent
shall authenticate Definitive Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to
the same benefits under this Warrant Agreement as the Definitive
Warrants or Global Warrants surrendered upon the registration of
transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the
person in whose name any Warrant is registered as the absolute owner
of such Warrant, and neither the Warrant Agent nor the Company shall
be affected by notice to the contrary.
(j) PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes attributable to the initial issuance of the
<PAGE>
-15-
Shares upon the exercise of Warrants; PROVIDED, HOWEVER, that the Company shall
not be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of any Warrant Certificates or any certificates
for the Shares in a name other than that of the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant, and the Company shall
not be required to issue or deliver such Warrant Certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 1.09. LOST, STOLEN, DESTROYED, DEFACED OR MUTILATED WARRANT
CERTIFICATES. Upon receipt by the Company and the Warrant Agent (or any agent
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity satisfactory to them and, in the
case of mutilation or defacement, upon surrender thereof to the Warrant Agent
for cancellation, then, in the absence of notice to the Company or the Warrant
Agent that such Warrant Certificate has been acquired by a BONA FIDE purchaser
or holder in due course, the Company shall execute, and an authorized signatory
of the Warrant Agent shall manually authenticate and deliver, in exchange for or
in lieu of the lost, stolen, destroyed, defaced or mutilated Warrant
Certificate, a new Warrant Certificate representing a like number of Warrants,
bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Warrant Certificate under this
Section, the Company may require the payment from the holder of such Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled
<PAGE>
-16-
to the benefits of (but shall be subject to all the limitations of rights set
forth in) this Agreement equally and proportionately with any and all other
Warrant Certificates duly executed and delivered hereunder. The provisions of
this Section 1.09 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
The Warrant Agent is hereby authorized to authenticate in accordance
with the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 1.10. OFFICES FOR EXERCISE, ETC. So long as any of the
Warrants remain outstanding, the Company will designate and maintain in the
Borough of Manhattan, The City of New York: (a) an office or agency where
the Warrant Certificates may be presented for exercise, (b) an office or
agency where the Warrant Certificates may be presented for registration of
transfer and for exchange (including the exchange of temporary Warrant
Certificates for definitive Warrant Certificates pursuant to Section 1.05
hereof), and (c) an office or agency where notices and demands to or upon the
Company in respect of the Warrants or of this Agreement may be served. The
Company may from time to time change or rescind such designation, as it may
deem desirable or expedient; PROVIDED, HOWEVER, that an office or agency
shall at all times be maintained in the Borough of Manhattan, The City of New
York, as provided in the first sentence of this Section. In addition to such
office or offices or agency or agencies, the Company may from time to time
designate and maintain one or more additional offices or agencies within or
outside The City of New York, where Warrant Certificates may be presented for
exercise or for registration of transfer or for exchange, and the Company may
from time to time change or rescind such designation, as it may deem
desirable or expedient. The Company will give to the Warrant Agent written
notice of the
<PAGE>
-17-
location of any such office or agency and of any change of location thereof.
The Company hereby designates the Warrant Agent at its principal corporate trust
office in the Borough of Manhattan, The City of New York (the "WARRANT AGENT
OFFICE"), as the initial agency maintained for each such purpose. In case the
Company shall fail to maintain any such office or agency or shall fail to give
such notice of the location or of any change in the location thereof,
presentations and demands may be made and notice may be served at the Warrant
Agent Office and the Company appoints the Warrant Agent as its agent to receive
all such presentations, surrenders, notices and demands.
ARTICLE II.
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. DURATION OF WARRANTS. Subject to the terms and
conditions established herein, the Warrants shall expire at 5:00 p.m., New
York City time, on the earlier to occur of (i) 90 days after an Exercise
Event which causes such Warrants to become exercisable and (ii) June 15, 2005
(such earlier date, the "EXPIRATION DATE"). Each Warrant may be exercised on
any Business Day (as defined below) on or after the Exercisability Date (as
defined below) and on or prior to the close of business on the Expiration
Date.
Any Warrant not exercised before the close of business on the
Expiration Date shall become void, and all rights of the holder under the
Warrant Certificate evidencing such Warrant and under this Agreement shall
cease.
"BUSINESS DAY" shall mean any day on which (i) banks in New York City,
(ii) the principal national securities exchange or market on which the Common
Stock is listed or admitted to trading and (iii) the principal national
securities exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
<PAGE>
-18-
SECTION 2.02. EXERCISE, EXERCISE PRICE, SETTLEMENT AND DELIVERY. (a)
Subject to the provisions of this Agreement, a holder of Warrants shall have the
right to purchase from the Company on or after the occurrence of an Exercise
Event (the date of the occurrence of an Exercise Event, the "EXERCISABILITY
DATE") and on or prior to the close of business on the Expiration Date one (1)
fully paid, registered and non-assessable Share, subject to adjustment in
accordance with Article V hereof, at the purchase price of $.01 for each Warrant
exercised (the "EXERCISE PRICE"). The number and kind of Shares for which a
Warrant may be exercised (the "EXERCISE RATE") shall be subject to adjustment
from time to time as set forth in Article V hereof.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events (whether or not approved by the Board of Directors of the
Company):
(i) the Company consolidates with or merges with or into another
Person or the Company or any of its subsidiaries, directly or indirectly,
sells, assigns, conveys, transfers, leases or otherwise disposes of, in
one transaction or a series of related transactions, all or substantially
all of the property or assets of the Company and its subsidiaries
(determined on a consolidated basis) to any Person or group of related
Persons for purposes of Sections 13(d) and 14(d) of the Exchange Act,
whether or not applicable (a "GROUP OF PERSONS"), or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which immediately after the consummation
thereof the Persons owning Voting Stock of the Company having greater than
50% of the total voting power of the outstanding Voting Stock of the
Company immediately prior to the consummation of such transaction shall
cease to own, directly or indirectly, the Voting Stock of the surviving or
transferee entity or of the Company having greater than 50% of the total
voting power of the outstanding Voting Stock of such Person; or
(ii) the approval by the holders of Capital Stock of the Company of
any Plan of Liquidation; or
<PAGE>
-19-
(iii) any Person or Group of Persons either (1) is or becomes, by
purchase, tender offer, exchange offer, open market purchases, privately
negotiated purchases or otherwise, the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire at the time of
determination, whether such right is exercisable immediately or after the
passage at the time of determination of 90 days or less), directly or
indirectly, of Voting Stock of the Company having greater than 50% of the
total voting power of the outstanding Voting Stock of the Company (for the
purpose of this clause (iii), such Person or Group of Persons will be
deemed to "beneficially own" (determined as aforesaid) any Voting Stock of
a corporation (the "SPECIFIED CORPORATION") held by any other corporation
(the "PARENT CORPORATION") if such Person or Group of Persons "beneficially
owns," directly or indirectly, Voting Stock of such parent corporation
having a majority of the voting power of the outstanding Voting Stock of
such parent corporation) or (2) otherwise has the ability to elect,
directly or indirectly, a majority of the members of the Board of Directors
of the Company; PROVIDED, HOWEVER, that for purposes of this clause (iii),
a Person shall not be deemed the beneficial owner of any securities in
respect of which beneficial ownership by such Person arises solely as a
result of a revocable proxy delivered in response to a proxy or consent
solicitation that is made pursuant to, and in accordance with, applicable
law for a shareholder meeting, or, if the Company is at the time required
to file reports under Section 13 or 15 of the Exchange Act, the Exchange
Act and is not then reportable on Schedule 13D (or any successor schedule,
form or report) under the Exchange Act; or
(iv) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors
or whose nomination for election by the stockholders of the Company was
approved
<PAGE>
-20-
by a vote of a majority of the directors of the Company then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the
Company then in office.
For purposes of the foregoing definition of Change of Control, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or
series of related transactions) of all or substantially all of the properties or
assets of one or more Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
"EXERCISE EVENT" means, with respect to each Warrant, the date of the
earliest of: (1) the seventh day prior to the occurrence of a Change of
Control, (2) the consummation of a Public Equity Offering and (3) 90 days prior
to June 15, 2005.
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"PLAN OF LIQUIDATION" means, with respect to any Person, a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of such Person otherwise
than as an entirety or substantially as an entirety and (ii) the distribution of
all or substantially all of the proceeds of such sale, lease, conveyance or
other disposition and all or substantially all of the remaining assets of such
Person to holders of Capital Stock of such Person.
"PUBLIC EQUITY OFFERING" means a primary public offering (whether or
not underwritten, but excluding any offering pursuant
<PAGE>
-21-
to Form S-4 or S-8 under the Securities Act) of capital stock of the Company
pursuant to an effective registration statement under the Securities Act.
"VOTING STOCK" means, with respect to any Person, securities of any
class or classes of Capital Stock of such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
(b) Warrants may be exercised on or after the Exercisability Date by
(i) surrendering at any office or agency maintained for that purpose by the
Company pursuant to Section 1.10 (each a "WARRANT EXERCISE OFFICE") the Warrant
Certificate evidencing such Warrants with the form of election to purchase
Shares set forth on the reverse side of the Warrant Certificate (the "ELECTION
TO EXERCISE") duly completed and signed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and in the case of a transfer, such signature shall be
guaranteed by an Eligible Guarantor Institution, and (ii) paying in full the
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to Section 1.08(j) hereof. Each Warrant may be exercised only
in whole.
(c) Simultaneously with the exercise of each Warrant, payment in full
of the Exercise Price shall be made in cash or by certified or official bank
check to be delivered to the office or agency where the Warrant Certificate is
being surrendered. Notwithstanding the foregoing sentence, a Warrant may also
be exercised solely by the surrender of the Warrant, and without the payment of
the Exercise Price in cash, for such number of Shares equal to the product of
(1) the number of Shares for which such Warrant is exercisable with payment of
the Exercise Price as of the date of exercise and (2) the Cashless Exercise
Ratio. For purposes of this Agreement, the "CASHLESS EXERCISE RATIO" shall
equal a fraction, the numerator of which is the excess of the Current Market
Value of the Common Stock on the date of exercise
<PAGE>
-22-
(calculated as set forth in Section 5.01(n) hereof) over the Exercise Price Per
Share as of the date of exercise and the denominator of which is the Current
Market Value of the Common Stock on the date of exercise (calculated as set
forth in Section 5.01(n) hereof). An exercise of a Warrant in accordance with
the immediately preceding sentences is herein called a "CASHLESS EXERCISE."
Upon surrender of a Warrant Certificate representing more than one Warrant in
connection with the holder's option to elect a Cashless Exercise, the number of
Shares deliverable upon a Cashless Exercise shall be equal to the number of
Warrants that the holder specifies is to be exercised pursuant to a Cashless
Exercise multiplied by the Cashless Exercise Ratio. All provisions of this
Agreement shall be applicable with respect to an exercise of a Warrant
Certificate pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby. "EXERCISE PRICE PER SHARE" means the Exercise
Price divided by the number of Shares for which a Warrant is then exercisable
(without giving effect to the Cashless Exercise option). No payment or
adjustment shall be made on account of any dividends on the Shares issued upon
exercise of a Warrant. If, pursuant to the Securities Act, the Company is not
able to effect the registration of the offer and sale of the Warrant Shares by
the Company to the holders of the Warrants upon the exercise thereof as required
by Section 4.02 hereof, the holders of the Warrants agree to effect the exercise
of the Warrants solely pursuant to the Cashless Exercise option to the extent
that such Cashless Exercise is not adverse to the interests of the holders of
the Warrants.
(d) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office (other than any
Warrant Exercise Office that also is an office of the Warrant Agent), such
Warrant Certificate and payment shall be promptly delivered to the Warrant
Agent. The "EXERCISE DATE" for a Warrant shall be the date when all of the
items referred to in the first sentence of paragraphs (b) and (c) of this
Section 2.02 are received by the Warrant Agent at or prior to 11:00 a.m., New
York City time, on a Business Day and the exercise of the Warrants will be
effective as of such Exercise Date. If any items referred to in the first
sentence of paragraphs
<PAGE>
-23-
(b) and (c) are received after 11:00 a.m., New York City time, on a Business
Day, the exercise of the Warrants to which such item relates will be effective
on the next succeeding Business Day. Notwithstanding the foregoing, in the case
of an exercise of Warrants on the Expiration Date (as defined in Section 2.01),
if all of the items referred to in the first sentence of paragraphs (b) and (c)
are received by the Warrant Agent at or prior to 5:00 p.m., New York City time,
on such Expiration Date, the exercise of the Warrants to which such items relate
will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price
(or election of the Cashless Exercise option), the Warrant Agent shall:
(i) except to the extent exercise of the Warrant has been effected through
Cashless Exercise, cause an amount equal to the Exercise Price to be paid to the
Company by crediting the same to the account designated by the Company in
writing to the Warrant Agent for that purpose; (ii) advise the Company
immediately by telephone of the amount so deposited to the Company's account and
promptly confirm such telephonic advice in writing; and (iii) as soon as
practicable, advise the Company in writing of the number of Warrants exercised
in accordance with the terms and conditions of this Agreement and the Warrant
Certificates, the instructions of each exercising holder of the Warrant
Certificates with respect to delivery of the Shares to which such holder is
entitled upon such exercise, and such other information as the Company shall
reasonably request.
(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to or upon the written order of the
registered holder of the Warrant Certificate evidencing such exercised Warrant
or Warrants, a certificate or certificates evidencing the Shares to which such
holder is entitled, in fully registered form, registered in such name or names
as may be directed by such holder pursuant to the Election to Exercise, as set
forth on the reverse of the Warrant Certificate. Such certificate or
certificates evidencing
<PAGE>
-24-
the Shares shall be deemed to have been issued and any persons who are
designated to be named therein shall be deemed to have become the holder of
record of such Shares as of the close of business on the Exercise Date. After
such exercise of any Warrant or Warrants, the Company shall also issue or cause
to be issued to or upon the written order of the registered holder of such
Warrant Certificate, a new Warrant Certificate, countersigned by the Warrant
Agent pursuant to written instruction, evidencing the number of Warrants, if
any, remaining unexercised unless such Warrants shall have expired.
SECTION 2.03. CANCELLATION OF WARRANT CERTIFICATES. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall at the Company's written instruction be canceled by it and
retired. The Warrant Agent shall cancel all Warrant Certificates properly
surrendered for exchange, substitution, transfer or exercise. The Warrant Agent
shall deliver such canceled Warrant Certificates to the Company.
SECTION 2.04. NOTICE OF AN EXERCISE EVENT. The Company shall, to the
extent reasonably practicable, not fewer than 30 days nor more than 60 days
prior to the occurrence of an Exercise Event, send to each holder of Warrants
and to each beneficial owner of the Warrants to the extent that the Warrants are
held of record by a depositary or other agent, by first-class mail, at the
addresses appearing on the Warrant Register, a notice of the Exercise Event to
occur, which notice shall describe the type of Exercise Event and the date of
the proposed occurrence thereof and the date of expiration of the right to
exercise the Warrants prominently set forth in the face of such notice.
ARTICLE III.
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
<PAGE>
-25-
SECTION 3.01. ENFORCEMENT OF RIGHTS. (a) Notwithstanding any of the
provisions of this Agreement, any holder of any Warrant Certificate, without the
consent of the Warrant Agent, the holder of any Shares or the holder of any
other Warrant Certificate, may, in and for his own behalf, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, his right to exercise the Warrant or Warrants evidenced by
his Warrant Certificate in the manner provided in such Warrant Certificate and
in this Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall entitle
the holders thereof to any of the rights of a holder of Shares, including,
without limitation, the right to vote or to receive any dividends or other
payments or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or for the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
ARTICLE IV.
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the Shares
upon the exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be
required to pay any tax or other governmental charge which may be payable in
respect of any transfer or exchange of any Warrant Certificates or any
certificates for Shares in a name other than the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant. In any such case, no
transfer or exchange shall be made unless or until the person or persons
requesting issuance thereof shall have paid to the Company the amount of such
tax or other governmental charge or shall have established to the satisfaction
of the Company that such tax or other governmental charge has been paid or an
exemption is available therefrom.
SECTION 4.02. QUALIFICATION UNDER THE SECURITIES LAWS. Prior to the
occurrence of an Exercise Event arising as a result of
<PAGE>
-26-
a Public Offering the Company will, if permitted by applicable law, take all
such action as is necessary to cause the offer and sale by the Company of the
Shares issuable upon exercise of the Warrants to be registered or otherwise
qualified under the provisions of the Securities Act and pursuant to all
applicable state securities laws and to provide for the issuance of all Shares
delivered upon exercise of the Warrants pursuant to an effective registration
statement under the Securities Act. So long as any unexpired Warrants which
have become exercisable due to the occurrence of such an Exercise Event remain
outstanding, the Company will file such amendments and/or supplements to any
registration statement under the Securities Act or under any state securities
laws covering the issuance of such Shares and supplement and keep current any
prospectus forming a part of such registration statement as may be necessary to
permit the Company to deliver to each person exercising a Warrant a prospectus
meeting the requirements of Section 10(a)(3) of the Securities Act (a
"PROSPECTUS") and the regulations of the Securities and Exchange Commission and
otherwise complying with the Securities Act and regulations thereunder, and as
may be necessary to comply with any applicable state securities laws. The
Company shall, upon the request of any holder of Warrants that may be required
pursuant to the Securities Act to deliver a prospectus in connection with any
sale or other disposition of Shares, include within the plan of distribution
section of the Prospectus and in such other places in the Prospectus as may be
necessary, all information necessary under the Securities Act to enable such
holder to deliver such Prospectus in connection with sales or other dispositions
of such Shares, and the Company shall also take such action as may be necessary
under the Securities Act with respect to the related registration statement to
enable such holder to effect such delivery in connection with such sale or other
disposition. The Company further agrees to provide any holder who may be
required to deliver a prospectus upon the sale or other disposition of such
Shares, such number of copies of the Prospectus as such holder reasonably
requests. The Warrant Agent shall have no duty to monitor when such
registration or qualification is necessary nor shall the Warrant Agent be
responsible for the Company's failure to comply with this Section 4.02.
<PAGE>
-27-
SECTION 4.03. RULES 144 AND 144A. The Company covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder in a timely manner in accordance with the
requirements of the Securities Act and the Exchange Act and, if at any time the
Company is not required to file such reports, it will, upon the request of any
holder or beneficial owner of Warrants, make available such information
necessary to permit sales pursuant to Rule 144A under the Securities Act. The
Company further covenants that it will take such further action as any holder or
beneficial owner of Warrants may reasonably request, all to the extent required
from time to time to enable such holder or beneficial owner to sell Warrants
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act,
as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission (it being
expressly understood that the foregoing shall not create any obligation on the
part of the Company to file periodic or other reports under the Exchange Act at
any time that it is not then required to file such reports pursuant to the
Exchange Act).
ARTICLE V.
ADJUSTMENTS
SECTION 5.01. ADJUSTMENT OF EXERCISE RATE; NOTICES. The Exercise
Rate is subject to adjustment from time to time as provided in this Section.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the date
hereof, the Company:
(i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a greater
number of shares;
<PAGE>
-28-
(iii) combines its outstanding shares of Common Stock into a smaller
number of shares;
(iv) pays a dividend or makes a distribution on its Common Stock in
shares of its Capital Stock (as defined below) (other than Common Stock or
rights, warrants, or options for its Common Stock to the extent such
issuance or distribution is covered by Section 5.03); or
(v) issues by reclassification of its Common Stock any shares of its
Capital Stock (other than rights, warrants or options for its Common
Stock);
then the Exercise Rate in effect immediately prior to such action shall be
adjusted so that the holder of a Warrant thereafter exercised may receive the
number of shares of Capital Stock of the Company which such holder would have
owned immediately following such action if such holder had exercised the Warrant
immediately prior to such action or immediately prior to the record date
applicable thereto, if any (regardless of whether the Warrants are then
exercisable and without giving effect to the Cashless Exercise option).
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
In the event that such dividend or distribution is not so paid or made or such
subdivision, combination or reclassification is not effected, the Exercise Rate
shall again be adjusted to be the Exercise Rate which would then be in effect if
such record date or effective date had not been so fixed.
If after an adjustment a holder of a Warrant upon exercise of such
Warrant may receive shares of two or more classes of Capital Stock of the
Company, the Exercise Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated
<PAGE>
-29-
by this Article V with respect to the Common Stock, on terms comparable to
those applicable to Common Stock in this Article V.
(b) ADJUSTMENT FOR SALE OF COMMON STOCK BELOW CURRENT MARKET VALUE.
If, after the date hereof, the Company sells any Common Stock or any securities
convertible into or exchangeable or exercisable for the Common Stock (other than
(1) pursuant to the exercise of the Warrants, (2) any security convertible into,
or exchangeable or exercisable for, the Common Stock which was outstanding as of
the date of this Agreement or as to which the issuance thereof has previously
been the subject of any required adjustment pursuant to this Article V, (3) the
issuance of Common Stock upon the conversion, exchange or exercise of
convertible, exchangeable or exercisable securities of the Company outstanding
on the date of this Agreement (to the extent in accordance with the terms of
such securities as in effect on the date of this Agreement) or (4) any security
issued pursuant to any stock plan for employees, officers, directors or
consultants of the Company approved by the non-management members of the Board
of Directors of the Company) at a price per share less than the Current Market
Value, the Exercise Rate shall be adjusted in accordance with the formula:
E' = E x (O + N)
_________________
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the date of sale
of Common Stock at a price per share less than the Current Market
Value to which this paragraph (b) applies;
N = the number of shares of Common Stock so sold or the maximum stated
number of shares of Common Stock issuable
<PAGE>
-30-
upon the conversion, exchange, or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share pursuant to any such convertible,
exchangeable or exercisable securities so sold or the sale price of
the shares so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at the
time of sale, as the case may be.
The Board of Directors of the Company shall reasonably and in good
faith determine fair market values for the purposes of this paragraph (b), which
determination shall be conclusive absent manifest error.
The adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
warrants or options to which this paragraph (b) applies or upon consummation of
the sale of Common Stock, as the case may be. To the extent that shares of
Common Stock are not delivered after the expiration of such rights or warrants,
the Exercise Rate shall be readjusted to the Exercise Rate which would otherwise
be in effect had the adjustment made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. In the event that such rights or warrants are
not so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect if such date fixed for determination of
stockholders entitled to receive such rights or warrants had not been so fixed.
No adjustment shall be made under this paragraph (b) if the
application of the formula stated above in this paragraph (b) would result in a
value of E' that is lower than the value of E.
(c) NOTICE OF ADJUSTMENT. Whenever the Exercise Rate is adjusted,
the Company shall promptly mail to holders of Warrants at
<PAGE>
-31-
the addresses appearing on the Warrant Register a notice of the adjustment. The
Company shall file with the Warrant Agent and any other Registrar such notice
and a certificate from the Company's independent public accountants briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is correct.
Neither the Warrant Agent nor any such Registrar shall be under any duty or
responsibility with respect to any such certificate except to exhibit the same
during normal business hours to any holder desiring inspection thereof.
(d) REORGANIZATION OF COMPANY; SPECIAL DISTRIBUTIONS. If the
Company, in a single transaction or through a series of related transactions,
consolidates with or merges with or into any other person or transfers (by
lease, assignment, sale or otherwise) all or substantially all of its properties
and assets to another person or group of affiliated persons (other than a sale
of all or substantially all of the assets of the Company in a transaction in
which the holders of Common Stock immediately prior to such transaction do not
receive securities, cash, or other assets of the Company or any other person) or
is a party to a merger or binding share exchange which reclassifies or changes
its outstanding Common Stock, the person obligated to deliver securities, cash
or other assets upon exercise of Warrants shall enter into a supplemental
warrant agreement. If the issuer of securities deliverable upon exercise of
Warrants is an affiliate of the successor Company, that issuer shall join in the
supplemental warrant agreement.
The supplemental warrant agreement shall provide that the holder of a
Warrant may exercise it for the kind and amount of securities, cash or other
assets which such holder would have received immediately after the
consolidation, merger, binding share exchange or transfer if such holder had
exercised the Warrant immediately before the effective date of the transaction
(whether or not the Warrants were then exercisable and without giving effect to
the Cashless Exercise option), assuming (to the extent applicable) that such
holder (i) was not a constituent person or an affiliate of a constituent person
to such transaction; (ii) made no election with respect thereto; and (iii) was
treated alike with the
<PAGE>
-32-
plurality of non-electing holders. The supplemental warrant agreement shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article V. The successor
Company shall mail to holders of Warrants at the addresses appearing on the
Warrant Register a notice briefly describing the supplemental warrant agreement.
If this paragraph (d) applies paragraph (a) shall not apply.
(e) COMPANY DETERMINATION FINAL. Any determination that the Company
or the Board of Directors of the Company must make pursuant to this Article V is
conclusive.
(f) WARRANT AGENT'S ADJUSTMENT DISCLAIMER. The Warrant Agent has no
duty to determine when an adjustment under this Article V should be made, how it
should be made or what it should be. The Warrant Agent has no duty to determine
whether a supplemental warrant agreement under paragraph (e) need be entered
into or whether any provisions of any supplemental warrant agreement are
correct. The Warrant Agent shall not be accountable for and makes no
representation as to the validity or value of any securities or assets issued
upon exercise of Warrants. The Warrant Agent shall not be responsible for the
Company's failure to comply with this Article V.
(g) ADJUSTMENT FOR TAX PURPOSES. The Company may make such increases
in the Exercise Rate, in addition to those otherwise required by this Section,
as it considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be taxable
to the recipients.
(h) UNDERLYING SHARES. The Company shall at all times reserve and
keep available, free from preemptive rights, out of its authorized but unissued
Common Stock or Common Stock held in the treasury of the Company, for the
purpose of effecting the exercise of Warrants, the full number of Shares then
deliverable upon the exercise of all Warrants then outstanding, and the shares
so
<PAGE>
-33-
deliverable shall be fully paid and nonassessable and free from all liens and
security interests.
(i) SPECIFICITY OF ADJUSTMENT. Irrespective of any adjustments in
the number or kind of shares purchasable upon the exercise of the Warrants,
Warrant Certificates theretofore or thereafter issued may continue to express
the same number and kind of Shares per Warrant as are stated on the Warrant
Certificates initially issuable pursuant to this Agreement.
(j) ADJUSTMENTS TO PAR VALUE. The Company shall make such
adjustments to the par value of the Common Stock in order that, upon exercise of
the Warrants, the Shares will be fully paid and non-assessable.
(k) VOLUNTARY ADJUSTMENT. The Company from time to time may increase
the Exercise Rate by any number and for any period of time (PROVIDED, that such
period is not less than 20 Business Days). Whenever the Exercise Rate is so
increased, the Company shall mail to holders at the addresses appearing on the
Warrant Register and file with the Warrant Agent a notice of the increase. The
Company shall give the notice at least 15 days before the date the increased
Exercise Rate takes effect. The notice shall state the increased Exercise Rate
and the period it will be in effect. A voluntary increase in the Exercise Rate
does not change or adjust the Exercise Rate otherwise in effect as determined by
this Section 5.01.
(l) NO OTHER ADJUSTMENT FOR DIVIDENDS. Except as provided in this
Article V, no payment or adjustment will be made for dividends on any Common
Stock.
(m) MULTIPLE ADJUSTMENTS. After an adjustment to the Exercise Rate
under this Article V, any subsequent event requiring an adjustment under this
Article V shall cause an adjustment to the Exercise Rate as so adjusted.
(n) DEFINITIONS.
<PAGE>
-34-
"CAPITAL STOCK" means, with respect to any corporation, any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests (however designated) in stock issued by that
corporation.
"CURRENT MARKET VALUE" per share of Common Stock or of any other
security at any date shall be (1) if the security is not registered under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (i) the value
of the security determined reasonably and in good faith by a disinterested
majority of the Board of Directors of the Company and certified in a board
resolution, or, if at the time there are not at least three disinterested
members of the Board of Directors, by a nationally recognized investment banking
firm or appraisal firm which is not an affiliate of the Company ("INDEPENDENT
FINANCIAL EXPERT"), or (2) if the security is registered under the Exchange Act,
the average of the daily closing bid prices for each Business Day during the
period commencing 15 Business Days before such date and ending on the date one
day prior to such date or, if the security has been registered under the
Exchange Act for less than 15 consecutive Business Days before such date, then
the average of the daily closing bid prices for all of the Business Days before
such date for which daily closing bid prices are available. If the closing bid
is not determinable for at least 10 Business Days in such period, the Current
Market Value of the security shall be determined as if the security were not
registered under the Exchange Act.
"TIME OF DETERMINATION" means the time and date of the determination
of stockholders entitled to receive rights, warrants, or options or a
distribution, in each case, to which paragraph (b) applies.
SECTION 5.02. FRACTIONAL SHARES. The Company will not be required
to issue fractional Shares upon exercise of the Warrants or distribute Share
certificates that evidence fractional Shares. In lieu of fractional Shares,
there shall be paid to the registered holders of Warrant Certificates at the
time Warrants evidenced thereby are exercised as herein provided an amount in
<PAGE>
-35-
cash equal to the same fraction of the Current Market Value, as defined in
paragraph (n) of Section 5.01 of this Agreement, per Share on the Business Day
preceding the date the Warrant Certificates evidencing such Warrants are
surrendered for exercise. Such payments will be made by check or by transfer to
an account maintained by such registered holder with a bank in The City of New
York. If any holder surrenders for exercise more than one Warrant Certificate,
the number of Shares deliverable to such holder may, at the option of the
Company, be computed on the basis of the aggregate amount of all the Warrants
exercised by such holder.
SECTION 5.03. CERTAIN DISTRIBUTIONS. If at any time the Company
grants, issues or sells options, convertible securities, or rights to purchase
Capital Stock, warrants or other securities pro rata to the record holders of
the Common Stock (the "DISTRIBUTION RIGHTS") or, without duplication, makes any
dividend or otherwise makes any distribution ("DISTRIBUTION") on shares of
Common Stock (whether in cash, property, evidences of indebtedness or
otherwise), then the Company shall grant, issue, sell or make to each registered
holder of Warrants the aggregate Distribution Rights or Distribution, as the
case may be, which such holder would have acquired if such holder had held the
maximum number of Shares acquirable upon complete exercise of such holder's
Warrants (regardless of whether the Warrants are then exercisable and without
giving effect to the Cashless Exercise option) immediately before the record
date for the grant, issuance or sale of such Distribution Rights or
Distribution, as the case may be, or, if there is no such record date, the date
as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Distribution Rights or Distribution, as the case
may be.
ARTICLE VI.
CONCERNING THE WARRANT AGENT
SECTION 6.01. WARRANT AGENT. The Company hereby appoints The Bank
of New York as Warrant Agent of the Company in respect of the Warrants and the
Warrant Certificates upon the terms
<PAGE>
-36-
and subject to the conditions herein and in the Warrant Certificates set forth;
and The Bank of New York hereby accepts such appointment. The Warrant Agent
shall have the powers and authority specifically granted to and conferred upon
it in the Warrant Certificates and hereby and such further powers and authority
to act on behalf of the Company as the Company may hereafter grant to or confer
upon it and it shall accept in writing. All of the terms and provisions with
respect to such powers and authority contained in the Warrant Certificates are
subject to and governed by the terms and provisions hereof.
SECTION 6.02. CONDITIONS OF WARRANT AGENT'S OBLIGATIONS. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of which
the Company agrees and to all of which the rights hereunder of the holders from
time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the Company
agrees promptly to pay such compensation and to reimburse the Warrant Agent for
its reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred without gross negligence or willful misconduct on its part in
connection with the services rendered by it hereunder. The Company also agrees
to indemnify the Warrant Agent and any predecessor Warrant Agent, their
directors, officers, affiliates, agents and employees for, and to hold them and
their directors, officers, affiliates, agents and employees harmless against,
any loss, liability or expense of any nature whatsoever (including, without
limitation, fees and expenses of counsel) incurred without gross negligence or
willful misconduct on the part of the Warrant Agent, arising out of or in
connection with its acting as such Warrant Agent hereunder and its exercise of
its rights and performance of its obligations hereunder. The obligations of the
Company under this Section 6.02 shall survive the exercise and the expiration of
the Warrant Certificates and the resignation and removal of the Warrant Agent.
<PAGE>
-37-
(b) In acting under this Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of the Company and
does not assume any obligation or relationship of agency or trust for or with
any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel of its selection and
any advice or written opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with such advice or
opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Warrant Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("RELATED PARTIES"), may become the owners of, or acquire any interest
in, Warrant Certificates, shares or other obligations of the Company with the
same rights that it or they would have it if were not the Warrant Agent
hereunder and, to the extent permitted by applicable law, it or they may engage
or be interested in any financial or other transaction with the Company and may
act on, or as depositary, trustee or agent for, any committee or body of holders
of shares or other obligations of the Company as freely as if it were not the
Warrant Agent hereunder. Nothing in this Agreement shall be deemed to prevent
the Warrant Agent or such Related Parties from acting in any other capacity for
the Company.
(f) The Warrant Agent shall not be under any liability for interest
on, and shall not be required to invest, any monies at any time received by it
pursuant to any of the provisions of this Agreement or of the Warrant
Certificates.
<PAGE>
-38-
(g) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement (or any term or provision hereof) or
the execution and delivery hereof (except the due execution and delivery hereof
by the Warrant Agent) or in respect of the validity or execution of any Warrant
Certificate (except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication thereon)
shall be taken as the statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this Agreement or the
Warrant Certificates, except for its due execution and delivery of this
Agreement; PROVIDED, HOWEVER, that the Warrant Agent shall not be relieved of
its duty to authenticate the Warrant Certificates as authorized by this
Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Warrant Agreement, it may require:
(1) an Officers' Certificate (as defined in the Indenture) stating on
behalf of the Company that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Warrant Agreement relating to the
proposed action have been complied with; and
(2) if reasonably necessary in the sole judgment of the Warrant
Agent, an opinion of counsel for the Company stating that, in the opinion
of such counsel, all such conditions precedent have been complied with
provided that such matter is one customarily opined on by counsel.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in this
Warrant Agreement shall include:
<PAGE>
-39-
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform such duties as
are herein and in the Warrant Certificates specifically set forth and no
implied duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and delivered
by it to the Company pursuant to this Agreement. The Warrant Agent shall have
no duty or responsibility in case of any default by the Company in the
performance of its covenants or agreements contained in the Warrant Certificates
or in the case of the receipt of any written demand from a holder of a Warrant
Certificate with respect to such default, including, without limiting the
generality of the foregoing, any duty or responsibility to initiate or attempt
to initiate any proceedings at law or otherwise or, except as provided in
Section 7.02 hereof, to make any demand upon the Company.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if
signed by its chairman of the
<PAGE>
-40-
Board of Directors, its president, its treasurer, its controller or any vice
president or its secretary or any assistant secretary.
(l) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the chairman of the Board of Directors, the president, the
treasurer, the controller, any vice president or the secretary of the Company or
any other officer or official of the Company reasonably believed to be
authorized to give such instructions and to apply to such officers or officials
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in connection
with the Warrant Agent's duties and obligations arising under this Agreement.
Such application by the Warrant Agent for written instructions from the Company
may, at the option of the Warrant Agent, set forth in writing any action
proposed to be taken or omitted by the Warrant Agent with respect to its duties
or obligations under this Agreement and the date on or after which such action
shall be taken and the Warrant Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein (which date shall be not less than 10 Business
Days after the Company receives such application unless the Company consents to
a shorter period), provided that (i) such application includes a statement to
the effect that it is being made pursuant to this paragraph (m) and that unless
objected to prior to such date specified in the application, the Warrant Agent
will not be liable for any such action or omission to the extent
<PAGE>
-41-
set forth in such paragraph (m) and (ii) prior to taking or omitting any such
action, the Warrant Agent has not received written instructions objecting to
such proposed action or omission.
(o) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed on behalf of the Company by any one of the
chairman of the Board of Directors, the president, the treasurer, the
controller, any vice president or the secretary of the Company or any other
officer or official of the Company reasonably believed to be authorized to give
such instructions and delivered to the Warrant Agent; and such certificate shall
be full authorization to the Warrant Agent for any action taken or suffered in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(p) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.
SECTION 6.03. RESIGNATION AND APPOINTMENT OF SUCCESSOR.
(a) The Company agrees, for the benefit of the holders from time to
time of the Warrant Certificates, that there shall at all times be a Warrant
Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective; PROVIDED,
HOWEVER, that such date shall be at least 60 days after the date on which such
notice is given unless the Company agrees to accept less notice. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
Warrant Agent, qualified as provided in Section 6.03(d) hereof, by written
instrument in duplicate signed on behalf of the
<PAGE>
-42-
Company, one copy of which shall be delivered to the resigning Warrant Agent and
one copy to the successor Warrant Agent. As provided in Section 6.03(d) hereof,
such resignation shall become effective upon the earlier of (x) the acceptance
of the appointment by the successor Warrant Agent or (y) 60 days after receipt
by the Company of notice of such resignation. The Company may, at any time and
for any reason, and shall, upon any event set forth in the next succeeding
sentence, remove the Warrant Agent and appoint a successor Warrant Agent by
written instrument in duplicate, specifying such removal and the date on which
it is intended to become effective, signed on behalf of the Company, one copy of
which shall be delivered to the Warrant Agent being removed and one copy to the
successor Warrant Agent. The Warrant Agent shall be removed as aforesaid if it
shall become incapable of acting, or shall be adjudged a bankrupt or insolvent,
or a receiver of the Warrant Agent or of its property shall be appointed, or any
public officer shall take charge or control of it or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation. Any removal of
the Warrant Agent and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant Agent as
provided in Section 6.03(d). As soon as practicable after appointment of the
successor Warrant Agent, the Company shall cause written notice of the change in
the Warrant Agent to be given to each of the registered holders of the Warrants
in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 60 days after
receipt of such notice of resignation or removal, then the holder of any Warrant
Certificate or the retiring Warrant Agent may apply to a court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to the Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company.
(d) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a bank or trust company in good
<PAGE>
-43-
standing, incorporated under the laws of the United States of America or any
State thereof and having, at the time of its appointment, a combined capital
surplus of at least $50 million. Such successor Warrant Agent shall execute and
deliver to its predecessor and to the Company an instrument accepting such
appointment hereunder and all the provisions of this Agreement, and thereupon
such successor Warrant Agent, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Warrant Agent
hereunder, and such predecessor shall thereupon become obligated to (i) transfer
and deliver, and such successor Warrant Agent shall be entitled to receive, all
securities, records or other property on deposit with or held by such
predecessor as Warrant Agent hereunder and (ii) upon payment of the amounts then
due it pursuant to Section 6.02(a) hereof, pay over, and such successor Warrant
Agent shall be entitled to receive, all monies deposited with or held by any
predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder
may be merged or converted, or any corporation or bank with which the Warrant
Agent may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or otherwise transfer
all or substantially all of its corporate trust business, shall be the successor
to the Warrant Agent under this Agreement (provided that such corporation or
bank shall be qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties hereto.
(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent.
<PAGE>
-44-
ARTICLE VII.
MISCELLANEOUS
SECTION 7.01. AMENDMENT. This Agreement and the terms of the
Warrants may be amended by the Company and the Warrant Agent, without the
consent of the holder of any Warrant Certificate, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained herein or therein, or to effect any assumptions
of the Company's obligations hereunder and thereunder by a successor corporation
under the circumstances described in Section 5.01(d) hereof or in any other
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement and the
terms of the Warrants with the consent of not less than a majority in number of
the then outstanding Warrants for the purpose of adding any provision to or
changing in any manner or eliminating any of the provisions of this Agreement or
modifying in any manner the rights of the holders of the outstanding Warrants;
PROVIDED, HOWEVER, that no such modification that decreases the Exercise Rate,
reduces the period of time during which the Warrants are exercisable hereunder,
otherwise materially and adversely affects the exercise rights of the holders of
the Warrants, reduces the percentage required for modification, or effects any
change to this Section 7.01 may be made with respect to an outstanding Warrant
without the consent of the holder of such Warrant. Notwithstanding any other
provision of this Agreement, the Warrant Agent's consent must be obtained
regarding any supplement or amendment which alters the Warrant Agent's rights or
duties (it being expressly understood that the foregoing shall not be in
derogation of the right of the Company to remove the Warrant Agent in accordance
with Section 6.03 hereof).
Any modification or amendment made in accordance with this Agreement
will be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have
<PAGE>
-45-
consented to such modification or amendment or waiver and whether or not
notation of such modification or amendment is made upon such Warrant
Certificates. Any instrument given by or on behalf of any holder of a Warrant
Certificate in connection with any consent to any modification or amendment will
be conclusive and binding on all subsequent holders of such Warrant Certificate.
SECTION 7.02. NOTICES AND DEMANDS TO THE COMPANY AND WARRANT AGENT.
If the Warrant Agent shall receive any notice or demand addressed to the Company
by the holder of a Warrant Certificate pursuant to the provisions hereof or of
the Warrant Certificates, the Warrant Agent shall promptly forward such notice
or demand to the Company.
SECTION 7.03. ADDRESSES FOR NOTICES TO PARTIES AND FOR TRANSMISSION
OF DOCUMENTS. All notices hereunder to the parties hereto shall be deemed to
have been given when sent by certified or registered mail, postage prepaid, or
by facsimile transmission, confirmed by first class mail, postage prepaid,
addressed to any party hereto as follows:
To the Company:
Cellnet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Facsimile No.: (415) 592-6858
Attention: General Counsel
with copies to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Facsimile No.: (415) 493-6811
Attention: Barry E. Taylor, Esq.
To the Warrant Agent:
<PAGE>
-46-
The Bank of New York
101 Barclay Street Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
or at any other address of which either of the foregoing shall have notified the
other in writing.
SECTION 7.04. NOTICES TO HOLDERS. Notices to holders of Warrants
shall be mailed to such holders at the addresses of such holders as they appear
in the Warrant Register. Any such notice shall be sufficiently given if sent by
first-class mail, postage prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER AND
OF THE RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
SECTION 7.06. PERSONS HAVING RIGHTS UNDER AGREEMENT. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Warrant Agent and the
holders of the Warrant Certificates any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof; and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their successors and of the
holders of the Warrant Certificates.
SECTION 7.07. HEADINGS. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
<PAGE>
-47-
SECTION 7.08. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.09. INSPECTION OF AGREEMENT. A copy of this Agreement
shall be available during regular business hours at the principal corporate
trust office of the Warrant Agent, for inspection by the holder of any Warrant
Certificate. The Warrant Agent may require such holder to submit his Warrant
Certificate for inspection by it.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-48-
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
CELLNET DATA SYSTEMS, INC.
By: /s/ Paul Manca
---------------------------------------------
Name: Paul Manca
Title: CFO
THE BANK OF NEW YORK,
as Warrant Agent
By: /s/ Vivian Georges
---------------------------------------------
Name: Vivian Georges
Title: Assistant Vice President
<PAGE>
-49-
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR
_____________________
1 This paragraph is to be included only if the Warrant is in global form.
<PAGE>
-2-
SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPHS (a)(1), (a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S RIGHT IN ITS SOLE DISCRETION PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
A WRITTEN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO THE COMPANY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE WARRANT AGENT.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
CELLNET DATA SYSTEMS, INC.
<PAGE>
-3-
This Warrant Certificate certifies that [ ], or registered
assigns, is the registered holder of [ ] Warrants (the "WARRANTS") to purchase
shares of Common Stock, no par value per share (the "COMMON STOCK"), of CELLNET
DATA SYSTEMS, INC., a California corporation (the "COMPANY"). Each Warrant
entitles the holder to purchase from the Company at any time from 9:00 a.m. New
York City time on or after the occurrence of an Exercise Event until 5:00 p.m.,
New York City time, on the earlier to occur of (a) 90 days after an Exercise
Event and (b) June 15, 2005 (the "EXPIRATION DATE"), one fully paid and
nonassessable share of Common Stock (a "SHARE", or, if adjusted, the "SHARES",
which may also include any other securities or property purchasable upon
exercise of a Warrant, such adjustment and inclusion each as provided in the
Warrant Agreement) at the exercise price (the "EXERCISE PRICE") of $.01 per
Warrant upon surrender of this Warrant Certificate and payment of the Exercise
Price at any office or agency maintained for that purpose by the Company (the
"WARRANT AGENT OFFICE"), subject to the conditions set forth herein and in the
Warrant Agreement. Notwithstanding the foregoing, a Warrant may also be
exercised solely by the surrender of the Warrant, and without the payment of the
Exercise Price in cash, for such number of Shares equal to the product of
(1) the number of Shares for which such Warrant is exercisable with payment of
the Exercise Price as of the date of exercise and (2) the Cashless Exercise
Ratio. For purposes of this Warrant, the "CASHLESS EXERCISE RATIO" shall equal
a fraction, the numerator of which is the excess of the Current Market Value of
the Common Stock on the date of exercise (calculated as set forth in
Section 5.01(n) of the Warrant Agreement) over the Exercise Price Per Share as
of the date of exercise and the denominator of which is the Current Market Value
of the Common Stock on the date of exercise (calculated as set forth in Section
5.01(n) of the Warrant Agreement). An exercise of a Warrant in accordance with
the immediately preceding sentences is herein called a "CASHLESS EXERCISE."
Upon surrender of a Warrant Certificate representing more than one Warrant in
connection with the Holder's option to elect a Cashless Exercise, the number of
Shares deliverable upon a Cashless Exercise shall be equal to the number of
Warrants that the Holder specifies is to be exercised pursuant to a Cashless
Exercise multiplied by the Cashless Exercise
<PAGE>
-4-
Ratio. All provisions of this Agreement shall be applicable with respect to an
exercise of a Warrant Certificate pursuant to a Cashless Exercise for less than
the full number of Warrants represented thereby.
"Exercise Event" means, with respect to each Warrant as to which such
event is applicable (but not with respect to any other Warrant), the date of the
earliest of: (1) the seventh day prior to the occurrence of a Change of
Control, (2) the consummation of a Public Equity Offering and (3) the 90th day
prior to June 15, 2005.
To the extent an exercise of a Warrant is not in effect through the
Cashless Exercise, the Exercise Price shall be payable by certified check or
official bank check or by such other means as is acceptable to the Company in
the lawful currency of the United States of America which as of the time of
payment is legal tender for payment of public or private debts. The Company has
initially designated the principal corporate trust office of the Warrant Agent
in the Borough of Manhattan, The City of New York, as the initial Warrant Agent
Office. The number of Shares issuable upon exercise of the Warrants ("EXERCISE
RATE") is subject to adjustment upon the occurrence of certain events set forth
in the Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on June 15, 2005 shall thereafter be void.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Warrant Certificate shall not be valid unless authenticated by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
<PAGE>
-5-
WITNESS the facsimile seal of the Company and facsimile signatures of
its duly authorized officers.
Dated:
CELLNET DATA SYSTEMS, INC.
By:
---------------------------------
Name:
Title:
Attest:
By:
---------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
THE BANK OF NEW YORK,
as Warrant Agent
By:
---------------------------------
Authorized Signatory
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
CELLNET DATA SYSTEMS, INC.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring at 5:00 p.m., New York City time, on the
earlier to occur of (a) 90 days after an Exercise Event which causes such
Warrants to become exercisable and (b) June 15, 2005, each of which represents
the right to purchase at any time on or after the Exercisability Date (as
defined in the Warrant Agreement) and on or prior to such date one share of
Common Stock of the Company, subject to adjustment as set forth in the Warrant
Agreement. The Warrants are issued pursuant to a Warrant Agreement dated as of
June 15, 1995 (the "WARRANT AGREEMENT"), duly executed and delivered by the
Company to The Bank of New York, a New York banking corporation, as Warrant
Agent (the "WARRANT AGENT"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or holder" meaning the registered holders or registered holder)
of the Warrants.
Warrants may be exercised by (i) surrendering at any Warrant Agent
Office this Warrant Certificate with the form of Election to Exercise set forth
hereon duly completed and executed and (ii) to the extent such exercise is not
being effected through a Cashless Exercise, paying in full the Warrant Exercise
Price for each such Warrant exercised and any other amounts required to be paid
pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 11:00 a.m., New York
City time, on a Business Day, the exercise of the Warrant to which such items
relate will be effective on such Business Day. If any items referred to in the
last sentence of the preceding paragraph are received after 11:00 a.m., New York
City time, on a Business Day, the exercise of the Warrants to which such item
relates will be deemed to be effective
<PAGE>
-2-
on the next succeeding Business Day. Notwithstanding the foregoing, in the case
of an exercise of Warrants on June 15, 2005, if all of the items referred to in
the last sentence of the preceding paragraph are received by the Warrant Agent
at or prior to 5:00 p.m., New York City time, on such Expiration Date, the
exercise of the Warrants to which such items relate will be effective on the
Expiration Date.
As soon as practicable after the exercise of any Warrant or Warrants,
the Company shall issue or cause to be issued to or upon the written order of
the registered holder of this Warrant Certificate, a certificate or certificates
evidencing the Share or Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the reverse of this
Warrant Certificate. Such certificate or certificates evidencing the Share or
Shares shall be deemed to have been issued and any persons who are designated to
be named therein shall be deemed to have become the holder of record of such
Share or Shares as of the close of business on the date upon which the exercise
of this Warrant was deemed to be effective as provided in the preceding
paragraph.
The Company will not be required to issue fractional shares of Common
Stock upon exercise of the Warrants or distribute Share certificates that
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, there shall be paid to the registered Holder of this Warrant
Certificate at the time such Warrant Certificate is exercised an amount in cash
equal to the same fraction of the Current Market Value (as defined in the
Warrant Agreement) per share on the Business Day preceding the date this Warrant
Certificate is surrendered for exercise.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may be
exchanged for a new Warrant Certificate or new Warrant Certificates evidencing
in the aggregate a like number of Warrants, in the manner and subject to the
<PAGE>
-3-
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone) for the
purpose of any exercise hereof and for all other purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in New
York City, (ii) the principal national securities exchange or market on which
the Common Stock is listed or admitted to trading and (iii) the principal
national securities exchange or market on which the Warrants are listed or
admitted to trading are open for business.
<PAGE>
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of the
Warrants represented by this Warrant Certificate and purchase the whole number
of Shares issuable upon the exercise of such Warrants and herewith tenders
payment for such Shares in the amount of $[ ] in cash or by certified or
official bank check, in accordance with the terms hereof. In lieu of payment of
the cash exercise price, the holder hereof is electing to exercise [ ]
Warrants pursuant to a Cashless Exercise (as defined in the Warrant Agreement)
for [ ] shares of Common Stock at the current Cashless Exercise Ratio. The
undersigned requests that a certificate representing such Shares be registered
in the name of _____________ whose address is _____________________________ and
that such certificate be delivered to ___________________________ whose address
is __________________________. Any cash payments to be paid in lieu of a
fractional Share should be made to __________________ whose address is
________________________ and the check representing payment thereof should be
delivered to ______________________ whose address is ______________________.
Dated __________________, 19__
Name of holder of
Warrant Certificate: ________________________________________________
(Please Print)
Tax Identification or
Social Security Number: _____________________________________________
Address: __________________________________________________________
__________________________________________________________
Signature: __________________________________________________________
Note: The above signature must correspond with the name
as written upon the face of this Warrant
Certificate in
<PAGE>
-2-
every particular, without alteration or
enlargement or any change whatever and if the
certificate representing the Shares or any Warrant
Certificate representing Warrants not exercised
is to be registered in a name other than that in
which this Warrant Certificate is registered, or
if any cash payment to be paid in lieu of a
fractional share is to be made to a person other
than the registered holder of this Warrant
Certificate, the signature of the holder hereof
must be guaranteed as provided in the Warrant
Agreement.
Dated ____________________, 19__
Signature: __________________________________________________________
Note: The above signature must correspond with the name
as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed: _______________________________________________
[FORM OF ASSIGNMENT]
For value received _______________________ hereby sells, assigns and
transfers unto _____________________ the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint __________________________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
<PAGE>
-3-
Dated ____________________, 199__
Signature: __________________________________________________________
Note: The above signature must correspond with the name
as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed: _______________________________________________
<PAGE>
-4-
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS (2)
--------------------------------------------------
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
Number of
Warrants of
Amount of Amount of this Global
decrease in increase in Warrant Signature of
Number of Number of following authorized
Date of Warrants of this Warrants of this such decrease officer of
Exchange Global Warrant Global Warrant (or increase) Warrant Agent
- -------------------------------------------------------------------------------
______________________________
2 This is to be included only if the Warrant is in global form.
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants")
of CELLNET DATA SYSTEMS, INC.
This Certificate relates to ____ Warrants held in* ___ book-entry or*
_______ certificated form by ______ (the "Transferor").
The Transferor:*
/ / has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above); or
/ / has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants and the restrictions on
transfers thereof as provided in Section 1.08 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "ACT") because[*]:
/ / Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 1.08(a)(y)(A) or Section
1.08(d)(i)(A) of the Warrant Agreement).
/ / Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
B-1
<PAGE>
/ / Such Warrant is being transferred in accordance with Rule 144 under
the Act.
/ / Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act, other than Rule
144A or Rule 144 or Regulation S under the Act. An opinion of counsel to the
effect that such transfer does not require registration under the Act
accompanies this Certificate.
__________________________________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________
Date: _____________
*Check applicable box.
B-2
<PAGE>
EXHIBIT C
Transferee Letter of Representation
CELLNET DATA SYSTEMS, INC.
125 Shoreway Road
San Carlos, CA 94070
Ladies and Gentlemen:
In connection with our proposed purchase of warrants to purchase
Common Stock, par value $.01 per share, (the "SECURITIES") of Cellnet Data
Systems, Inc. (the "COMPANY") we confirm that:
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "SECURITIES ACT") and, unless
so registered, may not be sold except as permitted in the following
sentence. We agree on our own behalf and on behalf of any investor account
for which we are purchasing Securities to offer, sell or otherwise transfer
such Securities prior to the date which is three years after the later of
the date of original issue and the last date on which the Company or any
affiliate of the Company was the owner of such Securities, or any
predecessor thereto (the "RESALE RESTRICTION TERMINATION DATE") only (a) to
the Company, (b) pursuant to a registration statement which has been
declared effective under the Securities Act, (c) so long as the Securities
are eligible for resale pursuant to Rule 144A, under the Securities Act, to
a person we reasonably believe is a qualified institutional buyer under
Rule 144A (a "QIB") that purchases for its own account or for the account
of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur outside
the United States within the meaning of Regulation S under the Securities
Act, (e) to an institutional "accredited investor" within the meaning of
subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act
that is purchasing for his own account or for the account of such an
institutional "accredited investor," or (f) pursuant to any other available
exemption from the
C-1
<PAGE>
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our
property or the property of such investor account or accounts be at all
times within our or their control and to compliance with any applicable
state securities laws. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to
clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the
form of this letter to the warrant agent under the Warrant Agreement
pursuant to which the Securities were issued (the "WARRANT AGENT") which
shall provide, among other things, that the transferee is an institutional
"accredited investor" within the meaning of subparagraphs (a)(1), (2), (3)
or (7) of Rule 501 under the Securities Act and that it is acquiring such
Securities for investment purposes and not for distribution in violation of
the Securities Act. The Warrant Agent and the Company reserve the right
prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Securities pursuant to clauses (c), (d), (e) or (f)
above to require the delivery of a written opinion of counsel,
certifications, and or other information satisfactory to the Company and
the Warrant Agent.
2. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with,
any distribution in violation of the Securities Act and we have such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and
we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment for an indefinite period.
3. We are acquiring the Securities purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion.
C-2
<PAGE>
4. You and your counsel are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
__________________________________________________
(Name of Purchaser)
By: ______________________________________________
Date: ____________________________________________
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:______________________________
Address:___________________________
Taxpayer ID Number:________________
C-3
<PAGE>
---------------------------------------------------------------
---------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 15, 1995
Between
CELLNET DATA SYSTEMS, INC.,
as Issuer
and
SMITH BARNEY INC.,
as Initial Purchaser
---------------------------------------------------------------
---------------------------------------------------------------
<PAGE>
[Notes Registration Rights Agreement]
TABLE OF CONTENTS
PAGE
1. Definitions...............................................................1
2. Exchange Offer............................................................5
3. Shelf Registration.......................................................10
4. Additional Interest......................................................13
5. Registration Procedures..................................................15
6. Registration Expenses....................................................26
7. Indemnification..........................................................27
8. Rules 144 and 144A.......................................................32
9. Underwritten Registrations...............................................32
10. Miscellaneous............................................................33
(a) No Inconsistent Agreements..........................................33
(b) Adjustments Affecting Registrable
Notes.............................................................33
(c) Amendments and Waivers..............................................33
(d) Notices.............................................................34
(e) Successors and Assigns..............................................35
(f) Counterparts........................................................35
(g) Headings............................................................35
(h) Governing Law; Jurisdiction.........................................36
(i) Severability........................................................36
(j) Securities Held by the Company
or Its Affiliates.................................................36
(k) Third Party Beneficiaries...........................................36
<PAGE>
[Notes Registration Rights Agreement]
(l) Entire Agreement....................................................36
<PAGE>
[Notes Registration Rights Agreement]
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is dated as of
June 15, 1995, between CELLNET DATA SYSTEMS, INC., a California corporation (the
"COMPANY"), and SMITH BARNEY INC. (the "INITIAL PURCHASER").
This Agreement is entered into in connection with the Purchase
Agreement, of even date herewith, between the Company and the Initial Purchaser
(the "PURCHASE AGREEMENT") which provides for the sale by the Company to the
Initial Purchaser of 235,000 units consisting of $235,000,000 aggregate
principal amount at maturity of the Company's 13% Senior Discount Notes due June
15, 2005 (the "NOTES") and warrants to purchase 940,000 shares of common stock,
no par value per share, of the Company. In order to induce the Initial
Purchaser to enter into the Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Initial Purchaser and its direct and indirect transferees and assigns. The
execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4 hereof.
ADVICE: See Section 5 hereof.
AGREEMENT: See the introductory paragraphs hereto.
APPLICABLE PERIOD: See Section 2 hereof.
<PAGE>
[Notes Registration Rights Agreement]
-2-
COMPANY: See the introductory paragraphs hereto.
EFFECTIVENESS DATE: With respect to any Registration Statement, the
60th day after the Filing Date with respect thereto.
EFFECTIVENESS PERIOD: See Section 3 hereof.
EVENT DATE: See Section 4 hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2 hereof.
EXCHANGE OFFER: See Section 2 hereof.
EXCHANGE REGISTRATION STATEMENT: See Section 2 hereof.
FILING DATE: (A) If no Registration Statement has been filed by the
Company pursuant to this Agreement, the 30th day after the Trigger Date;
PROVIDED, HOWEVER, that if a Shelf Notice is given within 10 days of the Filing
Date, then the Filing Date with respect to the Initial Shelf Registration shall
be the 15th calendar day after the date of the giving of such Shelf Notice; and
(B) in each other case (which may be applicable notwithstanding the consummation
of an Exchange Offer), the 30th day after the delivery of a Shelf Notice.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
<PAGE>
[Notes Registration Rights Agreement]
-3-
INDENTURE: The Indenture, of even date herewith, between the Company
and The Bank of New York, as trustee, pursuant to which the Notes are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
INITIAL PURCHASER: See the introductory paragraphs hereto.
INITIAL SHELF REGISTRATION: See Section 3(a) hereof.
INSPECTORS: See Section 5(o) hereof.
NASD: See Section 5(t) hereof.
NOTES: See the introductory paragraphs hereto, and such term includes
any Notes issued pursuant to the terms of the Indenture in payment of accrued
interest on the outstanding Notes in lieu of cash interest thereon.
PARTICIPANT: See Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2 hereof.
PERSON: An individual, trustee, corporation, partnership, joint stock
company, trust, unincorporated association, union, business association, firm or
other legal entity.
PRIVATE EXCHANGE: See Section 2 hereof.
PRIVATE EXCHANGE NOTES: See Section 2 hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes
<PAGE>
[Notes Registration Rights Agreement]
-4-
any information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
PUBLIC EQUITY OFFERING: A primary public offering (whether or not
underwritten, but excluding any offering pursuant to Form S-4 or S-8 under the
Securities Act) of capital stock of the Company pursuant to an effective
registration statement under the Securities Act.
PURCHASE AGREEMENT: See the introductory paragraphs hereto.
RECORDS: See Section 5(o) hereof.
REGISTRABLE NOTES: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which Section
2(c)(iv) hereof is applicable, the Exchange Registration Statement) covering
such Note, Exchange Note or such Private Exchange Note has been declared
effective by the SEC and such Note or such Private Exchange Note, as the case
may be, has been disposed of in accordance with such effective Registration
Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case
may be, may at the time of determination be sold to the public pursuant to Rule
144(k) promulgated under the Securities Act without the
<PAGE>
[Notes Registration Rights Agreement]
-5-
lapse of any further time or the satisfaction of any condition, (iii) such Note
has been exchanged for an Exchange Note or Exchange Notes pursuant to an
Exchange Offer which may be resold without restriction under state and federal
securities laws, or (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceases to be outstanding for purposes of the Indenture.
REGISTRATION STATEMENT: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, filed with
the SEC pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
<PAGE>
[Notes Registration Rights Agreement]
-6-
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2 hereof.
SHELF REGISTRATION: See Section 3(b) hereof.
SUBSEQUENT SHELF REGISTRATION: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRIGGER DATE: The earliest to occur of (i) the consummation of a
Public Equity Offering, (ii) the Company or any of its subsidiaries shall effect
any offering of debt securities and thereafter the Company shall be subject to
the reporting requirements of Section 13 or 15 of the Exchange Act (whether
pursuant to the Exchange Act or by contractual obligation) or (iii) June 15,
1998; PROVIDED, HOWEVER, that June 15, 1998 shall not be a Trigger Date if, in
the opinion of counsel to the Company (a copy of which shall be delivered to the
Holders not later than the 30th day after June 15, 1998), the Registrable Notes
may on and after such date be sold to the public pursuant to Rule 144(h) under
the Securities Act (or any successor rule) without the lapse of any further time
or the satisfaction of any conditions; PROVIDED, FURTHER, HOWEVER, that if the
opinion referred to in the parenthetical to this proviso is not delivered to the
Holders on or prior to the 30th day after June 15, 1998, then June 15, 1998
shall nonetheless be a Trigger Date; PROVIDED, FURTHER, STILL, HOWEVER, that if
such opinion is delivered prior to the Filing Date, then June 15, 1998 shall
then be deemed not to be a Trigger Date and no action arising therefrom need be
pursued.
<PAGE>
[Notes Registration Rights Agreement]
-7-
TRUSTEE: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. EXCHANGE OFFER
(a) The Company shall file with the SEC no later than the Filing
Date, an offer to exchange (the "EXCHANGE OFFER") any and all of the
Registrable Notes (other than Private Exchange Notes, if any) for a like
aggregate principal amount of debt securities of the Company which are identical
in all material respects to the Notes (the "EXCHANGE NOTES"), except that the
Exchange Notes shall have been registered pursuant to an effective Registration
Statement under the Securities Act and shall contain no restrictive legend
thereon, and which are entitled to the benefits of the Indenture or a trust
indenture which is identical in all material respects to the Indenture (other
than such changes to the Indenture or any such identical trust indenture as are
necessary to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and which, in either case, has been
qualified under the TIA. The Exchange Offer shall be registered under the
Securities Act on the appropriate form (the "EXCHANGE REGISTRATION STATEMENT")
and shall comply with all applicable tender offer rules and regulations under
the Exchange Act and other applicable law. The Company shall use its best
efforts to (x) cause the Exchange Registration Statement to be declared
effective under the Securities Act on or before the Effectiveness Date; (y) keep
the Exchange Offer open for at least 30 days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) consummate the Exchange Offer on or prior to the 45th day
following the date on which the Exchange Registration Statement is declared
effective
<PAGE>
[Notes Registration Rights Agreement]
-8-
by the SEC. For purposes of this Section 2(a) only, if after such Exchange
Registration Statement is initially declared effective by the SEC, the Exchange
Offer or the issuance of the Exchange Notes thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Exchange Registration Statement shall be
deemed not to have become effective for purposes of this Agreement.
Each Holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, and that such Holder is not an affiliate
of the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, MUTATIS
MUTANDIS, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers, and the Company
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be included in the
Exchange Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
<PAGE>
[Notes Registration Rights Agreement]
-9-
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "PARTICIPATING
BROKER-DEALER"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in the
judgment of the Initial Purchaser, represent the prevailing views of the staff
of the SEC. Such "Plan of Distribution" section shall also expressly permit the
use of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers,
and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Notes; PROVIDED, HOWEVER, that such
period shall not exceed 180 days after the Exchange Registration Statement is
declared effective (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) (the "APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it and having, or which are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, or any other Holder is not entitled to participate in the
Exchange Offer, the Company upon the request of either of the Initial Purchaser
or any such Holder shall simultaneously with the delivery of the Exchange Notes
in the Exchange Offer, issue and deliver to the Initial Purchaser and any such
Holder, in exchange (the "PRIVATE EXCHANGE") for such Notes held by the Initial
Purchaser and any such Holder, a like principal amount of debt securities of the
<PAGE>
[Notes Registration Rights Agreement]
-10-
Company that are identical in all material respects to the Exchange Notes (the
"PRIVATE EXCHANGE NOTES") (and which are issued pursuant to the same indenture
as the Exchange Notes). The Private Exchange Notes shall bear the same CUSIP
number as the Exchange Notes.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
<PAGE>
[Notes Registration Rights Agreement]
-11-
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or the Private Exchange,
as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding is
instituted or threatened in any court or by any governmental agency which might
materially impair the ability of the Company to proceed with the Exchange Offer
or the Private Exchange and no material adverse development has occurred in any
existing action or proceeding with respect to the Company and (iii) all
governmental approvals have been obtained, which approvals the Company deems
necessary for the consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event shall provide that the Exchange Notes shall not
be subject to the transfer restrictions set forth in the Indenture. The
Indenture or such indenture shall provide that the Exchange Notes, the Private
Exchange Notes and the Notes shall vote and consent together on all matters as
one class and that neither the Exchange Notes, the Private Exchange Notes or the
Notes will have the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
an Exchange Offer, (ii) the Exchange Offer is not consummated within 135 days of
the Filing Date, (iii) any holder of Private Exchange Notes so requests, or (iv)
in the case of any Holder that participates in the Exchange Offer, such Holder
does not receive Exchange Notes on the date of the exchange that may be sold
without restriction under state and
<PAGE>
[Notes Registration Rights Agreement]
-12-
federal securities laws, in the case of each of clauses (i) to and including
(iv) of this sentence, then the Company shall promptly deliver to the Holders
and the Trustee written notice thereof (the "SHELF NOTICE") and shall file a
Shelf Registration pursuant to Section 3 hereof.
(d) In the event that no Trigger Date occurs by virtue of the proviso
to clause (3) of the definition of Trigger Date, then the Company shall cause a
registration statement pursuant to the Exchange Act in respect of the Notes to
be filed with the SEC and to become effective, and so long as any of the Notes
shall be outstanding shall thereafter file all reports required to be filed
pursuant to Section 13 of the Exchange Act by an issuer subject to such Section
13 (whether or not the Company is then subject to the reporting requirements of
Section 13 of the Exchange Act).
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) SHELF REGISTRATION. The Company shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes (the "INITIAL SHELF
REGISTRATION"). The Company shall use its diligent best efforts to file with
the SEC the Initial Shelf Registration on or prior to the Filing Date. The
Initial Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by Holders in the
manner or manners designated by them (including, without limitation, one or more
underwritten offerings). The Company shall not permit any securities other than
the Registrable Notes to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below).
<PAGE>
[Notes Registration Rights Agreement]
-13-
The Company shall use its best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is 36 months from June
15, 1995 (or, with respect to any Notes held by the Initial Purchaser, 36 months
from the Effectiveness Date), subject to extension pursuant to the last
paragraph of Section 5 hereof (the "EFFECTIVENESS PERIOD"), or such shorter
period ending when (i) all Registrable Notes covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration or (ii) a Subsequent Shelf Registration covering all
of the Registrable Notes has been declared effective under the Securities Act;
PROVIDED, HOWEVER, that the Effectiveness Period shall be extended to the extent
required to permit dealers to comply with the applicable prospectus delivery
requirements of Rule 174 under the Securities Act and as otherwise provided
herein.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Company shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness to amend the Initial Shelf Registration in a manner to obtain
the withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes (a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent
Shelf Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective under the Securities Act
as soon as practicable after such filing and to keep such Registration Statement
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration or any
<PAGE>
[Notes Registration Rights Agreement]
-14-
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "SHELF REGISTRATION" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
(d) HOLD-BACK AGREEMENTS
(i) RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE NOTES.
Each Holder of Registrable Notes whose Registrable Notes are covered by a
Shelf Registration filed pursuant to Section 3 hereof (which Registrable
Notes are not being sold in the underwritten offering described below)
agrees, if requested (pursuant to a timely written notice) by the managing
underwriter or underwriters in an underwritten offering, not to effect any
public sale or distribution of any securities within the class of
securities covered by such Shelf Registration or any similar class of
securities of the Company, including a sale pursuant to Rule 144 or Rule
144A (except as part of such underwritten offering), during the period
beginning 10 days prior to, and ending 60 days after, the closing date of
each underwritten offering made pursuant to such Shelf Registration, to the
extent timely notified in writing by the Company or by the managing
underwriter or underwriters; PROVIDED, HOWEVER, that each holder of
Registrable Notes shall be subject to the hold-back restrictions of this
Section 3(d)(i) only once during the term of this Agreement.
<PAGE>
[Notes Registration Rights Agreement]
-15-
The foregoing provisions shall not apply to any Holder of Registrable
Notes if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; PROVIDED, HOWEVER, that any such Holder
shall undertake, in its request to participate in any such underwritten
offering, not to effect any public sale or distribution of the class of
securities covered by such Shelf Registration (except as part of such
underwritten offering) during such period unless it has provided 45 days'
prior written notice of such sale or distribution to the Company or the
managing underwriter or underwriters, as the case may be.
(ii) RESTRICTIONS ON THE COMPANY AND OTHERS. The Company agrees (A)
not to effect any public or private sale or distribution (including,
without limitation, a sale pursuant to Regulation D under the Securities
Act) of any securities the same as or similar to those covered by a Shelf
Registration filed pursuant to Section 3 hereof, or any securities
convertible into or exchangeable or exercisable for such securities, during
the 10 days prior to, and during the 60-day period beginning on, the
commencement of an underwritten public distribution of Registrable Notes,
where the managing underwriter or underwriters so requests; (B) to include
in any agreements entered into by the Company on or after the date of this
Agreement (other than any underwriting agreement relating to a public
offering registered under the Securities Act) pursuant to which the Company
issues or agrees to issue securities the same as or similar to the Notes a
provision that each holder of such securities that are the same as or
similar to Notes issued at any time on or after the date of this Agreement
agrees not to effect any public or private sale or distribution, or request
or demand the registration, of any such securities (or any securities
convertible into or exchangeable or exercisable for such securities) during
the period referred to in clause (A) of this Section
<PAGE>
[Notes Registration Rights Agreement]
-16-
3(d)(ii), including any sale pursuant to Rule 144 or Rule 144A; and (C) not
to grant or agree to grant any "piggy back registration" or other similar
rights to any holder of the Company's or any of its subsidiaries'
securities issued on or after the date of this Agreement with respect to
any Registration Statement.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchaser agree that the Holders of
Notes will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Notes ("ADDITIONAL INTEREST")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Registration Statement nor the Initial
Shelf Registration has been filed on or prior to the Filing Date or (B)
notwithstanding that the Company has consummated or will consummate an
Exchange Offer, the Company is required to file a Shelf Registration and
such Shelf Registration is not filed on or prior to the Filing Date
applicable thereto, then, commencing on the day after any Filing Date,
Additional Interest shall accrue on the Accreted Value (if prior to June
15, 2000) or principal amount (if on or after June 15, 2000) of the Notes
at a rate of .50% per annum (which shall be in addition to the stated
interest per annum for such events on or after June 15, 2000) for the first
90 days immediately following each such Filing Date, such Additional
Interest rate increasing by an additional .50% per annum at the beginning
of each subsequent 90-day period;
<PAGE>
[Notes Registration Rights Agreement]
-17-
(ii) if (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to
the Effectiveness Date or (B) notwithstanding that the Company has
consummated or will consummate an Exchange Offer, the Company is required
to file a Shelf Registration and such Shelf Registration is not declared
effective by the SEC on or prior to the Effectiveness Date in respect of
such Shelf Registration, then, commencing on the day after such
Effectiveness Date, Additional Interest shall accrue on the Accreted Value
(if prior to June 15, 2000) or principal amount (if on or after June 15,
2000) of the Notes included or which should have been included in such
Registration Statement at a rate of .50% per annum (which shall be in
addition to the stated interest per annum for such events on or after June
15, 2000) for the first 90 days immediately following the day after the
Effectiveness Date, such Additional Interest rate increasing by an
additional .50% per annum at the beginning of each subsequent 90-day
period; and
(iii) if (A) the Company has not exchanged Notes for all Notes validly
tendered in accordance with the terms of the Exchange Offer on or prior to
the 45th day after the date on which the Exchange Registration Statement
was declared effective or (B) if applicable, the Shelf Registration has
been declared effective and such Shelf Registration ceases to be effective
at any time during the Effectiveness Period, then Additional Interest shall
accrue on the Accreted Value (if prior to June 15, 2000) or principal
amount (if on or after June 15, 2000) of the Notes at a rate of .50% per
annum (which shall be in addition to the stated interest per annum for such
events on or after June 15, 2000) for the first 90 days commencing on the
(x) 46th day after such effective date, in the case of (A) above, or (y)
the day such Shelf Registration ceases to be effective in the case of (B)
above, such Additional Interest
<PAGE>
[Notes Registration Rights Agreement]
-18-
rate increasing by an additional .50% per annum at the beginning of each
such subsequent 90-day period;
PROVIDED, HOWEVER, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 3.0% per annum; PROVIDED, FURTHER, HOWEVER,
that (1) upon the filing of the Exchange Registration Statement or the Shelf
Registration as required hereunder (in the case of clause (i) of this Section
4), (2) upon the effectiveness of the Exchange Registration Statement or the
Shelf Registration as required hereunder (in the case of clause (ii) of this
Section 4), or (3) upon the exchange of Exchange Notes for all Notes tendered
(in the case of clause (iii)(A) of this Section 4), or upon the effectiveness of
the Shelf Registration which had ceased to remain effective (in the case of
(iii)(B) of this Section 4), Additional Interest on the Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
(b) The Company shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "EVENT DATE"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semi-annually on each June 15 and December 15 (to the
holders of record on the June 1 and December 1 immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
Accreted Value (if prior to June 15, 2000) or the principal amount (if on or
after June 15, 2000) of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
<PAGE>
[Notes Registration Rights Agreement]
-19-
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Company hereunder the Company
shall:
(a) Prepare and file with the SEC prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Sections
2 or 3 hereof, and use its diligent best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that, if (1) such filing is pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall furnish to and afford the Holders of the
Registrable Notes covered by such Registration Statement or each such
Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each
case at least five business days prior to such filing, or such later date
as is reasonable under the circumstances). The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto if the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their
<PAGE>
[Notes Registration Rights Agreement]
-20-
counsel, or the managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented
by any Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus. The Company
shall be deemed not to have used its diligent best efforts to keep a
Registration Statement effective during the Applicable Period if the
Company voluntarily takes any action that would result in selling Holders
of the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable
Notes or such Exchange Notes during that period unless (i) such action is
required by applicable law or (ii) such action is taken by the Company in
good faith and for valid business reasons (not including avoidance of the
Company's obligations hereunder), including the acquisition or divestiture
of assets.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act
<PAGE>
[Notes Registration Rights Agreement]
-21-
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, notify the selling Holders of Registrable Notes, or
each such Participating Broker-Dealer, as the case may be, their counsel
and the managing underwriters, if any, promptly (but in any event within
two business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Company, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or
deemed to be incorporated by reference and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Notes or resales of Exchange Notes by Participating Broker-Dealers the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement), contemplated by Section 5(n) hereof
cease to be true and correct in all material respects, (iv) of the receipt
by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement
or any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
<PAGE>
[Notes Registration Rights Agreement]
-22-
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes
in or amendments or supplements to such Registration Statement, Prospectus
or documents so that, in the case of the Registration Statement, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use its diligent best efforts
to prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer, for sale in any jurisdiction, and,
if any such order is issued, to use its diligent best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders
of a majority in aggregate principal amount of the Registrable Notes being
<PAGE>
[Notes Registration Rights Agreement]
-23-
sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters (if any), such Holders, any Participating Broker-Dealer or
counsel for any of them determine is reasonably necessary to be included
therein, (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment, and (iii) supplement or make
amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling Holder
of Registrable Notes and to each such Participating Broker-Dealer who so
requests and to counsel and each managing underwriter, if any, at the sole
expense of the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if requested, all
documents incorporated or deemed to be incorporated therein by reference
and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling Holder
of Registrable Notes, or each such
<PAGE>
[Notes Registration Rights Agreement]
-24-
Participating Broker-Dealer, as the case may be, their respective counsel,
and the underwriters, if any, at the sole expense of the Company, as many
copies of the Prospectus or Prospectuses (including each form of
preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter
or underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer, or the managing
underwriter or underwriters reasonably request; PROVIDED, HOWEVER, that
where Exchange Notes held by Participating Broker-Dealers or Registrable
Notes are offered other than through an underwritten offering, the Company
agrees to cause the Company's counsel to perform Blue Sky investigations
and file registrations and qualifications required to be filed
<PAGE>
[Notes Registration Rights Agreement]
-25-
pursuant to this Section 5(h); keep each such registration or qualification
(or exemption therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the Registrable Notes covered by the applicable Registration Statement;
PROVIDED, HOWEVER, that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
request.
(j) Use its diligent best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be reasonably
necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature of
such selling Holder's business, in which case the Company will cooperate in
all reasonable
<PAGE>
[Notes Registration Rights Agreement]
-26-
respects with the filing of such Registration Statement and the granting of
such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC,
at the sole expense of the Company, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(l) [Intentionally Omitted]
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes.
(n) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter
<PAGE>
[Notes Registration Rights Agreement]
-27-
into an underwriting agreement as is customary in underwritten offerings of
debt securities similar to the Notes and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in order
to expedite or facilitate the registration or the disposition of such
Registrable Notes and, in such connection, (i) make such representations
and warranties to, and covenants with, the underwriters with respect to the
business of the Company and its subsidiaries (including any acquired
business, properties or entity, if applicable) and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities
similar to the Notes, and confirm the same in writing if and when
requested; (ii) obtain the written opinions of counsel to the Company and
written updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by the managing underwriter or underwriters; (iii) obtain "cold
comfort" letters and updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included or incorporated by reference in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings and such other matters as
reasonably requested by the managing underwriter or underwriters as
permitted by the Statement on Auditing
<PAGE>
[Notes Registration Rights Agreement]
-28-
Standards No. 72; and (iv) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Registration
Statement and the managing underwriter or underwriters or agents) with
respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting agreement, or
as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for inspection
by any selling Holder of such Registrable Notes being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or
each such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "INSPECTORS"), at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and instruments of the Company and its
subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary
to enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Company and its
subsidiaries to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement. Records which
the Company determines, in good faith, to be confidential and any Records
which it notifies the Inspectors are confidential shall not be disclosed by
<PAGE>
[Notes Registration Rights Agreement]
-29-
the Inspectors unless (i) the disclosure of such Records is necessary or
advisable to avoid or correct a misstatement or omission in such
Registration Statement; PROVIDED, HOWEVER, that prior notice is given to
the Company, and the Company's legal counsel and such Holder's legal
counsel concur that disclosure is required, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, (iii) disclosure of such information is necessary
or advisable in connection with any action, claim, suit or proceeding,
directly or indirectly, involving or potentially involving such Inspector
and arising out of, based upon, relating to, or involving this Agreement or
the Purchase Agreement, or any transactions contemplated hereby or thereby
or arising hereunder or thereunder; PROVIDED, HOWEVER, that prior notice
shall be provided as soon as practicable to the Company of the potential
disclosure of any information by such Inspector pursuant to clauses (ii) or
(iii) of this sentence to permit the Company to obtain a protective order
(or waive the provisions of this paragraph (o)) and that such Inspector
shall take such actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the extent such
action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector, or
(iv) the information in such Records has been made generally available to
the public.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer or the first Registration Statement relating to the Registrable
Notes; and in connection therewith, cooperate with the trustee under any
such indenture and the Holders of the Registrable Notes, to effect such
changes to such
<PAGE>
[Notes Registration Rights Agreement]
-30-
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best efforts
to cause such trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely
manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, that the Exchange Notes or Private
Exchange Notes, as the case may be, and the related indenture constitute
legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with its respective terms, subject to customary
exceptions and qualifications.
<PAGE>
[Notes Registration Rights Agreement]
-31-
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(u) Use its diligent best efforts to take all other steps necessary
or advisable to effect the registration of the Exchange Notes and/or
Registrable Notes covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude
from such registration the Registrable Notes of any seller so long as such
seller fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such seller not materially misleading.
<PAGE>
[Notes Registration Rights Agreement]
-32-
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force, the deletion of the
reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event the Company shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration
<PAGE>
[Notes Registration Rights Agreement]
-33-
Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as
the case may be, shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice.
6. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions (x) where the holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or in respect of Registrable Notes
or Exchange Notes to be sold by any Participating Broker-Dealer during the
Applicable Period, as the case may be, (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company and fees and
disbursements of one special counsel for all of the sellers of
<PAGE>
[Notes Registration Rights Agreement]
-34-
Registrable Notes, (v) fees and disbursements of all independent certified
public accountants referred to in Section 5(n)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company desires such insurance, (vii) fees and expenses of all
other Persons retained by the Company, (viii) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties), (ix) the
expense of any annual audit, (x) the fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange,
if applicable, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, indentures
and any other documents necessary in order to comply with this Agreement.
7. INDEMNIFICATION
(a) In the event of a Shelf Registration or in connection with any
delivery by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, the Company agrees to indemnify and
hold harmless each Holder of Registrable Notes and each Participating
Broker-Dealer selling Exchange Notes during the Applicable Period, the officers
and directors of each such Person, and each Person, if any, who controls any
such Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "PARTICIPANT"), from and against any and
all losses, claims, damages and liabilities (including, without limitation, the
reasonable legal fees and other expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) caused by, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) or
Prospectus (as amended or supplemented if the Company
<PAGE>
[Notes Registration Rights Agreement]
-35-
shall have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the case of the Prospectus in light
of the circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages or liabilities are caused by any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Participant furnished to
the Company in writing by such Participant expressly for use therein; PROVIDED,
HOWEVER, that the Company will not be liable if such untrue statement or
omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any amendment or
supplement thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or omission of a material fact
that was the subject matter of the related proceeding and any such loss,
liability, claim, damage or expense suffered or incurred by the Participants
resulted from any action, claim or suit by any Person who purchased Registrable
Notes or Exchange Notes which are the subject thereof from such Participant and
it is established in the related proceeding that such Participant failed to
deliver or provide a copy of the Prospectus (as amended or supplemented) to such
Person with or prior to the confirmation of the sale of such Registrable Notes
or Exchange Notes sold to such Person if required by applicable law, unless such
failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section 5 of
this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the
<PAGE>
[Notes Registration Rights Agreement]
-36-
Company to each Participant, but only with reference to information relating to
such Participant furnished to the Company in writing by such Participant
expressly for use in any Registration Statement or Prospectus, any amendment or
supplement thereto, or any preliminary prospectus. The liability of any
Participant under this paragraph shall in no event exceed the proceeds received
by such Participant from sales of Registrable Notes or Exchange Notes giving
rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "INDEMNIFIED PERSON") shall promptly
notify the Person against whom such indemnity may be sought (the "INDEMNIFYING
PERSON") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; PROVIDED, HOWEVER, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise. In any such proceeding, any Indemnified Person
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) the Indemnifying Person shall have failed within a reasonable
period of time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person or any affiliate and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. It is understood that the Indemnifying Person shall not, in connection
with any
<PAGE>
[Notes Registration Rights Agreement]
-37-
one such proceeding or separate but substantially similar related proceeding in
the same jurisdiction arising out of the same general allegations, be liable for
the fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and reasonably acceptable to the
Company and any such separate firm for the Company, its directors, its officers
and such control Persons of the Company shall be designated in writing by the
Company and reasonably acceptable to the Holders. The Indemnifying Person shall
not be liable for any settlement of any proceeding effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed),
but if settled with such consent or if there be a final judgment for the
plaintiff for which the Indemnified Person is entitled to indemnification
pursuant to this Agreement, the Indemnifying Person agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without
the prior written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities
<PAGE>
[Notes Registration Rights Agreement]
-38-
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Notes or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Participants on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of discounts and
commissions but before deducting expenses) of the Notes received by the Company
bears to the total proceeds received by such Participant from the sale of
Registrable Notes or Exchange Notes, as the case may be. The relative fault of
the parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or such Participant or such other Indemnified Person, as the
case may be, on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA allocation
(even if the Participants were
<PAGE>
[Notes Registration Rights Agreement]
-39-
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such Participant from
sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the
amount of any damages that such Participant has otherwise been required to pay
or has paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any of the Initial Purchaser or any person
who controls an Initial Purchaser, the Company, their respective directors or
officers or any person controlling the Company, and (ii) any termination of this
Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability
<PAGE>
[Notes Registration Rights Agreement]
-40-
which the Indemnifying Persons may otherwise have to the Indemnified Persons
referred to above.
8. RULES 144 AND 144A
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner in accordance with
the requirements of the Securities Act and the Exchange Act and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder or beneficial owner of Registrable Notes, make available such
information necessary to permit sales pursuant to Rule 144A under the Securities
Act. The Company further covenants that it will take such further action as any
Holder of Registrable Notes may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Notes without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such
Rules may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC (it being expressly understood that the foregoing
shall not create any obligation on the part of the Company to file periodic
reports or other reports under the Exchange Act at any time that it is not then
required to file such reports pursuant to the Exchange Act).
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and reasonably acceptable to the Company.
<PAGE>
[Notes Registration Rights Agreement]
-41-
No Holder of Registrable Notes may participate in any underwritten
registation hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Company has not, as of the date
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements. The Company has not entered and will not
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back registration rights with respect to a Registration
Statement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall not,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Company and (II)(A) the Holders of not less than a
<PAGE>
[Notes Registration Rights Agreement]
-42-
majority in aggregate principal amount of the then outstanding Registrable
Notes and (B) in circumstances that would adversely affect the Participating
Broker-Dealers, the Participating Broker-Dealers holding not less than a
majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; PROVIDED, HOWEVER, that Section 7 and this Section
10(c) may not be amended, modified or supplemented without the prior written
consent of each Holder and each Participating Broker-Dealer (including any
person who was a Holder or Participating Broker-Dealer of Registrable Notes or
Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold by such Holders pursuant to such Registration
Statement.
(d) NOTICES. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchaser as follows:
Smith Barney Inc.
<PAGE>
[Notes Registration Rights Agreement]
-43-
388 Greenwich Street
New York, New York 10013
Facsimile No.: (212) 816-7816
Attention: Corporate Finance
Department
2. if to the Initial Purchaser, at the addresses specified in
Section 10(d)(1);
3. if to the Company, at the address as follows:
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Facsimile No.: (415) 592-6858
Attention: General Counsel
with copies to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Facsimile No.: (415) 493-6811
Attention: Barry F. Taylor, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
<PAGE>
[Notes Registration Rights Agreement]
-44-
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers; PROVIDED, HOWEVER,
that this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and to the extent such successor or
assign holds Registrable Notes.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(i) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. 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
<PAGE>
[Notes Registration Rights Agreement]
-45-
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(k) THIRD PARTY BENEFICIARIES. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchaser on the
one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
<PAGE>
[Notes Registration Rights Agreement]
-46-
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CELLNET DATA SYSTEMS, INC.
By: /s/ P. Manca
-------------------------------
Name: Paul Manca
Title: CFO
SMITH BARNEY INC.
By: /s/ Sean P. Crowley
-------------------------------
Name: Sean P. Crowley
Title: Managing Director
<PAGE>
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 15, 1995
BETWEEN
CELLNET DATA SYSTEMS, INC.
AND
SMITH BARNEY INC.
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
Section 1. Definitions.................................... 1
Section 2. Registration Rights............................ 6
2.1(a) Demand Registration After a Public
Equity Offering............................. 6
2.1(b) Effective Registration......................... 7
2.1(c) Restrictions on Sale by Holders................ 8
2.1(d) Underwritten Registrations..................... 9
2.1(e) Expenses....................................... 9
2.1(f) Priority in Demand Registration................ 9
2.2(a) Piggy-Back Registration........................ 10
2.2(b) Priority in Piggy-Back Registration............ 12
2.3 Limitations, Conditions and
Qualifications to Obligations
Under Registration Covenants................ 14
2.4 Restrictions on Sale by the Company and
Others...................................... 16
2.5 Rule 144 and Rule 144A......................... 16
2.6 Registration on Form S-3....................... 17
Section 3. [Intentionally Omitted]
Section 4. Registration Procedures........................ 18
Section 5. Indemnification and Contribution............... 26
Section 6. Miscellaneous.................................. 30
(a) No Inconsistent Agreements..................... 30
(b) Amendments and Waivers......................... 31
(c) Notices........................................ 31
(d) Successors and Assigns......................... 32
(e) Counterparts................................... 32
(f) Headings....................................... 32
(g) Governing Law; Jurisdiction.................... 32
(h) Severability................................... 32
(i) Entire Agreement............................... 33
-i-
<PAGE>
(j) Attorneys' Fees................................ 33
(k) Securities Held by the Company or
Its Affiliates............................... 33
(l) Remedies....................................... 33
-ii-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and
entered into as of June 15, 1995, between CELLNET DATA SYSTEMS, INC., a
California corporation (the "COMPANY"), and SMITH BARNEY INC. (the "PURCHASER").
This Agreement is made pursuant to the Purchase Agreement, of even
date herewith, among the Company and the Purchaser (the "PURCHASE AGREEMENT"),
relating to, among other things, the sale by the Company to the Purchaser of an
aggregate of 235,000 Units, each Unit consisting of $1,000 principal amount at
maturity of 13% Senior Discount Notes due June 15, 2005 and four (4) warrants,
each initially exercisable for one (1) share of Common Stock, no par value per
share, of the Company. In order to induce the Purchaser to enter into the
Purchase Agreement, the Company has agreed to provide to the Purchaser and the
Holders (as defined herein), among other things, the registration rights for the
Warrant Shares (as defined herein) set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations of the
Purchaser under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. DEFINITIONS. As used in this Agreement, the following defined
terms shall have the following meanings:
"ADVICE" has the meaning ascribed to such term in the last paragraph
of Section 4 hereof.
"AFFILIATE" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, the referent Person or such other Person,
as the case may be. For the purposes of this definition, the term
"CONTROL" when used with respect to any specified Person means the power to
direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or
<PAGE>
-2-
otherwise; and the terms "AFFILIATED," "CONTROLLING" and "CONTROLLED" have
meanings correlative of the foregoing. None of the Purchaser or any of its
Affiliates shall be deemed to be an Affiliate of the Company or of any of
its subsidiaries or Affiliates.
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
"CAPITAL STOCK" means any and all shares, interests, participations,
or other equivalents (however designated) of corporate stock of the
Company, including each class of common stock and preferred stock of the
Company, together with any warrants, rights, or options to purchase or
acquire any of the foregoing.
"COMMON STOCK" shall mean the Common Stock, no par value per share, of
the Company.
"COMPANY" shall have the meaning ascribed to that term in the preamble
of this Agreement and shall also include the Company's permitted successors
and assigns.
"DEMAND REGISTRATION" has the meaning ascribed to such term in Section
2.1(a) hereof.
"DTC" has the meaning ascribed to such term in Section 4(i) hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"HOLDER" means each of the Purchaser, for so long as it owns any
Warrant Shares, and each of its successors, assigns and direct and indirect
transferees who become registered owners of such Warrant Shares.
"INCLUDED SECURITIES" has the meaning ascribed to such term in Section
2.1(a) hereof.
"INDEMNIFIED PARTY" has the meaning ascribed to such term
<PAGE>
-3-
in Section 5(c) hereof.
"INDEMNIFYING PARTY" has the meaning ascribed to such term in Section
5(c) hereof.
"INDENTURE" means the Indenture, of even date herewith, between the
Company and The Bank of New York, as Trustee, pursuant to which the Notes
are issued.
"INSPECTORS" has the meaning ascribed to such term in Section 4(a)
hereof.
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on which
banking institutions in New York, New York are required by law, regulation
or executive order to remain closed.
"NOTES" means the aggregate of $235,000,000 at maturity of 13% Senior
Discount Notes due June 15, 2005 of the Company issued under the Indenture.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"PIGGY-BACK REGISTRATION" has the meaning ascribed to such term in
Section 2.2 hereof.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act),
as amended or supplemented by any prospectus supplement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"PUBLIC EQUITY OFFERING" means a primary public offering
<PAGE>
-4-
(whether or not underwritten, but excluding any offering pursuant to
Form S-4 or S-8 under the Securities Act) of capital stock of the Company
pursuant to an effective registration statement under the Securities Act.
"PURCHASE AGREEMENT" has the meaning ascribed to such term in the
preamble hereof.
"PURCHASER" has the meaning ascribed to such term in the preamble
hereof.
"REGISTRABLE SECURITIES" means any of (i) the Warrant Shares and
(ii) any other securities issued or issuable with respect to any
Registrable Securities by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise, unless, in each case,
such Warrant Shares have been offered and sold to the Holder pursuant to
an effective registration statement under the Securities Act declared
effective prior to the exercisability of the Warrants. As to any
particular Registrable Securities held by a Holder, such securities shall
cease to be Registrable Securities when (i) a Registration Statement with
respect to the offering of such securities by the Holder thereof shall have
been declared effective under the Securities Act and such securities shall
have been disposed of by such Holder pursuant to such Registration
Statement, (ii) such securities may at the time of determination be sold to
the public pursuant to Rule 144 without any restriction on the amount of
securities which may be sold by such Holder or Rule 144(k) (or any similar
provision then in force, but not Rule 144A) promulgated under the
Securities Act without the lapse of any further time or the satisfaction of
any condition, (iii) such securities shall have been otherwise transferred
by such Holder and new certificates for such securities not bearing a
legend restricting further transfer shall have been delivered by the
Company or its transfer agent and subsequent disposition of such securities
shall not require registration or qualification under the Securities Act or
any similar state law then in force or (iv) such securities shall have
ceased to be outstanding.
<PAGE>
-5-
"REGISTRATION EXPENSES" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees
and expenses of compliance with securities or blue sky laws (including,
without limitation, reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities), printing expenses, messenger, telephone and delivery expenses,
fees and disbursements of counsel for the Company and all independent
certified public accountants, the fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (but not including any
underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Securities by Holders of such
Registrable Securities) and other reasonable out-of-pocket expenses of
Holders (it being understood that Registration Expenses shall not include,
as to the fees and expenses of counsel, the fees and expenses of more than
one counsel for the Holders).
"REGISTRATION STATEMENT" shall mean any appropriate registration
statement of the Company filed with the SEC pursuant to the Securities Act
which covers any of the Registrable Securities pursuant to the provisions
of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"REQUISITE SECURITIES" shall mean a number of Registrable Securities
equal to not less than 25% of the Registrable Securities held in the
aggregate by all Holders; PROVIDED, HOWEVER, that with respect to any
action to be taken at the request of the Holders of the Registrable
Securities prior to such time as the Warrants have expired pursuant to the
terms thereof and of the Warrant Agreement, each Warrant outstanding shall
be deemed to represent that number of Registrable Securities for which such
Warrant would be then exercisable (without giving effect to the Cashless
Exercise (as defined in
<PAGE>
-6-
the Warrant Agreement)).
"RULE 144" shall mean Rule 144 promulgated under the Securities Act,
as such Rule may be amended from time to time, or any similar rule (other
than Rule 144A) or regulation hereafter adopted by the SEC providing for
offers and sales of securities made in compliance therewith resulting in
offers and sales by subsequent holders that are not affiliates of an issuer
of such securities being free of the registration and prospectus delivery
requirements of the Securities Act.
"RULE 144A" shall mean Rule 144A promulgated under the Securities Act,
as such Rule may be amended from time to time, or any similar rule (other
than Rule 144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"SELLING HOLDER" shall mean a Holder who is selling Registrable
Securities in accordance with the provisions of Section 2.1 or 2.2.
"SHAREHOLDERS' AGREEMENT" means the Shareholders' Agreement dated
August 15, 1994 by and among the Company and the other persons or entities
party thereto, as amended or supplemented from time to time.
"WARRANT AGENT" means The Bank of New York and any successor Warrant
Agent for the Warrants pursuant to the Warrant Agreement.
"WARRANT AGREEMENT" means the Warrant Agreement dated as of June 15,
1995 between the Company and The Bank of New York, as warrant agent, as
amended or supplemented from time to time in accordance with the terms
thereof.
"WARRANTS" means the 940,000 warrants of the Company issued pursuant
to the Warrant Agreement.
<PAGE>
-7-
"WARRANT SHARE PROSPECTUS" means the prospectus included in any
Warrant Share Registration Statement (including, without limitation, any
prospectus subject to completion and a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Warrant Share
Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Warrant Share Prospectus.
"WARRANT SHARE REGISTRATION STATEMENT" has the meaning ascribed to
that term in Section 5(a) hereof.
"WARRANT SHARES" means the shares of Common Stock deliverable upon
exercise of the Warrants.
Section 2. REGISTRATION RIGHTS.
2.1 (a) DEMAND REGISTRATION AFTER PUBLIC EQUITY OFFERING. At any
time and from time to time after the occurrence of a Public Equity Offering
Holders owning, individually or in the aggregate, not less than the Requisite
Securities may make a written request for registration under the Securities Act
of their Registrable Securities (a "DEMAND REGISTRATION"). Within 120 days of
the receipt of such written request for a Demand Registration, the Company shall
file with the SEC and use its best efforts to cause to become effective under
the Securities Act a Registration Statement with respect to such Registrable
Securities. Any such request will specify the number of Registrable Securities
proposed to be sold and will also specify the intended method of disposition
thereof. The Company shall give written notice of such registration request to
all other Holders of Registrable Securities within 15 days after the receipt
thereof. Within 20 days after receipt by any Holder of Registrable Securities
of such notice from the Company, such Holder may request in writing that such
Holder's Registrable Securities be included in such Registration Statement and
the Company shall include in such Registration Statement the Registrable
Securities of any such Holder requested to be so included (the "INCLUDED
SECURITIES"). Each such request by such
<PAGE>
-8-
other Holders shall specify the number of Included Securities proposed to be
sold and the intended method of disposition thereof. Subject to Sections 2.1(b)
and 2.1(f) hereof, the Company shall be required to register Registrable
Securities pursuant to this Section 2.1(a) on a maximum of three separate
occasions.
Subject to Section 2.1(f) hereof, no other securities of the Company
except (i) Registrable Securities held by any Holder, (ii) equity securities to
be offered and sold for the account of the Company and (iii) any equity
securities of the Company held by the parties to the Shareholders' Agreement or
by any Person having "piggy-back" registration rights pursuant to any
contractual obligation of the Company shall be included in a Demand
Registration; PROVIDED, HOWEVER, that no such securities for the account of the
Company or any other person (other than the parties to the Shareholders'
Agreement) shall be so included unless, in connection with any underwritten
offering, the managing underwriter or underwriters confirm to the Holders of
Registrable Securities to be included in such Demand Registration that the
inclusion of such other securities will not be likely to effect the price at
which the Registrable Securities may be sold. The inclusion of any such
securities for the account of the Company or any other Person shall be on the
same terms as that of the Registrable Securities.
(b) EFFECTIVE REGISTRATION. A Registration Statement will not be
deemed to have been effected as a Demand Registration unless it has been
declared effective by the SEC and the Company has complied in a timely manner
and in all material respects with all of its obligations under this Agreement
with respect thereto; PROVIDED, HOWEVER, that if, after such Registration
Statement has become effective, the offering of Registrable Securities pursuant
to such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Registrable Securities pursuant to such Registration Statement for any
reason not attributable to any Holder participating in such registration and
such Registration Statement has not become effective within a reasonable time
period thereafter (not to exceed 30 days), such Registration Statement will be
deemed not to have been effected. If (i) a registration requested pursuant to
this Section 2.1 is
<PAGE>
-9-
deemed not to have been effected or (ii) a Demand Registration does not remain
effective under the Securities Act until at least the earlier of (A) an
aggregate of 90 days after the effective date thereof or (B) the consummation of
the distribution by the Holders of all of the Registrable Securities covered
thereby, then such registration shall not count towards determining if the
Company has satisfied its obligation to effect three Demand Registrations
pursuant to this Section 2.1. For purposes of calculating the 90-day period
referred to in the preceding sentence, any period of time during which such
Registration Statement was not in effect shall be excluded. The Holders of
Registrable Securities shall be permitted to withdraw all or any part of the
Registrable Securities from a Demand Registration at any time prior to the
effective date of such Demand Registration.
(c) RESTRICTIONS ON SALE BY HOLDERS. Each Holder of Registrable
Securities whose Registrable Securities are covered by a Registration Statement
filed pursuant to this Section 2.1 and are to be sold thereunder agrees, if and
to the extent reasonably requested by the managing underwriter or underwriters
in an underwritten offering, not to effect any public sale or distribution of
Registrable Securities or of securities of the Company of the same class as any
securities included in such Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten offering), during the 30-day
period prior to, and during the 120-day period beginning on, the closing date of
each underwritten offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or such managing underwriter or
underwriters.
The foregoing provisions of Section 2.1(c) shall not apply to any
Holders of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; PROVIDED, HOWEVER,
that any such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Registrable Securities commencing on the date of sale of such Registrable
Securities unless it has provided 45 days' prior written notice of such sale or
distribution to the underwriter or underwriters.
<PAGE>
-10-
(d) UNDERWRITTEN REGISTRATIONS. If any of the Registrable Securities
covered by a Demand Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and will be reasonably acceptable
to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Rules 10b-6
and 10b-7 under the Exchange Act and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
(e) EXPENSES. The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to Section 2.1(a) hereof.
Each Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
requested pursuant to this Section 2.1.
(f) PRIORITY IN DEMAND REGISTRATION. In a registration pursuant to
Section 2.1 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders who have requested such Demand
Registration or who have sought inclusion therein that in such underwriter's or
underwriters' opinion the total number of securities which the Selling Holders
and any other Person desiring to participate in such registration intend to
include in such offering is such as to adversely affect the success of such
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such
<PAGE>
-11-
registration. In such event, securities shall be registered in such
registration in the following order of priority: (i) FIRST, the securities
which have been requested to be included in such registration by the Holders of
Registrable Securities pursuant to this Agreement and the securities of the
parties to the Shareholders' Agreement in such proportion between the Holders
and such parties to the Shareholders' Agreement such that one-third of the
securities to be included shall be for the account of the Holders and two-thirds
shall be for the account of the parties to the Shareholders' Agreement (such
one-third for the account of the Holders to be allocated among the Holders pro
rata based on the amount of securities sought to be registered by the Holders),
(ii) SECOND, provided that no securities sought to be included by the Holders or
the parties to the Shareholders' Agreement have been excluded from such
registration, the securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company (pro rata
based on the amount of securities sought to be registered by such Persons) and
(iii) THIRD, provided that no securities of any other Person sought to be
included therein have been excluded from such registration, securities to be
offered and sold for the account of the Company.
If any securities of a Holder have been excluded from a registration
statement pursuant to the provisions of the foregoing paragraph, then such
registration shall not count towards determining whether the Company has
satisfied its obligation to effect three Demand Registrations pursuant to
Section 2.1 hereof.
2.2 (a) PIGGY-BACK REGISTRATION. If at any time the Company
proposes to file a Registration Statement under the Securities Act with respect
to an offering by the Company for its own account or for the account of any of
its securityholders of any class of its common equity securities (other than
(i) a Registration Statement on Form S-4 or S-8 (or any substitute form that may
be adopted by the SEC) or (ii) a Registration Statement filed in connection with
an exchange offer or offering of securities solely to the Company's existing
securityholders), then the Company shall give written notice of such proposed
filing to the Holders of Registrable Securities as soon as practicable (but in
no event fewer than 15 days before the anticipated filing date or 10 days if the
Company is subject to filing reports under the
<PAGE>
-12-
Exchange Act and able to use Form S-3 under the Securities Act), and such notice
shall offer such Holders the opportunity to register such number of shares of
Registrable Securities as each such Holder may request in writing within 15 (or
eight days if the Company is subject to filing reports under the Exchange Act
and able to use Form S-3 under the Securities Act) days after receipt of such
written notice from the Company (which request shall specify the Registrable
Securities intended to be disposed of by such Selling Holder and the intended
method of distribution thereof) (a "PIGGY-BACK REGISTRATION"). The Company
shall use its best efforts to keep such Piggy-Back Registration continuously
effective under the Securities Act until at least the earlier of (A) 90 days
after the effective date thereof or (B) the consummation of the distribution by
the Holders of all of the Registrable Securities covered thereby. The Company
shall use its best efforts to cause the managing underwriter or underwriters, if
any, of such proposed offering to permit the Registrable Securities requested to
be included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Company or any other securityholder
included therein and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof. Any
Selling Holder shall have the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement pursuant to this
Section 2.2 by giving written notice to the Company of its request to withdraw.
The Company may withdraw a Piggy-Back Registration at any time prior to the time
it becomes effective or the Company may elect to delay the registration;
PROVIDED, HOWEVER, that the Company shall give prompt written notice thereof to
participating Selling Holders. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 2.2, and each Holder of Registrable Securities shall
pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to a Registration Statement effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of its
obligation to effect a registration
<PAGE>
-13-
upon the request of Holders of Registrable Securities pursuant to Section 2.1
hereof, and no failure to effect a registration under this Section 2.2 and to
complete the sale of securities registered thereunder in connection therewith
shall relieve the Company of any other obligation under this Agreement.
(b) PRIORITY IN PIGGY-BACK REGISTRATION. In a registration pursuant
to Section 2.2 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders requesting inclusion in such
offering that in such underwriter's or underwriters' opinion the total number of
securities which the Company, the Selling Holders and any other Persons desiring
to participate in such registration intend to include in such offering is such
as to adversely affect the success of such offering, including the price at
which such securities can be sold, then the Company will be required to include
in such registration only the amount of securities which it is so advised should
be included in such registration. In such event: (x) in cases only involving
the registration for sale of securities for the Company's own account (other
than pursuant to the exercise of piggyback rights herein and in other
contractual commitments of the Company), securities shall be registered in such
offering in the following order of priority: (i) FIRST, the securities which
the Company proposes to register, (ii) SECOND, provided that no securities
sought to be included by the Company have been excluded from such registration,
the securities which have been requested to be included in such registration by
the Holders of Registrable Securities pursuant to this Agreement and by the
parties to the Shareholders' Agreement pro rata between the Holders and the
parties to the Shareholders' Agreement based upon the aggregate amount of
securities held (such securities for the account of the Holders to be allocated
among the Holders pro rata based on the amount of securities sought to be
registered by the Holders) and (iii) THIRD, provided that no securities sought
to be included by the Company or the Holders or the parties to the Shareholders'
Agreement have been excluded from such registration, the securities of other
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments of the Company (pro rata based on the amount of
securities sought to be registered by such Persons); (y) in cases not involving
the
<PAGE>
-14-
registration for sale of securities for the Company's own account only or not
for the account of any party to the Shareholders' Agreement, securities shall
be registered in such offering in the following order of priority: (i) FIRST,
the securities of any Person whose exercise of a "demand" registration right
pursuant to a contractual commitment of the Company is the basis for the
registration (provided that if such Person is a Holder of Registrable
Securities, as among Holders of Registrable Securities there shall be no
priority and Registrable Securities sought to be included by Holders of
Registrable Securities shall be included pro rata based on the amount of
securities sought to be registered by such Persons), (ii) SECOND, provided that
no securities of such Person referred to in the immediately preceding clause (i)
have been excluded from such registration, the securities requested to be
included in such registration by the Holders of Registrable Securities pursuant
to this Agreement and the parties to the Shareholders' Agreement in such
proportion between the Holders and the parties to the Shareholders' Agreement
such that one-third of the securities permitted to be included pursuant to this
clause (ii) shall be for the account of the Holders and two-thirds shall be for
the account of the parties to the Shareholders' Agreement (such one-third for
the account of the Holders to be allocated among the Holders pro rata based on
the total amount of securities sought to be registered by the Holders) and
(iii) THIRD, provided that no securities of such Person referred to in the
immediately preceding clause (i) or of the Holders or of the parties to the
Shareholders' Agreement have been excluded from such registration, securities of
other Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments (pro rata based on the amount of securities sought to be
registered by such Persons) and (iv) FOURTH, provided that no securities of any
other Person have been excluded from such registration, the securities which the
Company proposes to register; and (z) in cases involving the registration for
sale of securities for the account of any party to the Shareholders' Agreement,
securities shall be registered in such offering in the following order of
priority: (i) FIRST, the securities requested to be included in such
registration by the Holders pursuant to this Agreement and the parties to the
Shareholders' Agreement in such proportion between the Holders and the parties
to the Shareholders' Agreement such that one-third shall be for the account of
the Holders and
<PAGE>
-15-
two-thirds shall be for the account of the parties to the Shareholders'
Agreement (such one-third for the account of the Holders to be allocated among
the Holders pro rata based on the amount of securities sought to be registered
by the Holders), (ii) SECOND, provided that no securities of the Holders or of
the parties to the Shareholders' Agreement have been excluded from such
registration, securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments (pro rata based on the
amount of securities sought to be registered by such Persons) and (iii) THIRD,
provided that no securities of any other Person has been excluded from such
registration, the securities which the Company proposes to register.
If, as a result of the provisions of this Section 2.2(b), any Selling
Holder shall not be entitled to include all Registrable Securities in a Piggy-
Back Registration that such Selling Holder has requested to be included, such
Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
2.3 LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS. The obligations of the Company set forth in Sections
2.1 and 2.2 hereof are subject to each of the following limitations, conditions
and qualifications:
(i) Subject to the next sentence of this paragraph, the Company shall
be entitled to postpone, for a reasonable period of time, the filing or
effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, any Registration Statement otherwise required to be prepared,
filed and made and kept effective by it hereunder; PROVIDED, HOWEVER, that
the duration of such postponement or suspension may not exceed the earlier
to occur of (A) 15 days after the cessation of the circumstances described
in the next sentence of this paragraph on which such postponement or
suspension is based or (B) 90 days after the date of the determination of
the Board of Directors referred to in the next sentence, and the duration
of such postponement or suspension shall be excluded from the calculation
of the 90-day period described in Section 2.1(b) hereof. Such postponement
or suspension may be effected only
<PAGE>
-16-
if the Board of Directors of the Company determines reasonably and in good
faith that the filing or effectiveness of, or sales pursuant to, such
Registration Statement would materially impede, delay or interfere with any
financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction involving the Company or
any of its affiliates or require disclosure of material information which
the Company has a bona fide business purpose for preserving as
confidential; PROVIDED, HOWEVER, that the Company shall not be entitled to
such postponement or suspension more than twice in any twelve-month period.
If the Company shall so postpone the filing of a Registration Statement it
shall, as promptly as possible, deliver a certificate signed by the Chief
Executive Officer of the Company to the Selling Holders as to such
determination, and the Selling Holders shall (y) have the right, in the
case of a postponement of the filing or effectiveness of a Registration
Statement, upon the affirmative vote of the Holders of not less than a
majority of the Registrable Securities to be included in such Registration
Statement, to withdraw the request for registration by giving written
notice to the Company within 10 days after receipt of such notice or (z) in
the case of a suspension of the right to make sales, receive an extension
of the registration period equal to the number of days of the suspension.
Any Demand Registration as to which the withdrawal election referred to in
the preceding sentence has been effected shall not be counted for purposes
of the three Demand Registrations the Company is required to effect
pursuant to Section 2.1 hereof.
(ii) The Company shall not be required by this Agreement to effect a
Demand Registration within 90 days immediately following the effective date
of any registration statement pertaining to a firmly underwritten offering
of equity securities of the Company for its own account; PROVIDED, HOWEVER,
that this clause (ii) shall not apply if the underwriter of such offering
consents to the request for such Demand Registration pursuant to Section
2.1(a).
(iii) The Company shall not be required by this Agreement to effect a
Demand Registration within 60 days
<PAGE>
-17-
immediately following the effective date of any registration statement
pertaining to a firmly underwritten offering of equity securities of the
Company for the account of any securityholder of the Company; PROVIDED,
HOWEVER, that this clause (ii) shall not apply if the underwriter of such
offering consents to the request for such Demand Registration pursuants to
Section 2.1(a).
(iv) The Company's obligations shall be subject to the obligations of
the Selling Holders, which the Selling Holders acknowledge, to furnish all
information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations
to permit the Company to comply with all applicable requirements of the SEC
and to obtain any acceleration of the effective date of such Registration
Statement.
(v) The Company shall not be obligated to cause any special audit to
be undertaken in connection with any registration pursuant to this
Agreement unless such audit is required by the SEC or requested by the
underwriters with respect to such registration.
2.4 RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The Company
covenants and agrees that (i) it shall not, and that it shall not cause or
permit any of its subsidiaries to, effect any public sale or distribution of any
securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for such securities
(or any option or other right for such securities) during the 30-day period
prior to, and during the 90-day period beginning on, the commencement of any
underwritten offering of Registrable Securities pursuant to a Demand
Registration which has been requested pursuant to this Agreement, or a Piggy-
Back Registration which has been scheduled, prior to the Company or any of its
subsidiaries publicly announcing its intention to effect any such public sale or
distribution; (ii) the Company will not, and the Company will not cause or
permit any subsidiary of the Company to, after the date hereof, enter into any
agreement or contract that conflicts with or limits or prohibits the full and
timely exercise by the Holders of Registrable Securities of the rights herein to
request a Demand
<PAGE>
-18-
Registration or to join in any Piggy-Back Registration subject to the other
terms and provisions hereof; and (iii) that it shall use its reasonable best
efforts to secure the written agreement of each of its officers and directors to
not effect any public sale or distribution of any securities of the same class
as the Registrable Securities (or any securities convertible into or
exchangeable or exercisable for any such securities), or any option or right for
such securities during the period described in clause (i) of this Section 2.4.
2.5 RULE 144 AND RULE 144A. The Company covenants that it will file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder in a timely
manner and, if at any time the Company is not required to file such reports, it
will, upon the request of any Holder or beneficial owner of Registrable
Securities, make available such information necessary to permit sales pursuant
to Rule 144A under the Securities Act. The Company further covenants that it
will take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule
144A under the Securities Act, as such Rules may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the SEC (it being
expressly understood that the foregoing shall not create any obligation on the
part of the Company to file periodic reports or other reports under the Exchange
Act at any time that it is not then required to file such reports pursuant to
the Exchange Act). Upon the request of any Holder of Registrable Securities,
the Company will in a timely manner deliver to such Holder a written statement
as to whether it has complied with such information requirements.
2.6 REGISTRATION ON FORM S-3. (a) In addition to the rights set
forth in Section 2.1 and 2.2 hereof, if a Holder requests that the Company file
a registration statement on Form S-3 (or any successor to Form S-3) for a public
offering of shares of Registrable Securities the reasonably anticipated
aggregate price to the public of which would be at least $1,000,000, and the
Company is a registrant entitled to use Form S-3 to register the
<PAGE>
-19-
Shares for such an offering, the Company shall use its best efforts to cause
such shares to be registered for the offering as soon as practicable on Form S-3
(or any successor form to Form S-3).
(b) The Holders' right to register shares under Section 2.6 shall be
shared pro rata among all Holders of Registrable Securities and all other
holders of securities of the Company who have a right to request inclusion
therein based on the number of shares of Registrable Securities held by each
Holder.
(c) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 2.6 in the following situations:
(i) if the Company, within ten (10) days of the receipt of the request of the
Holders, gives notice of its bona fide intention to effect the filing of a
registration statement with the SEC within forty-five (45) days of receipt of
such request (other than with respect to a registration statement relating to a
Rule 145 transaction, an offering solely to employees or any other registration
which is not appropriate for the registration of Registrable Securities); (ii)
during the period starting with the date of filing of, and ending on a date
ninety (90) days following the effective date of, a registration statement
described in (i) above or pursuant to Section 2.1 or 2.2 hereof; PROVIDED,
HOWEVER, that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective; PROVIDED,
HOWEVER, that no other person or entity could require the Company to file a
registration statement in such period; or (iii) more than once in any six-month
period.
Section 3. [Intentionally Omitted]
Section 4. REGISTRATION PROCEDURES. In connection with the obligations of
the Company with respect to any Registration Statement pursuant to Sections 2.1,
2.2 and 2.6 hereof, the Company shall, except as otherwise provided:
(a) Prepare and file with the SEC as soon as practicable each such
Registration Statement (but in any event on or prior to the date of filing
thereof required under this Agreement) and cause such Registration
Statement to become effective and remain effective as provided herein;
PROVIDED, HOWEVER, that
<PAGE>
-20-
before filing any such Registration Statement or any Prospectus (for
registrations pursuant to Sections 2.1 and 2.2 hereof) or any amendments or
supplements thereto (only for registrations pursuant to Section 2.1 hereof)
(including documents that would be incorporated or deemed to be
incorporated therein by reference, including such documents filed under the
Exchange Act that would be incorporated therein by reference), the Company
shall afford promptly to the Holders of the Registrable Securities covered
by such Registration Statement, their counsel and the managing underwriter
or underwriters, if any, an opportunity to review copies of all such
documents proposed to be filed a reasonable time prior to the proposed
filing thereof. The Company shall not file any Registration Statement or
Prospectus (for registrations pursuant to Sections 2.1 and 2.2 hereof) or
any amendments or supplements thereto (only for registrations pursuant to
Section 2.1 hereof) if the Holders of a majority of the Registrable
Securities covered by such Registration Statement, their counsel, or the
managing underwriter or underwriters, if any, shall reasonably object in
writing unless failure to file any such amendment or supplement would
involve a violation of the Securities Act or other applicable law.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods
prescribed hereby; cause the related Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities, their counsel and
the managing underwriter or underwriters, if any, promptly (but in any
event within two (2) Business Days), and
<PAGE>
-21-
confirm such notice in writing, (i) when a Prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to
a Registration Statement or any post-effective amendment, when the same has
become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
such Registration Statement or post-effective amendment including financial
statements and schedules and exhibits), (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of such Registration Statement
or of any order preventing or suspending the use of any preliminary
prospectus or the initiation or threatening of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Securities the representations and warranties of the Company contained in
any agreement (including any underwriting agreement) contemplated by
Section 4(m) below, to the knowledge of the Company, cease to be true and
correct in any material respect, (iv) of the receipt by the Company of any
notification with respect to (A) the suspension of the qualification or
exemption from qualification of the Registration Statement or any of the
Registrable Securities covered thereby for offer or sale in any
jurisdiction, or (B) the initiation of any proceeding for such purpose,
(v) of the happening of any event, the existence of any condition or
information becoming known that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of
such Registration Statement, it will conform in all material respects with
the requirements of the Securities Act and it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, not
misleading, and that in the case of the Prospectus, it will conform in all
material respects with the requirements of the Securities Act and it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination
that a post-effective amendment to such Registration Statement
<PAGE>
-22-
would be appropriate.
(d) Use every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities covered thereby for sale in any jurisdiction, and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment.
(e) If requested by the managing underwriter or underwriters, if any,
or the Holders of a majority of the Registrable Securities being sold in
connection with an underwriting offering (only for registrations pursuant
to Section 2.1 hereof), (i) promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriter or
underwriters, if any, or such Holders reasonably request to be included
therein to comply with applicable law, (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to
be incorporated in such prospectus supplement or post- effective amendment,
and (iii) supplement or make amendments to such Registration Statement.
(f) Furnish to each Holder of Registrable Securities who so requests
and to counsel for the Holders of Registrable Securities and each managing
underwriter, if any, without charge, upon request, one conformed copy of
the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, and of all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits (including exhibits incorporated by reference).
(g) Deliver to each Holder of Registrable Securities, their counsel
and each underwriter, if any, without charge, as many copies of each
Prospectus (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and, subject to
the last
<PAGE>
-23-
paragraph of this Section 4, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the Holders
of Registrable Securities and the underwriter or underwriters or agents, if
any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to register or
qualify, and cooperate with the Holders of Registrable Securities, the
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of, such Registrable Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions within
the United States as the managing underwriter or underwriters reasonably
request in writing, or, in the event of a non-underwritten offering, as the
Holders of a majority of the Registrable Securities may request; PROVIDED,
HOWEVER, that where Registrable Securities are offered other than through
an underwritten offering, the Company agrees to cause its counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 4(h); keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the securities
covered thereby; PROVIDED, HOWEVER, that the Company will not be required
to (A) qualify generally to do business in any jurisdiction where it is not
then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject
or (C) become subject to taxation in any jurisdiction where it is not then
so subject.
(i) Cooperate with the Holders of Registrable Securities and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any restrictive
legends whatsoever
<PAGE>
-24-
and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"); and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request at least two
business days prior to any sale of Registrable Securities in a firm
commitment underwritten public offering.
(j) [Intentionally Omitted]
(k) Upon the occurrence of any event contemplated by Section
4(c)(v) or 4(c)(vi) above, as promptly as practicable prepare a
supplement or post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and, subject to Section
4(a) hereof, file such with the SEC so that, as thereafter delivered to
the purchasers of Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(l) Prior to the effective date of a Registration Statement,
(i) provide the registrar for the Registrable Securities with certificates
for such securities in a form eligible for deposit with DTC and
(ii) provide a CUSIP number for such securities.
(m) Enter into an underwriting agreement in form, scope and substance
as is customary in underwritten offerings and take all such other actions
as are reasonably requested by the managing underwriter or underwriters in
order to expedite or facilitate the registration or disposition of such
Registrable Securities in any underwritten offering to be made of the
Registrable Securities in accordance with this Agreement, and in such
connection, (i) make such representations and warranties to the underwriter
or underwriters, with respect to the business of the Company and the
subsidiaries of the Company, and the Registration Statement, Prospectus and
<PAGE>
-25-
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made
by issuers to underwriters in underwritten offerings, and confirm the same
if and when requested; (ii) use reasonable efforts to obtain opinions of
counsel to the Company and updates thereof, addressed to the underwriter or
underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by underwriters; (iii) use reasonable efforts to obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if applicable, the subsidiaries of the
Company) and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement, addressed to each
of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as reasonably
requested by the managing underwriter or underwriters and as permitted by
the Statement of Auditing Standards No. 72; and (iv) if an underwriting
agreement is entered into, the same shall contain customary indemnification
provisions and procedures (or such other provisions and procedures
acceptable to Holders of a majority of Registrable Securities covered by
such Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(n) Make available for inspection by a representative of the Holders
of Registrable Securities being sold, any underwriter participating in any
such disposition of Registrable Securities, if any, and any attorney or
accountant retained by such representative of the Holders or underwriter
(collectively, the "INSPECTORS"), at the offices where normally kept,
during reasonable business hours, all financial
<PAGE>
-26-
and other records, pertinent corporate documents and properties of the
Company and the subsidiaries of the Company, and cause the officers,
directors and employees of the Company and the subsidiaries of the Company
to supply all information in each case reasonably requested by any such
Inspector in connection with such Registration Statement; PROVIDED,
HOWEVER, that all material non-public information shall be kept
confidential by such Inspector, except to the extent that (i) the
disclosure of such information is necessary or advisable to avoid or
correct a misstatement or omission in the Registration Statement or in any
Prospectus; PROVIDED, HOWEVER, that prior notice is given to the Company,
and the Company's legal counsel and such Holder's legal counsel concur that
disclosure is required, (ii) the release of such information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is necessary or
advisable in connection with any action, claim, suit or proceeding,
directly or indirectly, involving or potentially involving such Inspector
and arising out of, based upon, relating to or involving this Agreement or
any of the transactions contemplated hereby or arising hereunder; PROVIDED,
HOWEVER, that prior notice shall be provided as soon as practicable to the
Company of the potential disclosure of any information by such Inspector
pursuant to clauses (ii) or (iii) of this sentence to permit the Company to
obtain a protective order (or waive the provisions of this paragraph (n))
and that such Inspector shall take all actions as are reasonably necessary
to protect the confidentiality of such information (if practicable) to the
extent such action is otherwise not inconsistent with, an impairment of or
in derogation of the rights and interests of the Holder or any Inspector,
or (iv) such information has been made generally available to the public.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than forty-five (45) days after the end of any 12-month period (or
ninety (90) days after the end of any 12-month period if
<PAGE>
-27-
such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to an underwriter or to
underwriters in a firm commitment or best efforts underwritten offering and
(ii) if not sold to an underwriter or to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of the relevant Registration Statement, which
statements shall cover said 12-month periods.
(p) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on each securities exchange, if
any, on which similar securities issued by the Company are then listed.
(q) Cooperate with the Selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends
and registered in such names as the selling Holders may reasonably request
at least two business days prior to the closing of any sale of Registrable
Securities.
Each seller of Registrable Securities as to which any registration is
being effected agrees, as a condition to the registration obligations with
respect to such Holder provided herein, to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing
to comply with the Securities Act and other applicable law. The Company may
exclude from such registration the Registrable Securities of any seller for so
long as such seller fails to furnish such information within a reasonable time
after receiving such request. If the identity of a seller of Registrable
Securities is to be disclosed in the Registration Statement, such seller shall
be permitted to include all information regarding such seller as it shall
reasonably request.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv),
4(c)(v), or 4(c)(vi)
<PAGE>
-28-
hereof, such Holder will forthwith discontinue disposition of such Registrable
Securities covered by the Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(k) hereof), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable prospectus may be
resumed, and has received copies of any amendments or supplements thereto, and,
if so directed by the Company, such Holder will, at the Company's expense,
deliver to the Company all copies, other than permanent file copies, then in
such Holder's actual possession of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice; PROVIDED, HOWEVER,
that nothing herein shall create any obligation on the part of any Holder to
undertake to retrieve or return any such Prospectus not within the actual
possession of such Holder. In the event the Company shall give any such notice,
the period of time for which a Registration Statement is required hereunder to
be effective shall be extended by the number of days during such periods from
and including the date of the giving of such notice to and including the date
when each seller of Registrable Securities covered by such Registration
Statement shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 4(k) hereof or (y) the Advice.
Section 5. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Holder and each Person, if any, who controls
such Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, or is under common control with, or is
controlled by, such Holder, from and against all losses, claims, damages and
liabilities (including, without limitation, and subject to clause (c) of this
Section 5 below, the reasonable legal fees and other reasonable out-of-pocket
expenses actually incurred by any Holder or any such controlling or affiliated
Person in connection with any suit, action or proceeding or any claim asserted),
caused by, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were registered
under the Securities Act or in any registration statement filed by the Company
covering the issuance of Warrant Shares and resales thereof (a "WARRANT SHARE
<PAGE>
-29-
REGISTRATION STATEMENT"), or caused by any omission or alleged omission to state
in any such Registration Statement or Warrant Share Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or caused by any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, Prospectus
or Warrant Share Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state in any such preliminary prospectus, Prospectus or
Warrant Share Prospectus a material fact required to be stated in any such
preliminary prospectus, Prospectus or Warrant Share Prospectus or necessary to
make the statements in any such preliminary prospectus, Prospectus or Warrant
Share Prospectus in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in comformity with information relating to
any Holder furnished to the Company in writing by such Holder expressly for use
in any such Registration Statement, Warrant Share Registration Statement or
Prospectus; PROVIDED, HOWEVER, that the Company shall not be required to
indemnify any such Person if such untrue statement or omission or alleged untrue
statement or omission was contained or made in any preliminary prospectus and
corrected in the Prospectus or such Warrant Share Prospectus, as the case may
be, or any amendment or supplement thereto and the Prospectus or such Warrant
Share Prospectus, as the case may be, does not contain any other untrue
statement or omission or alleged untrue statement or omission of a material fact
that was the subject matter of the related proceeding and any such loss,
liability, claim, damage or expense suffered or incurred by such indemnified
Person resulted from any action, claim or suit by any Person who purchased
Registrable Securities which are the subject thereof from such indemnified
Person and it is established in the related proceeding that such indemnified
Person failed to deliver or provide a copy of the Prospectus or Warrant Share
Prospectus, as the case may be (as amended or supplemented) to such Person with
or prior to the confirmation of the sale of such Registrable Securities sold to
such Person if required by applicable law, unless such failure to deliver or
provide a copy of the Prospectus or Warrant Share Prospectus, as the case may be
(as
<PAGE>
-30-
amended or supplemented) was a result of noncompliance by the Company with
Section 4 hereof or as a result of the failure of the Company to provide such
Prospectus or Warrant Share Prospectus, as the case may be.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign any Registration
Statement or Warrant Share Registration Statement, as the case may be, and each
Person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Holder, but only with reference
to information relating to such Holder furnished to the Company in writing by
such Holder expressly for use in any Registration Statement or Warrant Share
Registration Statement, as the case may be (or any amendment thereto) or any
Prospectus or Warrant Share Prospectus, as the case may be (or any amendment or
supplement thereto). The liability of any Holder under this paragraph shall in
no event exceed the proceeds received by such Holder from sales of Registrable
Securities giving rise to such obligations.
(c) In case any suit, action, proceeding (including any governmental
or regulatory investigation), claim or demand shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to either paragraph
(a) or (b) above, such Person (the "INDEMNIFIED PARTY") shall promptly notify
the Person against which such indemnity may be sought (the "INDEMNIFYING PARTY")
in writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses actually incurred of such counsel relating to such proceeding;
PROVIDED, HOWEVER, that the failure to so notify the indemnifying party shall
not relieve it of any obligation or liability which it may have hereunder or
otherwise. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the contrary,
<PAGE>
-31-
(ii) the indemnifying party shall have failed to retain within a reasonable
period of time counsel reasonably satisfactory to such indemnified party or
parties or (iii) the named parties to any such proceeding (including any
impleaded parties) include both such indemnified party or parties and the
indemnifying parties or an affiliate of the indemnifying parties or such
indemnified parties and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between the
indemnifying party or parties and the indemnified party or parties. It is
understood that the indemnifying parties shall not, in connection with any one
such proceeding or separate but substantially similar or related proceedings in
the same jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for such
indemnified party or parties and that all such fees and expenses shall be
reimbursed within reasonable time of the request after the incurrence thereof.
Any such separate firm for the Holders and such control Persons of the Holders
shall be designated in writing by Holders who sold a majority in interest of
Registrable Securities sold by all such Holders and reasonably acceptable to the
Company and any such separate firm for the Company, its directors, its officers
and such control Persons of the Company shall be designated in writing by the
Company and reasonably acceptable to the Holders. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed)
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify and hold harmless the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), effect any settlement or compliance of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party, or indemnity could have been sought hereunder by such indemnified party,
unless such settlement or compliance includes an unconditional written release
of such indemnified party in form and substance reasonably satisfactory to such
indemnified party of such indemnified party from all liability
<PAGE>
-32-
on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 5 is unavailable to, or insufficient to hold harmless, an
indemnified party in respect of any losses, claims, damages or liabilities, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder and in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and the Holders on the other hand from the offering
of such Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, not only such relative benefits but
also the relative fault of the Company on the one hand and the Holders on the
other hand in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Holders on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of discounts and commissions but before
deducting expenses) of the Warrants sold pursuant to the Purchase Agreement
received by the Company bears to the total proceeds received by such Holder from
the sale of Registrable Securities, as the case may be. The relative fault of
the Company on the one hand and the Holders on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by PRO RATA
allocation or by any other method of allocation that does not take account of
the equitable
<PAGE>
-33-
considerations referred to in Section 5(d) above. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages and liabilities
referred to in Section 5(d) above shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 5, in
no event shall a Holder be required to contribute any amount in excess of the
amount by which proceeds received by such Holder from sales of Registrable
Securities exceeds the amount of any damages that such Holder has otherwise been
required to pay or has paid by reason of such untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 5 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 5 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 5 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Purchaser or any person who controls a
Purchaser, the Company, their respective directors or officers or any person
controlling the Company and (ii) any termination of this Agreement.
Section 6. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company has not entered into nor
will the Company on or after the date of this Agreement enter into, or cause or
permit any of its subsidiaries to enter into, any agreement which is
inconsistent with the rights granted to the Holders of Registrable Securities in
this Agreement
<PAGE>
-34-
or otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities, if any, under any such agreements.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained the prior
written consent of Holders of not less than a majority of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; PROVIDED, HOWEVER, that Section 5 hereof and this Section
6(b) may not be amended, modified or supplemented without the prior written
consent of each Holder (including any Person who was a Holder of Registrable
Securities disposed of pursuant to any Registration Statement or a Warrant Share
Registration Statement) affected by such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Securities may be
given by the Holders of not less than a majority of the Registrable Securities
proposed to be sold by such Holders pursuant to such Registration Statement.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address of Holder as set forth
in the register for the Warrants or the Warrant Shares, which address initially
is, with respect to the Purchaser, the address set forth in the Purchase
Agreement; and (ii) if to the Company, initially at the address set forth below
the Company's name on the signature pages hereto and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 6(c), with a copy to Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California 94304-1050, Attention: Barry E. Taylor,
<PAGE>
-35-
Esq., and thereafter at such other address notice of which is given in
accordance with the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if Personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders. If any transferee of any Holder shall
acquire Warrants and/or Registrable Securities, in any manner, whether by
operation of law or otherwise, such Warrants and/or Registrable Securities shall
be held subject to all of the terms of this Agreement, and by taking and holding
such Warrants and/or Registrable Securities such Person shall be conclusively
deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement and such Person shall be entitled to receive the
benefits hereof.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(h) SEVERABILITY. If any term, provision, covenant or
<PAGE>
-36-
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. 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 that
may be hereafter declared invalid, illegal, void or unenforceable.
(i) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Warrant Agreement, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. This Agreement, the Purchase
Agreement and the Warrant Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(j) ATTORNEYS' FEES. As between the parties to this Agreement, in
any action or proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to
its costs and expenses and any other available remedy.
(k) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required hereunder, Registrable Securities or Warrants
held by the Company or by any of its affiliates (as such term is defined in Rule
405 under the Securities Act) shall not be counted (in either the numerator or
the denominator) in determining whether such consent or approval was given by
the Holders of such required percentage.
(l) REMEDIES. In the event of a breach by the Company
<PAGE>
-37-
of any of its obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights provided herein, in the Purchase Agreement
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CELLNET DATA SYSTEMS, INC.
By: /s/ P. Manca
-------------------------------------
Name: Paul Manca
Title: CFO
Address for Notices:
125 Shoreway Road
San Carlos, CA 94070
Facsimile No.: (415) 592-6858
Telephone No.: (415) 508-6000
SMITH BARNEY INC.
By: /s/ Sean P. Crowley
-------------------------------------
Name: Sean P. Crowley
Title: Managing Director
Address for Notices:
338 Greenwich Street
New York, New York 10013
Facsimile No.: (212) 816-7816
Telephone No.: (212) 816-6000
<PAGE>
-1-
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of November 21, 1995, to
the INDENTURE, dated as of June 15, 1995, between CELLNET DATA SYSTEMS, INC., a
California corporation (the "COMPANY"), and THE BANK OF NEW YORK, a New York
banking corporation, as trustee thereunder (the "TRUSTEE").
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore executed and
delivered an Indenture dated as of June 15, 1995 (the "INDENTURE") providing for
the issuance by the Company of up to $235,000,000 in aggregate principal amount
at maturity of its 13% Senior Discount Notes due 2005;
WHEREAS, the Company desires to amend the Indenture as set forth in
this First Supplemental Indenture;
WHEREAS, Section 9.02 of the Indenture provides, among other things,
that, subject to certain exceptions not herein relevant, with the consent of the
Holders of at least a majority in aggregate principal amount of the Notes at the
time outstanding, the Company and the Trustee may amend or supplement the
Indenture or the Notes;
WHEREAS, the Company has received consents to the amendments to the
Indenture contained herein (the "PROPOSED AMENDMENTS") of Holders of at least a
majority in aggregate principal amount of the Notes outstanding on the date
hereof (the "REQUISITE CONSENTS"); and
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of the Company and the Trustee and a valid amendment
of and supplement to the Indenture and all of the conditions and requirements
set forth in Section 9.02 of the Indenture have been performed and fulfilled and
the execution and delivery hereof have been in all respects duly authorized;
<PAGE>
-2-
NOW, THEREFORE, the Company and the Trustee mutually covenant and
agree for the equal and proportionate benefit of the respective holders from
time to time of the Notes as follows:
ARTICLE 1.
AMENDMENTS TO INDENTURE
SECTION 1.1. Section 1.01 of the Indenture is hereby amended as
follows:
(1) The definition of "INITIAL NOTES" shall be amended by inserting
the text "and includes any securities issued under the Indenture pursuant to the
Second Issuance" at the end thereof;
(2) The definition of "ISSUE DATE" shall be amended by deleting ",
the date of original issuance of the Notes" from the end thereof;
(3) The definition of "NET EQUITY PROCEEDS" shall be amended by
deleting "the Notes on the Issue Date" at the end thereof and inserting in its
place "any Notes";
(4) The following definitions shall be added to Section 1.01:
"FIRST SUPPLEMENTAL INDENTURE" means the First
Supplemental Indenture to the Indenture dated as of November 21, 1995.
"SECOND ISSUANCE" means the issuance of up to $90,000,000
aggregate principal amount at maturity of Notes pursuant to the First
Supplemental Indenture.
"SECOND ISSUANCE ISSUE DATE" means November 21, 1995, the
date of original issuance of the Initial Notes pursuant to the Second Issuance.
<PAGE>
-3-
SECTION 1.2. The fourth paragraph of Section 2.02 of the Indenture is
hereby amended by deleting "$235,000,000" in the third and twelfth line thereof
and replacing it with "$325,000,000".
SECTION 1.3. Section 2.15 of the Indenture is hereby amended by
adding the text "(with respect to any Note not issued pursuant to the Second
Issuance) or the third anniversary of the Second Issuance Issue Date (with
respect to any Note issued pursuant to the Second Issuance)" on the fourth line
of the first paragraph thereof after the words "Issue Date".
SECTION 1.4. Section 2.17(a)(i) of the Indenture is hereby amended by
deleting, on the fifth and eighth lines thereof, the words "Issue Date" and
inserting in their place "date such Note was issued".
SECTION 1.5. Section 2.17(c) of the Indenture shall be amended by
deleting, on the eighth and eleventh-twelfth lines thereof, the words "Issue
Date" and inserting in their place "date such Note was issued".
SECTION 1.6. Section 2.17(e) of the Indenture is hereby amended by
deleting, on the third-fourth lines thereof, the words "Issue Date" and
inserting in their place "date such Note was issued".
ARTICLE 2.
AMENDMENT TO FORM OF SECURITY
SECTION 2.1. The first paragraph of Exhibit A to the Indenture (Form
of Initial Note) is hereby amended by deleting "$450.398," "$1,199.602" and
"15.04049098%" and adding in their place "$525.126," "$1,124.87" and "13.173%",
respectively.
SECTION 2.2. Paragraph 4 of the reverse of Exhibit A to the Indenture
(Form of Initial Note) is hereby amended by adding the text "as it may be
supplemented or amended from time to time in accordance with the terms thereof,"
inside the parenthetical
<PAGE>
-4-
immediately following "June 15, 1995" in the first sentence thereof and deleting
"$235,000,000" in the second sentence thereof and replacing it with
"$325,000,000".
SECTION 2.3. Paragraph 6(b) of the reverse of Exhibit A to the
Indenture (Form of Initial Note) is hereby amended by deleting "25% of the
aggregate principal amount of the Notes originally issued" and "75% in aggregate
principal amount of the Notes originally issued" and inserting in their place
"$81,250,000 of the aggregate principal amount at maturity of the Notes" and
"$243,750,000 in aggregate principal amount at maturity of the Notes",
respectively.
SECTION 2.4. The first paragraph of Exhibit B to the Indenture (Form
of Exchange Note) is hereby amended by deleting "$450.398," "$1,199.602" and
"15.04049098%" and adding in their place "$525.126," "$1,124.87" and "13.173%",
respectively.
SECTION 2.5. Paragraph 4 of the reverse of Exhibit B to the Indenture
(Form of Exchange Note) is hereby amended by adding "as it may be supplemented
or amended from time to time in accordance with the terms thereof," inside the
parenthetical immediately following "June 15, 1995" in the first sentence
thereof and deleting "$235,000,000" in the second sentence thereof and replacing
it with "$325,000,000".
SECTION 2.6. Paragraph 6(b) of the reverse of Exhibit B to the
Indenture (Form of Exchange Note) is hereby amended by deleting "25% of the
aggregate principal of the Notes originally issued" and "75% in aggregate
principal amount of the Notes originally issued" and inserting in their place
"$81,250,000 of the aggregate principal amount at maturity of the Notes" and
"$243,750,000 in aggregate principal amount at maturity of the Notes",
respectively.
ARTICLE 3.
MISCELLANEOUS
<PAGE>
-5-
SECTION 3.1. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Indenture, and the Rules of
Construction set forth in the Indenture shall likewise govern this First
Supplemental Indenture.
SECTION 3.2. Upon the execution and delivery of this First
Supplemental Indenture by the Trustee and the Company, the Proposed Amendments
contained herein will become effective and operative. Thereafter, all
references to the Indenture shall, unless specifically referring to the
Indenture as originally executed, be deemed to be references to the Indenture as
modified by this First Supplemental Indenture.
SECTION 3.3. The recitals contained herein shall be taken as the
statement of the Company, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representation as to the validity
of this First Supplemental Indenture. The Indenture, as supplemented and
amended by this First Supplemental Indenture, is in all respects hereby ratified
and confirmed.
SECTION 3.4. This First Supplemental Indenture shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Except as amended herein, the terms, provisions and covenants of
the Indenture shall remain in full force and effect and continue to govern the
parties thereto.
SECTION 3.5. This First Supplemental Indenture may be executed in two
or more counterparts, each of which shall be deemed original and all of which
together will constitute the same agreement, whether or not all parties execute
each counterpart.
SECTION 3.6. The laws of the State of New York, without regard to
principles of conflicts of law, shall govern this First Supplemental Indenture
and the Notes.
[Remainder of Page Intentionally Left Blank]
<PAGE>
6--
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed, all as of the date first above written.
CELLNET DATA SYSTEMS, INC.
By: /s/ David Perry
---------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By: /s/ Vivian Georges
---------------------------
Name: Vivian Georges
Title: Assistant Vice President
<PAGE>
FIRST SUPPLEMENTAL WARRANT AGREEMENT
THIS FIRST SUPPLEMENTAL WARRANT AGREEMENT, dated as of November 21,
1995, to the WARRANT AGREEMENT, dated as of June 15, 1995, between CELLNET DATA
SYSTEMS, INC., a California corporation (the "COMPANY"), and THE BANK OF NEW
YORK, a New York banking corporation, as warrant agent thereunder (the "WARRANT
AGENT").
W I T N E S S E T H:
WHEREAS, the Company and the Warrant Agent have heretofore executed
and delivered a Warrant Agreement dated as of June 15, 1995 (the "WARRANT
AGREEMENT") providing for the issuance by the Company of up to 940,000 warrants
each to purchase initially one share of the Common Stock, no par value, of the
Company (the "WARRANTS");
WHEREAS, the Company desires to amend the Warrant Agreement as set
forth in this First Supplemental Warrant Agreement;
WHEREAS, Section 7.01 of the Warrant Agreement provides, among other
things, that, subject to certain exceptions not herein relevant, with the
consent of the holders of at least a majority in number of the Warrants at the
time outstanding, the Company and the Warrant Agent may amend or supplement the
Warrant Agreement or the Warrants;
WHEREAS, the Company has received consents to the amendments to the
Warrant Agreement contained herein (the "PROPOSED AMENDMENTS") of holders of at
least a majority in number of the Warrants outstanding on the date hereof (the
"REQUISITE CONSENTS"); and
WHEREAS, all things necessary to make this First Supplemental Warrant
Agreement a valid agreement of the Company and the Warrant Agent and a valid
amendment of and supplement to the Warrant Agreement and all of the conditions
and requirements set forth in Section 7.01 of the Warrant Agreement have been
performed
<PAGE>
-2-
and fulfilled and the execution and delivery hereof have been in all respects
duly authorized;
NOW, THEREFORE, the Company and the Warrant Agent mutually covenant
and agree for the equal and proportionate benefit of the respective holders
from time to time of the Warrants as follows:
ARTICLE 1.
AMENDMENTS TO WARRANT AGREEMENT
SECTION 1.1. The second paragraph of the Warrant Agreement is hereby
amended by deleting it in its entirety and replacing it with the following:
"WHEREAS, the Company entered into a purchase agreement dated
June 15, 1995 with Smith Barney Inc. (the "INITIAL PURCHASER") in
which the Company sold to the Initial Purchaser 235,000 units (the
"ORIGINAL UNITS") consisting of (i) $235,000,000 aggregate principal
amount at maturity of 13% Senior Discount Notes due 2005 (the
"ORIGINAL NOTES") of the Company issued under an indenture dated as of
June 15, 1995 (the "INDENTURE") between the Company and The Bank of
New York, as trustee, and (ii) 940,000 warrants (the "ORIGINAL
WARRANTS"), each representing the right to purchase initially one
share of Common Stock, no par value per share, of the Company (the
"COMMON STOCK"), subject to adjustment in accordance with the terms
hereof; and
WHEREAS, the Company has entered into a purchase agreement dated
November 21, 1995 with the Initial Purchaser in which the Company has
agreed to sell to the Initial Purchaser 90,000 additional units (the
"ADDITIONAL UNITS," and together with the Original Units, the "UNITS")
consisting of (i) $90,000,000 aggregate principal amount at maturity
of 13% Senior Discount Notes due 2005 (the "ADDITIONAL NOTES," and
together with the
<PAGE>
-3-
Original Notes, the "NOTES") of the Company to be issued under the Indenture, as
supplemented by the First Supplemental Indenture dated as of November 21, 1995
between the Company and the Trustee and (ii) 360,000 warrants (the "ADDITIONAL
WARRANTS," and together with the Original Warrants, the "WARRANTS" and the
certificates evidencing the Warrants, the "WARRANT CERTIFICATES"), each
representing the right to purchase initially one share of Common Stock, subject
to adjustment in accordance with the terms hereof; and"
SECTION 1.2. Section 4.02 of the Warrant Agreement is hereby amended
by adding the word "Equity" after the word "Public" on the second line of the
first sentence thereof.
ARTICLE 2.
AMENDMENT TO FORM OF WARRANT CERTIFICATE
SECTION 2.1. Paragraph 1 of the reverse of Exhibit A to the Warrant
Agreement (Form of Warrant Certificate) is hereby amended by adding "as it may
be supplemented or amended from time to time in accordance with the terms
thereof," inside the parenthetical immediately following "June 15, 1995" in the
second sentence thereof.
ARTICLE 3.
MISCELLANEOUS
SECTION 3.1. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Warrant Agreement.
SECTION 3.2. Upon the execution and delivery of this First
Supplemental Warrant Agreement by the Warrant Agent and the Company, the
Proposed Amendments contained herein will become effective and operative.
<PAGE>
-4-
SECTION 3.3. The recitals contained herein shall be taken as the
statement of the Company, and the Warrant Agent assumes no responsibility for
the correctness of the same. The Warrant Agent makes no representation as to
the validity of this First Supplemental Warrant Agreement. The Warrant
Agreement, as supplemented and amended by this First Supplemental Warrant
Agreement, is in all respect hereby ratified and confirmed.
SECTION 3.4. This First Supplemental Warrant Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Except as amended herein, the terms, provisions and
covenants of the Warrant Agreement shall remain in full force and effect and
continue to govern the parties thereto.
SECTION 3.5. This First Supplemental Warrant Agreement may be
executed in two or more counterparts, each of which shall be deemed original and
all of which together will constitute the same agreement, whether or not all
parties execute each counterpart.
SECTION 3.6. The laws of the State of New York, without regard to
principles of conflicts of law, shall govern this First Supplemental Warrant
Agreement and the Warrants.
[Remainder of Page Intentionally Left Blank]
<PAGE>
-5-
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Warrant Agreement to be duly executed, all as of the date first above written.
CELLNET DATA SYSTEMS, INC.
By: /s/ David Perry
__________________________
Name:
Title:
THE BANK OF NEW YORK, as Warrant
Agent
By: /s/ Vivian Georges
__________________________
Name: Vivian Georges
Title: Assistant Vice President
<PAGE>
FIRST SUPPLEMENTAL NOTES REGISTRATION RIGHTS AGREEMENT
THIS FIRST SUPPLEMENTAL NOTES REGISTRATION RIGHTS AGREEMENT, dated as of
November 21, 1995, to the REGISTRATION RIGHTS AGREEMENT (the "Registration
Rights Agreement"), dated as of June 15, 1995, between CELLNET DATA SYSTEMS,
INC., a California corporation (the "Company"), and the Holders of Registrable
Notes listed on the signature pages thereto.
WITNESSETH:
WHEREAS, the Company and the Initial Purchaser entered into a Purchase
Agreement dated as of June 15, 1995 which provided for the sale by the Company
to the Initial Purchaser of 235,000 units consisting of $235,000,000 aggregate
principal amount at maturity of the Company's 13% Senior Discount Notes due
June 15, 2005 and warrants to purchase 940,000 shares of common stock, no par
value per share, of the Company; and
WHEREAS, in order to induce the Initial Purchaser to enter into the
Purchase Agreement dated as of June 15, 1995 between the Company and the Initial
Purchaser, the Company agreed to provide the registration rights set forth in
the Registration Rights Agreement for the benefit of the Initial Purchaser and
its direct and indirect transferees and assigns; and
WHEREAS, the Company desires to amend the Registration Rights Agreement as
set forth in this First Supplemental Notes Registration Rights Agreement; and
WHEREAS, Section 10(c) of the Registration Rights Agreement provides, among
other things, that, subject to certain exceptions not herein relevant, with the
consent of the Holders of at least a majority in aggregate principal amount of
the Registrable Notes at the time outstanding the Registration Rights Agreement
may be amended or supplemented; and
WHEREAS, the Company has received consents to the amendments to the
Registration Rights Agreement contained herein (the "Proposed Amendments") of
Holders of at least a majority in aggregate principal amount of the Registrable
Notes outstanding on the date hereof; and
WHEREAS, all things necessary to make this First Supplemental Notes
Registration Rights Agreement a valid agreement of the Company and a valid
amendment of and supplement to the Registration Rights Agreement and all of the
conditions and requirements set forth in Section 10(c) of the Registration
Rights Agreement have been performed and fulfilled and the execution and
delivery hereof have been in all respects duly authorized;
NOW, THEREFORE, the Company and the Holders signatory hereto mutually
covenant and agree for the equal and proportionate benefit of the respective
Holders from time to time of the Registrable Notes as follows:
<PAGE>
ARTICLE 1.
AMENDMENTS TO REGISTRATION RIGHTS AGREEMENT
SECTION 1.1. Section 1 of the Registration Rights Agreement is hereby
amended as follows:
(1) The definition of "Notes" is hereby amended by deleting all text after
the comma after the word "hereto" in the first line thereof and inserting the
following text "and including any Notes (as defined in the Indenture) issued
pursuant to the Second Issuance"; and
(2) The definition of "Trigger Date" is hereby amended by deleting the
reference in the first proviso thereto to "Rule 144(h)" and inserting in lieu
thereof "Rule 144(k)".
(3) The following definitions are hereby added to Section 1.:
FIRST SUPPLEMENTAL INDENTURE: The First Supplemental Indenture
dated as of November 31, 1995.
SECOND ISSUANCE: The issuance of up to $90,000,000 aggregate
principal amount at maturity of Notes pursuant to the First Supplemental
Indenture.
SECOND ISSUANCE ISSUE DATE: November 21, 1995, the date of
original issuance of the Initial Notes pursuant to the Second Issuance.
SECTION 1.2. Paragraph (d) of Section 2 is hereby amended by deleting the
text "(3)" after the word "clause" in the second line thereof and inserting
"(iii)" in lieu thereof.
SECTION 1.3. The second paragraph of Section 3(a) is hereby amended as
follows:
(1) The first sentence is hereby amended by adding the text "or, with
respect to any Notes issued pursuant to the Second Issuance, 36 months from the
Second Issuance Issue Date" on the sixth line immediately after "June 15, 1995".
[Supplemental Notes Registration Rights Agreement]
-2-
<PAGE>
ARTICLE 2.
MISCELLANEOUS
SECTION 2.1. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Registration Rights Agreement.
SECTION 2.2. Upon the execution and delivery of this First Supplemental
Notes Registration Rights Agreement by the Holders named on the signature pages
hereto and the Company, the Proposed Amendments contained herein will become
effective and operative.
SECTION 2.3. The recitals contained herein shall be taken as the
statement of the Company, and the Holders assume no responsibility for the
correctness of the same. The Holders make no representation as to the validity
of this First Supplemental Notes Registration Rights Agreement. The
Registration Rights Agreement, as supplemented and amended by this First
Supplemental Notes Registration Rights Agreement, is in all respects hereby
ratified and confirmed.
SECTION 2.4. This First Supplemental Notes Registration Rights Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Except as amended herein, the terms,
provisions and covenants of the Registration Rights Agreement shall remain in
full force and effect and continue to govern the parties thereto.
SECTION 2.5. This First Supplemental Notes Registration Rights Agreement
may be executed in two or more counterparts, each of which shall be deemed
original and all of which together will constitute the same agreement, whether
or not all parties execute each counterpart.
SECTION 2.6. The laws of the State of New York, without regard to
principles of conflicts of law, shall govern this First Supplemental Notes
Registration Rights Agreement and the Notes.
[Remainder of Page Intentionally Left Blank]
[Supplemental Notes Registration Rights Agreement]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Supplemental Notes
Registration Rights Agreement to be duly executed, all as of the date first
above written.
CELLNET DATA SYSTEMS, INC.
By: /s/ DAVID PERRY
-----------------------------
[Supplemental Notes Registration Rights Agreement]
-4-
<PAGE>
The Prudential Insurance Company of
America, as Investment Manager for the
General Motors Retirement Program for
Salaried Employees High Yield Account
-------------------------------------
Name of Holder
By: /s/ LARS M. BERKMAN
---------------------------------
Name: Lars M. Berkman
Title: Vice President
[Supplemental Notes Registration Rights Agreement]
-5-
<PAGE>
The Prudential Series Fund, Inc.,
High Yield Bond Portfolio
The U.S. High Yield Fund SICAV
By: The Prudential Insurance Company
of America, as investment adviser
---------------------------------------
Name of Holder
By: /s/ LARS M. BERKMAN
-----------------------------------
Name: Lars M. Berkman
Title: Vice President
[Supplemental Notes Registration Rights Agreement]
-6-
<PAGE>
The High Yield Income Fund, Inc.
Prudential High Yield Fund
By: The Prudential Investment
Corporation,
as investment adviser
------------------------------------
Name of Holder
By: /s/ LARS M. BERKMAN
--------------------------------
Name: Lars M. Berkman
Title: Vice President
[Supplemental Notes Registration Rights Agreement]
-7-
<PAGE>
Merrill Lynch Multinational
Investment Portfolios
Equity/Convertible Series
(Global Allocation Portfolio)
------------------------------------
Name of Holder
By: /s/ B. ISON
--------------------------------
Name: B. Ison
Title: Vice President
[Supplemental Notes Registration Rights Agreement]
-8-
<PAGE>
Merrill Lynch Global
Allocation Fund, Inc.
------------------------------------
Name of Holder
By: /s/ B. ISON
--------------------------------
Name: B. Ison
Title: Vice President
[Supplemental Notes Registration Rights Agreement]
-9-
<PAGE>
Capital Research and Management Company
on behalf of The Bond Fund of America,
Inc., American High-Income Trust, and
American Variable Insurance High-Yield
Bond Fund
---------------------------------------
Name of Holder
By: /s/ RICHARD T. SCHOTTE
-----------------------------------
Name: Richard T. Schotte
Title: Senior Vice President
[Supplemental Notes Registration Rights Agreement]
-10-
<PAGE>
Putnam Capital Manager Trust-PCM High Yield Fund
Putnam Asset Allocation Funds-Balanced Portfolio
Putnam Fiduciary Trust Company on behalf of Putnam High
Yield Managed Trust
Putnam High Yield Trust
Putnam Asset Allocation Funds-Conservative Portfolio
The Putnam Advisory Company, Inc. on behalf of
Ameritech Pension Trust
Putnam High Yield Advantage Fund
Putnam High Income Convertible and Bond Fund
Putnam Asset Allocation Funds-Growth Portfolio
The Putnam Advisory Company, Inc. on behalf of Central
States, Southeast and Southwest Areas Pension Fund
Putnam Managed High Yield Trust
The Putnam Advisory Company, Inc. on behalf of Southern
Farm Bureau Annuity Insurance Company
Putnam Convertible Opportunities and Income Trust
Putnam Master Income Trust
Putnam Premier Income Trust
Putnam Master Intermediate Income Trust
Putnam Diversified Income Trust
Putnam Capital Manager Trust-PCM Diversified Income
Fund
By: /s/ PAUL M. O'NEIL
--------------------------------
Name: Paul M. O'Neil
Title: Vice President
[Supplemental Notes Registration Rights Agreement]
-11-
<PAGE>
FIRST SUPPLEMENTAL WARRANTS REGISTRATION RIGHTS AGREEMENT
---------------------------------------------------------
THIS FIRST SUPPLEMENTAL WARRANTS REGISTRATION RIGHTS AGREEMENT, dated
as of November 21, 1995, to the REGISTRATION RIGHTS AGREEMENT (the "REGISTRATION
RIGHTS AGREEMENT"), dated as of June 15, 1995, between CELLNET DATA SYSTEMS,
INC., a California corporation (the "COMPANY"), and the persons listed on the
signature pages thereto.
W I T N E S S E T H:
WHEREAS, the Company and the Initial Purchaser entered into a Purchase
Agreement dated as of June 15, 1995 which provided for the sale by the Company
to the Initial Purchaser of 235,000 units consisting of $235,000,000 aggregate
principal amount at maturity of the Company's 13% Senior Discount Notes due June
15, 2005 and warrants to purchase 940,000 shares of common stock, no par value
per share, of the Company; and
WHEREAS, in order to induce the Initial Purchaser to enter into the
Purchase Agreement dated as of June 15, 1995 between the Company and the Initial
Purchaser, the Company agreed to provide the registration rights set forth in
the Registration Rights Agreement for the benefit of the Initial Purchaser and
its direct and indirect transferees and assigns; and
WHEREAS, the Company desires to amend the Registration Rights
Agreement as set forth in this First Supplemental Warrants Registration Rights
Agreement; and
WHEREAS, Section 6(b) of the Registration Rights Agreement provides,
among other things, that, subject to certain exceptions not herein relevant,
with the consent of the Holders of at least a majority of the Registrable
Securities at the time outstanding the Registration Rights Agreement may be
amended or supplemented; and
WHEREAS, the Company has received consents to the amendments to the
Registration Rights Agreement contained herein
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-2-
(the "PROPOSED AMENDMENTS") of Holders of at least a majority of the
Registrable Securities outstanding on the date hereof; and
WHEREAS, all things necessary to make this First Supplemental Warrants
Registration Rights Agreement a valid agreement of the Company and a valid
amendment of and supplement to the Registration Rights Agreement and all of the
conditions and requirements set forth in Section 6(b) of the Registration Rights
Agreement have been performed and fulfilled and the execution and delivery
hereof have been in all respects duly authorized;
NOW, THEREFORE, the Company and the Holders signatory hereto mutually
covenant and agree for the equal and proportionate benefit of the respective
Holders from time to time as follows:
ARTICLE 1.
AMENDMENTS TO REGISTRATION RIGHTS AGREEMENT
SECTION 1.1. The first sentence of the second paragraph of the
Registration Rights Agreement is hereby amended by deleting "(the "PURCHASE
AGREEMENT")" and inserting before the period thereof:
"and the Purchase Agreement, dated as of November 21, 1995, between
the Company and the Purchaser, relating to, among other things, the
sale by the Company to the Purchaser of an aggregate of 90,000 Units,
each Unit consisting of $1,000 principal amount at maturity of 13%
Senior Discount Notes due June 15, 2005 and four (4) warrants, each
initially exercisable for one (1) share of Common Stock, no par value
per share, of the Company (collectively, the "PURCHASE AGREEMENT")".
SECTION 1.2. Section 1. of the Registration Rights Agreement is
hereby amended as follows:
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-3-
(1) The definition of "HOLDER" is hereby amended by inserting the words
"Warrants or" before the words "Warrant Shares" on the second and fourth line
thereof;
(2) The definition of "INDENTURE" is hereby amended by inserting the
words "as supplemented by the First Supplemental Indenture, dated as of
November 21, 1995" after the words "as Trustee".
(3) The definition of "NOTES" is hereby amended by deleting
"$235,000,000" and inserting in lieu thereof "$325,000,000"; and
(4) The definition of "WARRANTS" is hereby amended by deleting
"940,000" and inserting in lieu thereof "1,300,000".
SECTION 1.2. Section 6(b) of the Registration Rights Agreement is
hereby amended by inserting the text "(A) prior to the time that the Warrants
are exercisable pursuant to the terms of the Warrant Agreement, the Warrants and
(B) after such time as the Warrants are exercisable pursuant to the terms of the
Warrant Agreement, the Warrants and the Registrable Securities considered as one
class of securities (with each Warrant being deemed equal to that number of
Warrant Shares for which it is then exercisable (without regard to the Cashless
Exercise option set forth in the Warrant Agreement)" immediately after the word
"outstanding" on the sixth line thereof and deleting the words "Registrable
Securities" on such sixth line.
ARTICLE 2.
MISCELLANEOUS
SECTION 2.1. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Registration Rights Agreement.
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-4-
SECTION 2.2. Upon the execution and delivery of this First
Supplemental Warrants Registration Rights Agreement by the Holders named on the
signature pages hereto and the Company, the Proposed Amendments contained herein
will become effective and operative.
SECTION 2.3. The recitals contained herein shall be taken as the
statement of the Company, and the Holders assume no responsibility for the
correctness of the same. The Holders make no representation as to the validity
of this First Supplemental Warrants Registration Rights Agreement. The
Registration Rights Agreement, as supplemented and amended by this First
Supplemental Warrants Registration Rights Agreement, is in all respect hereby
ratified and confirmed.
SECTION 2.4. This First Supplemental Warrants Registration Rights
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Except as amended herein, the
terms, provisions and covenants of the Registration Rights Agreement shall
remain in full force and effect and continue to govern the parties thereto.
SECTION 2.5. This First Supplemental Warrants Registration Rights
Agreement may be executed in two or more counterparts, each of which shall be
deemed original and all of which together will constitute the same agreement,
whether or not all parties execute each counterpart.
SECTION 2.6. The laws of the State of New York, without regard to
principles of conflicts of law, shall govern this First Supplemental Warrants
Registration Rights Agreement.
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Warrants Registration Rights Agreement to be duly executed, all as of the date
first above written.
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-5-
CELLNET DATA SYSTEMS, INC.
By: /s/ David Perry
_________________________
Name:
Title:
____________________________
Name of Holder
By:_________________________
Name:
Title:
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-6-
The Prudential Series Fund, Inc.,
High Yield Bond Portfolio
The U.S. High Yield Fund SICAV
By: The Prudential Insurance Company of
America, as investment adviser
----------------------------------
Name of Holder
By: /s/ Lars M. Berkman
________________________________
Name: Lars M. Berkman
Title: Vice President
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-6-
The High Yield Income Fund, Inc.
Prudential High Yield Fund
By: The Prudential Investment Corporation,
as investment adviser
----------------------------------
Name of Holder
By: /s/ Lars M. Berkman
_________________________________
Name: Lars M. Berkman
Title: Vice President
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-6-
The Prudential Insurance Company of
America, as Investment Manager for the
General Motors Retirement Program for
Salaried Employees High Yield Account
----------------------------------
Name of Holder
By: /s/ Lars M. Berkman
_________________________________
Name: Lars M. Berkman
Title: Vice President
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-6-
Merrill Lynch Multinational
Investment Portfolios Equity/Convertible
Series (Global Allocation Portfolio)
----------------------------------
Name of Holder
By: /s/ B. Ison
_________________________________
Name: B. Ison
Title: Vice President
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-6-
Merrill Lynch Global
Allocation Fund, Inc.
----------------------------------
Name of Holder
By: /s/ B. Ison
_________________________________
Name: B. Ison
Title: Vice President
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
-6-
CAPITAL RESEARCH AND MANAGEMENT COMPANY
on behalf of
THE BOND FUND OF AMERICA, INC.,
AMERICAN HIGH-INCOME TRUST,
and AMERICAN VARIABLE INSURANCE
HIGH-YIELD BOND FUND
----------------------------------
Name of Holder
By: /s/ Richard T. Schotte
_________________________________
Name: Richard T. Schotte
Title: Senior Vice President
<PAGE>
[Supplemental Warrants Registration Rights Agreement]
Putnam Capital Manager Trust-PCM High Yield Fund
Putnam Asset Allocation Funds-Balanced Portfolio
Putnam Fiduciary Trust Company on behalf of
Putnam High Yield Managed Trust
Putnam High Yield Trust
Putnam Asset Allocation Funds-Conservative Portfolio
The Putnam Advisory Company, Inc. on behalf of
Ameritech Pension Trust
Putnam High Yield Advantage Fund
Putnam High Income Convertible and Bond Fund
Putnam Asset Allocation Funds-Growth Portfolio
The Putnam Advisory Company, Inc. on behalf of
Central States, Southeast and Southwest
Areas Pension Fund
Putnam Managed High Yield Trust
The Putnam Advisory Company, Inc. on behalf of
Southern Farm Bureau Annuity Insurance Company
Putnam Convertible Opportunities and Income Trust
Putnam Master Income Trust
Putnam Premier Income Trust
Putnam Master Intermediate Income Trust
Putnam Diversified Income Trust
Putnam Capital Manager Trust-PCM Diversified Income Fund
By: /s/ Paul M. O'Neil
----------------------
Name: Paul M. O'Neil
Title: Vice President
<PAGE>
WARRANT NO. BB-1-
THIS WARRANT AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN AND IN THE
SERIES BB PREFERRED SHARE PURCHASE AGREEMENT, A COPY OF WHICH IS AVAILABLE
FROM THE SECRETARY OF THE COMPANY.
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION.
THE SALE OF THESE SECURITIES HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS SUCH SALE OR
TRANSFER IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED
UNLESS THE SALE IS SO EXEMPT.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE
COMPANY AND LEGAL COUNSEL FOR THE COMPANY.
Void after September 30, 1998
CELLNET DATA SYSTEMS, INC.
WARRANT TO PURCHASE UP TO 2- SHARES OF SERIES BB PREFERRED
----------
THIS CERTIFIES THAT, for a maximum aggregate purchase price of 3-, 4- is
entitled at any time prior to expiration of this Warrant to subscribe for and
purchase up to 2- shares of the fully paid and nonassessable Series BB Preferred
Stock of CellNet Data Systems, Inc., a California corporation (hereinafter
called the "Company"), at the price of $4.75 per share (such price and such
other price as shall result, from time to time, from the adjustments specified
in paragraph 4 hereof is herein referred to as the "Warrant Price"), subject to
the provisions and upon the terms and conditions hereinafter set forth. As used
herein, the terms "Series BB Preferred"
<PAGE>
and "Shares" shall mean the Company's presently authorized Series BB Preferred
Stock, and any stock into or for which such Series BB Preferred Stock may
hereafter be converted or exchanged, and the term "Date of Grant" shall mean
October 12, 1993.
1. TERM.
This Warrant is exercisable, in whole or in part, at any time and from
time to time from the Date of Grant through September 30, 1998, provided,
however that this Warrant must be either exercised or the Warrant terminates
immediately before (i) the closing of a firmly underwritten initial public
offering of the Company's securities or (ii) the merger or consolidation of the
corporation into or with another corporation in which this corporation shall not
survive and the shareholders of this corporation shall own less than 50% of the
voting securities of the surviving corporation or the sale, transfer or lease
(but not including a transfer or lease by pledge or mortgage to a bona fide
lender) of all or substantially all of the assets of the corporation ("Merger or
Consolidation"); provided the Company has given the holder of the Warrant at
least fifteen (15) days written notice of such closing date.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) Subject to paragraph 1 hereof, the purchase right represented by
this Warrant may be exercised by the Holder hereof, in whole or in part, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Exhibit A duly executed) at the principal office of the Company and (i) by the
payment to the Company, by check, of an amount equal to the then applicable
Warrant Price per share multiplied by the number of Shares then being purchased,
or (ii) on or after the date on which the Company's Common Stock becomes
publicly traded or in conjunction with a Merger or Consolidation, by surrender
of the right to receive upon exercise hereof a number of Shares equal to the
value (as determined below) of the Shares with respect to which this Warrant is
being exercised, in which case the number of shares to be issued to the Holder
upon such exercise shall be computed using the following formula:
X = Y(A-B)
-------
A
Where: X = the number of shares of Common to be issued to the Holder.
Y = the number of shares of Common with respect to which this Warrant
is being exercised.
-2-
<PAGE>
A = the fair market value of one share of Common.
B = Warrant Price.
As used herein, the "fair market value of one share of Common"
shall be determined as provided below.
(i) In conjunction with a Merger or Consolidation, then the
"fair market value of one share of Common" shall be the value received by the
holders of the Company's Common Stock pursuant to such transaction for each
share of Common Stock, and such purchase shall be effective upon the closing of
such transaction, subject to the due, proper and prior surrender of this
Warrant; or
(ii) In conjunction with the initial underwritten public offering
of the Company's Common Stock pursuant to a registration statement filed under
the Securities Act of 1933, the "fair market value of one share of Common" shall
be the price at which registered shares are sold to the public in such offering,
and such purchase shall be effective upon the date of such offering, subject to
the due, proper and prior surrender of this Warrant and the closing of the
offering.
(iii) Should such Merger or Consolidation or such offering
not be consummated, the Company shall refund to the holder the Warrant Price and
the Holder may exercise the purchase right represented by this Warrant, in whole
or in part, at any time and from time to time during the remainder of its term.
(b) In the event of any exercise of the purchase right represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within thirty days of the effective date of such
purchase and, unless this Warrant has been fully exercised or expired, a new
Warrant representing the portion of the Shares, if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to the
holder hereof within such thirty day period. Upon the effective date of such
purchase, the Holder shall be deemed to be the holder of record of the Shares,
notwithstanding that Certificates representing the Shares shall not then be
actually delivered to such Holder or that such Shares are not then set forth on
the stock transfer books of the Company.
3. STOCK FULLY PAID; RESERVATION OF SHARES.
All Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the
-3-
<PAGE>
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Series BB Preferred to provide for
the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The number and kind of securities purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the occurrence of certain events, as follows:
(a) RECLASSIFICATION OR MERGER. In case of any reclassification or
change of outstanding securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company
shall, as condition precedent to such transaction, execute a new Warrant or
cause such successor or purchasing corporation, as the case may be, to execute a
new Warrant, providing that the holder of this Warrant shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Series BB Preferred theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Series BB Preferred. Such new Warrant shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this paragraph 4. The provisions of this subparagraph (a) shall
similarly apply to successive reclassifications, changes, mergers and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Series BB Preferred, the Warrant Price shall be proportionately decreased in
the case of a subdivision or increased in the case of a combination.
(c) STOCK DIVIDENDS. If the Company at any time while this Warrant
is outstanding and unexpired shall pay a dividend with respect to Series BB
Preferred payable in, or make any other distribution with respect to Series BB
Preferred (except any distribution specifically provided for in the foregoing
subparagraph (a) and (b)) of, Series BB Preferred then the Warrant Price shall
be adjusted, from and after the date of determination of shareholders entitled
to receive such dividend or distribution, to
-4-
<PAGE>
that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (a) the numerator of which
shall be the total number of shares of Series BB Preferred outstanding
immediately prior to such dividend or distribution, and (b) the denominator of
which shall be the total number of shares of Series BB Preferred outstanding
immediately after such dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price, the number of Shares of Series BB Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
5. NOTICE OF ADJUSTMENTS.
Whenever any Warrant Price shall be adjusted pursuant to paragraph 4
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price or Prices after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail, postage prepaid) to the holder of this Warrant.
6. NOTICE OF CERTAIN ACTIONS. In the event that this corporation shall
propose at any time:
(i) to declare any dividend or distribution upon any class or
series of its stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other corporation,
or sell, lease or convey all or substantially all its assets or property, or to
liquidate, dissolve or wind up, whether voluntary or involuntary;
(v) to amend or repeal any provision of, or add any provision
to, the Company's Articles of Incorporation or Bylaws if
-5-
<PAGE>
such action would alter or change the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, Series BB Preferred or
increase or decrease the number of shares of the Series BB Preferred authorized;
(vi) to authorize or issue shares of any class or series of stock
having any preference or priority as to dividends or assets superior to or on a
parity with any such preference or priority of the Series BB Preferred, or
authorize or issue any bonds, debentures, notes or other obligations convertible
into or exchangeable for, or having preferences or priority as to dividends or
assets superior to or on a parity with any such performance or priority of the
Series BB Preferred;
(vii) to reclassify any Common Stock or Series BB Preferred into
shares having any preference or priority as to dividends or assets superior to
or on a parity with any such preference or priority of the Series BB Preferred;
then, in connection with each such event, this Company shall send to the holders
of the Warrants:
(1) at least 10 days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (i) and (ii) above;
(2) in the case of the matters referred to in (iii) through
(vii) above, at least 10 days' prior written notice of the date for the
determination of shareholders entitled to vote thereon (and specifying the date
on which the holders of Common Stock shares shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the occurrence of
such event); and
(3) prompt notice of any material change in the terms of
the transactions described in (i) through (vii) above.
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Warrants at the
address for each such holder as shown on the books of this corporation.
7. FRACTIONAL SHARES.
No fractional shares of Series BB Preferred will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.
-6-
<PAGE>
8. COMPLIANCE WITH SECURITIES ACT; NON-TRANSFERABILITY
OF WARRANT; DISPOSITION OF SHARES OF SERIES BB PREFERRED.
(A) COMPLIANCE WITH SECURITIES ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant and the shares of Series BB
Preferred to be issued upon exercise hereof are being acquired for investment
and that he will not offer, sell or otherwise dispose of this Warrant or any
shares of Series BB Preferred to be issued upon exercise hereof except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Act"). Upon exercise of this Warrant, the holder hereof
shall confirm in writing, in a form of Exhibit B, that the shares of Series BB
Preferred so purchased are being acquired for investment and not with a view
toward distribution or resale. In addition, the holder shall provide such
additional information regarding such holder's financial and investment
background as the Company may reasonably request. This Warrant and all shares
of Series BB Preferred issued upon exercise of this Warrant (unless registered
under the Act) shall be stamped or imprinted with a legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMPANY AND WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION."
(B) TRANSFERABILITY OF WARRANT. This Warrant may not be transferred
or assigned in whole or in part without (i) the prior written consent of the
Company and (ii) compliance with applicable federal and state securities laws;
provided, however, that the Warrant may be transferred without the prior written
consent of the Company in the following transactions:
(i) A holder's transfer of the Warrant in whole or in part
during such holder's lifetime or on death by will or intestacy to such holder's
immediate family or to any custodian or trustee for the account of such holder
or such holder's immediate family. "Immediate family" as used herein shall mean
spouse, lineal descendant, father, mother, brother, or sister of the holder
making such transfer.
(ii) A holder's transfer of the Warrant in whole or in part to
the Company or to any shareholder of the Company.
(iii) A holder's transfer of the Warrant in whole or in part to a
person who, at the time of such transfer, is an officer or director of the
Company.
-7-
<PAGE>
(iv) A holder's transfer of the Warrant in whole or in part
pursuant to and in accordance with the terms of any merger, consolidation,
reclassification of shares or capital reorganization of the corporate
shareholder, or pursuant to a sale of all or substantially all of the stock or
assets of a corporate shareholder.
(v) A transfer by a holder which is a limited or general
partnership to any or all of its partners or former partners or any professional
employee (or entity of which such employees are the beneficiaries) of such
partnership.
(c) DISPOSITION OF SHARES OF SERIES BB PREFERRED. With respect to
any offer, sale or other disposition of any shares of Series BB Preferred
acquired pursuant to the exercise of this Warrant prior to registration of such
shares, the holder hereof and each subsequent holder of this Warrant agrees to
give written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of such shares of
Series BB Preferred and indicating whether or not under the Act certificates for
such shares of Series BB Preferred to be sold or otherwise disposed of require
any restrictive legend as to applicable restrictions on transferability in order
to insure compliance with the Act; provided, however, that no such opinion of
counsel or no action letter shall be necessary for a transfer without
consideration by a holder which is a partnership to a partner of such
partnership, a retired partner of such partnership who retires after the date
hereof or to the estate of any such partner or retired partner, so long as such
transfer is made pursuant to the terms of the partnership agreement, or to the
transfer by gift, will or intestate succession by any partner to his spouse or
lineal descendants or ancestors or any trust for the benefit of any of the
foregoing if the transferee agrees in writing to be subject to the terms hereof
to the same extent as if he were an original holder hereunder. Promptly upon
receiving such written notice and reasonably satisfactory opinion, if so
requested, the Company, as promptly as practicable, shall notify such holder
that such holder may sell or otherwise dispose of such shares of Series BB
Preferred, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this subparagraph (c)
that the opinion of counsel for the holder is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly after such
determination has been made. Notwithstanding the foregoing, such shares of
Series BB Preferred may be offered, sold or otherwise disposed of in accordance
with Rule 144 under the Act, provided that the Company shall have been furnished
with such information as the Company may request to
-8-
<PAGE>
provide a reasonable assurance that the provisions of Rule 144 have been
satisfied. Each certificate representing the shares of Series BB Preferred thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as to
the applicable restrictions on transferability in order to insure compliance
with the Act, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to insure compliance with the Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
9. RIGHTS OF SHAREHOLDERS.
No holder of the Warrant or Warrants shall be entitled to vote or
receive dividends or be deemed the holder of Series BB Preferred or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant or Warrants shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
10. REGISTRATION RIGHTS.
The shares of Series BB Preferred obtained upon exercise of this
Warrant shall have the registration rights set forth in the Shareholders
Agreement between the Company and certain investors dated as of October 4, 1993,
and, effective as of the Date of Grant, the term "Registrable Securities" as
defined in the Agreement shall include the Common Stock issuable upon conversion
of the Series BB Preferred obtained upon exercise of this Warrant.
11. GOVERNING LAW.
The terms and conditions of this Warrant shall be governed by and
construed in accordance with California law.
12. MISCELLANEOUS.
The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the registered
-9-
<PAGE>
holder hereof. All notices and other communications from the Company to the
holder of this Warrant shall be mailed by first-class registered or certified
mail, postage prepaid, to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in writing.
CELLNET DATA SYSTEMS, INC.
By:
------------------------------
John M. Seidl
President and CEO
December , 1995
--
-10-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
TO: CELLNET DATA SYSTEMS, INC.
1. The undersigned hereby elects to purchase ___________ shares of
Series BB Preferred Stock of Cellnet Data Systems, Inc. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Series BB Preferred Stock in the name of the undersigned or in such other name
as is specified below:
---------------------------------
(Name)
---------------------------------
---------------------------------
(Address)
3. The undersigned represents that the aforesaid shares of Series BB
Preferred Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares. In support thereof, the undersigned has
executed an Investment Representation Statement attached hereto as Exhibit B.
------------------------------
(Signature)
- ------------------------
(Date)
<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : 4-
COMPANY : CELLNET DATA SYSTEMS, INC.
SECURITY : SERIES BB PREFERRED STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed securities and underlying
Common Stock (the "Securities"), I, the Purchaser, represent to the Company the
following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933 ("Securities Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission ("SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities except set
forth in the Shareholders Agreement. In addition, I understand that the
certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are
<PAGE>
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions.
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.
(f) I further understand that in the event all of the requirements of
Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
Signature of Purchaser:
-------------------------------
Date: , 19
---------------- --
<PAGE>
WARRANT W-4
THIS WARRANT AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY
AND WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE SECURITIES ACT OR RECEIPT OF A NO ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION.
THE SALE OF THESE SECURITIES HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS WARRANT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
----------------------------
DOMESTIC AUTOMATION COMPANY
WARRANT TO PURCHASE 25,000 SHARES OF COMMON STOCK
----------------------------
THIS CERTIFIES THAT, for value received of $1,250.00, Axonn Corporation
("Axonn" or the "holder"), is entitled to purchase up to 25,000 shares (as
adjusted pursuant to Section 4 hereof, the "Shares") of the fully paid and
nonassessable Common Stock of Domestic Automation Company, a California
corporation (the "Company"), at the price of $4.00 per share (such price and
such other price as shall result, from time to time, from the adjustments
specified in Section 4 hereof is herein referred to as the "Warrant Price"),
subject to the provisions and upon the terms and conditions herein set forth.
As used herein, the term "Common Stock" shall mean the Company's presently
authorized Common Stock and any stock into or for which such Common Stock may
hereafter be converted or exchanged, the term "Date of Grant" shall mean
February 24, 1993, and the term "Vesting Commencement Date" shall mean August
21, 1992.
<PAGE>
1. CONDITIONS TO EXERCISE AND TERMINATION.
(a) VESTING. Subject to Sections 1(b) and 1(c) below, the purchase
right represented by this Warrant shall vest and become exercisable, as follows:
Number of Years
Elapsed Since Percentage of
Vesting Shares Becoming Cumulative Percentage
Commencement Date Exercisable of Shares Exercisable
- ----------------- --------------- ---------------------
1 20% 20%
2 20% 40%
3 20% 60%
4 20% 80%
5 20% 100%
(b) EXERCISE RESTRICTIONS. The purchase right may not be exercised
prior to occurrence of one of the following events:
(i) the expiration of five (5) years from the Date of
Grant;
(ii) the effectiveness of a Registration Statement filed by
the Company registering shares of the Company's Common Stock in its initial
public offering; or
(iii) the date five (5) days prior to the date of: (1) a
consolidation or merger of the Company with or into another corporation or
corporations as a result of which the holders of equity securities of the
Company immediately prior to such merger or consolidation hold less than fifty
percent (50%) of the equity securities of the surviving corporation or its
parent, or (2) a sale, conveyance or disposition of all or substantially all of
the assets of the Company.
(c) TERMINATION. This Warrant will remain exercisable until the
Expiration Date, as defined below, and thereafter this Warrant shall cease to be
outstanding and exercisable. The Expiration Date shall be the close of
business, California time, on the earliest of the following to occur:
(i) the date two (2) days prior to the date of (i) a
consolidation or merger of the Company with or into another corporation or
corporations as a result of which the holders of equity securities of the
Company immediately prior to such merger or consolidation hold less than fifty
percent (50%) of the equity securities of the surviving corporation or its
parent (other than a
-2-
<PAGE>
consolidation or merger in which the holders of the Company's Common Stock
receive freely tradeable securities of the surviving corporation listed on a
national securities exchange or the NASDAQ National Market System and the
surviving corporation agrees to assume this Warrant or substitute an equivalent
warrant for this Warrant (ii) a sale, conveyance or disposition of all or
substantially all of the assets of the Company or (iii) the liquidation,
dissolution or winding up of the Company; PROVIDED however, that before any
Expiration Date shall be deemed to occur under this subparagraph 1(c)(i), the
Company shall give the holder of this Warrant written notice at least 10
business days before such event; or
(ii) Six (6) years from the Date of Grant.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) Subject to Section 1 hereof, the purchase right represented by
this Warrant may be exercised by the holder hereof (in amounts of 1,000 Shares
or more) by the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Company and by payment to the Company, by one of the methods specified in
subparagraph 2(b) below, of an amount equal to the then applicable Warrant Price
per Share multiplied by the number of Shares then being purchased. In the event
of any exercise of the rights represented by this Warrant, certificates for the
Shares so purchased shall be delivered to the holder hereof within thirty (30)
days of receipt of such notice. Upon receipt by the Company of this Warrant and
such notice of exercise form, together with the applicable Warrant Price, the
holder shall be deemed to be the holder of record of the Shares, notwithstanding
that certificates representing the Shares shall not then be actually delivered
to such holder. In the event that this Warrant is exercised for a number of
Shares less than the total number of Shares for which it may be exercised, the
Company shall deliver to the warrantholder at the time of delivery of a
certificate for purchased Shares, a new Warrant with the same terms as set forth
herein, but for a number of Shares reduced by the number of Shares as to which
this Warrant (and any subsequent surrendered Warrant) has already been
exercised.
(b) Payment of the exercise price (equal to the Warrant Price per
Share multiplied by the number of Shares then being purchased) of this Warrant
shall be made by (i) cashier's or certified check, (ii) wire transfer or
(iii) authorization for the Company to retain from the total number of Shares as
to which the Warrant is exercised that number of Shares having a fair market
value on the date of exercise equal to the exercise price for the total number
of Shares as to which the Warrant is exercised. Any
-3-
<PAGE>
combination of the foregoing methods of payment shall also be acceptable.
3. STOCK FULLY PAID; RESERVATION OF SHARES.
All Shares which may be issued upon the exercise of this Warrant
according to its terms will, upon issuance, be fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of Shares of its Common Stock to provide for the
exercise of this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The number and kind of securities purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the occurrence of certain events, as follows:
(a) RECLASSIFICATION. In case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), the
Company shall, as a condition precedent to such transaction, cancel this Warrant
and execute and issue a new Warrant providing that the holder of this Warrant
shall have the right to exercise such new Warrant and upon such exercise to
receive, in lieu of each Share of Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification by a holder
of one share of Common Stock. Such new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4. The provisions of this subparagraph 4(a) shall
similarly apply to successive reclassifications.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding shall subdivide or combine the Common
Stock, the Warrant Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination.
(c) STOCK DIVIDENDS. If the Company at any time while this Warrant
is outstanding shall pay a dividend with respect to the Common Stock payable in,
or make any other distribution with respect to the Common Stock (except any
distribution specifically provided for in the foregoing subparagraph (a) and
(b)) of, the
-4-
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (a) the
numerator of which shall be the total number of shares of the Common Stock
outstanding immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of the Common Stock
outstanding immediately after such dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price, the number of Shares of the Common Stock purchasable hereunder
shall be adjusted, to the nearest whole Share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
5. NOTICE OF ADJUSTMENTS.
Whenever any Warrant Price shall be adjusted pursuant to Section 4
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price or Prices after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail, postage prepaid) to the holder of this Warrant at the address
specified below.
6. FRACTIONAL SHARES.
No fractional Shares of the Common Stock will be issued in connection
with any exercise hereunder, but in lieu of such fractional Shares the Company
shall make a cash payment therefor upon the basis of the Warrant Price then in
effect.
7. RESTRICTIONS ON RESALE.
(a) The Shares issued upon exercise of this Warrant shall be subject
to a 180-day market standoff agreement contained in the Investment
Representation Statement attached hereto as Exhibit B.
(b) The holder shall not sell, transfer, pledge, hypothecate or
otherwise dispose of any of the Shares issuable upon exercise of this Warrant,
except as follows:
(i) Before any of the Shares issuable upon exercise of this
Warrant may be sold or transferred (including transfer by
-5-
<PAGE>
operation of law), such Shares shall first be offered to the Company. The
holder shall deliver a notice ("Notice") to the Company stating (i) its bona
fide intention to sell or transfer such Shares, (ii) the number of such Shares
to be sold or transferred, (iii) the price for which it proposes to sell or
transfer such Shares, and (iv) the name of the proposed purchaser or transferee.
(ii) Within thirty (30) days after receipt of the Notice, the
Company or its assignee may elect to purchase any or all Shares to which the
Notice refers, at the price per Share specified in the Notice.
(iii) If all the Shares to which the Notice refers are not elected
to be purchased by the Company, the holder may sell the remaining Shares to any
person named in the Notice at the price specified in the Notice or at a higher
price, provided that such sale or transfer is consummated within 60 days after
the date of such Notice to the Company, and provided further, that any such sale
is in accordance with all the terms and conditions hereof.
The provisions of this paragraph shall terminate upon (but not prior to)
the date specified in clauses 1(b)(ii) or 1(b)(iii) above (and without any
requirement of written notice from the Company). The provisions of this
subparagraph 5(b) shall not apply to a transfer of any Shares by a corporate
shareholder to any of its shareholders; PROVIDED, in each such case any such
transferee shall receive and hold such Shares subject to the provisions of this
subparagraph 5(b) and there shall be no further transfer of such Shares unless
in accordance herewith.
The Company shall not be required (i) to transfer on its books any Shares
of the Company which shall have been sold or transferred in violation of any of
the provisions set forth in this Warrant or (ii) to treat as owner of such
Shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
8. COMPLIANCE WITH SECURITIES LAWS.
The holder of this Warrant, by acceptance hereof, agrees that this
Warrant and the Shares to be issued upon exercise hereof are being acquired for
investment and that it will not offer, sell or otherwise dispose of this Warrant
or any Shares to be issued upon exercise hereof except under circumstances which
will not result in a violation of the Securities Act of 1933, as amended (the
"Securities Act"). Upon exercise of this Warrant, the holder hereof shall
confirm in writing, in the form of Exhibit B attached hereto, that the Shares so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant and all Shares issued upon exercise of
this Warrant shall
-6-
<PAGE>
be stamped or imprinted with legends in substantially the following form
(unless, in the opinion of the Company's legal counsel, such action is not
required):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMPANY AND WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR RECEIPT OF A NO ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180-DAY
LOCK-UP AGREEMENT BETWEEN THE SHAREHOLDER AND THE COMPANY, A COPY OF WHICH IS
AVAILABLE UPON REQUEST FROM THE COMPANY."
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
COMPANY'S RIGHT OF FIRST REFUSAL ON SALE OR TRANSFER AS SET FORTH IN THE WARRANT
EXERCISED FOR THESE SHARES, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE
COMPANY."
Other legends required by the terms of the Warrant Agreement or any
state securities laws may also be stamped or imprinted on certificates
representing the Shares or other securities purchased upon exercise of this
Warrant.
9. TRANSFERABILITY OF WARRANT.
This Warrant may not be transferred or assigned in whole or in part to
any other entity without (i) the prior written consent of the Company, which may
be withheld in its absolute discretion and (ii) compliance with applicable
federal and state securities laws; PROVIDED however, that this Warrant may be
transferred without the prior written consent of (but upon notice to) the
Company to any successor to Axonn as a result of a merger or consolidation or
any transferee of all or substantially all of the assets of Axonn.
10. RIGHTS OF SHAREHOLDERS.
No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value or change of
stock to no par value,
-7-
<PAGE>
consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
11. GOVERNING LAW.
The terms and conditions of this Warrant shall be governed by and
construed in accordance with California law as applied to agreements which are
entered into solely between California residents and are to be performed
entirely within that state.
12. MISCELLANEOUS.
The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the registered holder hereof.
13. NOTICES.
All notices and other communications from the Company to the holder of
this Warrant shall be mailed by first-class registered or certified mail,
postage prepaid, to Axonn Corporation at
__________________________________________, Attn:_________________, President or
such other address as Axonn shall specify in writing. Notices to the Company
should be addressed to its principal offices at 125 Shoreway Road, San Carlos CA
94070, Attn: Chief Financial Officer, or such other address as the Company
shall specify in writing.
DOMESTIC AUTOMATION COMPANY
/s/Paul M. Cook
--------------------------------
Signature
CEO
--------------------------------
Title
12 March 1993
--------------------------------
Date
-8-
<PAGE>
Exhibit A
NOTICE OF EXERCISE
TO: DOMESTIC AUTOMATION COMPANY
1. The undersigned hereby elects to purchase _______ Shares of Common
Stock of Domestic Automation Company pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such Shares in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said Shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
--------------------------------
(Name)
--------------------------------
--------------------------------
(Address)
3. The undersigned represents that the aforesaid Shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
Shares. In support thereof, the undersigned has executed an Investment
Representation Statement attached hereto as Exhibit B.
--------------------------------
By:
-----------------------------
--------------------------------
(Print Name)
- --------------------
(Date)
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION STATEMENT
In connection with the acquisition of ______ Shares of Common Stock of
Domestic Automation Company, the undersigned hereby represents to Domestic
Automation Company (the "Company") as follows:
RECEIPT OF INFORMATION. The undersigned believes that it has received all
information it considers necessary or appropriate for deciding whether to
purchase the Common Stock issuable upon exercise of the Warrant dated
_______________ issued by the Company to the undersigned (the "Warrant"), and it
has examined the information furnished to it by the Company.
INVESTMENT REPRESENTATION.
(a) The Common Stock to be received upon the exercise of the Warrant will
be acquired for investment for its own account, not as a nominee or agent, and
not with a view to the sale or distribution of any part thereof, and it has no
intention of selling, granting any participation in or otherwise distributing
the same, but subject, nevertheless, to any requirement of law that the
disposition of its property shall at all times be within its control. By
executing this Statement, the undersigned further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer, or grant participations to such person or to any third person,
with respect to the Common Stock acquired upon exercise of the Warrant.
(b) The undersigned understands that any Common Stock acquired upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and applicable state
securities laws on the ground that the issuance of securities is exempt pursuant
to Section 4(2) of the Securities Act and a state law exemption relating to
offers and sales not by means of a public offering and that the Company's
reliance on such exemptions is predicated on the undersigned's representations
set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of
any Common Stock acquired upon the exercise of the Warrant unless and until
(i) it shall have notified the Company of the proposed disposition and shall
have furnished the Company with a statement of the circumstances surrounding the
proposed disposition and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and its counsel to the effect
that (A) appropriate action necessary for compliance with the Securities Act and
any applicable state securities laws has been taken or an exemption from the
registration requirements of the Securities Act and such laws is available and
(B) that the proposed transfer will not violate any of said laws.
<PAGE>
(d) The undersigned represents that it is able to fend for itself in
connection with its purchase of Common Stock as contemplated by this Statement,
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment and that it has the
ability to bear the economic risks (including the risk of total loss) of its
investment. The undersigned represents that it has had the opportunity to ask
questions of the Company concerning the Company's business and assets and to
obtain any additional information which it considered necessary to verify the
accuracy of or to amplify the Company's disclosures, and has had all questions
which have been asked by such undersigned satisfactorily answered by the
Company.
(e) The undersigned acknowledges that the Common Stock acquired upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available.
The undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of Shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the Shares, the availability of certain current
public information about the Company, the resale occurring not less than two
years after the later of sale by the issuer or sale by any of its affiliates,
the sale being made through a "broker's transaction" or in transactions directly
with a "market maker" (as provided by Rule 144(f)) and the number of Shares
being sold during any three-month period not exceeding specified limitations.
The undersigned is aware that the conditions for resale set forth in Rule 144
have not been satisfied to date, and that they may not be satisfied at any
future date on which the undersigned might otherwise choose to sell the Shares.
MARKET STANDOFF AGREEMENT
As required by the terms of the Warrant, the undersigned hereby agrees in
connection with the first registration of the Company's securities, whether for
its own account or for the accounts of others, not to sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise dispose of any of
the Shares issued pursuant to the exercise of the Warrant (other than those
included in the registration) without the prior written consent of the Company
and underwriters managing the offering for such period of time (not to exceed
180 days) from the effective date of such registration as the Company or the
underwriters may specify; PROVIDED however, that (i) the undersigned shall be
relieved of its obligations hereunder unless all executive officers and
directors of the Company enter into similar agreements and (ii) nothing herein
shall prevent the undersigned from making a distribution of Shares to its
shareholders, if made in compliance with applicable securities laws, provided
that all such shareholders shall remain subject to this paragraph.
-2-
<PAGE>
The terms of this market standoff agreement shall be applicable to
shareholders to whom any Shares are transferred, and receipt of a written
acknowledgement of this provision by the Company shall be a condition precedent
to transfer of any Shares.
Dated:
------------------ --------------------------------
By:
-----------------------------
--------------------------------
(Typed or Printed Name)
-3-
<PAGE>
WARRANT W-3
THIS WARRANT AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY
AND WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE SECURITIES ACT OR RECEIPT OF A NO ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION.
THE SALE OF THESE SECURITIES HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS WARRANT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
---------------------------
DOMESTIC AUTOMATION COMPANY
WARRANT TO PURCHASE 7,500 SHARES OF COMMON STOCK
---------------------------
THIS CERTIFIES THAT, for value received of $375.00, Diablo Research
Corporation, a California corporation ("Diablo" or the "holder"), is entitled at
any time prior to the Expiration Date (as defined in Section 1) to purchase
7,500 shares (as adjusted pursuant to Section 4 hereof, the "Shares") of the
fully paid and nonassessable Common Stock of Domestic Automation Company, a
California corporation (the "Company"), at the price of $.40 per share (such
price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions herein set
forth. As used herein, the term "Common Stock" shall mean the Company's
presently authorized Common Stock, and any stock into or for which
<PAGE>
such Common Stock may hereafter be converted or exchanged, and the term "Date of
Grant" shall mean February __, 1992.
1. TERM.
This Warrant will remain exercisable until the Expiration Date, as defined
below, and thereafter this Warrant shall cease to be outstanding and
exercisable. The Expiration Date shall be the close of business, California
time, on the earliest of the following to occur:
(a) the date two (2) days prior to the date of (i) a consolidation or
merger of the Company with or into another corporation or corporations (other
than a consolidation or merger solely to effect a reincorporation of the Company
in another state) as a result of which the holders of equity securities of the
Company immediately prior to such merger or consolidation hold less than fifty
percent (50%) of the equity securities of the surviving corporation or its
parent, (ii) a sale, conveyance or disposition of all or substantially all of
the assets of the Company or (iii) the liquidation, dissolution or winding up of
the Company; PROVIDED however, that before any Expiration Date shall be deemed
to occur under this subparagraph 1(a), the Company shall give the holder of this
Warrant written notice at least 10 business days before such event;
(b) immediately prior to the closing of the Company's initial public
offering registered on Form S-1 (or successor or substitute form); PROVIDED
however, that the Company shall give the holder of this Warrant written notice
of such Expiration Date at least 10 business days prior to such closing; or
(c) five (5) years from the Date of Grant.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) Subject to Section 1 hereof, the purchase right represented by
this Warrant may be exercised by the holder hereof (in amounts of 1,000 Shares
or more) by the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Company and by payment to the Company, by one of the methods specified in
subparagraph 2(b) below, of an amount equal to the then applicable Warrant Price
per Share multiplied by the number of Shares then being purchased. In the event
of any exercise of the rights represented by this Warrant, certificates for the
Shares so purchased shall be delivered to the holder hereof within thirty (30)
days of receipt of such notice. Upon receipt by the Company of this Warrant and
such notice of exercise form, together with the applicable Warrant Price, the
holder shall be deemed to be the
-2-
<PAGE>
holder of record of the Shares, notwithstanding that certificates
representing the Shares shall not then be actually delivered to such holder.
In the event that this Warrant is exercised for a number of Shares less than
the total number of Shares for which it may be exercised, the Company shall
deliver to the warrantholder at the time of delivery of a certificate for
purchased Shares, a new Warrant with the same terms as set forth herein, but
for a number of Shares reduced by the number of Shares as to which this
Warrant (and any subsequent surrendered Warrant) has already been exercised.
(b) Payment of the exercise price (equal to the Warrant Price per
Share multiplied by the number of Shares then being purchased) of this Warrant
shall be made by (i) cashier's or certified check, (ii) wire transfer or (iii)
authorization for the Company to retain from the total number of Shares as to
which the Warrant is exercised that number of Shares having a fair market value
on the date of exercise equal to the exercise price for the total number of
Shares as to which the Warrant is exercised. Any combination of the foregoing
methods of payment shall also be acceptable.
3. STOCK FULLY PAID; RESERVATION OF SHARES.
All Shares which may be issued upon the exercise of this Warrant
according to its terms will, upon issuance, be fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of Shares of its Common Stock to provide for the
exercise of this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The number and kind of securities purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the occurrence of certain events, as follows:
(a) RECLASSIFICATION. In case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), the
Company shall, as a condition precedent to such transaction, cancel this Warrant
and execute and issue a new Warrant providing that the holder of this Warrant
shall have the right to exercise such new Warrant and upon such exercise to
receive, in lieu of each Share of Common Stock
-3-
<PAGE>
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification by a holder of one share of Common Stock. Such new Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. The provisions
of this subparagraph 4(a) shall similarly apply to successive reclassifications.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding shall subdivide or combine the Common
Stock, the Warrant Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination.
(c) STOCK DIVIDENDS. If the Company at any time while this Warrant
is outstanding shall pay a dividend with respect to the Common Stock payable in,
or make any other distribution with respect to the Common Stock (except any
distribution specifically provided for in the foregoing subparagraph (a) and
(b)) of, the Common Stock, then the Warrant Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of the Common
Stock outstanding immediately prior to such dividend or distribution, and (b)
the denominator of which shall be the total number of shares of the Common Stock
outstanding immediately after such dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price, the number of Shares of the Common Stock purchasable hereunder
shall be adjusted, to the nearest whole Share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
5. NOTICE OF ADJUSTMENTS.
Whenever any Warrant Price shall be adjusted pursuant to Section 4
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price or Prices after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail, postage prepaid) to the holder of this Warrant at the address
specified below.
-4-
<PAGE>
6. FRACTIONAL SHARES.
No fractional Shares of the Common Stock will be issued in connection
with any exercise hereunder, but in lieu of such fractional Shares the Company
shall make a cash payment therefor upon the basis of the Warrant Price then in
effect.
7. RESTRICTIONS ON RESALE.
(a) The Shares issued upon exercise of this Warrant shall be subject
to a 120-day market standoff agreement contained in the Investment
Representation Statement attached hereto as Exhibit B.
(b) The holder shall not sell, transfer, pledge, hypothecate or
otherwise dispose of any of the Shares issuable upon exercise of this Warrant,
except as follows:
(i) Before any of the Shares issuable upon exercise of this
Warrant may be sold or transferred (including transfer by operation of law),
such Shares shall first be offered to the Company. The holder shall deliver a
notice ("Notice") to the Company stating (i) its bona fide intention to sell or
transfer such Shares, (ii) the number of such Shares to be sold or transferred,
(iii) the price for which it proposes to sell or transfer such Shares, and (iv)
the name of the proposed purchaser or transferee.
(ii) Within thirty (30) days after receipt of the Notice, the
Company or its assignee may elect to purchase any or all Shares to which the
Notice refers, at the price per Share specified in the Notice.
(iii) If all the Shares to which the Notice refers are not elected
to be purchased by the Company, the holder may sell the remaining Shares to any
person named in the Notice at the price specified in the Notice or at a higher
price, provided that such sale or transfer is consummated within 60 days after
the date of such Notice to the Company, and provided further, that any such sale
is in accordance with all the terms and conditions hereof.
The provisions of this paragraph shall terminate upon (but not prior to)
the date specified in clauses 1(a)(i), 1(a)(ii) or 1(b) above (and without any
requirement of written notice from the Company). The provisions of this
subparagraph 5(b) shall not apply to a transfer of any Shares by a corporate
shareholder to any of its shareholders; PROVIDED, in each such case any such
transferee shall receive and hold such Shares subject to the provisions of
-5-
<PAGE>
this subparagraph 5(b) and there shall be no further transfer of such Shares
unless in accordance herewith.
The Company shall not be required (i) to transfer on its books any Shares
of the Company which shall have been sold or transferred in violation of any of
the provisions set forth in this Warrant or (ii) to treat as owner of such
Shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
8. COMPLIANCE WITH SECURITIES LAWS.
The holder of this Warrant, by acceptance hereof, agrees that this
Warrant and the Shares to be issued upon exercise hereof are being acquired for
investment and that it will not offer, sell or otherwise dispose of this Warrant
or any Shares to be issued upon exercise hereof except under circumstances which
will not result in a violation of the Securities Act of 1933, as amended (the
"Securities Act"). Upon exercise of this Warrant, the holder hereof shall
confirm in writing, in the form of Exhibit B attached hereto, that the Shares so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant and all Shares issued upon exercise of
this Warrant shall be stamped or imprinted with legends in substantially the
following form (unless, in the opinion of the Company's legal counsel, such
action is not required):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMPANY AND WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR RECEIPT OF A NO ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 120-DAY
LOCK-UP AGREEMENT BETWEEN THE SHAREHOLDER AND THE COMPANY, A COPY OF WHICH IS
AVAILABLE UPON REQUEST FROM THE COMPANY."
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
COMPANY'S RIGHT OF FIRST REFUSAL ON SALE OR TRANSFER AS SET FORTH IN THE WARRANT
EXERCISED FOR THESE SHARES, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE
COMPANY."
Other legends required by the terms of the Warrant Agreement or any
state securities laws may also be stamped or imprinted on certificates
representing the Shares or other securities purchased upon exercise of this
Warrant.
-6-
<PAGE>
9. TRANSFERABILITY OF WARRANT.
This Warrant may not be transferred or assigned in whole or in part to
any other entity without (i) the prior written consent of the Company, which may
be withheld in its absolute discretion and (ii) compliance with applicable
federal and state securities laws; PROVIDED however, that this Warrant may be
transferred without the prior written consent of (but upon notice to) the
Company to any successor to Diablo as a result of a merger or consolidation or
any transferee of all or substantially all of the assets of Diablo.
10. RIGHTS OF SHAREHOLDERS.
No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
11. GOVERNING LAW.
The terms and conditions of this Warrant shall be governed by and
construed in accordance with California law as applied to agreements which are
entered into solely between California residents and are to be performed
entirely within that state.
12. MISCELLANEOUS.
The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the registered holder hereof.
-7-
<PAGE>
13. NOTICES.
All notices and other communications from the Company to the holder of
this Warrant shall be mailed by first-class registered or certified mail,
postage prepaid, to Diablo Research at 130 Kifer Court, Sunnyvale, CA 94086,
Attn: Don Pezzolo, President or such other address as Diablo shall specify in
writing. Notices to the Company should be addressed to its principal offices at
125 Shoreway Road, San Carlos CA 94070, Attn: Chief Financial Officer, or such
other address as the Company shall specify in writing.
DOMESTIC AUTOMATION COMPANY
/s/ Domestic Automation Company
----------------------------------------
Signature
Vice President
----------------------------------------
Title
2/6/92
----------------------------------------
Date
-8-
<PAGE>
Exhibit A
NOTICE OF EXERCISE
TO: DOMESTIC AUTOMATION COMPANY
1. The undersigned hereby elects to purchase _______ Shares of Common
Stock of Domestic Automation Company pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such Shares in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said Shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------
(Name)
----------------------------------
----------------------------------
(Address)
3. The undersigned represents that the aforesaid Shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
Shares. In support thereof, the undersigned has executed an Investment
Representation Statement attached hereto as Exhibit B.
----------------------------------------
By:
----------------------------------------
----------------------------------------
(Print Name)
- ----------------------------------------
(Date)
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION STATEMENT
In connection with the acquisition of ______ Shares of Common Stock of
Domestic Automation Company, the undersigned hereby represents to Domestic
Automation Company (the "Company") as follows:
RECEIPT OF INFORMATION. The undersigned believes that it has received all
information it considers necessary or appropriate for deciding whether to
purchase the Common Stock issuable upon exercise of the Warrant dated
_______________ issued by the Company to the undersigned (the "Warrant"), and it
has examined the information furnished to it by the Company.
INVESTMENT REPRESENTATION.
(a) The Common Stock to be received upon the exercise of the Warrant will
be acquired for investment for its own account, not as a nominee or agent, and
not with a view to the sale or distribution of any part thereof, and it has no
intention of selling, granting any participation in or otherwise distributing
the same, but subject, nevertheless, to any requirement of law that the
disposition of its property shall at all times be within its control. By
executing this Statement, the undersigned further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer, or grant participations to such person or to any third person,
with respect to the Common Stock acquired upon exercise of the Warrant.
(b) The undersigned understands that any Common Stock acquired upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and applicable state
securities laws on the ground that the issuance of securities is exempt pursuant
to Section 4(2) of the Securities Act and a state law exemption relating to
offers and sales not by means of a public offering and that the Company's
reliance on such exemptions is predicated on the undersigned's representations
set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of
any Common Stock acquired upon the exercise of the Warrant unless and until (i)
it shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and its counsel to the effect
that (A) appropriate action necessary for compliance with the Securities Act and
any applicable state securities laws has been taken or an exemption from the
registration requirements of
<PAGE>
the Securities Act and such laws is available and (B) that the proposed transfer
will not violate any of said laws.
(d) The undersigned represents that it is able to fend for itself in
connection with its purchase of Common Stock as contemplated by this Statement,
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment and that it has the
ability to bear the economic risks (including the risk of total loss) of its
investment. The undersigned represents that it has had the opportunity to ask
questions of the Company concerning the Company's business and assets and to
obtain any additional information which it considered necessary to verify the
accuracy of or to amplify the Company's disclosures, and has had all questions
which have been asked by such undersigned satisfactorily answered by the
Company.
(e) The undersigned acknowledges that the Common Stock acquired upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available.
The undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of Shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the Shares, the availability of certain current
public information about the Company, the resale occurring not less than two
years after the later of sale by the issuer or sale by any of its affiliates,
the sale being made through a "broker's transaction" or in transactions directly
with a "market maker" (as provided by Rule 144(f)) and the number of Shares
being sold during any three-month period not exceeding specified limitations.
The undersigned is aware that the conditions for resale set forth in Rule 144
have not been satisfied to date, and that they may not be satisfied at any
future date on which the undersigned might otherwise choose to sell the Shares.
MARKET STANDOFF AGREEMENT
As required by the terms of the Warrant, the undersigned hereby agrees in
connection with the first registration of the Company's securities, whether for
its own account or for the accounts of others, not to sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise dispose of any of
the Shares issued pursuant to the exercise of the Warrant (other than those
included in the registration) without the prior written consent of the Company
and underwriters managing the offering for such period of time (not to exceed
120 days) from the effective date of such registration as the Company or the
underwriters may specify; PROVIDED however, that (i) the undersigned shall be
relieved of its obligations hereunder unless all executive officers and
directors of the Company enter into similar agreements and
-2-
<PAGE>
(ii) nothing herein shall prevent the undersigned from making a distribution of
Shares to its shareholders, if made in compliance with applicable securities
laws, provided that all such shareholders shall remain subject to this
paragraph.
The terms of this market standoff agreement shall be applicable to
shareholders to whom any Shares are transferred, and receipt of a written
acknowledgement of this provision by the Company shall be a condition precedent
to transfer of any Shares.
Dated: ---------------------------- ----------------------------------------
By:
-------------------------------------
----------------------------------------
(Typed or Printed Name)
-3-
<PAGE>
Warrant No. _____________
THIS WARRANT AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN AND IN THE
SERIES E PREFERRED SHARE PURCHASE AGREEMENT, A COPY OF WHICH IS AVAILABLE
FROM THE SECRETARY OF THE COMPANY.
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT OR RECEIPT OF A NO-ACTION LET7ER FROM THE SECURITIES AND EXCHANGE
COMMISSION.
THE SALE OF THESE SECURITIES HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS SUCH SALE OR
TRANSFER IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED
UNLESS THE SALE IS SO EXEMPT.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT N COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE
COMPANY AND LEGAL COUNSEL FOR THE COMPANY.
Void after December 9, 1996
DOMESTIC AUTOMATION COMPANY
WARRANT TO PURCHASE UP TO __________ SHARES OF SERIES E PREFERRED
THIS CERTIFIES THAT, for a maximum aggregate purchase price of $__________,
________________________________ is entitled at any time prior to expiration of
this Warrant to subscribe for and purchase up to __________ shares of the fully
paid and nonassessable Series E Preferred Stock of Domestic Automation Company,
a California corporation (hereinafter called the "Company"), at the price of
$0.33 per share (such price and such other price as shall result, from time
<PAGE>
to time, from the adjustments specified in paragraph 4 hereof is herein referred
to as the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the terms "Series E
Preferred" and "Shares" shall mean the Company's presently authorized Series E
Preferred Stock, and any stock into or for which such Series E Preferred Stock
may hereafter be converted or exchanged, and the term "Date of Grant" shall mean
December 9, 1991.
1. TERM.
This Warrant is exercisable, in whole or in part, at any time and from
time to time from the Date of Grant through December 9, 1996, provided, however
that this Warrant must be either exercised or the Warrant terminates immediately
before (i) the closing of a firmly underwritten initial public offering of the
Company's securities or (ii) the merger or consolidation of the corporation into
or with another corporation in which this corporation shall not survive and the
shareholders of this corporation shall own less than 50% of the voting
securities of the surviving corporation or the sale, transfer or lease (but not
including a transfer or lease by pledge or mortgage to a bona fide lender) of
all or substantially all of the assets of the corporation ("Merger or
Consolidation"); PROVIDED the Company has given the holder of the Warrant at
least fifteen (15) days written notice of such closing date.
2. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT.
(a) Subject to paragraph 1 hereof, the purchase right represented by
this Warrant may be exercised by the Holder hereof, in whole or in part, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Exhibit A duly executed) at the principal office of the Company and (i) by the
payment to the Company, by check, of an amount equal to the then applicable
Warrant Price per share multiplied by the number of Shares then being purchased,
or (ii) on or after the date on which the Company's Common Stock becomes
publicly traded or in conjunction with a Merger or Consolidation, by surrender
of the right to receive upon exercise hereof a number of Shares equal to the
value (as determined below) of the Shares with respect to which this Warrant is
being exercised, in which case the number of shares to be issued to the Holder
upon such exercise shall be computed using the following formula:
X = (A-
----
A
Where: X = the number of shares of Common to be issued to the Holder.
Y = the number of shares of Common with respect to which this
Warrant is being exercised.
A = the fair market value of one share of Common.
B = Warrant Price.
-2-
<PAGE>
As used herein, the "fair market value of one share of Common" shall
be determined as provided below.
(i) If the Holder shall purchase such shares in conjunction
with a Merger or Consolidation, then the "fair market value of one share of
Common" shall be the value received by the holders of the Company's Common Stock
pursuant to such transaction for each share of Common Stock, and such purchase
shall be effective upon the closing of such transaction, subject to the due,
proper and prior surrender of this Warrant; or
(ii) If the Holder shall purchase such shares in conjunction
with the initial underwritten public offering of the Company's Common Stock
pursuant to a registration statement filed under the Securities Act of 1933, the
"fair market value of one share of Common" shall be the price at which
registered shares are sold to the public in such offering, and such purchase
shall be effective upon the date of such offering, subject to the due, proper
and prior surrender of this Warrant and the closing of the offering.
(iii) Should such Merger or Consolidation or such offering
not be consummated, the Company shall refund to the holder the Warrant Price and
the Holder may exercise the purchase right represented by this Warrant, in whole
or in part, at any time and from time to time during the remainder of its term.
(b) In the event of any exercise of the purchase right represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within thirty days of the effective date of such
purchase and, unless this Warrant has been fully exercised or expired, a new
Warrant representing the portion of the Shares, if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to the
holder hereof within such thirty day period. Upon the effective date of such
purchase, the Holder shall be deemed to be the holder of record of the Shares,
notwithstanding that Certificates representing the Shares shall not then be
actually delivered to such Holder or that such Shares are not then set forth on
the stock transfer books of the Company.
3. STOCK FULLY PAID; RESERVATION OF SHARES.
All Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series E
Preferred to provide for the exercise of the rights represented by this Warrant.
-3-
<PAGE>
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The number and kind of securities purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the occurrence of certain events, as follows:
(a) RECLASSIFICATION OR MERGER. In case of any reclassification or
change of outstanding securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company
shall, as condition precedent to such transaction, execute a new Warrant or
cause such successor or purchasing corporation, as the case may be, to execute a
new Warrant, providing that the holder of this Warrant shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Series E Preferred theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Series E Preferred. Such new Warrant shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this paragraph 4. The provisions of this subparagraph (a) shall
similarly apply to successive reclassifications, changes, mergers and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Series E Preferred, the Warrant Price shall be proportionately decreased in
the case of a subdivision or increased in the case of a combination.
(c) STOCK DIVIDENDS. If the Company at any time while this Warrant
is outstanding and unexpired shall pay a dividend with respect to Series E
Preferred payable in, or make any other distribution with respect to Series E
Preferred (except any distribution specifically provided for in the foregoing
subparagraph (a) and (b)) of, Series E Preferred then the Warrant Price shall be
adjusted, from and after the date of determination of shareholders entitled to
receive such dividend or distribution, to that price determined by multiplying
the Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Series E Preferred outstanding immediately prior to such dividend or
distribution, and (b) the denominator of which shall be the total number of
shares of Series E preferred outstanding immediately after such dividend or
distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price, the number of Shares of Series E Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the
-4-
<PAGE>
Warrant price immediately prior to such adjustment and tile denominator of which
shall be the Warrant Price immediately thereafter.
5. NOTICE OF ADJUSTMENTS.
Whenever any Warrant Price shall be adjusted pursuant to paragraph 4
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price or Prices after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail, postage prepaid) to the holder of this Warrant.
6. NOTICE OF CERTAIN ACTIONS. In the event that this corporation shall
propose at any time:
(i) to declare any dividend or distribution upon any class
or series of its stock, whether in cash, property stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(ii) to offer for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of
its Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its assets or
property, or to liquidate, dissolve or wind up, whether voluntary or
involuntary;
(v) to amend or repeal any provision of, or add any
provision to, the Company's Articles of Incorporation or Bylaws if such action
would alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, Series E Preferred or increase or
decrease the number of shares of the Series E Preferred authorized;
(vi) to authorize or issue shares of any class or series of
stock having any preference or priority as to dividends or assets superior to or
on a parity with any such preference or priority of the Series E Preferred, or
authorize or issue any bonds, debentures, notes or other obligations convertible
into or exchangeable for, or having preferences or priority as to dividends or
assets superior to or on a parity with any such performance or priority of the
Series E Preferred;
(vii) to reclassify any Common Stock or Series A Preferred,
Series B Preferred or Series C Preferred into shares having any preference or
priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Series E Preferred;
-5-
<PAGE>
then, in connection with each such event, this Company shall send to the holders
of the Warrants:
(1) at least 10 days' prior written notice of the date
on which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (i) and (ii) above;
(2) in the case of the matters referred to in (iii)
through (vii) above, at least 10 days' prior written notice of the date for the
determination of shareholders entitled to vote thereon (and specifying the date
on which the holders of Common Stock shares shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the occurrence of
such event); and
(3) prompt notice of any material change in the terms
of the transactions described in (i) through (vii) above.
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Warrants at the
address for each such holder as shown on the books of this corporation.
7. FRACTIONAL SHARES.
No fractional shares of Series E Preferred will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.
8. COMPLIANCE WITH SECURITIES ACT: NON-TRANSFERABILITY OF WARRANT;
DISPOSITION OF SHARES OF SERIES E PREFERRED.
(a) COMPLIANCE WITH SECURITIES ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant and the shares of Series E Preferred
to be issued upon exercise hereof are being acquired for investment and that he
will not offer, sell or otherwise dispose of this Warrant or any shares of
Series E Preferred to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended
(the "Act"). Upon exercise of this Warrant, the holder hereof shall confirm in
writing, in a form of Exhibit B, that the shares of Series E Preferred so
purchased are being acquired for investment and not with a view toward
distribution or resale. In addition, the holder shall provide such additional
information regarding such holder's financial and investment background as the
Company may reasonably request. This Warrant and all shares of Series E
Preferred issued upon exercise of this Warrant (unless registered under the Act)
shall be stamped or imprinted with a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT
-6-
<PAGE>
THE PRIOR WRITTEN CONSENT OF THE COMPANY AND WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR
THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION."
(b) TRANSFERABILITY OF WARRANT. This Warrant may not be transferred
or assigned in whole or in part without (i) the prior written consent of the
Company and (ii) compliance with applicable federal and state securities laws;
provided, however, that the Warrant may be transferred without the prior written
consent of the Company in the following transactions:
(i) A holder's transfer of the Warrant in whole or in part
during such holder's lifetime or on death by will or intestacy to such holder's
immediate family or to any custodian or trustee for the account of such holder
or such holder's immediate family. "Immediate family" as used herein shall mean
spouse, lineal descendant, father, mother, brother, or sister of the holder
making such transfer.
(ii) A holder's transfer of the Warrant in whole or in part
to the Company or to any shareholder of the Company.
(iii) A holder's transfer of the Warrant in whole or in part
to a person who, at the time of such transfer, is an officer or director of the
Company.
(iv) A holder's transfer of the Warrant in whole or in part
pursuant to and in accordance with the terms of any merger, consolidation,
reclassification of shares or capital reorganization of the corporate
shareholder, or pursuant to a sale of all or substantially all of the stock or
assets of a corporate shareholder.
(v) A transfer by a holder which is a limited or general
partnership to any or all of its partners or former partners.
(c) DISPOSITION OF SHARES OF SERIES E PREFERRED. With respect to any
offer, sale or other disposition of any shares of Series E Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such shares,
the holder hereof and each subsequent holder of this Warrant agrees to give
written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of such shares of
Series E Preferred and indicating whether or not under the Act certificates for
such shares of Series E Preferred to be sold or otherwise disposed of require
any restrictive legend as to applicable restrictions on transferability in order
to insure compliance with the Act, provided, however, that no such opinion of
counsel or no action letter shall be necessary for a transfer without
consideration by a holder which is a partnership to a partner of such
partnership, a retired partner of such partnership
-7-
<PAGE>
who retires after the date hereof or to the estate of any such partner or
retired partner, so long as such transfer is made pursuant to the terms of the
partnership agreement, or to the transfer by gift, will or intestate succession
by any partner to his spouse or lineal descendants or ancestors or any trust for
the benefit of any of the foregoing if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he were an original holder
hereunder. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such holder that such holder may sell or otherwise dispose of such
shares of Series E Preferred, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
subparagraph (c) that the opinion of counsel for the holder is not reasonably
satisfactory to the Company, the Company shall so notify the holder promptly
after such determination has been made. Notwithstanding the foregoing, such
shares of Series E Preferred by be offered, sold or otherwise disposed of in
accordance with Rule 144 under the Act, provided that the Company shall have
been furnished with such information as the Company may request to provide a
reasonable assurance that the provisions of Rule 144 have been satisfied. Each
certificate representing the shares of Series E Preferred thus transferred
(except a transfer pursuant to Rule 144) shall bear a legend as to the
applicable restrictions on transferability in order to insure compliance with
the Act, unless in the aforesaid opinion of counsel for the holder, such legend
is not required in order to insure compliance with the Act. The Company may
issue stop transfer instructions to its transfer agent in connection with such
restrictions.
9. RIGHTS OF SHAREHOLDERS.
No holder of the Warrant or Warrants shall be entitled to vote or
receive dividends or be deemed the holder of Series E Preferred or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
shareholder of the company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant or Warrants shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
10. REGISTRATION RIGHTS.
Subject to the consent of holders of 50% of the currently outstanding
Series E Preferred Stock, the Shares of Series E Preferred obtained upon
exercise of this Warrant shall have the registration rights set forth in the
Amended and Restated Registration Rights Agreement between the Company and
certain investors dated as of January 31, 1991, and effective as of the Date of
Grant, the term "Registrable Securities" as defined in the Agreement shall
include the Common Stock issuable upon conversion of the Series E Preferred
obtained upon exercise of this Warrant.
-8-
<PAGE>
11. GOVERNING LAW.
The terms and conditions of this Warrant shall be governed by and construed
in accordance with California law.
12. MISCELLANEOUS
The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the registered holder hereof. All notices and other communications from the
Company to the holder of this Warrant shall be mailed by first-class registered
or certified mail, postage prepaid, to the address furnished to the Company in
writing by the last holder of this Warrant who shall have furnished an address
to the Company in writing.
DOMESTIC AUTOMATION COMPANY
By:
------------------------------------------
Thomas A. Rota
Vice President, Finance
December 9, 1991
-9-
<PAGE>
NOTICE OF EXERCISE
TO: DOMESTIC AUTOMATION COMPANY
1. The undersigned hereby elects to purchase __________ shares of
Series E Preferred Stock of Domestic Automation Company pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Series E Preferred Stock in the name of the undersigned or in such other name as
is specified below:
----------------------------------
(Name)
----------------------------------
----------------------------------
(Address)
3. The undersigned represents that the aforesaid shares of Series E
Preferred Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares. In support thereof, the undersigned has
executed an Investment Representation Statement attached hereto as Exhibit B.
----------------------------------------
(Signature)
- -----------------------------------
(Date)
EXHIBIT A
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY : DOMESTIC AUTOMATION COMPANY
SECURITY : SERIES E PREFERRED STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed securities and underlying
Common Stock (the "Securities"), I, the Purchaser, represent to the Company the
following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933 ("Securities Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission ("SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities except set
forth in the Registration Rights Agreement. In addition, I understand that the
certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) I am aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions.
EXHIBIT B
<PAGE>
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.
(f) I further understand that in the event all of the requirements of
Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) The exercise price of the Warrant is less than 10% of my net
worth excluding home, home furnishings and automobiles.
Signature of Purchaser:
----------------------------------------
Date: ___________________, 19__
EXHIBIT B
<PAGE>
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this day of
, 1990 by and between Domestic Automation Company, a California
corporation (the "Company"), and ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action or proceeding if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Indemnitee's conduct was
unlawful. The termination of any action or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that (i) Indemnitee did not act in
good faith and in a manner which Indemnitee reasonably
<PAGE>
believed to be in the best interests of the Company, or (ii) with respect to any
criminal action or proceeding, Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement, in each case to the extent actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the best interests of the Company and
its shareholders, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company in the performance of Indemnitee's duty to the Company and
its shareholders unless and only to the extent that the court in which such
action or proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for expenses and then only to the extent that the court
shall determine.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three business days after the date
postmarked if sent by domestic certified or registered mail, properly addressed;
otherwise notice shall be deemed received when such notice shall actually be
received by the Company. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
-2-
<PAGE>
(c) PROCEDURE. Any indemnification provided for in Section 1 shall
be made no later than forty-five (45) days after receipt of the written request
of Indemnitee. If a claim under this Agreement, under any statute, or under any
provision of the Company's Articles of Incorporation or By-laws providing for
indemnification, is not paid in full by the Company within forty-five (45) days
after a written request for payment thereof has first been received by the
Company, Indemnitee may, but need not, at any time thereafter bring an action
against the Company to recover the unpaid amount of the claim and, subject to
Section 12 of this Agreement, Indemnitee shall also be entitled to be paid for
the expenses (including attorneys' fees) of bringing such action. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in connection with any action or proceeding in advance of its
final disposition) that Indemnitee has not met the standards of conduct which
make it permissible under applicable law for the Company to indemnify Indemnitee
for the amount claimed, but the burden of proving such defense shall be on the
Company, and Indemnitee shall be entitled to receive interim payments of
expenses pursuant to Subsection 2(a) unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. It is the parties' intention that if the Company contests
Indemnitee's right to indemnification, the question of Indemnitee's right to
indemnification shall be for the court to decide, and neither the failure of the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its shareholders) to have made
a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its shareholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice
of a claim pursuant to Section 2(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 2(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which approval
shall not be unreasonably withheld, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of
such counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not, in fact, have employed counsel to assume
-3-
<PAGE>
the defense of such proceeding, then the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's By-laws or by statute. In the event of any change,
after the date of this Agreement, in any applicable law, statute or rule which
expands the right of a California corporation to indemnify a member of its board
of directors or an officer, such changes shall be, IPSO FACTO, within the
purview of Indemnitee's rights and Company's obligations, under this Agreement.
In the event of any change in any applicable law, statute or rule which narrows
the right of a California corporation to indemnify a member of its Board of
Directors or an officer, such changes, to the extent not otherwise required by
such law, statute or rule to be applied to this Agreement shall have no effect
on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Articles of Incorporation, its By-laws, any agreement, any
vote of shareholders or disinterested directors, the California General
Corporation Law, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action or
other covered proceeding.
4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
5. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
6. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the
-4-
<PAGE>
officers and directors of the Company with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded by
such coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company
shall have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the Company.
7. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) EXCLUDED ACTS. To indemnify Indemnitee for any acts or omissions
or transactions from which a director may not be relieved of liability under the
California General Corporation Law.
(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California General Corporation Law, but such indemnification
or advancement of expenses may be provided by the Company in specific cases if
the Board of Directors has approved the initiation or bringing of such suit; or
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
-5-
<PAGE>
(d) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Company; or
(e) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase
and sale by Indemnitee of securities in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any similar successor statute.
9. EFFECTIVENESS OF AGREEMENT. To the extent that the indemnification
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification provided for in the California General Corporation
Law, such provisions shall not be effective unless and until the Company's
Articles of Incorporation authorize such additional rights of indemnification.
In all other respects, the balance of this Agreement shall be effective as of
the date set forth on the first page and may apply to acts or omissions of
Indemnitee which occurred prior to such date if Indemnitee was an officer,
director, employee or other agent of the Company, or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, at the time such act or
omission occurred.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that if
Indemnitee is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries.
-6-
<PAGE>
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California.
16. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of California as applied to
contracts between California residents entered into and to be performed entirely
within California.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
DOMESTIC AUTOMATION COMPANY
By: /s/
------------------------------------
Title: President
Address: Domestic Automation Company
125 Shoreway Road
San Carlos, CA 94070
AGREED TO AND ACCEPTED:
INDEMNITEE:
/s/
- -----------------------------------
(signature)
-8-
<PAGE>
CELLNET DATA SYSTEMS, INC.
1992 INCENTIVE STOCK PLAN
(Amended March, 1994)
(Amended August, 1996)
This Plan is effective immediately following the filing of the Amended and
Restated Articles of Incorporation of the Company dated September 17, 1992 with
the Office of the Secretary of State authorizing a recapitalization of the
Company (the "Recapitalization").
1. PURPOSES OF THE PLAN. The purposes of this Incentive Stock Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, or "nonstatutory
stock options," at the discretion of the Board and as reflected in the terms of
the written option agreement. The Board may also grant Stock Purchase Rights
under this Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "CODE" shall mean the Internal Revenue Code of 1986.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Domestic Automation Company, a California
corporation.
(e) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(f) "CONSULTANT" shall mean any person who is engaged by the Company
or any subsidiary to render consulting services and is compensated for such
consulting services, and any director of the Company whether compensated for
such services or not; provided that if and in the event the Company registers
any class of any equity security pursuant to Section 12 of the Exchange Act, the
term Consultant shall thereafter not include directors who are not compensated
for their services or are paid only a director's fee by the Company.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave or
<PAGE>
any other leave of absence approved by the Board; provided that such leave is
for a period of not more than 90 days or reemployment upon the expiration of
such leave is guaranteed by contract or statute.
(h) "EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(k) "NONSTATUTORY STOCK OPTION" shall mean an option not intended to
qualify as an Incentive Stock Option.
(l) "OPTION" shall mean a stock option granted pursuant to the Plan.
(m) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(n) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.
(o) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "PLAN" shall mean this 1992 Incentive Stock Plan.
(q) "PURCHASER" shall mean an Employee or Consultant who exercises a
Stock Purchase Right.
(r) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(s) "STOCK PURCHASE RIGHT" shall mean a right, other than an Option,
to purchase Common Stock pursuant to the Plan.
(t) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and/or
sold under the Plan is 2,300,000 post-split shares of Common Stock, after giving
effect to the Recapitalization. The Shares may be authorized, but unissued, or
reacquired Common Stock.
-2-
<PAGE>
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Repurchased shares shall not become available for
future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board of
Directors of the Company.
(i) Subject to subparagraph (ii), the Board of Directors may
appoint a Committee consisting of not less than two members of the Board of
Directors or one or more officers of the Company to administer the Plan on
behalf of the Board of Directors, subject to such terms and conditions as the
Board of Directors may prescribe. Once appointed, the Committee shall continue
to serve until otherwise directed by the Board of Directors. From time to time
the Board of Directors may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies however caused, or remove
all members of the Committee and thereafter directly administer the Plan.
Members of the Board who either are eligible for Options or Stock Purchase
Rights or have been granted Options or Stock Purchase Rights may vote on any
matters affecting the administration of the Plan or the grant of any Options or
Stock Purchase Rights pursuant to the Plan, except that no such member shall act
upon the granting of an Option or Stock Purchase Right to himself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting of Options
or Stock Purchase Rights to him.
(ii) Notwithstanding the foregoing subparagraph (i), if and in
the event the Company registers any class of any equity security pursuant to
Section 12 of the Exchange Act, from the effective date of such registration
until six months after the termination of such registration, any grants of
Options or Stock Purchase Rights to directors shall only be made by the Board of
Directors; provided, however, that if a majority of the Board of Directors is
eligible to participate in this Plan or any other stock option or other stock
plan of the Company or any of its affiliates, or has been eligible at any time
within the preceding year, any grants of Options or Stock Purchase Rights to
directors must be made by, or only in accordance with the recommendation of, a
Committee consisting of three or more persons, who may but need not be directors
or employees of the Company, appointed by the Board of Directors and having full
authority to act in the matter, none of whom is eligible to participate in this
Plan or any other stock option or other stock plan of the Company or any of its
affiliates, or has been eligible at any time within the preceding year. Any
Committee administering the Plan with respect to grants to officers who are not
also directors shall conform to the requirements of the preceding sentence.
Once appointed, the Committee shall continue to serve until otherwise directed
by the Board of Directors. Subject to the foregoing, from time to time the
Board of Directors may increase the size of the Committee and appoint additional
members thereof, remove members (with or
-3-
<PAGE>
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, in accordance with Section 422 of the Internal Revenue Code of 1986,
Nonstatutory Stock Options, or Stock Purchase Rights; (ii) to determine, upon
review of relevant information and in accordance with Section 8(b) of the Plan,
the fair market value of the Common Stock; (iii) to determine the exercise price
per share of Options or Stock Purchase Rights to be granted, which exercise
price shall be determined in accordance with Section 8(a) of the Plan; (iv) to
determine the Employees or Consultants to whom, and the time or times at which,
Options or Stock Purchase Rights shall be granted and the number of shares to be
represented by each Option or Stock Purchase Right; (v) to interpret the Plan;
(vi) to prescribe, amend and rescind rules and regulations relating to the Plan;
(vii) to determine the terms and provisions of each Option or Stock Purchase
Right granted (which need not be identical) and, with the consent of the holder
thereof, modify or amend each Option or Stock Purchase Right; (viii) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option or Stock Purchase Right previously granted
by the Board; and (ix) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees,
Purchasers and any other holders of any Options or Stock Purchase Rights granted
under the Plan.
5. ELIGIBILITY.
(a) Options and Stock Purchase Rights may be granted only to
Employees or Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Stock
Purchase Right may, if he is otherwise eligible, be granted an additional Option
or Options or Stock Purchase Right or Rights.
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other Incentive Stock Options granted to such Employee
by the Company or any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 becoming first
available for purchase upon exercise of one or more Incentive Stock Options
during any calendar year.
(c) Section 5(b) of the Plan shall apply only to an Incentive Stock
Option evidenced by an "Incentive Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall qualify as an
Incentive Stock Option. Section 5(b) of the Plan shall not apply to any Option
evidenced by a "Nonstatutory Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall be a
nonstatutory stock option.
-4-
<PAGE>
(d) The Plan shall not confer upon any Optionee, Purchaser or holder
of a Stock Purchase Right any right with respect to continuation of employment
or consulting relationship with the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment or consulting
relationship at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option or Stock Purchase Right shall be such price as is
determined by the Board, but shall be subject to the following:
(i) In the case of any Incentive Stock Option granted to any
Employee, the per Share exercise price shall be no less than 100% of the fair
market value per Share on the date of grant.
(ii) In the case of any Nonstatutory Stock Option, other than an
Incentive Stock Option, or any Stock Purchase Right, the per Share exercise
price shall be no less than 85% of the fair market value per Share on the date
of grant.
(iii) In the case of any Option granted to any person who, at the
time of the grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
fair market value per Share on the date of grant.
(iv) In the case of any Option or Stock Purchase Right granted on
or after the effective date of registration of any class of equity security of
the Company pursuant to Section 12 of the Exchange Act and prior to six months
after the termination of such registration, the per Share exercise price shall
be no less than 100% of the fair market value per Share on the date of grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices of the Common Stock for the date of grant of the Option or Stock
Purchase Right, as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation (Nasdaq) System) or, in the event the Common Stock is listed
on a stock exchange, the fair market value per Share shall be the closing price
on such exchange on the date of grant of the Option or Stock Purchase Right, as
reported in The Wall Street Journal.
-5-
<PAGE>
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option or Stock Purchase Right, including the method of payment,
shall be determined by the Board and may consist entirely of cash, check,
promissory note, other shares of Common Stock which (i) either have been owned
by the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company and (ii) have a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option or Stock Purchase Right shall be exercised, or any combination of such
methods of payment, or such other consideration and method of payment for the
issuance of Shares to the extent permitted under Sections 408 and 409 of the
California General Corporation Law.
8. OPTIONS.
(a) TERM OF OPTION. The term of each Incentive Stock Option shall be
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement. The term of each Nonstatutory
Stock Option shall be ten (10) years and one (1) day from the date of grant
thereof or such shorter term as may be provided in the Nonstatutory Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the
Option shall be five (5) years from the date of grant thereof or shorter time as
may be provided in the Stock Option Agreement, or (b) if the Option is a
Nonstatutory Stock Option, the term of the Option shall be five (5) years and
one (1) day from the date of grant thereof or such shorter time as may be
provided in the Nonstatutory Stock Option Agreement.
(b) EXERCISE OF OPTION.
(i) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may be exercisable over a period of time or may be immediately
exercisable as determined by the Board and may grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
Optionee's employment with the Company for any reason (including death or
disability). The purchase price for shares repurchased pursuant to the
repurchase option shall be the original price paid by the Optionee and may be
paid by cancellation of any indebtedness of the Optionee to the Company. The
repurchase option shall lapse at such a rate as the Board may determine.
Notwithstanding any other provisions of this Plan, no Option may be
exercised after the expiration of the term of the Option as set forth in the
Stock Option Agreement.
An Option may not be exercised for a fraction of a Share.
-6-
<PAGE>
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 7(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter shall be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. If an
Employee ceases to serve as an Employee or Consultant (as the case may be), he
may, but only within thirty (30) days (or such other period of time, not
exceeding three (3) months in the case of an Incentive Stock Option or six (6)
months in the case of a Nonstatutory Stock Option, as is determined by the
Board, with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option) after the date he ceases to be an
Employee or Consultant (as the case may be) of the Company, exercise his Option
to the extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(iii) DISABILITY OF OPTIONEE. In the event of termination of
an Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within six (6) months
from the date of such termination (and in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Nonstatutory Stock Option on the day three months and one day following
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
-7-
<PAGE>
(iv) DEATH OF OPTIONEE. In the event of the death of an
Optionee:
(A) during the term of the Option who is at the time
of his death an Employee or Consultant of the Company and who shall
have been in Continuous Status as an Employee or Consultant since the
date of grant of the Option, the Option may be exercised, at any time
within twelve (12) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set
forth in Section 8(a) above), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in
Continuous Status as an Employee or Consultant six (6) months after
the date of death, subject to the limitation set forth in
Section 5(b); or
(B) within thirty (30) days (or such other period of
time not exceeding three (3) months as is determined by the Board at
the time of grant of the Option) after the termination of Continuous
Status as an Employee, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than
the date of expiration of the term of this Option as set forth in
Section 8(a) above), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at
the date of termination.
9. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. After the Board of Directors determines that
it will offer an Employee or Consultant the right to purchase Shares under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions relating to the offer, including the number of Shares that such
person shall be entitled to purchase, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Board of Directors or its Committee made the determination to
grant the Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Board of
Directors.
(b) ISSUANCE OF SHARES. Forthwith after payment therefor, the Shares
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate provision for any Federal and State withholding
obligations of the Company as a condition to such purchase.
(c) REPURCHASE OPTION. Unless the Board of Directors or its
Committee determines otherwise, the Employee Stock Restriction Agreement shall
grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the Purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the Employee Stock Restriction Agreement shall be the
original price
-8-
<PAGE>
paid by the Purchaser and may be paid by cancellation of any indebtedness of the
Purchaser to the Company. The repurchase option shall lapse at such a rate as
the Board of Directors may determine.
(d) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Board of Directors.
(e) RIGHTS AS A SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing the shares as to which
a Stock Purchase Right has been exercised, no right to vote or to receive
dividends or any other rights as a stockholder shall exist with respect to
shares of Common Stock subject to a Stock Purchase Right, notwithstanding the
exercise of a Stock Purchase Right. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
(f) SHARES AVAILABLE UNDER THE PLAN. Exercise of a Stock Purchase
Right in any manner shall result in a decrease in the number of Shares that
thereafter shall be available, both for purposes of the Plan and for sale under
the Stock Purchase Right, by the number of Shares as to which the Stock Purchase
Right is exercised. Shares repurchased by the Company pursuant to Section 9(c)
hereof shall not be available for reissuance under the Plan.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee or holder of a Stock Purchase Right, only by such Optionee or holder of
a Stock Purchase Right.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and Stock Purchase Right, and
the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option or Stock Purchase Right, as well as the price per share of Common
Stock covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by
-9-
<PAGE>
reason thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option or Stock Purchase Right.
In the event of the proposed dissolution or liquidation of the Company, the
Board shall notify each Optionee as soon as practicable prior to the effective
date of such proposed transaction. The Board in its discretion may provide for
an Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Board may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has
not been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
In the event of a merger of the Company with or into another corporation,
or the sale of substantially all of the assets of the Company, each outstanding
Option and Stock Purchase Right shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option or Stock Purchase Right, the Optionee shall
fully vest in and have the right to exercise the Option or Stock Purchase Right
as to all of the Optioned Stock, including Shares as to which it would not
otherwise be vested or exercisable. If an Option or Stock Purchase Right
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify the Optionee in
writing or electronically that the Option or Stock Purchase Right shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option or Stock Purchase
Right, for each Share of Optioned Stock subject to the Option or Stock Purchase
Right, to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
12. TIME OF GRANTING OPTIONS OR STOCK PURCHASE RIGHTS. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Board makes the determination granting such Option or Stock Purchase
Right. Notice of the determination shall be
-10-
<PAGE>
given to each Employee to whom an Option or Stock Purchase Right is so granted
within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 17 of the
Plan:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11 of the
Plan;
(ii) any change in the designation of the class of Employees or
Consultants eligible to be granted Options or Stock Purchase Rights;
or
(iii) any material increase in the benefits accruing to participants
under the Plan.
(b) SHAREHOLDER APPROVAL. If any amendment requiring shareholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity security by the Company under Section 12 of
the Exchange Act, such shareholder approval shall be solicited as described in
Section 17(a) of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Board and the Optionee, Purchaser or
holder of a Stock Purchase Right, which agreement must be in writing and signed
by the Company and the Optionee, Purchaser or holder of the Stock Purchase
Right.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right, the
Company may require the person exercising such Option or Stock Purchase Right to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
-11-
<PAGE>
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AND STOCK PURCHASE AGREEMENTS. Options shall be evidenced by
written Stock Option Agreements in such form as the Board shall approve. Upon
the exercise of Stock Purchase Rights, a Purchaser shall execute an Employee
Stock Restriction Agreement in such form as the Board of Directors shall
approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve months before or after
the date the Plan is adopted. If such shareholder approval is obtained at a
duly held shareholders' meeting, it may be obtained by the affirmative vote of
the holders of a majority of the issued and outstanding shares of the Company.
If and in the event that the Company registers any class of any equity security
pursuant to Section 12 of the Exchange Act, the approval of such shareholders of
the Company shall be:
(a) (1) solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, or
(2) solicited after the Company has furnished in writing to the holders entitled
to vote substantially the same information concerning the Plan as that which
would be required by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished; and
(b) obtained at or prior to the first annual meeting of shareholders
held subsequent to the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act.
If such shareholder approval is obtained by written consent, it must be
obtained by the unanimous written consent of all shareholders of the Company.
18. INFORMATION TO OPTIONEES AND HOLDERS OF STOCK PURCHASE RIGHTS. The
Company shall provide to each Optionee and each holder of a Stock Purchase
Right, during the period for which such Optionee or holder of a Stock Purchase
Right has one or more Options or Stock Purchase Rights outstanding, copies of
all annual reports. The Company shall not be required to provide such
information if the issuance of Options and Stock Purchase Rights under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information.
-12-
<PAGE>
Grant No.____
CELLNET DATA SYSTEMS, INC.
INCENTIVE STOCK OPTION AGREEMENT
- --------------------------------------------------------------------------------
THE NUMBER OF SHARES OF COMMON STOCK OF THIS OPTION RECOGNIZE THE COMPANY'S ONE
FOR TEN REVERSE STOCK SPLIT ON JANUARY 17, 1992, AND ONE FOR ONE HUNDRED REVERSE
STOCK SPLIT ON SEPTEMBER 17, 1992.
- --------------------------------------------------------------------------------
CELLNET DATA SYSTEMS, INC., a California corporation (the "Company"), has
granted to (OPTIONEEF) (OPTIONEEL), (the "Optionee") an option (the "Option")
to purchase a total of (SHARES) shares of Common Stock (the "Shares"), at the
price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the 1992 Stock Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings
herein.
1. NATURE OF THE OPTION. This Option is intended to qualify as an
Incentive Stock Option as defined in Section 422A of the Internal Revenue Code
of 1986 (the "Code").
2. EXERCISE PRICE. The exercise price is $0.50 for each share of Common
Stock, which price is not less than the fair market value per share of the
Common Stock on the date of grant.
3. EXERCISE OF OPTION. This Option shall be exercisable during its term,
in accordance with the provisions of Section 8 of the Plan and subject to
Section 6 hereof, as follows:
(i) RIGHT TO EXERCISE.
(a) Subject to subsections 3(i) (b) and (c), below, this Option
shall commence vesting from the date of grant or the employee's date of hire,
whichever is later, such that 1/10th of the Shares subject to the Option shall
be vested after six (6) months have expired from the employee's date of hire,
(DOH), then vesting shall continue at the rate of 1/20th of the Shares subject
to the Option every three (3) months thereafter, such that all Shares shall be
vested five years from the date of hire, based on continuous employment.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of employment, the timing for exercise of the Option is governed by
Sections 7, 8, or 9 of this agreement, subject to the limitations in Subsections
3(i) (e) and (f).
(d) NOTHING IN THIS AGREEMENT SHALL AFFECT IN ANY MANNER
WHATSOEVER THE RIGHT OR POWER OF THE COMPANY TO TERMINATE THE OPTIONEE'S
EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE COMPANY FOR ANY REASON, WITH OR
WITHOUT CAUSE. NOTHING IN THE AGREEMENT CONSTITUTES AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED EMPLOYMENT OR A CONSULTING RELATIONSHIP FOR THE EXERCISE
PERIOD OR FOR ANY PERIOD AT ALL.
(e) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 11 below.
(f) In no event may this Option become exercisable at a time or
times which, when this Option is aggregated with all other Incentive Stock
Options granted to Optionee by the Company
(PAGE)
<PAGE>
or any Parent or Subsidiary, would result in Shares having an aggregate fair
market value (determined for each Share as of the date of grant of the option
covering such share) in excess of $100,000 becoming first available for purchase
upon exercise of one or more incentive stock options during any calendar year.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by written
notice in the form attached hereto as Exhibit A, which shall state the election
to exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such Shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the exercise price. This Option shall be deemed
exercised upon receipt by the Company of such written notice accompanied by the
exercise price.
No shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the shares may then be
listed. Assuming such compliance, for income tax purposes, the shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such shares.
4. OPTIONEE'S REPRESENTATIONS. In the event the shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his Investment Representation Statement in the
form attached hereto as Exhibit B, and shall read the applicable rules of the
Commissioner of Corporations attached to such Investment Representation
Statement.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Board:
(i) cash;
(ii) check;
(iii) delivery of a promissory note (the "Note") of Optionee in the
amount of the exercise price together with the execution and delivery by the
Optionee of the Security Agreement attached hereto as Exhibit C; the Note shall
be in the form attached hereto as Exhibit D, shall contain the terms and be
payable as set forth therein, shall bear interest at a rate not less than the
rate required to ensure that there will be no "unstated interest" with respect
to the purchase of shares under this Option, pursuant to Section 483 of the Code
and the regulations in effect thereunder at the time of such purchase, and shall
be secured by a pledge of the Shares purchased by the Note pursuant to the
Security Agreement; or
(iv) surrender of other Shares of Common Stock of the Company which
either have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company and have a fair market value
equal to the exercise price of the Shares as to which the Option is being
exercised.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been amended by the shareholders of the company to increase
the number of shares available for incentive stock options, or if the issuance
of such Shares upon such exercise or the method of payment of consideration for
such shares would constitute a violation of any applicable federal or state
securities or other law or regulation, including any rule under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by
the Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
(PAGE)
<PAGE>
7. TERMINATION OF STATUS AS AN EMPLOYEE.
(i) If Optionee ceases to serve as an Employee, he may, but only
within 30 days after date he ceases to be an Employee of the Company (but in no
event later than the date of expiration of the term of this Option set forth in
Section 11 below), exercise this Option to the extent that he was entitled to
exercise it at the date of such termination as provided in paragraph 3(i). To
the extent that he was not entitled to exercise it at the date of such
termination, or if he does not exercise this Option within the time specified
herein, the Option shall terminate.
(ii) In the event that the Optionee has paid the purchase price
hereunder by delivery of a Note, and before the Note is paid in full, the
Optionee ceases to be an Employee or Consultant, the Company shall have the
right to accelerate the due date of the Note, and the whole unpaid balance on
the Note of principal and interest shall become immediately due.
8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 7
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his or her disability, Optionee
may, but only within six (6) months from the date of such termination (and in no
event later than the expiration date of the term of such Option as set forth in
Section 11 of this Incentive Stock Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e) (3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically convert to a Nonstatutory
Stock Option on the day three months and one day following such termination. To
the extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
9. DEATH OF OPTIONEE. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee of the
Company and having been in Continuous Status as an Employee since the date of
grant of the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the date of
expiration of the term of this Option set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as an Employee six (6) months after the date of death, subject to the
limitations contained in Section 3(i)(f) above; or
(ii) within 30 days after termination of Optionee's Continuous Status
as an Employee, the Option may be exercised, at any time within three (3) months
following the date of death (but in no event later than the date of expiration
of the term of this Option set forth in section 11 below), by Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had accrued at
the date of termination.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
11 TERM OF THE OPTION.
(a) This Option may not be exercised more than ten (10) years (five
(5) years if Optionee owns, immediately before this Option is granted, stock
representing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary) from the date of
grant of this Option, and may be exercised during such term only in accordance
with the Plan and the terms of this Option.
(PAGE)
<PAGE>
(b) ADJUSTMENT UPON SALE OF ASSETS OR MERGER. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, this Option shall be
assumed or an equivalent Option shall be substituted by the successor
corporation or a parent or subsidiary of such successor corporation. In the
event that such successor corporation refuses to assume the Option, the Optionee
shall have the right to exercise this Option as to all of the Common Stock
subject to the Option, including Shares as to which the Option would not
otherwise be exercisable. The Board shall notify the Optionee that the Option
shall be fully exercisable for a period of 15 days from the date of notice and
that the Option will terminate upon expiration of such period.
12. EARLY DISPOSITION OF STOCK. Optionee understands that if he disposes
of any Shares received under this Option within two (2) years after the date of
this agreement or within one (1) year after such Shares were transferred to him,
he will be treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount generally measured by the
difference between the price paid for the Shares and the lower of the fair
market value of the Shares on the date of the exercise or the fair market value
on the date of disposition. The amount of such ordinary income may be measured
differently if the Optionee is an officer, director, or 10% shareholder of the
Company or if the Shares are subject to a substantial risk of forfeiture at the
time they were transferred to Optionee. OPTIONEE HEREBY AGREES TO NOTIFY THE
COMPANY IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY SUCH DISPOSITION.
Optionee understands that if he disposes of such Shares at any time after the
expiration of such two-year and one-year holding periods, any gain on such sale
will be taxed as long-term capital gain.
13. RESTRICTION ON TRANSFER; RIGHT OF FIRST REFUSAL. Optionee shall not
sell, transfer, pledge, hypothecate or otherwise dispose of any Shares, except
as follows:
(a) Before any Shares registered in the name of Optionee may be sold
or transferred (including transfer by operation of law), such Shares shall first
be offered to the Company. The Optionee shall deliver a notice ("Notice") to
the Company stating (i) his bona fide intention to sell or transfer such Shares,
(ii) the number of such Shares to be sold or transferred, (iii) the price for
which he proposes to sell or transfer such Shares, and (iv) the name of the
proposed purchaser or transferee.
(b) Within thirty (30) days after receipt of the Notice, the Company
or its assignee may elect to purchase all, but not less than all, Shares to
which the Notice refers, at the price per share specified in the Notice.
(c) If all of the Shares to which the Notice refers are not elected
to be purchased, as provided in subparagraph 13(b) hereof, the Optionee may sell
the remaining Shares to any person named in the Notice at the price specified in
the notice or at a higher price, provided that such sale or transfer is
consummated within 60 days after the date of said Notice to the Company, and
provided, further, that any such sale is in accordance with all terms and
conditions hereof.
The provisions of this paragraph 13 shall terminate upon (i) the
effective date of a merger involving the Company in which the Company is not the
survivor (except a merger with an affiliate of the Company), (ii) the effective
date of a sale of all, or substantially all, of the assets of the Company
(except a sale to an affiliate of the Company) or (iii) the closing of the
Company's initial firmly underwritten public offering. The provisions of
subparagraphs 13(a), 13(b) and 13(c) shall not apply to a transfer of any shares
by Optionee, either during his lifetime or on death by will or intestacy to his
other ancestors, descendants or spouse or any custodian or trustee for the
account of Optionee or Optionee's Ancestors, desendents or spouse; provided, in
each such case any such transferee shall receive and hold such Shares subject
to the provisions of this paragraph 13 and there shall be no further transfer
of such Shares unless in accordance herewith.
(PAGE)
<PAGE>
The Company shall not be required (i) to transfer on its books any
Shares of the Company which shall have been sold or transferred in violation of
any of the provisions set forth in this Agreement, or (ii) to treat as owner of
such Shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such Shares shall have been so transferred.
14. LOCKUP AGREEMENT. In consideration for the sale of the Shares, the
Optionee agrees, upon request of the Company or the underwriters managing the
initial underwritten offering of the Company's securities, not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any shares of the Stock (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 120 days) from the effective
date of such registration as the Company or underwriters may specify; provided,
however, that the Optionee shall have no obligation to enter into the agreement
described in this paragraph 14 unless all executive officers and directors of
the Company enter into similar agreements.
DATE OF GRANT: (dog)
CELLNET DATA SYSTEMS, INC.,
a California Corporation
By:
-------------------------------
Alan H. Bushell
Title: Senior Vice President
-------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION
3 HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION, THE
TRANSACTIONS CONTEMPLATED HEREUNDER, AND THE VESTING SCHEDULE SET FORTH HEREIN
DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED EMPLOYMENT FOR
THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL.
Optionee acknowledges receipt of a copy of the Plan and certain information
related thereto, a copy of which is annexed hereto, and represents that he is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all of the terms and provisions thereof. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Board upon any questions arising under the Plan Optionee further acknowledges
that he has read and is familiar with the terms of the Plan and this agreement
and has read and understands Sections 3 (i) (d) and 7 (ii) and has had an
opportunity to obtain the advice of counsel prior to executing this Agreement.
Dated: Optionee
----------------- -------------------------------------
(PAGE)
<PAGE>
CELLNET DATA SYSTEMS, INC.
1994 STOCK PLAN
(AMENDED AND RESTATED AS OF AUGUST ___, 1996)
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions of
substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means CellNet Data Systems, Inc., a California
corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services and who is compensated for
such services.
(i) "DIRECTOR" means a member of the Board.
<PAGE>
(j) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
-2-
<PAGE>
(p) "NOTICE OF GRANT" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this 1994 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 below.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "SECTION 16(b)" means Section 16(b) of the Securities Exchange
Act of 1934, as amended.
(cc) "SERVICE PROVIDER" means an Employee, Director or Consultant.
-3-
<PAGE>
(dd) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 1,500,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); PROVIDED, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered
by different Committees with respect to different groups of Service Providers.
(ii) SECTION 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the Plan shall be administered by the
Board or a Committee of two or more "non-employee directors" within the meaning
of Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
-4-
<PAGE>
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(x) to modify or amend each Option or Stock Purchase Right (subject
to Section 15(c) of the Plan), including the discretionary authority to extend
the post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld.
-5-
<PAGE>
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined. All elections
by an Optionee to have Shares withheld for this purpose shall be made in such
form and under such conditions as the Administrator may deem necessary or
advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be deter-
mined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 1,000,000 Shares.
(ii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
-6-
<PAGE>
(iii) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsection (i) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
-7-
<PAGE>
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting
of Options granted hereunder shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised.
-8-
<PAGE>
Full payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan. Shares
issued upon exercise of an Option shall be issued in the name of the Optionee
or, if requested by the Optionee, in the name of the Optionee and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company),
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such Shares promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is determined by the Administrator (with such determination in the case
of an Incentive Stock Option not exceeding three (3) months after the date of
such termination exercise his or her Option), to the extent that he or she is
entitled to exercise it on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option at any time within twelve (12) months from the date of
termination, but only to the extent that the Optionee is entitled to exercise it
on the date of termination (and in no event later than the expiration of the
term of the Option as set forth in the Option Agreement). If, on the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider,
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Optionee would have been entitled to exercise
the Option on the date of death.
-9-
<PAGE>
If, at the time of death, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent
-10-
<PAGE>
or distribution and may be exercised, during the lifetime of the Optionee, only
by the Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such additional
terms and conditions as the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the
assets of the Company, each outstanding Option and Stock Purchase Right shall
be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested
or exercisable. If an Option or Stock Purchase Right becomes fully vested
and exercisable in lieu of assumption or
-11-
<PAGE>
substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee in writing or electronically that the Option or
Stock Purchase Right shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock
Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders
of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale
of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option
or Stock Purchase Right, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes
the determination granting such Option or Stock Purchase Right, or such other
later date as is determined by the Administrator. Notice of the
determination shall be provided to each Optionee within a reasonable time
after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company.
-12-
<PAGE>
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
19. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan
is adopted. Such shareholder approval shall be obtained in the manner and to
the degree required under Applicable Laws.
-13-
<PAGE>
CELLNET DATA SYSTEMS, INC.
1994 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1994 Stock Plan
(the "Plan") shall have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
[25% OF THE SHARES SUBJECT TO THE OPTION SHALL VEST TWELVE MONTHS AFTER THE
VESTING COMMENCEMENT DATE, AND 1/48 OF THE SHARES SUBJECT TO THE OPTION SHALL
VEST EACH MONTH THEREAFTER, SUBJECT TO THE OPTIONEE CONTINUING TO BE A SERVICE
PROVIDER ON SUCH DATES].
<PAGE>
TERMINATION PERIOD:
This Option may be exercised for _____ [days/months] after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for such longer period as provided in the Plan. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan;
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. TAX CONSEQUENCES. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION.
(i) NONSTATUTORY STOCK OPTION. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair
-3-
<PAGE>
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an Employee or a former Employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(ii) INCENTIVE STOCK OPTION. If this Option qualifies as an ISO,
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) DISPOSITION OF SHARES.
(i) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
-4-
<PAGE>
7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: CELLNET DATA SYSTEMS, INC.
- ----------------------------------- ---------------------------------------
Signature By
- ----------------------------------- ---------------------------------------
Print Name Title
- -----------------------------------
Residence Address
-5-
<PAGE>
- -----------------------------------
-6-
<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
---------------------------------------
Spouse of Optionee
-7-
<PAGE>
EXHIBIT A
CELLNET DATA SYSTEMS, INC.
1994 STOCK PLAN
EXERCISE NOTICE
CellNet Data Systems, Inc.
75 Shoreway Road, #2000
San Carlos, CA 94070-2705
Attention: Corporate Secretary
1. EXERCISE OF OPTION. Effective as of today, ________________, 199__,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of CellNet Data Systems, Inc. (the "Company")
under and pursuant to the 1994 Stock Plan (the "Plan") and the Stock Option
Agreement dated ______________ , 19___ (the "Option Agreement"). The purchase
price for the Shares shall be $ ___________, as required by the Option
Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in [Section 13] of the
Plan.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter
<PAGE>
hereof and supersede in their entirety all prior undertakings and agreements of
the Company and Purchaser with respect to the subject matter hereof, and may not
be modified adversely to the Purchaser's interest except by means of a writing
signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: CELLNET DATA SYSTEMS, INC.
- ---------------------------------- -------------------------------------
Signature By
- ---------------------------------- -------------------------------------
Print Name Its
-------------------------------------
Date Received
ADDRESS: ADDRESS:
- ---------------------------------- 75 Shoreway Road, #2000
San Carlos, CA 94070-2705
- ----------------------------------
-2-
<PAGE>
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between CellNet
Data Systems, Inc., a California corporation ("Pledgee"), and
_________________________ ("Pledgor").
RECITALS
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1994 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. CREATION AND DESCRIPTION OF SECURITY INTEREST. In consideration of
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. PLEDGOR'S REPRESENTATIONS AND COVENANTS. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. PAYMENT OF INDEBTEDNESS. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. ENCUMBRANCES. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE>
c. MARGIN REGULATIONS. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. VOTING RIGHTS. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. STOCK ADJUSTMENTS. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. OPTIONS AND RIGHTS. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. DEFAULT. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. RELEASE OF COLLATERAL. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder here-
-2-
<PAGE>
under upon payments of the principal of the Note. The number of the pledged
Shares which shall be released shall be that number of full Shares which bears
the same proportion to the initial number of Shares pledged hereunder as the
payment of principal bears to the initial full principal amount of the Note.
8. WITHDRAWAL OR SUBSTITUTION OF COLLATERAL. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. TERM. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. INSOLVENCY. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. PLEDGEHOLDER LIABILITY. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. INVALIDITY OF PARTICULAR PROVISIONS. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. SUCCESSORS OR ASSIGNS. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. GOVERNING LAW. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR"
---------------------------------
Signature
---------------------------------
Print Name
Address:
---------------------------------
---------------------------------
"PLEDGEE"
CellNet Data Systems, Inc.,
a California corporation
--------------------------------
Signature
--------------------------------
Print Name
--------------------------------
Title
"PLEDGEHOLDER"
--------------------------------
Secretary of
CellNet Data Systems, Inc.
-4-
<PAGE>
EXHIBIT C
NOTE
$_______________ [City, State]
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to CellNet Data
Systems, Inc., a California corporation (the "Company"), or order, the principal
sum of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Should the undersigned fail to make full payment of principal or interest for a
period of 10 days or more after the due date thereof, the whole unpaid balance
on this Note of principal and interest shall become immediately due at the
option of the holder of this Note. Payments of principal and interest shall be
made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of __________
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
------------------------------------
------------------------------------
<PAGE>
CELLNET DATA SYSTEMS, INC.
1994 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number
-------------------------
Date of Grant
-------------------------
Price Per Share $
------------------------
Total Number of Shares Subject
to This Stock Purchase Right -------------------------
Expiration Date:
-------------------------
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 1994 Stock Plan and the Restricted Stock
Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: CELLNET DATA SYSTEMS, INC.
- --------------------------- --------------------------------
Signature By
- --------------------------- --------------------------------
Print Name Title
<PAGE>
EXHIBIT A-1
1994 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
Service Provider, and the Purchaser's continued participation is considered by
the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser a Stock
Purchase Right subject to the terms and conditions of the Plan and the Notice of
Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. SALE OF STOCK. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per Share purchase price and as otherwise described in
the Notice of Grant.
2. PAYMENT OF PURCHASE PRICE. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. REPURCHASE OPTION.
(a) In the event the Purchaser ceases to be a Service Provider for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (see Section 4), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company) have an irrevocable, exclusive option (the "Repurchase Option") for
a period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). The Repurchase
Option shall be exercised by the Company by delivering written notice to the
Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at
the Company's option, (i) by delivering to the Purchaser or the Purchaser's
executor a check in the amount of the aggregate Repurchase Price, or (ii) by
cancelling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals the aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price, the Company shall become the legal and beneficial owner of the
Shares being repurchased and all
<PAGE>
rights and interests therein or relating thereto, and the Company shall have the
right to retain and transfer to its own name the number of Shares being
repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares
to be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. RELEASE OF SHARES FROM REPURCHASE OPTION.
(a) _______________________ percent (______%) of the Shares shall be
released from the Company's Repurchase Option [ONE YEAR] after the Date of
Grant and __________________ percent (______%) of the Shares [AT THE END OF EACH
MONTH THEREAFTER], provided that the Purchaser does not cease to be a Service
Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. RESTRICTION ON TRANSFER. Except for the escrow described in Section 6
or the transfer of the Shares to the Company or its assignees contemplated by
this Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until such Shares
are released from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
6. ESCROW OF SHARES.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's Repurchase Option
expires. As a further condition to the Company's obligations under this
-2-
<PAGE>
Agreement, the Company may require the spouse of Purchaser, if any, to execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow while acting
in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. LEGENDS. The share certificate evidencing the Shares, if any, issued
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
9. TAX CONSEQUENCES. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contem-
-3-
<PAGE>
plated by this Agreement. The Purchaser is relying solely on such advisors and
not on any statements or representations of the Company or any of its agents.
The Purchaser understands that the Purchaser (and not the Company) shall be
responsible for the Purchaser's own tax liability that may arise as a result of
the transactions contemplated by this Agreement. The Purchaser understands that
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes
as ordinary income the difference between the purchase price for the Shares and
the Fair Market Value of the Shares as of the date any restrictions on the
Shares lapse. In this context, "restriction" includes the right of the Company
to buy back the Shares pursuant to the Repurchase Option. The Purchaser
understands that the Purchaser may elect to be taxed at the time the Shares are
purchased rather than when and as the Repurchase Option expires by filing an
election under Section 83(b) of the Code with the IRS within 30 days from the
date of purchase. The form for making this election is attached as Exhibit A-5
hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER
SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
10. GENERAL PROVISIONS.
(a) This Agreement shall be governed by the internal substantive
laws, but not the choice of law rules of California. This Agreement, subject to
the terms and conditions of the Plan and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of the Shares
by the Purchaser. Subject to Section 15(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
-4-
<PAGE>
(d) Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, nor prevent
that party from thereafter enforcing any other provision of this Agreement. The
rights granted both parties hereunder are cumulative and shall not constitute a
waiver of either party's right to assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED:
----------------------
PURCHASER: CELLNET DATA SYSTEMS, INC.
- ----------------------------- ----------------------------------
Signature By
- ----------------------------- ----------------------------------
Print Name Title
-5-
<PAGE>
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto ________________________________________________________________
________________________________ (__________) shares of the Common Stock of
CellNet Data Systems, Inc. standing in my name of the books of said corporation
represented by Certificate No. _____ herewith and do hereby irrevocably
constitute and appoint _____________________________________________ to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________ and
the undersigned dated ______________, 19__.
Dated: _______________, 19 ____
Signature:
______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
_____________, 19__
Corporate Secretary
CellNet Data Systems, Inc.
75 Shoreway Road, #2000
San Carlos, CA 94070-2705
Dear _________________:
As Escrow Agent for both CellNet Data Systems, Inc., a California
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively as the "Company") exercises the Company's Repurchase Option set
forth in the Agreement, the Company shall give to Purchaser and you a written
notice specifying the number of shares of stock to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE>
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
-2-
<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: CELLNET DATA SYSTEMS, INC.
75 Shoreway Road, #2000
San Carlos, CA 94070-2705
PURCHASER:
---------------------------
---------------------------
---------------------------
ESCROW AGENT: Corporate Secretary
CELLNET DATA SYSTEMS, INC.
75 Shoreway Road, #2000
San Carlos, CA 94070-2705
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-3-
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the internal substantive laws, but not the
choice of law rules, of California.
Very truly yours,
CELLNET DATA SYSTEMS, INC.
-------------------------------------
By
-------------------------------------
Title
PURCHASER:
-------------------------------------
Signature
-------------------------------------
Print Name
ESCROW AGENT:
- -----------------------------------
Corporate Secretary
-4-
<PAGE>
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of CellNet Data Systems, Inc., as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact in respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: _______________, 19____
------------------------------------------
Signature of Spouse
<PAGE>
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of CellNet
Data Systems, Inc. (the "Company").
3. The date on which the property was transferred is: ______________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
Dated: ___________________, 19____ _____________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ _____________________________________
Spouse of Taxpayer
<PAGE>
-7-
<PAGE>
CELLNET DATA SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of CellNet Data Systems, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean CellNet Data Systems, Inc. and any
Designated Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross earnings,
exclusive of payments for overtime, commissions, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment is at least twenty (20)
hours per week. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first day of each Offering
Period.
(i) "EXERCISE DATE" shall mean the last day of each Offering Period.
<PAGE>
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "OFFERING PERIOD" shall mean a period of approximately six (6)
months, commencing on the first Trading Day on or after May 1 and terminating on
the last Trading Day in the period ending the following October 31, or
commencing on the first Trading Day on or after November 1 and terminating on
the last Trading Day in the period ending the following April 30, during which
an option granted pursuant to the Plan may be exercised. The first Offering
Period shall begin on or after May 1, 1997. The duration of Offering Periods
may be changed pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this Employee Stock Purchase Plan.
(m) "PURCHASE PRICE" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(p) "TRADING DAY" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
-2-
<PAGE>
3. ELIGIBILITY.
(a) Any Employee (as defined in Section 2(g)), who shall be employed
by the Company on a given Enrollment Date shall be eligible to participate in
the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 19 hereof. The first Offering Period shall begin on or after May 1,
1997. The Board shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected
thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
-3-
<PAGE>
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at such time during any
Offering Period which is scheduled to end during the current calendar year (the
"Current Offering Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Offering Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Offering Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Offering Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than five
hundred (500) shares of the Company's Common Stock, and provided further that
such purchase shall be subject to the limitations set forth in Sections 3(b) and
12 hereof. Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 10 hereof. The Option
shall expire on the last day of the Offering Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
-4-
<PAGE>
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof) for any reason, he or she shall be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof, and
such participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
(c) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 600,000 shares, subject
to adjustment upon changes
-5-
<PAGE>
in capitalization of the Company as provided in Section 18 hereof. If, on a
given Exercise Date, the number of shares with respect to which options are to
be exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. ADMINISTRATION.
(a) ADMINISTRATIVE BODY. The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
(b) RULE 16B-3 LIMITATIONS. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the
-6-
<PAGE>
Company, in its discretion, may deliver such shares and/or cash to the spouse or
to any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
15. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. REPORTS. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the Reserves, as well as the price per share and
the number of shares of Common Stock covered by each option under the Plan which
has not yet been exercised, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New
-7-
<PAGE>
Exercise Date"). The New Exercise Date shall be before the date of the
Company's proposed sale or merger. The Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
19. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
-8-
<PAGE>
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
-9-
<PAGE>
EXHIBIT A
---------
CELLNET DATA SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in the
CellNet Data Systems, Inc. 1996 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):___________
.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be treated
for federal income tax purposes as having received ordinary income at the
time of such disposition in an amount equal to the excess of the fair
market value of the shares at the time such shares were purchased by me
over the price which I paid for the shares. I HEREBY AGREE TO NOTIFY THE
COMPANY IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY DISPOSITION OF
SHARES AND I WILL MAKE ADEQUATE PROVISION FOR FEDERAL, STATE OR OTHER TAX
WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON THE DISPOSITION OF THE
COMMON STOCK. The
<PAGE>
Company may, but will not be obligated to, withhold from my compensation
the amount necessary to meet any applicable withholding obligation
including any withholding necessary to make available to the Company any
tax deductions or benefits attributable to sale or early disposition of
Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year holding period, I understand that I will be
treated for federal income tax purposes as having received income only at
the time of such disposition, and that such income will be taxed as
ordinary income only to the extent of an amount equal to the lesser of
(1) the excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2) 15%
of the fair market value of the shares on the first day of the Offering
Period. The remainder of the gain, if any, recognized on such disposition
will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) _______________________________________________________
(First) (Middle) (Last)
_________________________ __________________________________________________
Relationship
__________________________________________________
(Address)
Employee's Social
Security Number: __________________________________________________
Employee's Address: __________________________________________________
__________________________________________________
__________________________________________________
-2-
<PAGE>
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: __________________ _______________________________________________
Signature of Employee
_______________________________________________
Spouse's Signature (If beneficiary other than spouse)
-3-
<PAGE>
EXHIBIT B
---------
CELLNET DATA SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the CellNet Data
Systems, Inc. 1996 Employee Stock Purchase Plan which began on ___________
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
____________________________________
____________________________________
____________________________________
Signature:
____________________________________
Date: _______________________________
<PAGE>
------------------------------------------------------------------
CELLNET DATA SYSTEMS, INC.
SHAREHOLDERS' AGREEMENT
August 15, 1994
------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 RIGHTS OF SHAREHOLDERS............................................. 2
SECTION 2 REGISTRATION RIGHTS................................................ 2
2.1 Definitions........................................................ 2
2.2 Requested Registration............................................. 4
2.3 Company Registration...............................................12
2.4 Expenses of Registration...........................................13
2.5 Registration Procedures............................................14
2.6 Registration on Form S-3...........................................16
2.7 Indemnification....................................................17
2.8 Lockup Agreement...................................................20
2.9 Information by Holder..............................................20
2.10 Rule 144 Reporting.................................................20
2.11 Transfer of Registration Rights....................................21
2.12 Termination of Registration Rights.................................21
SECTION 3 AFFIRMATIVE COVENANTS OF THE COMPANY AND THE SHAREHOLDERS..........22
3.1 Board Representation and Voting Agreement of the Shares............22
3.2 Information Rights.................................................27
3.3 Right to Co-Invest.................................................30
3.4 Non-Management Directors...........................................31
SECTION 4 RIGHT OF FIRST REFUSAL ON NEW SECURITIES...........................31
SECTION 5 CO-SALE RIGHT AMONG HOLDERS........................................35
SECTION 6 MISCELLANEOUS......................................................36
6.1 Waivers and Amendments.............................................36
6.2 Governing Law......................................................36
6.3 Successors and Assigns.............................................36
6.4 Entire Agreement...................................................37
6.5 Notices............................................................37
6.6 Severability.......................................................37
6.7 Titles and Subtitles...............................................37
6.8 Counterparts.......................................................37
-i-
<PAGE>
CELLNET DATA SYSTEMS, INC.
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT is entered into as of August 15, 1994, by and
among CELLNET DATA SYSTEMS, INC., a California corporation (the "Company"), and
the persons named in Schedule A hereto (the "Shareholders").
RECITALS
WHEREAS, certain Shareholders possess registration rights, information
rights and rights of first refusal granted under that certain Shareholders'
Agreement dated as of October 4, 1993 (the "Prior Agreement") between the
Company and those persons (the "Prior Holders") listed on Exhibit A attached
thereto;
WHEREAS, pursuant to that certain Series CC Preferred Shares Securities
Purchase Agreement dated the date hereof (the "Series CC Agreement") between the
Company and those persons (the "Purchasers") listed on the Schedule of
Purchasers attached thereto the Purchasers are purchasing shares of the
Company's Series CC Preferred Stock (the "Series CC Shares");
WHEREAS, the obligations of the Company and the Purchasers under the Series
CC Agreement are conditioned, among other things, upon the execution and
delivery of this Agreement by: (i) the holders of at least fifty percent (50%)
of the outstanding Registrable Securities (as defined in the Prior Agreement),
and (ii) the holders of at least fifty percent (50%) of the outstanding shares
of Series BB Preferred Stock or Common Stock issued upon conversion of the
shares of Series BB Preferred Stock (collectively, the "Consenting
Shareholders").
WHEREAS, the Prior Holders desire to terminate the Prior Agreement in
connection with the issuance of the Series CC Shares and to accept the rights
created herein in lieu of those rights;
WHEREAS, as inducement for the Purchasers to enter into the Series CC
Agreement, the Company desires to grant the information rights, registration
rights and rights of first refusal to the Shareholders contained herein;
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Company and the Prior Holders agree that the Prior
Agreement is terminated and superseded in its entirety by this Agreement, and
all parties agree as follows:
SECTION 1
RIGHTS OF SHAREHOLDERS
The Company hereby grants to the Shareholders the registration rights,
rights of first refusal, rights of transfer, information rights and rights
regarding representation on the Board of Directors (collectively the "Rights")
contained herein. The Shareholders accept the Rights and agree to be bound by
the obligations contained herein. The Company and the Shareholders agree that
the Rights provided herein set forth the sole and entire agreement on and
supersede any and all rights granted under the Prior Agreement and further agree
that the Prior Agreement shall hereafter be of no further force and effect.
Upon execution of this Agreement by the Consenting Shareholders, the Purchasers
and the Company, this Agreement shall be binding upon all Shareholders who
heretofore had rights under the Prior Agreement and each such Shareholder shall
have the Rights and be subject to the duties hereunder as if it were a signatory
hereof.
SECTION 2
REGISTRATION RIGHTS
2.1 DEFINITIONS. As used herein in this Agreement, the following terms
shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
(b) "EVENT OF NONCOMPLIANCE" shall be deemed to have occurred if the
Corporation fails to perform any of its obligations to the holders of the Series
CC Preferred Stock under the Put Agreement, whether or not performance of such
obligation is legally
-2-
<PAGE>
permissible, and whether or not it is prohibited by any agreement to which the
Company is subject.
(c) "HOLDER" or "HOLDERS" shall mean and include any person or
persons who holds Shares (as defined herein) which were originally issued, or
who holds Registrable Securities (as defined herein), or qualifying transferees
under Section 2.11 hereof who hold such Shares or Registrable Securities.
(d) "INITIATING HOLDERS" shall mean any Holders who in the aggregate
own not less than twenty percent (20%) of the Registrable Securities which have
not been sold to the public. The term "Initiating Holders" shall also include
any Holders who elect to join in a registration as provided in Section 2.2
(a)(ii).
(e) "INITIATING SERIES CC HOLDERS" shall mean and include any Series
CC Holders (as defined herein) who in the aggregate own not less than twenty
percent (20%) of the Series CC Shares or Registrable Securities, issued or
issuable upon conversion of the Series CC Shares, which have not been sold to
the public. The term "Initiating Series CC Holders" shall also include any
Series CC Holders who elect to join in a registration as provided in Section
2.2(b)(ii).
(f) "MATERIAL CHANGE" shall mean the sale of all or substantially
all the Company's assets, or a merger or consolidation as a result of which the
shareholders of the Company prior to such event own less than 50% of the voting
securities of the surviving corporation or its parent following such event.
(g) "PUT AGREEMENT" shall mean the Put Agreement dated as of August
15, 1994 by and among the Company and the holders of the Series CC Preferred
Stock, as such Agreement shall be amended from time to time.
(h) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
-3-
<PAGE>
(i) "REGISTRABLE SECURITIES" means (i) shares of the Company's
Common Stock held by any Holder who is a party to this Agreement, including but
not limited to any Common Stock issued or issuable pursuant to the conversion of
the Series AA, Series BB and Series CC Preferred Stock, including any Series BB
Preferred Stock issued upon exercise of any warrants held by a Holder, or any
Common Stock issued upon exercise of any warrant held by a Holder, in each case
which have not been sold to the public and (ii) any shares of the Company's
Common Stock or other securities issued or issuable pursuant to the conversion
of, or with respect to, the Series AA, Series BB and Series CC Preferred Stock
held by any Holder who is a party to this Agreement, upon any stock split, stock
dividend, recapitalization, or similar event, which shares have not been sold to
the public or securities issued in replacement or exchange of any of the
securities issued in clauses (i) or (ii) above.
(j) "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.6 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, fees and
disbursements of one counsel for all Holders, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
(k) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(l) "SELLING EXPENSES" shall mean all underwriting fees, discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for any
Holder, other than one counsel acting on behalf of all Holders.
(m) "SERIES AA SHARES" shall mean and include all currently
outstanding shares of Series AA Preferred Stock of the Company.
-4-
<PAGE>
(n) "SERIES BB SHARES" shall mean and include all currently
outstanding shares of the Series BB Preferred Stock of the Company.
(o) "SERIES CC SHARES" shall mean and include all shares of Series
CC Preferred Stock of the Company which shall be issued.
(p) "SERIES CC HOLDERS" shall mean and include any person who holds
Series CC Shares which were originally issued, or who holds Registrable
Securities, issued or issuable upon conversion of the Series CC Shares, or
qualifying transferees under Section 2.11 hereof who hold such Series CC Shares
or Registrable Securities.
(q) "SHARES" shall mean and include all outstanding shares of Series
AA, BB and CC Shares, collectively or shares issued in substitution or exchange
thereof.
(r) "SUBSIDIARY" shall mean and include any corporation in which the
Company has a right to elect a majority of the board of directors of such
corporation.
2.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION BY INITIATING HOLDERS. In case the
Company shall receive from Initiating Holders a written request that the Company
effect any registration, qualification or compliance with respect to twenty
percent (20%) or more of all of the Registrable Securities (or any lesser
percentage if the anticipated aggregate offering price, before deduction of
underwriting discounts and commissions, would exceed $7,500,000) (a "Request for
Registration"), the Company will:
(i) promptly, and in any event within 15 days, give written
notice of the proposed registration, qualification or compliance to all other
Holders; and
(ii) use its diligent efforts to effect such registration,
qualification or compliance as soon as practicable (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate
-5-
<PAGE>
compliance with applicable regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or Holders joining
in such request as are specified in a written request received by the Company
within twenty (20) days after receipt of such written notice from the Company;
Provided, however, that the Company shall not be obligated to
take any action to effect any such registration, qualification or compliance
pursuant to this Section 2.2(a):
(A) In any particular state jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act, provided that the Company shall be required to take all such
necessary action in the State of New York;
(B) Prior to September 30, 1997 or such earlier date as the
Company has completed its initial public offering under a registration statement
under the Securities Act; however, in the event a Request for Registration is
made prior to one (1) year after such initial public offering, the number of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among participating Holders as provided in clause (y) of the
second paragraph of Section 2.2(c), and thereafter, shall be allocated among
participating Holders as provided clause (x) of the second paragraph of Section
2.2(c).
(C) Within six (6) months immediately following the effective
date of any registration statement pertaining to a firmly underwritten offering
of equity securities of the Company for its own account unless otherwise
consented to by the underwriter of such offering; or
(D) After the Company has effected two such Requested
Registrations pursuant to Section 2.2(a) of this Agreement, such registrations
have been declared or ordered effective
-6-
<PAGE>
and the securities offered pursuant to such registrations have been sold.
Subject to the foregoing clauses (A) through (D), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, after receipt of the Request
for Registration; provided, however, that if the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed on or before the date filing would be required, and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer such filing for a period of not more than
90 days after receipt of the Request for Registration; provided, however, that
the Company may not make such certification more than once in any twelve (12)
month period. The Initiating Holders may make two such Requests for
Registration under this Section 2.2(a), but not more than once every six (6)
months.
(b) REQUEST FOR REGISTRATION BY INITIATING SERIES CC HOLDERS. If
after the effective date of a firm commitment underwritten initial public
offering of the Company's Common Stock, the Company shall receive from
Initiating Series CC Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities held by, or issuable to upon conversion of the Series CC Shares held
by, the Initiating Series CC Holders (a "Series CC Request for Registration"),
the Company will:
(i) promptly, and in any event within 15 days, give written
notice of the proposed registration, qualification or compliance to all other
Holders; and
(ii) use its best efforts to effect such registration,
qualification or compliance of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under
-7-
<PAGE>
the Securities Act and any other governmental requirements or regulations) as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a written request
received by the Company within 15 days after receipt of such written notice from
the Company;
Provided, however, that the Company shall not be obligated to take
any action to effect any such registration, qualification or compliance pursuant
to this Section 2.2(b):
(A) In any particular state jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act, provided that the Company shall be required to take all such
necessary action in the State of New York; or
(B) Within six (6) months immediately following the
effective date of any registration statement pertaining to a firmly underwritten
offering of securities of the Company for its own account unless otherwise
consented to by the underwriter of such offering; or
(C) After the Company has effected two such Series CC
Requests for Registration pursuant to Section 2.2(b) of this Agreement, such
registrations have been declared or ordered effective and the securities offered
pursuant to such registrations have been sold; or
(D) If the minimum anticipated aggregate net offering
price of the Registrable Securities included in such registration statement is
less than $2 million.
Subject to the foregoing clauses (A) through (D), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the Series CC Request
for Registration; provided, however, that if the Company shall furnish to such
-8-
<PAGE>
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed on or before the date filing would be required, and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer such filing for a period of not more than
90 days after receipt of the Series CC Request for Registration; provided,
however, that the Company may not make such certification more than once in any
twelve (12) month period.
The Initiating Series CC Holders may make two Series CC Requests for
Registration on Form S-1 (or any successor form to Form S-1), but not more than
once every six (6) months. Other holders of Registrable Securities may
participate in any offering conducted pursuant to a Series CC Request for
Registration provided that in the event of an Underwriter's Cutback (as defined
herein in Section 2.2(c)), the Series CC Holders shall receive priority with
respect to fifty percent (50%) of the shares to be registered; however, if as a
result of an Underwriter's Cutback the Series CC Holders are not allowed to
include in any such registration at least eighty percent (80%) of their
Registrable Securities requested to be registered, then such registration shall
not count as one of the Initiating Series CC Holders' two Series CC Requests for
Registration.
(c) UNDERWRITING. The distribution of the Registrable Securities
covered by a Request for Registration (or a Series CC Request for Registration)
shall be effected by means of a firm commitment underwriting. The right of any
Initiating Holder (or Initiating Series CC Holder if the registration is
pursuant to Section 2.2(b)) to registration pursuant to Section 2.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested by such Holder, unless otherwise mutually agreed by a majority
in interest of the Initiating Holders and such Initiating Holder (or majority in
interest of the Initiating Series CC Holders and such Initiating Series CC
Holder if the registration is pursuant to Section 2.2(b)), to the extent
provided herein.
-9-
<PAGE>
The Company, together with all Initiating Holders (or Initiating
Series CC Holders if the registration is pursuant to Section 2.2(b)) proposing
to distribute their securities through such underwriting, shall enter into an
underwriting agreement in customary form with the managing underwriter(s)
selected for such underwriting by a majority in interest of the Initiating
Holders (or Initiating Series CC Holders if the registration is pursuant to
Section 2.2(b)) which underwriter(s) shall be reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 2.2, if the
managing underwriter(s) advises the Initiating Holders (or Initiating Series CC
Holders if the registration is pursuant to Section 2.2(b)) in writing that
because the number of shares requested to be included in the registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company or Holders requesting
registration, as the case may be, marketing factors require a limitation of the
number of shares to be underwritten on behalf of Initiating Holders (or
Initiating Series CC Holders if the registration is pursuant to Section 2.2(b))
(an "Underwriter's Cutback"), then, subject to the provisions of this Section
2.2(c), all Initiating Holders (or Initiating Series CC Holders if the
registration is pursuant to Section 2.2(b)) shall be so advised, and the number
of shares of Registrable Securities that may be included in the registration and
underwriting, if any, shall be allocated, (x) if the registration is pursuant to
Section 2.2(a) in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Initiating Holders at the time of
filing the registration statement and (y) if the registration statement is
pursuant to Section 2.2(b) then (A) fifty percent (50%) of the shares to be
registered to the Initiating Series CC Holders participating in the registration
and among such Initiating Series CC Holders in proportion, as nearly as
practicable to the respective amount of Registrable Securities obtained as a
result of conversion into Common Stock of Series CC Shares held by such
Initiating Series CC Holders at the time of filing of the registration statement
and (b) fifty percent (50%) of the shares to be registered to the other Holders
of Registrable Securities participating in the registration and among such
Holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities (other than shares obtained as a result of conversion
into Common Stock of Series CC Shares) held by such Holders at the time of
filing of the registration statement. No
-10-
<PAGE>
Registrable Securities excluded from the underwriting by reason of the managing
underwriter's marketing limitation shall be included in such registration.
If any Initiating Holder (or Initiating Series CC Holder if the
registration is pursuant to Section 2.2(b)) of Registrable Securities
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the managing underwriter(s) and the
Initiating Holders (or Initiating Series CC Holders if the registration is
pursuant to Section 2.2(b)). The Registrable Securities and/or other securities
so withdrawn shall also be withdrawn from registration; provided, however, that,
if by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other Initiating Holders (or other Initiating
Series CC Holders if the registration is pursuant to Section 2.2(b)) may be
included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Initiating Holders (or
Initiating Series CC Holders if the registration is pursuant to Section 2.2(b))
who have included Registrable Securities in the registration the right to
include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 2.2(c).
(d) INCLUSION OF SHARES BY COMPANY. If the managing underwriter(s)
has not limited the number of Registrable Securities to be underwritten, the
Company may include securities for its own account or for the account of others
in such registration if the managing underwriter(s) so agrees and confirms to
the Holders of Registrable Securities to be included in the registration that
the inclusion of the other shares will not be likely to effect the price at
which the Registrable Securities may be sold, and if the number of Registrable
Securities held by Initiating Holders (or Initiating Series CC Holders if the
registration is pursuant to Section 2.2(b)) which would otherwise have been
included in such registration and underwriting will not thereby be limited. The
inclusion of such shares shall be on the same terms as the registration of
shares held by the Initiating Holders (or Initiating Series CC Holders if the
registration is pursuant to Section 2.2(b)).
-11-
<PAGE>
(e) REQUEST FOR REGISTRATION UPON AN EVENT OF NONCOMPLIANCE. If
after an Event of Noncompliance the Company shall receive from holders of at
least twenty-five percent (25%) of the outstanding number of Series CC Shares
("Special Initiating Series CC Holders) a written request that the Company
effect any registration, qualification or compliance with respect to the shares
of Common Stock issuable upon conversion of the Series CC Shares (a "Special
Series CC Request for Registration"), the Company will:
(i) promptly, and in any event within 15 days, give written
notice of the proposed registration, qualification or compliance to all other
holders of Series CC Shares ("Eligible Series CC Holders"); and
(ii) use its best efforts to effect such registration,
qualification or compliance of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Eligible
Series CC Holders joining in such request as are specified in a written request
received by the Company within twenty (20) days after receipt of such written
notice from the Company;
Provided, however, that the Company shall not be obligated to take
any action to effect any such registration, qualification or compliance pursuant
to this Section 2.2(e):
(A) In any particular state jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act, provided that the Company shall be required to take all such
necessary action in the State of New York; or
-12-
<PAGE>
(B) Within six (6) months immediately following the
effective date of any registration statement pertaining to a firmly underwritten
offering of securities of the Company for its own account unless otherwise
consented to by the underwriter of such offering.
Subject to the foregoing clauses (A) and (B), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, after receipt of the Special Series CC
Request for Registration; provided, however, that if the Company shall furnish
to such Special Initiating Series CC Holders and Eligible Series CC Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed on or before the date filing would be required, and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than 90 days after
receipt of the Special Series CC Request for Registration; provided, however,
that the Company may not make such certification more than once in any twelve
(12) month period.
Other Holders of Registrable Securities may participate in any
offering conducted pursuant to a Special Series CC Request for Registration
provided that in the event of an Underwriter's Cutback, the holders of Series CC
Shares shall receive full priority with respect to all their Registrable
Securities requested to be registered.
(f) UNDERWRITING FOR A SPECIAL SERIES CC REQUEST FOR REGISTRATION.
The distribution of the Registrable Securities covered by a Special Series CC
Request for Registration shall be effected by means of a firm commitment
underwriting. The right of any Special Initiating Series CC Holder to
registration pursuant to Section 2.2(e) shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent requested by such
Holder, unless otherwise mutually agreed by a majority in interest of the
Special Initiating Series CC Holders and such Special Initiating Series CC
Holder (or Eligible Series CC Holder).
-13-
<PAGE>
The Company, together with all Special Initiating Series CC Holders
proposing to distribute their securities through such underwriting, shall enter
into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by a majority in interest of the
Special Initiating Series CC Holders which underwriter(s) shall be reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
2.2, if the managing underwriter(s) advises the Special Initiating Series CC
Holders of the necessity for an Underwriter's Cutback (as defined in Section
2.2(c)), then, subject to the provisions of this Section 2.2(f), all Special
Initiating Series CC Holders, Eligible Series CC Holders, and any other
participating Holders shall be so advised, and the number of shares of
Registrable Securities that may be included in the registration and
underwriting, if any, shall be allocated first in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Special Initiating Series CC Holders and Eligible Series CC Holders at the time
of filing the registration statement. No Registrable Securities excluded from
the underwriting by reason of the managing underwriter's marketing limitation
shall be included in such registration.
If any Special Initiating Series CC Holder of Registrable Securities
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the managing underwriter(s) and the
Special Initiating Series CC Holders. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from registration; provided,
however, that, if by the withdrawal of such Registrable Securities a greater
number of Registrable Securities held by other Special Initiating Series CC
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Special Initiating Series CC Holders who have included Registrable Securities in
the registration the right to include additional Registrable Securities in the
same proportion used in determining the underwriter limitation in this Section
2.2(f).
2.3 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION TO HOLDERS. If at any time or from time
to time, the Company shall determine to register any
-14-
<PAGE>
of its securities, either for its own account or the account of a security
holder or holders, other than (i) a registration relating solely to employee
benefit plans, or (ii) a registration relating solely to a Commission Rule 145
transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within twenty (20) days after receipt of such written notice
from the Company, by any Holder or Holders.
(b) INCLUSION OF ADDITIONAL SHARES. The Company may include in any
registration pursuant to this Section 2.3 securities held by officers and
employees of the Company, in amounts as determined by the Company's Board of
Directors; provided, however, that the number of such shares included in such
registration shall not exceed thirty-three percent (33%) of the total number of
shares to be included on behalf of the Company's security holders in such
registration.
(c) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.3(a)(i). In such event the right of any Holder to
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 2.3, if the
managing underwriter determines the number of shares requested to be included in
the registration exceeds the number which can be sold in an orderly manner in
such offering within a price range acceptable to the Company or Holders
requesting registration, as
-15-
<PAGE>
the case may be, (i) if such registration is the first offering by the Company
to the general public of its securities for its own account, the underwriter may
exclude some or all Registrable Securities from such registration and
underwriting (provided the securities of other shareholders are not included
therein), and (ii) if such registration is other than the first offering by the
Company to the general public of its securities for its own account, the
underwriter may limit the Registrable Securities held by Holders and securities
to be included pursuant to Section 2.3(b) to be included in such registration
and underwriting to an aggregate of not less than twenty-five percent (25%) of
the total number of the securities to be registered in such registration and
underwriting. The Company shall so advise all Holders and the other holders
distributing their securities through such underwriting, and the number of
shares of Registrable Securities and other securities that may be included in
the registration and underwriting shall be allocated first among all Holders
thereof in proportion, as nearly as practicable, to the respective amounts of
securities entitled to inclusion in such registration (on an as-converted basis)
held by all such Holders at the time of filing the registration statement.
After such allocation, any additional shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among other holders thereof in proportion, as nearly as practicable,
to the respective amounts of securities entitled to inclusion in such
registration held by all such other holders. If any Holder or other holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration, but if the registration is the first offering by the Company
to the general public of its securities for its own account, then the securities
so excluded or withdrawn shall not be transferred in a public distribution prior
to 180 days after the effective date of the registration statement relating
thereto.
2.4 EXPENSES OF REGISTRATION. All Registration Expenses, other than
underwriting fees, discounts or commissions or fees of counsel other than one
counsel for all selling shareholders, incurred in connection with any
registration, qualification or compliance pursuant to Sections 2.2, 2.3 and 2.6,
shall be borne by the Company. The one such counsel representing all selling
share-
-16-
<PAGE>
holders shall be selected by a majority of the Initiating Holders (or Initiating
Series CC Holders if the registration is pursuant to Section 2.2(b), or Special
Initiating Series CC Holders if the registration is pursuant to Section 2.2(e)).
All Selling Expenses relating to securities registered by the Holders shall be
borne by the holders of such securities pro rata on the basis of the number of
shares so registered.
2.5 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) keep such registration, qualification or compliance effective
and current for a period of 180 days (or such longer period as may be necessary
to accommodate the filing of amendments or supplements necessary to comply with
the Securities Act) or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that, except in New York,
the Company shall not be required to in connection therewith or as a condition
thereto (i) qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this subsection, (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction);
-17-
<PAGE>
(d) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder and the
Company participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(e) notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing and of any SEC stop orders or other material
modifications in connection therewith;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable
-18-
<PAGE>
Securities (including effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any Holder of Registrable Securities which Holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(m) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered
-19-
<PAGE>
with or approved by such other governmental agencies or authorities as may be
necessary to enable the sellers thereof to consummate the disposition of such
Registrable Securities; and
(n) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the Holders of a majority of the
Registrable Securities being sold reasonably request (provided that Registrable
Securities constitute at least 10% of the securities covered by such
registration statement).
2.6 REGISTRATION ON FORM S-3.
(a) In addition to the rights set forth in Section 2.2, if a Holder
requests that the Company file a registration statement on Form S-3 (or any
successor to Form S-3) for a public offering of shares of Registrable Securities
the reasonably anticipated aggregate price to the public of which would be at
least $1,000,000, and the Company is a registrant entitled to use Form S-3 to
register the Shares for such an offering, the Company shall use its best efforts
to cause such shares to be registered for the offering as soon as practicable on
Form S-3 (or any successor form to Form S-3).
(b) The Holders' right to register shares under Section 2.6 shall be
shared pro rata among all Holders of Registrable Securities based on the number
of shares of Registrable Securities held by each Holder.
(c) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 2.6 in the following
situations: (i) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act; (ii) if the Company, within ten (10) days of the receipt of the request of
the Holders, gives notice of its bona fide intention to effect the filing of a
registration statement with the Commission within forty-five (45) days of
receipt of such request (other than with respect to a registration statement
relating to a Rule 145
-20-
<PAGE>
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities); (iii) during
the period starting with the date of filing of, and ending on a date ninety (90)
days following the effective date of, a registration statement described in (ii)
above or pursuant to Section 2.2, provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective and further provided that no other person or
entity could require the Company to file a registration statement in such
period; or (iv) more than once in any six-month period.
2.7 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling any such persons within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in the investigation or settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act or any state securities laws
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each such Holder, each of its officers and directors and such
Holder's legal counsel and independent accountants, and each person controlling
any such persons, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending
-21-
<PAGE>
any such claim, loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder or underwriter and stated to be specifically for
use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, legal counsel, independent accountants, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the obligation of such
Holder hereunder shall be limited to an amount equal to the proceeds received by
such Holder upon the sale of the Registrable Securities sold in the offering
covered by such registration.
-22-
<PAGE>
(c) Each party entitled to indemnification under this Section 2.7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall bear the
expense of such defense of the Indemnified Party if representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interest (as determined in good faith by the Indemnified Party).
The failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) The obligations of the Company and Holders under this Section
2.7 shall survive the completion of any offering of Registrable Securities under
this Agreement.
(e) The Company shall make payment in satisfaction of its
obligations under this Section 2.7 within thirty (30) days upon receiving
written confirmation from the Indemnified Party of the nature and amount of the
expenses to be indemnified.
(f) If the indemnification provided for in this Section 2.7 is
unavailable or insufficient to hold harmless an Indemnified Party, then each
Indemnifying Party shall contribute to the amount paid or payable to such
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in this Section 2.7 in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party or parties on the one hand and the
Indemnified Party on the other in connection with the
-23-
<PAGE>
statements or omissions which resulted in such losses, claims, demands or
liabilities as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Indemnifying Party or parties on the one hand or the Indemnified Party on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid to an Indemnified Party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 2.7(f) shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any action or
claim which is the subject of this Section 2.7. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(g) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Party or any officer, director or controlling person
of such Indemnified Party and shall survive the transfer of securities.
2.8 LOCKUP AGREEMENT. In consideration for the Company agreeing to its
obligations under this Agreement, each Holder hereby agrees in connection with
the first registration of the Company's securities whether for its own account
or any registration pursuant to Section 2.2, not to sell, make any short sale
of, loan, grant any option for the purchase of, grant an interest in, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or
underwriters managing the offering, as the case may be, for such period of time
(not to exceed 180 days or such shorter time as the officers and directors have
agreed to) from the date of the initial public offering, pursuant to an
effective registration statement, as the Company or the underwriters may
specify; provided, however, that such Holder shall be relieved of its
obligations under this Section 2.8 unless all executive officers, directors and
five percent (5%) or more shareholders of
-24-
<PAGE>
the Company enter into similar agreements. Nothing herein shall prevent any
Holder that is a partnership from making a distribution of Registrable
Securities to the partners thereof that is otherwise in compliance with
applicable securities laws, provided that all such partners shall remain subject
to this Section 2.8.
2.9 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
2.10 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of securities of the Company to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements);
(c) So long as a Holder owns any Registrable Securities to furnish
to the Holder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public), and of
the Securities Act and the Securities Exchange Act of 1934 (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as a Holder may
-25-
<PAGE>
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration.
2.11 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted Holders under Sections 2.2, 2.3 and 2.6 may be
assigned to a transferee or assignee in connection with the transfer or
assignment of at least 50,000 shares of the Registrable Securities, provided
that (i) such transfer may otherwise be effected in accordance with applicable
securities laws, and (ii) the Company is given reasonably prompt written notice
of such assignment. Notwithstanding the foregoing, rights to cause the Company
to register securities may be assigned, without the need for satisfying minimum
shareholding requirements, to any constituent partner (or any partner of such
partner if such partner is itself a partnership) or retired partner (or
professional employee or entity of which such employees are the beneficial
owners) of a Holder, where such Holder is a partnership, or to any parent or
subsidiary corporation or any officer, director or principal shareholder
thereof, where such Holder is a corporation or to an immediate family member
(spouse or children) or a trust for the benefit of an immediate family member,
where such Holder is an individual.
2.12 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant to
Section 2 of this Agreement shall terminate as to any Holder at the later of (i)
one year after the Company's initial public offering or (ii) at such time as
such Holder may sell under Rule 144 in a three month period all Registrable
Securities then held by such Holder.
-26-
<PAGE>
SECTION 3
AFFIRMATIVE COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
3.1 BOARD REPRESENTATION AND VOTING AGREEMENT OF THE SHARES.
(a) From and after the date hereof and until the provisions of this
Section cease to be effective, each Shareholder shall vote all of the voting
securities of the Company (including the Common Stock, Series AA Shares, Series
BB Shares and Series CC Shares) over which such person has voting control and
shall take all other necessary or desirable actions within his or its control
(whether in his or its capacity as a stockholder, director, member of a board
committee or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary or desirable actions within its control
(including, without limitation, calling special board and shareholders'
meetings) so that:
(i) the authorized number of directors of the Company's Board
of Directors (the "Board") shall be established at ten (10) directors;
(ii) subject to Section 3.1(b) hereof, the following persons
shall be elected to the Board at each election of directors during the term of
this Agreement:
(A) For so long as Kleiner, Perkins, Caufield & Byers
continues to own a total of at least 350,000 Series AA, Series BB and/or Series
CC Shares (or the Common Stock into which such Series AA, Series BB and/or
Series CC Shares may have been converted, appropriately adjusted for any stock
splits, consolidations or the like), one candidate selected by Kleiner, Perkins,
Caufield & Byers.
(B) For so long as Hambrecht & Quist continues to own
a total of at least 350,000 Series AA, Series BB and/or Series CC Shares (or the
Common Stock into which such Series AA,
-27-
<PAGE>
Series BB and/or Series CC Shares may have been converted, appropriately
adjusted for any stock splits, consolidations or the like), one candidate
selected by Hambrecht & Quist.
(C) For so long as El Dorado Investment Company
continues to own a total of at least 350,000 Series AA, Series BB and/or Series
CC Shares (or the Common Stock into which such Series AA, Series BB and/or
Series CC Shares may have been converted, appropriately adjusted for any stock
splits, consolidations or the like), one candidate selected by El Dorado
Investment Company.
(D) For so long as Paul Cook continues to own a total
of at least 350,000 Series AA, Series BB and/or Series CC Shares (or the Common
Stock into which such Series AA, Series BB and/or Series CC Shares may have been
converted, appropriately adjusted for any stock splits, consolidations or the
like), Paul Cook.
(E) For so long as Banner Partners continues to own a
total of at least 350,000 Series AA, Series BB and/or Series CC Shares (or the
Common Stock into which such Series AA, Series BB and/or Series CC Shares may
have been converted, appropriately adjusted for any stock splits, consolidations
or the like), one candidate selected by Banner Partners.
(F) For so long as AT&T Ventures continues to own a
total of at least 350,000 Series BB and/or Series CC Shares (or the Common Stock
into which such Series BB and/or Series CC Shares may have been converted,
appropriately adjusted for any stock splits, consolidations or the like), one
candidate selected by AT&T Ventures. The initial candidate selected by AT&T
Ventures shall be Neil Douglas.
(G) For so long as Odyssey Partners continues to own a
total of at least 350,000 Series BB and/or Series CC Shares (or the Common Stock
into which such Series BB and/or Series CC Shares may have been converted,
appropriately adjusted for any stock splits, consolidations or the like), one
candidate selected by Odyssey Partners. The initial candidate selected by
Odyssey Partners shall be Michael Barker.
-28-
<PAGE>
(H) For so long as Providence Media Partners L.P.
("Providence") continues to own a total of at least 350,000 Series CC Shares (or
the Common Stock into which such Series CC Shares may have been converted,
appropriately adjusted or any stock splits, consolidations or the like) one
representative (the "Providence Director") designated by Providence, provided
that until the next Annual Meeting of the Company's shareholders following the
date of this Agreement, Jonathan M. Nelson shall serve as the Providence
Director;
(I) The Chief Executive Officer of the Company.
(iii) any committees of the Board shall be created only upon
the approval of at least two thirds of the members of the Board;
(iv) any director designated hereunder shall be removed from
the Board (and thereupon from all committees of the Board) (with or without
cause) at the written request of the person or persons which have the right to
designate such a director hereunder, but only upon such written request and
under no other circumstance except for cause as provided by law; and
(v) in the event that any representative designated hereunder
for any reason ceases to serve as a member of the Board or any committee thereof
during such representative's term of office, the resulting vacancy on the Board
or committee shall be filled by a representative designated by a person or
persons which have the right to designate such a representative hereunder.
(b) The Company and each Shareholder agree that notwithstanding the
provisions of subparagraph (a) hereof, if an Event of Noncompliance shall have
occurred, each Shareholder shall vote all of the voting securities of the
Company (including the Common Stock, Series AA Shares, Series BB Shares and
Series CC Shares) over which such person has voting control and shall take all
other necessary or desirable actions within his or its control (whether in his
or its capacity as a shareholder, director, member of a board, committee or
officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of obtaining a quorum
and execution of
-29-
<PAGE>
written consent in lieu of meetings) and the Company shall take all necessary or
desirable actions within its control (including, without limitation, calling
special board and shareholders' meetings) so that:
(i) the authorized number of directors of the Company's Board
shall be increased to eleven (11) directors;
(ii) until such time as no Event of Noncompliance exists there
shall be elected to the Board that number of representatives as shall constitute
one less than a majority of the Board (which shall include the designee of
Providence) and who shall have been designated by the holders of a majority of
the Series CC Shares; and
(iii) for the remaining positions on the Board constituting a
majority of the Board, there shall be elected to the Board representatives
designated by Kleiner, Perkins, Caufield & Byers, Hambrecht & Quist, El Dorado
Investment Company, Banner Partners, AT&T Ventures, Odyssey Partners and Paul
Cook, as so agreed among themselves, provided that one such representative shall
be the Chief Executive Officer of the Company.
(c) For purposes of this Section 3.1, all shares held by an
affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933)
or professional employee (or entity of which such employees are the beneficial
owners) of Kleiner, Perkins, Caufield & Byers or Hambrecht & Quist or El Dorado
Investment Company or Banner Partners or AT&T Ventures or Odyssey Partners or
Providence, as the case may be, will be deemed to be owned by Kleiner, Perkins,
Caufield & Byers or Hambrecht & Quist or El Dorado Investment Company or Banner
Partners or AT&T Ventures or Odyssey Partners or Providence, as the case may be.
The provisions of Section 3.1(a) shall not be assignable by Kleiner, Perkins,
Caufield & Byers or Hambrecht & Quist or El Dorado Investment Company or Banner
Partners or AT&T Ventures or Odyssey Partners or Providence. The right of Paul
Cook pursuant to Section 3.1(a) is personal and is not transferrable to any
party.
(d) Each and every transferee or assignee of the Shares or
Registrable Securities from any Holder shall be bound by and subject to all the
terms and conditions of this Section 3.1. So
-30-
<PAGE>
long as the provisions of this Section 3.1 are in effect, the Company shall
require, as a condition precedent to the transfer of any Shares or Registrable
Securities covered by this Section 3.1, that the transferee agrees in writing to
be bound by, and subject to, the terms and conditions of this Section 3.1 as
provided in this Section 3.1 and to ensure that his transferees of the Shares or
Registrable Securities shall be likewise bound.
(e) The Company and the Holders agree that, so long as the
provisions of this Section 3.1 or Section 5 are in effect, all Shares or
Registrable Securities now or hereafter held by each Holder will be stamped or
otherwise imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AGREEMENTS, COVENANTS AND RESTRICTIONS IN REGARD TO THE
VOTING OF SUCH SHARES AND THEIR TRANSFER, INCLUDING
CO-SALE RIGHTS, AS PROVIDED IN THE PROVISIONS OF A
SHAREHOLDERS' RIGHTS AGREEMENT, A COPY OF WHICH IS ON FILE
IN THE OFFICE OF THE SECRETARY OF THE CORPORATION.
(f) Each of the parties acknowledge that all other parties hereto
will be irreparably damaged in the event that the provisions of this Section are
not specifically enforced. Accordingly, should any dispute arise pursuant to
Section 3.1 of this Agreement, the parties agree that a decree of specific
performance shall be an appropriate remedy. Such remedy shall be cumulative and
shall be in addition to any other remedies which any party may have at law or in
equity.
(g) In the event (i) the Company has consummated an initial public
offering of its Common Stock in which the net proceeds to the Company is at
least twenty million dollars ($20,000,000), (ii) the Series AA, BB or CC Shares
are entitled to a separate class vote on a Material Change, and (iii) a
shareholder vote is taken on the Material Change in which the Series AA, BB
and/or CC Holders in a separate class vote do not approve the Material Change by
the required number of votes of such holders of Preferred Stock, Holders of the
Series AA, BB and/or CC Shares agree to participate in a third vote which may be
solicited by the
-31-
<PAGE>
Company and in such vote the holders of such Shares agree to vote with the
holders of Common Stock on an as-converted basis. If the Material Change is
approved in such third vote by the requisite number of votes of the Company's
shareholders (other than any required class vote by the Series AA, BB and/or CC
Holders), the Series AA, BB and/or CC Holders agree that they shall have been
deemed to vote their Shares in favor of the Material Change. The provisions of
this Section 3.1(g) shall terminate when there are no longer any outstanding
shares of Series AA, BB or CC Preferred Stock outstanding.
(h) Following the closing of a registered public offering of the
Company's Common Stock, the Company shall pay the reasonable out-of-pocket
travel, lodging and other related expenses of all directors elected pursuant to
Section 3.1.
(i) DURATION OF SECTION 3.1. The provisions of Section 3.1 shall
terminate as follows:
(i) The obligations of any Shareholder to vote under Section
3.1(a), shall terminate upon the first to occur of the following events:
(A) upon the closing of a registered public offering
of the Company's Common Stock; or
(B) August 15, 2004.
(ii) The obligations of any Shareholder to vote under Section
3.1(b) and the obligation of the Company under Section 3.1(b), shall terminate
upon the first to occur of the following events:
(A) upon the closing of a registered public offering
of the Company's Common Stock in which the net proceeds to the Company is at
least twenty million dollars ($20,000,000); or
(B) August 15, 2004.
(iii) The Company's obligations as to any Shareholder under
Section 3.1(a) shall terminate when the Shareholder no longer
-32-
<PAGE>
holds the minimum number of Shares or Registrable Securities as provided under
Section 3.1(a).
(j) Notwithstanding subsections 3.1(i)(i) or (ii), if the Company
makes a registered public offering of its Common Stock, the Company shall cause
all persons designated pursuant to Section 3.1(a)(ii) to be nominated as a
director at each meeting of shareholders of the Company at which a vote for
directors will be taken so long as each Holder in Section 3.1(a)(ii) holds at
least the minimum number of Shares or Registrable Securities as provided in
Section 3.1(a)(ii).
(k) For three (3) years from the effective date of this Agreement,
the Company and the Shareholders agree to take such action as is necessary to
ensure that the Company's Restated Articles of Incorporation provide that the
Shareholders retain the right of cumulative voting in the election of directors,
and that the Board shall be not less than eight (8) directors.
3.2 INFORMATION RIGHTS.
(a) ANNUAL FINANCIAL INFORMATION. As soon as practicable after the
end of each fiscal year, and in any event within 90 days thereafter, commencing
with the fiscal year ending on December 31, 1994, the Company will furnish (a)
to each Shareholder an audited consolidated balance sheet and statement of
income and retained earnings and of cash flows of the Company audited to the
extent so required by any "big six" independent public accounting firm, as
selected by the Company, and (b) to each director of the Company consolidated
internal unaudited balance sheets and statements of income and retained earnings
and of cash flows of each Subsidiary of the Company, if any, in each case
showing the financial condition of the Company and/or each Subsidiary of the
Company as of the close of such fiscal year and the results of the Company's
and/or such Subsidiary's operations during such fiscal year, all on a
consolidated basis. Each of the audited financial statements delivered
hereunder shall be certified by such accounting firm to have been prepared in
accordance with generally accepted accounting principles consistently applied.
(b) QUARTERLY FINANCIAL INFORMATION. The Company will furnish the
following reports to each Shareholder holding at least
-33-
<PAGE>
50,000 shares of Series AA or BB or CC Preferred Stock (and/or Common Stock
issued upon conversion of the Series AA or BB or CC Preferred Stock) as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company and in any event within 45 days
thereafter, an unaudited consolidated balance sheet and an unaudited statement
of cash flows of the Company and its Subsidiaries, if any, as of the end of each
such quarterly period, and unaudited consolidated statements of income of the
Company and its Subsidiaries for such period and for the current fiscal year to
date, in each case with comparable prior periods, prepared in accordance with
generally accepted accounting principles consistently applied, all in reasonable
detail, including any material discrepancies between the results reported and
the Company's budgeted projections for the period, as well as other financial or
business events of material importance, and certified, subject to changes
resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company.
(c) MONTHLY AND OTHER FINANCIAL INFORMATION.
(i) MONTHLY FINANCIAL INFORMATION. The Company will furnish
to each director as soon as available, and in any event within 30 days after the
end of each month, commencing with the month ending September 30, 1994, (a) a
consolidated internal, unaudited balance sheet and statement of income and
retained earnings and of cash flows of the Company as of the end of each such
month, and (b) consolidated internal unaudited balance sheets and statements of
income and retained earnings and of cash flows of each Subsidiary of the
Company, if any, in each case, including a comparison of such unaudited
statement of income and cash flows to (i) the previous year's applicable
statement of income and cash flows and (ii) the projected monthly statement of
income and cash flows for such month.
(ii) OTHER FINANCIAL INFORMATION. The Company will deliver to
each director, within 30 days prior to the commencement of each fiscal year, an
annual operating budget and projected monthly balance sheets and statements of
income and as soon as practicable after preparation thereof, complete and
correct copies of all quarterly (if any) or annual budgetary analyses or
forecasts of the Company and its Subsidiaries prepared by
-34-
<PAGE>
management. Promptly after receipt thereof, the Company will provide to each
director copies of any reports as to adequacies in accounting controls submitted
by independent accountants with respect to the Company.
(d) RIGHTS TO VISITATION AND ANNUAL OPERATING PLAN. The Company
shall provide the following information to each Shareholder for so long as such
Shareholder is a holder of greater than 200,000 shares of Series AA or BB or CC
Preferred Stock (and/or Common Stock issued upon conversion of the Series AA or
BB or CC Preferred Stock) appropriately adjusted or any stock splits,
consolidations or the like;
(i) For so long as a Shareholder is eligible to receive
reports under this Section 3.2(d), he shall also have the right, at his expense,
to visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss their affairs, finances and accounts with their
officers, all at such reasonable times and as often as may be reasonably
requested.
(ii) Upon written request, the Company shall furnish such
Shareholder prior to the beginning of such fiscal year, the Company's annual
operating plan.
(e) CONFIDENTIALITY OF INFORMATION. Each Shareholder agrees that
any information obtained by such Shareholder pursuant to Sections 3.2(a),
3.2(b), 3.2(c) and 3.2(d) which is, or would reasonably be perceived to be,
proprietary to the Company or otherwise confidential will not be disclosed
without the prior written consent of the Company, unless required by law.
Disclosure of proprietary or confidential information to partners within a
partnership or professional employees or advisors to a partnership does not
require the prior written consent of the Company as long as those recipients are
informed of their obligation to maintain the confidentiality of the information.
Each Shareholder further acknowledges and understands that any information so
obtained which may be considered "inside" non-public information will not be
utilized by such Shareholder in connection with purchases and/or sales of the
Company's securities except in compliance with applicable state and federal
antifraud statutes. Confidential information will not include information or
material of any nature, whether or not obtained pursuant to legal process or
court order which was
-35-
<PAGE>
lawfully in the possession of such Shareholder or its representatives prior to
disclosure of such information by the Company; which was, or at any time
becomes, available in the public domain other than through a violation of this
Agreement; or which is furnished to such Shareholder or its representatives by a
third party (which is not known by the recipient to have an obligation of
confidentiality to the Company) having a right to do so.
(f) ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights
granted pursuant to Sections 3.2(a) and 3.2(b) may be assigned or otherwise
conveyed by a Shareholder or by any subsequent transferee of any such rights,
subject to the satisfaction of the requirements prescribed herein for the
holding of the Shares, and upon the written consent of the Company (provided
that such consent shall not be required with respect to transfers to partners or
affiliates of a Shareholder), which consent shall not be unreasonably withheld,
provided that such rights may not be assigned to a transferee which the Company
reasonably believes is a competitor or intends to become a competitor of the
Company.
(g) OFFICER'S CERTIFICATES. Together with delivery of financial
statements of the Company pursuant to Section 3.2(c)(i) above, the Company shall
deliver to each director a certificate of the President, Chief Financial Officer
or Treasurer of the Company, (a) that such statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except for such changes or deviations necessary to prepare such financial
statements in accordance with generally accepted accounting principles) and
present fairly the consolidated financial position of the Company as of the
dates specified and the results of its consolidated operations and changes in
financial position with respect to the periods specified (subject in the case of
interim financial statements only to normal year-end audit adjustments described
in reasonable detail) and (b) to the effect that such officer has caused the
provisions of this Agreement, as well as the Put Agreement, the Securities
Purchase Agreement dated August 15, 1994 and the Amended and Restated Articles
of Incorporation of the Company (collectively, the "Related Agreements") to be
reviewed and has no knowledge of the breach of any covenant or noncompliance
with any term of this Agreement or any Related Agreements.
-36-
<PAGE>
(h) TERMINATION OF INFORMATION RIGHTS. The information rights
granted to the Shareholders pursuant to this Section 3.2 shall terminate and be
of no further force or effect upon the closing of a registered public offering
of the Company's Common Stock in which the net proceeds to the Company is at
least twenty million dollars ($20,000,000).
3.3 RIGHT TO CO-INVEST. The Company will use reasonable best efforts to
provide each Series CC Holder with the opportunity to co-invest on similar terms
and conditions in any foreign investments, partnerships, or joint ventures (the
"Foreign Investment") involving the Company which include financing from purely
financial (as compared to strategic) investors ("Co-Investment Right"). In the
event that the Company proposes to make a Foreign Investment, it shall give each
Series CC Holder written notice (the "Foreign Investment Notice") of its
intention, describing the type of investment, the price, and the general terms
upon which the Company proposes to invest. Each Series CC Holder shall have
twenty (20) days from the date of mailing of the Foreign Investment Notice to
agree to participate in the Foreign Investment based on his pro rata share of
Series CC Shares for the price and upon the general terms specified in such
notice by giving written notice to the Company and stating therein the quantity
of securities to be purchased. The Co-Investment Right is conditioned upon and
only available to Series CC Holders who participate in such investment
transaction in a good faith manner to facilitate completion of the transaction
including reasonably prompt responses to requests by the Company regarding such
participation, with a closing to occur not sooner than thirty (30) days after
the mailing of the Foreign Investment Notice. The Co-Investment Right among
Series CC Holders shall be limited to fifty percent (50%) of the amount
available to financial investors, and shall be allocated among the participating
Series CC Holders on a pro rata basis according to the number of Series CC
Shares they hold. The provisions of Section 3.3 shall terminate and cease to
have any effect or be binding on any party hereto upon the third anniversary of
the closing of a registered public offering of the Company's Common Stock. The
Co-Investment Right is nonassignable.
3.4 NON-MANAGEMENT DIRECTORS. As long as any Series BB or Series CC
Shares are outstanding, any shares of Common Stock, or any rights or options to
acquire shares of Common Stock, issued to
-37-
<PAGE>
officers, directors, employees or consultants of the Company shall be approved
by a majority of the non-management Board.
-38-
<PAGE>
SECTION 4
RIGHT OF FIRST REFUSAL ON NEW SECURITIES
----------------------------------------
The Company hereby grants to each Shareholder holding at least 5,000 shares
of Series AA or BB or CC Preferred Stock (or Common Stock into which such shares
of Series AA or BB or CC Preferred Stock have been converted appropriately
adjusted for any stock splits, consolidations, or the like) the right of first
refusal to purchase such Holder's pro rata part of New Securities (as defined in
Section 4(a)) that the Company may, from time to time, propose to issue. Such
Shareholder's pro rata share, for purposes of this right of first refusal, is
the ratio of the number of shares of Common Stock held and Common Stock issued
or issuable upon conversion of the Series AA and BB and CC Preferred Stock held
by such Shareholder bears to the total number of shares of Common Stock
outstanding at the time of issuance of such New Securities, assuming conversion
into Common Stock of all outstanding Preferred Stock and any other securities
convertible into Common Stock provided any other stock options or similar
securities not In-the-Money, shall be excluded. For purposes of this Section 4,
"In-the-Money" means that the exercise price of such convertible security is
less than the fair market value of the security issuable upon conversion of such
convertible security. This right of first refusal shall be subject to the
following provisions:
(a) "New Securities" shall mean any Common Stock or any Preferred
Stock of the Company, whether now authorized or not, and any rights, options, or
warrants to purchase said Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible into Common Stock or
Preferred Stock; provided, however, that "New Securities" does not include (i)
securities issuable upon conversion of or with respect to the Series AA and BB
and CC Preferred Stock or upon conversion of any other Preferred Stock
subsequently issued; (ii) securities offered to the public pursuant to a
registration statement filed under the Securities Act; (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets, or other reorganization whereby the
Company owns not less than fifty percent (50%) of the voting power of the
surviving corporation; (iv) shares of the Company's Common
-39-
<PAGE>
Stock (or related options) issued to employees, officers, directors,
consultants, or other persons performing services for the Company (including,
but not by way of limitation, distributors and sales representatives) pursuant
to any stock offering, plan, or arrangement approved by the non-management
members of the Board of Directors of the Company; (v) any securities issued to a
corporate investor at a price greater than $4.75 per share where the primary
purpose is not to raise equity; (vi) shares of the Company's Common Stock or
Preferred Stock issued to its shareholders in connection with any stock split,
stock dividend, or recapitalization by the Company; or (vii) securities issued
upon the exercise of outstanding warrants of the Company as of the date of this
Agreement. Notwithstanding the provisions of Section 4(a)(v), the Series CC
Holders shall be entitled the right of first refusal, pursuant to the provisions
of Section 4, to purchase a pro rata part of New Securities that the Company
proposes to sell and issue to any public or private utility company or any of
their affiliates. Clauses (iii) and (iv) shall not be applicable to any sales
of securities to any utility company or any of its affiliates, or any officer,
director or employee thereof.
(b) In the event that the Company proposes to issue New Securities,
it shall give each Shareholder written notice (the "First Notice") of its
intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. Each Shareholder shall
have 20 days from the date of mailing of the First Notice to agree to purchase
his pro rata share of such New Securities for the price and upon the general
terms specified in the First Notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased. In determining
the price at which New Securities are being issued only the cash and readily
ascertainable fair value of tangible property to be received by the Company
shall be considered.
(c) The Company shall notify, in writing (the "Second Notice"), each
Shareholder which has agreed to purchase its entire pro rata share of the New
Securities under this Section 4 (a "Fully-Exercising Holder") of the number of
shares for which the rights of first refusal of other Shareholders have not been
exercised. Each Fully-Exercising Holder shall have 10 days from receipt of the
Second Notice to notify the Company that it shall
-40-
<PAGE>
purchase any or all of the remaining New Securities. In the event that the
total remaining New Securities sought to be purchased during this second round
exceeds the remaining shares available, each such Fully-Exercising Holder shall
be eligible to purchase the number of the remaining New Securities equal to the
(i) number of shares of Common Stock held by and into which such Fully-
Exercising Holder's Series AA and Series BB and Series CC Preferred Stock is
then convertible divided by (ii) the sum of the number of shares of Common Stock
held by and into which all such Fully-Exercising Holders' (which seek to
purchase additional shares) Series AA, Series BB and Series CC Preferred Stock
are convertible; multiplied by (iii) the number of additional New Securities
available for purchase.
(d) In the event that Shareholders fail to exercise in full the
right of first refusal within said time periods, the Company shall have 90 days
thereafter to sell (or enter into an agreement pursuant to which the sale of New
Securities covered thereby shall be closed, if at all, within said 90 day
period) the New Securities respecting which the Shareholders' rights were not
exercised, at a price and upon general terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has
not sold the New Securities within said 90 day period (or sold and issued New
Securities in accordance with the foregoing within 90 days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Shareholders in the manner
provided above.
(e) A Shareholder's failure to exercise this right of first refusal
on any issuance of New Securities shall not adversely affect the Shareholder's
right of first refusal to purchase subsequent issuances of New Securities.
(f) This right of first refusal is nonassignable except to any other
Shareholder (or successor thereto) or any parent or subsidiary of any
Shareholder or any partner (or partner of any partner which is itself a
partnership) or professional employee (or entity of which such employees are the
beneficial owners) of any Shareholder.
-41-
<PAGE>
(g) If at any time the Company grants, issues or sells any options,
convertible securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then to the extent that Section 4 is otherwise not
applicable, each Holder of Series AA, Series BB and Series CC Shares (or shares
of Common Stock issued or issuable upon conversion thereof, appropriately
adjusted for any stock splits, consolidations, or the like) shall be entitled to
acquire upon the terms applicable to such Purchase Rights the aggregate Purchase
Rights which such Holder should have acquired if such Holder had held the number
of shares of Common Stock acquirable upon conversion of the Series AA, Series
BB, and/or Series CC Shares held by such Holder immediately before the date on
which a record was taken for the grant, issuance or sale of such Purchase
Rights, or if no such record was taken as of which the record holders of Common
Stock would determine for the grant, issue or sale of such Purchase Rights.
(h) In addition to the rights set forth above, each Series CC Holder
shall have the right of first refusal to purchase a pro rata share of any New
Securities that any Subsidiary (direct or indirect) of the Company proposes to
issue. For the purposes of this subsection 4(h), "New Securities" in any
Subsidiary shall mean any common stock or any preferred stock of a Subsidiary of
the Company, whether now authorized or not, and any rights, options, or warrants
to purchase said common stock or preferred stock, and securities of any type
whatsoever that are, or may become, convertible into such common stock or
preferred stock that the Company or any direct or indirect Subsidiary proposes
to sell or issue to any public or private utility company or any of their
affiliates if the Subsidiary business (as contemplated at the time of issuance)
relates in whole or in part to any market area other than the market area of
such utility company or if the New Securities (as contemplated at the time of
issuance) are convertible into or exchangeable for Common Stock or Preferred
Stock of the Company (or any rights, options, or warrants to purchase said
Common Stock or Preferred Stock, and securities of any type whatsoever that are,
or may become, convertible into such Common Stock or Preferred Stock). For
purposes of this subsection 4(h), "affiliate" of any utility shall mean an
entity or person controlling, controlled by or under common control with such
utility or any entity of which such utility or affiliate holds greater than
twenty percent (20%) equity
-42-
<PAGE>
ownership. Such Series CC Holders shall have a pro rata right of first refusal
for such New Securities in the Subsidiary in the same manner as is set forth in
this Section 4. A Series CC Holder's right of first refusal pursuant to this
subsection 4(h) is nonassignable.
(i) The right of first refusal on New Securities granted to the
Shareholders pursuant to this Section 4 shall terminate on and be of no further
force or effect upon the closing of a registered public offering of the
Company's Common Stock with an aggregate offering price to the public of at
least twenty million dollars ($20,000,000), except that the rights of a Series
CC Holder (other than any Holder that has acquired its shares pursuant to a
registered public offering) as provided in this Section 4 shall terminate and
cease to have any effect or be binding on any party hereto three (3) years after
the closing of a registered public offering of the Company's Common Stock with
an aggregate offering price to the public of at least twenty million dollars
($20,000,000).
SECTION 5
CO-SALE RIGHT AMONG HOLDERS
---------------------------
(a) In the event a Holder (a "Selling Holder") intends to sell or
transfer any Shares or Registrable Securities (other than to an affiliate of
such Selling Holder), and is aware that the buyer (alone or together with
buyer's affiliates) owns or will acquire as a result of the sale either voting
stock or the right to acquire voting stock equal to twenty percent (20%) or more
of the Company's outstanding voting stock (including Common Stock and Preferred
Stock), the Selling Holder shall notify all Holders, in writing, of such
proposed transfer and its terms and conditions. Within fifteen (15) days of the
date of such notice, any Holder intending to participate ("Participating
Holder") in such transaction shall so notify the Selling Holder of such intent.
Each Participating Holder shall then have the right to sell, at the same price
and on the same terms as the Selling Holder, an amount of shares equal to the
number of shares to be sold or transferred multiplied by a fraction, the
numerator of which shall be the number of Shares and Registrable Securities held
by the Partici-
-43-
<PAGE>
pating Holder, and the denominator of which shall be the sum of the number of
Shares and Registrable Securities held by the Selling Holder and all
Participating Holders.
(b) In the event a Holder (a "Purchasing Holder") intends to
purchase or otherwise acquire Shares or Registrable Securities (other than from
an affiliate of such Purchasing Holder) and such Purchasing Holder (and such
Purchasing Holder's affiliates) owns or will acquire as a result of such
purchase voting stock or the right to acquire voting stock equal to twenty
percent (20%) or more of the Company's outstanding voting stock (including
Common Stock and Preferred Stock), the Purchasing Holder shall notify all
Holders, in writing, of such proposed acquisition and its terms and conditions.
Within fifteen (15) days of the date of such notice, any Holder intending to
participate ("Electing Holder") in such transaction shall so notify the
Purchasing Holder of such intent. Each Electing Holder shall then have the
right to sell to the Purchasing Holder, at the same price and on the same terms
offered by the Purchasing Holder, an amount of shares equal to the number of
shares to be purchased or acquired multiplied by a fraction, the numerator of
which shall be the number of Shares or Registrable Securities held by the
Electing Holder, and the denominator of which shall be the sum of the number of
Shares and Registrable Securities held by the Purchasing Holder and all Electing
Holders.
(c) The right of co-sale of any Holder pursuant to this Section 5
shall terminate upon the third anniversary of the sale in a firm commitment
underwritten public offering registered under the Securities Act of shares of
the Company's Common Stock to the public in which the net proceeds to the
Company are at least twenty million dollars ($20,000,000), except that the
co-sale right will not apply to or be binding on any transferee who acquired
Shares or Registrable Securities in a transfer pursuant to Rule 144, or any
successor rule, or pursuant to a registered public offering.
-44-
<PAGE>
SECTION 6
MISCELLANEOUS
-------------
6.1 WAIVERS AND AMENDMENTS. The rights and obligations of the Company
and the rights and obligations of the Holders under this Agreement may not be
waived (either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely) or
amended and no other agreement may be entered into by the Company with any
Holder which expands the rights granted to a Holder under Sections 2, 3, 4 or 5
hereof without the written consent of (i) the holders of at least fifty percent
(50%) of the outstanding Registrable Securities, (ii) the holders of at least
fifty percent (50%) percent of the outstanding Series BB Shares or Common Stock
issued upon conversion of the Series BB Shares, and (iii) the holders of at
least fifty percent (50%) of the outstanding Series CC Shares or Common Stock
issued upon conversion of the Series CC Shares; provided, however, that no such
waiver or amendment shall reduce the aforesaid number of shares, the holders of
which are required to consent to any waiver or amendment, without the consent of
the holders of all of shares in clause (i), shares in clause (ii), or shares in
clause (iii) above as applicable; and provided further, that the right of any
Shareholder to elect a representative to the Board of Directors pursuant to
Section 3.1 may not be waived or amended without the prior written consent of
such Shareholder and provided further that the rights of the Series CC Holders
under Section 3.1(b) may not be waived or amended without the written consent of
the holders of at least a majority of the Series CC Shares. Upon the
effectuation of each such waiver or amendment, the Company shall promptly give
written notice thereof to the holders of the shares who have not previously
consented thereto in writing.
6.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as such laws are applied to contracts
made and to be fully performed entirely within that state between residents of
that state. All disputes arising out of this Agreement shall be subject to the
exclusive jurisdiction and venue of the California State courts of San Mateo
County, California, (or, if there is exclusive federal jurisdiction, the United
States District Court for the Northern District of
-45-
<PAGE>
California) and the parties consent to the personal and exclusive jurisdiction
and venue of these courts.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
6.4 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. This Agreement shall supersede the Prior Agreement, which
agreement shall be of no further force or effect.
6.5 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class, postage
prepaid, addressed (a) at such Shareholders' address set forth in Schedule A
hereto, or at such other address as such Shareholder shall have furnished to the
Company in writing, or (b) if to the Company, at 75 Shoreway Road, Suite 2000,
San Carlos, California 94070, or at such other address as the Company shall have
furnished to the Shareholders in writing. Notices shall be effective upon
mailing.
6.6 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
6.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
-46-
<PAGE>
The foregoing Shareholders' Agreement is hereby executed as of the date
first above written.
CELLNET DATA SYSTEMS, INC.
a California corporation
By: /s/ Alan H. Bushell
----------------------------------
SHAREHOLDER
--------------------------------------
(Print Name)
--------------------------------------
(Signature of Holder or
Authorized Signatory)
--------------------------------------
(Print Name and Title of
Authorized Signatory if Applicable)
-47-
<PAGE>
SHAREHOLDERS' AGREEMENT
SCHEDULE A
All purchasers of Series AA, BB and CC Preferred Stock and other parties to
the Shareholders' Agreement:
Acorn Ventures, Inc.
11400 S.E. Sixth Street, Suite 120
Bellevue, WA 98004
Attn: Rufus Lumry
ALH Family Trust
c/o Gregory S. Anderson Company
400 Van Buren, Suite 650
Phoenix, AZ 85004
Attn: Gregory S. Anderson
Gregory S. Anderson Company
400 Van Buren, Suite 650
Phoenix, AZ 85004
Attn: Gregory S. Anderson
Michelle M. Anderson
4715 E. Calle del Norte
Phoenix, AZ 85018
AT&T Ventures
3000 Sand Hill Road
Building 4, Suite 235
Menlo Park, CA 94025
Attn: Neal M. Douglas
BancBoston Investments Inc.
c/o Lawrence Foster
BancBoston Capital Inc.
100 Federal Street
Boston, MA 02110
Banner Partners
3000 Sand Hill Road
Building 1, Suite 190
Menlo Park, CA 94025
Attn: Alan Brudos
<PAGE>
Banner Partners/Minaret
431 Florence St., Suite 200
Palo Alto, CA 94301
Attn: William L. Edwards
Barclays Capital Corporation
222 Broadway - 10th Floor
New York, NY 10038
Attn: Peggy Grieves, Esq.
Neal C. Bradsher
Hambrecht & Quist
230 Park Avenue
New York, NY 10169
Alan R. Brudos
70 Shearer Drive
Atherton, CA 94027
J.M. Bryan Family Trust
c/o John M. Bryan, Trustee
600 Montgomery Street
35th Floor
San Francisco, CA 94111
John M. & Florence E. Bryan Trust
c/o John M. Bryan, Trustee
600 Montgomery Street
35th Floor
San Francisco, CA 94111
Bryco Investments
600 Montgomery Street
35th Floor
San Francisco, CA 94111
Attn: Robert Ledonx
John J. Byrne
c/o Fund American Enterprises Holdings, Inc.
The 1820 House
Main Street
-2-
<PAGE>
Norwich, VT 05055
California Partners
3803 East Bayshore Road
Palo Alto, CA 94303
Attn: Tim Draper
Helen F. Cannon
c/o Banner Partners
3000 Sand Hill Road
Building 1, Suite 190
Menlo Park, CA 94025
Carson, a Partnership
c/o Banner Partners
3000 Sand Hill Road, 1-190
Menlo Park, CA 94025
Daniel H. Case III
Hambrecht & Quist
One Bush Street, 18th Floor
San Francisco, CA 94104
Chase 1991 Revocable Trust DTD 4-2-91
Andrew or Laura Chase, Trustee
145 Stonegate Road
Portola Valley, CA 94028
Attn: Andrew Chase
David E. Claridge
Hambrecht & Quist
One Bush Street, 18th Floor
San Francisco, CA 94104
Robert Cohn or Martha Adelia Adams Cohn
Trustees of the Wellington Trust U/T/D January 30, 1986
20292 Calle Montalvo
Saratoga, CA 95070
Guy Conger
-3-
<PAGE>
25 Skywood Way
Woodside, CA 94062
Paul M. Cook and Marcia L. Cook
Trustees of the Paul and Marcia Cook Living Trust
Dated April 21, 1992
P.O. Box 880
Menlo Park, CA 94026
OR
333 Ravenswood Avenue
Building IR-242
Menlo Park, CA 94025
Ira J. Cree
c/o Gammaloy Ltd.
3250 Cherry Avenue
Long Beach, CA 90807
William H. Cree III
c/o Gammaloy Ltd.
3250 Cherry Avenue
Long Beach, CA 90807
Ellen Berland Gibbs
c/o CRI Media Partners
667 Madison Ave., 18th Fl
New York, NY 10021
Delaware Charter Guarantee & Trust Co.
FBO Alan R. Brudos Pension
H10-2212982
c/o Norman Simmons
Hambrecht & Quist
IRA Dept., 14th Floor
One Bush Street
San Francisco, CA 94104
Delaware Charter Guarantee & Trust Co.
FBO Alan R. Brudos
H10-2272770/Pension
c/o Norman Simmons
Hambrecht & Quist
-4-
<PAGE>
IRA Dept., 14th Floor
One Bush Street
San Francisco, CA 94104
Delaware Charter Guarantee & Trust Co.
FBO Helen Cannon
H15-5515299
c/o Norman Simmons
Hambrecht & Quist
IRA Dept., 14th Floor
One Bush Street
San Francisco, CA 94104
Delaware Charter Guarantee & Trust
FBO Daniel J. Jackson
H10-9903625/Pension
c/o Norma Simmons
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Delaware Charter Guarantee & Trust Company
FBO Daniel J. Jackson
H10-9903781/Pension
Hambrecht & Quist
c/o Norma Simmons
One Bush Street
San Francisco, CA 94104
Delaware Charter Guarantee & Trust Co.
FBO Jeanne R. Jackson #10-9904136
c/o Norma Simmons
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Delaware Charter Guarantee & Trust,
Custodian FBO Robert W. Ledoux
H10-2272788/Pension
c/o Norma Simmons
Hambrecht & Quist
One Bush Street
-5-
<PAGE>
San Francisco, CA 94104
DKD Vencap
151 University Ave.
Palo Alto, CA 94306
Attn: David McMullin
Colin Dobell
c/o CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Polly Draper
c/o Draper Associates
400 Seaport Court
Suite 250
Redwood City, CA 94063
-6-
<PAGE>
Rebecca Draper
c/o Draper Associates
400 Seaport Court
Suite 250
Redwood City, CA 94063
Timothy C. Draper Living Trust
c/o Draper Associates
400 Seaport Court
Suite 250
Redwood City, CA 94063
William H. Draper III and Phyllis C. Draper
Trustees of the William H. Draper Revocable Trust dated
12/23/88
c/o Ms. Linda Rheem
7821 Horse Shoe Lane
Potomac, MD 20854
Barbara Edwards
c/o Banner Partners
3000 Sand Hill Road
Building 1, Suite 190
Menlo Park, CA 94025
Cree Edwards
3000 Sand Hill Road
Building 1, Suite 190
Menlo Park, CA 94025
Elizabeth Adams Edwards
Banner Partners/Minaret
431 Florence Street
Suite 200
Palo Alto, CA 94301
Helen Grace Edwards
Banner Partners/Minaret
431 Florence Street
Suite 200
Palo Alto, CA 94301
-7-
<PAGE>
Katherine R. Edwards
3000 Sand Hill Road
Bldg. 1, Ste. 190
Menlo Park, CA 94025
Laura Ann Edwards
Banner Partners/Minaret
431 Florence Street
Suite 200
Palo Alto, CA 94301
Paul C. Edwards
c/o Banner Partners
3000 Sand Hill Road
Building 1, Suite 190
Menlo Park, CA 94025
Scott Paul Edwards
Banner Partners/Minaret
431 Florence Street
Suite 200
Palo Alto, CA 94301
William C. Edwards Charitable Remainder Trust dtd 7/15/92
c/o Banner Partners
3000 Sand Hill Road, 1-190
Menlo Park, CA 94025
William C. Edwards Trust
William L. Edwards and Cree A. Edwards, Trustees
U/A dtd 12/8/92
c/o Banner Partners
3000 Sand Hill Road, 1-190
Menlo Park, CA 94025
William L. Edwards
Banner Partners/Minaret
431 Florence Street
Suite 200
Palo Alto, CA 94301
-8-
<PAGE>
The Edwards Foundation
c/o Banner Partners
3000 Sand Hill Road, 1-190
Menlo Park, CA 94025
El Dorado Investment Co.
400 Van Buren, Suite 650
Phoenix, AZ 85004
El Dorado Technology II
20300 Stevens Creek Blvd.
Ste. 395
Cupertino, CA 95014
Attn: Gary Kalbach
El Dorado Ventures
20300 Stevens Creek Blvd.
Ste. 395
Cupertino, CA 95014
Attn: Gary Kalbach
Electra Associates, Inc.
c/o Diane Smith
Electra Inc.
70 East 55th Street, 25th Floor
New York, NY 10022
Electra Investment Trust, PLC
c/o Diane Smith
Electra Inc.
70 East 55th Street, 25th Floor
New York, NY 10022
Scott Eller
Red River Opry
2122 E. Highland
Suite 425
Phoenix, AZ 85016
Essex Special Growth Opportunities Fund, L.P.
c/o Essex Investment Management
125 High St., 29th Floor
Boston, MA 02110-2702
-9-
<PAGE>
Attn: Susan Stickells
Robert E. and Bette E. Finnigan Living Trust,
Robert E. Finnigan and Bette E. Finnigan, Trustees
125 Los Alto Avenue
Los Altos, CA 94022
Quock Fong
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Erl Fossum
15 Tamarade Drive
Littleton, CO 80127
Gammaloy Ltd.
3250 Cherry Avenue
Long Beach, CA 90807
Fred Gibbons
c/o Palo Alto Investors
431 Florence Street
Suite 200
Palo Alto, CA 94301
Ron Goodall
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
John Gould
6554 Timber Court
San Jose, CA 95120
Katherine V. Gray
3000 Sand Hill Road, 1-190
Menlo Park, CA 94025
Kristin E. Gray
3000 Sand Hill Road, 1-190
Menlo Park, CA 94025
-10-
<PAGE>
Shelly D. Guyer
1100 Union Street, #700
San Francisco, CA 94109
H&Q Group
c/o Jackie Berterretche
Attorney-in-fact
One Bush Street
San Francisco, CA 94104
H&Q Venture Investors
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Amelia T. Hambrecht
Hambrecht & Quist
c/o Sharon Smith
One Bush Street
San Francisco, CA 94104
Elizabeth B. Hambrecht
Hambrecht & Quist
c/o Sharon Smith
One Bush Street
San Francisco, CA 94104
George N. Hambrecht
Hambrecht & Quist
c/o Sharon Smith
One Bush Street
San Francisco, CA 94104
Robert H. Hambrecht
Hambrecht & Quist
c/o Sharon Smith
One Bush Street
San Francisco, CA 94104
-11-
<PAGE>
Susan L. Hambrecht
Hambrecht & Quist
c/o Sharon Smith
One Bush Street
San Francisco, CA 94104
Hambrecht & Quist Environmental Technology Fund
c/o Jackie Berterretche
Attorney-in-fact
One Bush Street
San Francisco, CA 94104
The Hambrecht 1980 Revocable Trust
c/o Jackie Berterretche
Attorney-in-fact
One Bush Street
San Francisco, CA 94104
Martha O. Hesse
8 Greenway Plaza, #612
Houston, TX 77046
Cinda Cree Hicks
c/o Gammaloy Ltd.
3250 Cherry Avenue
Long Beach, CA 90809
Derk Hunter
20725 Valley Green Dr.
Suite 100
Cupertino, CA 95014
Daniel J. Jackson
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Jeanne R. Jackson and Christopher Jackson
Account No. H10-9904128
Hambrecht & Quist
c/o Norma Simmons
One Bush Street
-12-
<PAGE>
San Francisco, CA 94104
Jeanne R. Jackson and Dana Jackson, Joint Tenants
Account No. H10-9904110
c/o Norma Simmons
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Michael R. Jackson
KUFX FM 94.5
1589 Schallenberger Road
San Jose, CA 95131
Trust F/B/O
C. James Judson
Davis, Wright & Tremaine
1501 Fourth Ave., Suite 2600
Seattle, WA 98104
Attn: James Judson
Jupiter Partners
c/o Bryan & Edwards
600 Montgomery St., 35th Floor
San Francisco, CA 94111
Kleco, a Partnership
c/o Banner Partners
3000 Sand Hill Road, 1-190
Menlo Park, CA 94025
Kleiner Perkins Caufield Byers V
2750 Sand Hill Road
Menlo Park, CA 94025
Attn: Bernie Lacroute
Pamela E. Koenig and William R. Hambrecht
Trustees of the Gary E. Koenig Trust d/t/d 10/18/85
c/o William R. Hambrecht
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
-13-
<PAGE>
KPCB Zaibatsu Fund I
Two Embarcadero Place
2200 Geng Road, Ste. 205
Palo Alto, CA 94303
Attn: Bernie Lacroute
The Kulp Revocable Trust
c/o Richard Kulp
115 Geldert Drive
Tiburon, CA 94920
LTT Partners
1020 Continental Drive
Menlo Park, CA 94025
Rufus Lumry
Acorn Ventures, Inc.
11400 S.E. Sixth Street, Suite 120
Bellevue, WA 98004
Gordon S. Macklin
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
James L. Mohler, M.D.
113 Dartmouth Court
Chapel Hill, NC 27516
Marilyn L. Mohler
113 Dartmouth Court
Chapel Hill, NC 27514
Richard W. Mohler
816 Princeton
Sonoma, CA 95476
George G. Montgomery, Jr.
Hambrecht & Quist
One Bush Street
-14-
<PAGE>
San Francisco, CA 94104
Merrill E. Newman or Alicia M. Newman
Trustees of the Newman Revocable Trust dated 09/24/79
1256 Martin Avenue
Palo Alto, CA 94301
Northwood Ventures
485 Underhill Blvd., Suite 205
Syosset, NY 11791
Attn: Hal Wilson
Odyssey Partners, L.P.
31 W. 52nd Street, 19th Floor
New York, NY 10019
Attn: Brian Kwait, Principal
Standish H. O'Grady
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Kurt Ohms
c/o CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Palo Alto Investors, L.P.
431 Florence St., Suite 200
Palo Alto, CA 94301
Attn: William L. Edwards
Daniel Victor Perlroth
192 Corte Madera
Portola Valley, CA 94028
Mark G. and Karen A. Perlroth
192 Corte Madera
Portola Valley, CA 94028
F. Noel Perry
-15-
<PAGE>
2420 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Nancy E. Pfund and Phillip L. Polakoff
as Trustees of the Pfund Polakoff Family Trust DTD 2/18/93
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Polaris Fund
c/o Draper Associates
400 Seaport Court
Suite 250
Redwood City, CA 94063
Attn: Timothy C. Draper
Providence Media Partners, L.P.
c/o Paul Salem
Providence Ventures, Inc.
900 Fleet Center
50 Kennedy Plaza
Providence, RI 02903
Trevor Robinson
Tancreds South Road
St. George's Hill
Weybridge
Surrey UK
KT 130NA
Nathaniel de Rothschild
135 E. 57th Street
Ste. 2400
New York, NY 10022
Stephen Rowe
1291 Caroline Street
Alameda, CA 94501-3917
Jerald B. Russ and Margaret A. Russ
Trustees of the Russ Family Trust dated 02/26/91 (CP)
-16-
<PAGE>
143 Calle Cuervo
San Clemente, CA 92672
-17-
<PAGE>
Henry B. Sargent, Jr.
c/o Gregory S. Anderson Company
400 Van Buren, Suite 650
Phoenix, AZ 85004
Donald Scott
4328H Arcadia Lane
Phoenix, AZ 85018
Sequoia Capital
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
Sequoia Technology Partners III
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
Christopher W. Sheeline
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Christopher A. Slaboszewicz
c/o CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Dr. J. Richard Steadman
181 W. Meadow Drive, Suite 400
Vail, CO 81657
Sundance Venture Partners, L.P.
400 Van Buren, Suite 650
Phoenix, AZ 85004
Attn: Gregory Anderson
Barry Taylor
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
-18-
<PAGE>
Technology Partners West Fund IV, L.P.
1550 Tiburon Blvd., Suite A
Belvedere, CA 94920
Attn: William Hart
William R. Timken
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Toronto-Dominion Investments, Inc.
c/o Carole Clause
President
Toronto Dominion Investments, Inc.
909 Fannin Street
Houston, TX 77010
Turley Family Limited Partnership
7239 N. Desert Fairways
Paradise Valley, AZ 85253
Venhill Limited Partnership
Auto-Trol Technology Corporation
12500 N. Washington Street
Denver, CO 80233
WS Investment Co.
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Linda Wilson
CN Fund
c/o Williams, Jones & Associates
717 5th Ave - 24th Fl
New York, NY 10022
Attn: Bill Jones
Dennis Weibling
Eagle River
2320 Carillon Point
Kirkland, WA 98033
-19-
<PAGE>
-20-
<PAGE>
AMENDMENT NO. 1
TO SHAREHOLDERS' AGREEMENT
This Amendment so made this 22nd day of December, 1994 to the
Shareholders' Agreement dated August 15, 1994 (the "Agreement") by and among
CELLNET DATA SYSTEMS, INC., a California Corporation (the "Company") and the
persons and entities (the "Shareholders") whose names are set forth in Schedule
A attached thereto. For purposes of this amendment, capitalized terms shall
have the same meaning as those terms defined in the Agreement, unless otherwise
provided.
RECITALS
WHEREAS, the Shareholders possess registration rights, information
rights, Board rights, rights of first refusal, and co-sale rights granted under
the Agreement;
WHEREAS, pursuant to that certain Series DD Preferred Shares Purchase
Agreement (the "Series DD Agreement") between the Company and those persons (the
"Purchasers") listed on the Schedule of Purchasers attached thereto, the
Purchasers are purchasing shares of the Company's Series DD Preferred Stock (the
"Series DD Shares");
WHEREAS, the obligations of the Company and the Purchasers under the
Series DD Agreement are conditioned, among other things, upon the execution and
delivery of written consent to this Amendment by holders of at least (i) fifty
percent (50%) of the outstanding Registrable Securities, (ii) fifty percent
(50%) of the outstanding shares of Series BB Preferred Stock or Common Stock
issued upon conversion thereof, and (iii) fifty percent (50%) of the outstanding
shares of Series CC Preferred Stock or Common Stock issued upon conversion
thereof (collectively, the "Consenting Shareholders");
WHEREAS, the Shareholders desire to amend the Agreement (i) to clarify
certain rights of the holders of Series CC Preferred Stock to participate in
certain issuances of New Securities by the Company, and (ii) in connection with
the issuance of the Series DD Shares to grant certain rights to and impose
certain obligations upon the Purchasers pursuant to the Agreement;
WHEREAS, as an inducement for the Purchasers to enter into the Series DD
Agreement, the Company desires to grant certain rights to the Purchasers as
provided herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Company and the Consenting Shareholders agree that
the Agreement is amended by this Amendment, and all parties agree as follows:
<PAGE>
1. PURCHASERS PARTIES TO THE AGREEMENT. The Purchasers shall be
parties to the Agreement with rights and obligations as provided herein and
therein. The Purchasers shall be included in the definition of "Shareholders"
as provided in the preamble to the Agreement.
2. REGISTRATION RIGHTS. Section 2 of the Agreement shall be amended
as follows:
(a) The definition of "Registrable Securities" in Section
2.1(i) shall be amended and superseded by the following text:
(i) "REGISTRABLE SECURITIES" means (i) shares of the
Company's Common Stock held by any Holder who is a party to this Agreement,
including but not limited to any Common Stock issued or issuable pursuant to the
conversion of the Series AA, Series BB, Series CC and Series DD Preferred Stock,
including any Series BB Preferred Stock issued upon exercise of any warrant held
by a Holder, or any Common Stock issued upon exercise of any warrant held by a
Holder, in each case which have not been sold to the public and (ii) any shares
of the Company's Common Stock or other securities issued or issuable pursuant to
the conversion of, or with respect to, the Series AA, Series BB, Series CC and
Series DD Preferred Stock held by any Holder who is a party to this Agreement,
upon any stock split, stock dividend, recapitalization, or similar event, which
shares have not been sold to the public or securities issued in replacement or
exchange of any of the securities issued in clauses (i) or (ii) above.
(b) Sections 2.1(p) through 2.1(r) shall be renumbered as
Sections 2.1(q) through 2.1(s), respectively, and Section 2.1(p) shall provide
as follows:
"SERIES DD SHARES" shall mean and include all shares of Series DD
Preferred Stock of the Company.
(c) The definition of "Shares" in the newly-amended Section
2.1(r) (formerly Section 2.1(q)) shall provide as follows:
"SHARES" shall mean and include all outstanding shares of Series
AA, BB, CC and DD Shares, collectively or shares issued in
substitution or exchange thereof.
3. VOTING AGREEMENT OF THE SHARES. The voting securities of the
Company which each Shareholder shall be required to vote pursuant to Sections
3.1(a) and 3.1(b) shall include Series DD Shares or Registrable Securities, and
the requirements of Sections 3.1(d) through 3.1(k) shall apply to the holders of
Series DD Shares or Registrable Securities.
4. INFORMATION RIGHTS. Section 3.2 of the Agreement shall be amended
as follows:
(a) Section 3.2(b) shall be amended and superseded by the
following text:
-2-
<PAGE>
QUARTERLY FINANCIAL INFORMATION. The Company will furnish the
following reports to each Shareholder holding at least 50,000
shares of Series AA or BB or CC or DD Preferred Stock (and/or
Common Stock issued upon conversion of the Series AA or BB or CC
or DD Preferred Stock) as soon as practicable after the end of the
first, second and third quarterly accounting periods in each
fiscal year of the Company and in any event within 45 days
thereafter, an unaudited consolidated balance sheet and an
unaudited statement of cash flows of the Company and its
Subsidiaries, if any, as of the end of each such quarterly period,
and unaudited consolidated statements of income of the Company and
its Subsidiaries for such period and for the current fiscal year
to date, in each case with comparable prior periods, prepared in
accordance with generally accepted accounting principles
consistently applied, all in reasonable detail, including any
material discrepancies between the results reported and the
Company's budgeted projections for the period, as well as other
financial or business events of material importance, and
certified, subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting officer of
the Company.
(b) Section 3.2(d) shall be amended and superseded by the
following text:
RIGHTS TO VISITATION AND ANNUAL OPERATING PLAN. The Company shall
provide the following information to each Shareholder for so long
as such Shareholder is a holder of greater than 200,000 shares of
Series AA or BB or CC or DD Preferred Stock (and/or Common Stock
issued upon conversion of the Series AA or BB or CC or DD
Preferred Stock) appropriately adjusted for any stock splits,
consolidations or the like:
(i) For so long as a Shareholder is eligible to receive
reports under this Section 3.2(d), he shall also have the right,
at his expense, to visit and inspect any of the properties of the
Company or any of its subsidiaries, and to discuss their affairs,
finances and accounts with their officers, all at such reasonable
times and as often as may be reasonably requested.
(ii) Upon written request, the Company shall furnish such
Shareholder prior to the beginning of such fiscal year, the
Company's annual operating plan.
5. RIGHT OF FIRST REFUSAL ON NEW SECURITIES. Section 4 of the
Agreement shall be amended as follows:
(a) The last two sentences of the first paragraph of Section 4
shall be amended and superseded with the following text:
-3-
<PAGE>
Notwithstanding the above, a Series CC Holder's pro rata share,
for purposes of a right of first refusal for issuances of New
Securities (i) to any public or private utility company or any of
their affiliates, or (ii) of any Subsidiary of the Company as
provided in subsection 4(h) herein, is the ratio of the number of
shares of Series CC Preferred Stock and Common Stock issued or
issuable upon conversion of the Series CC Preferred Stock held by
such Series CC Holder bears to the total number of shares of
Common Stock outstanding at the time of issuance of such New
Securities, assuming conversion into Common Stock of all
outstanding Preferred Stock and any other securities convertible
into Common Stock provided any other stock options or similar
securities not In-the-Money, shall be excluded. For purposes of
this Section 4, "In-the-Money" means that the exercise price of
such convertible security is less than or equal to the fair market
value of the security issuable upon conversion of such convertible
security. This right of first refusal shall be subject to the
following provisions:
(b) The last two sentences of subsection 4(a) shall be amended
and superseded with the following text:
Notwithstanding the provisions of Section 4(a)(v), each Series CC
Holder (whether or not such Series CC Holder holds 5,000 shares of
Series CC Preferred Stock or Common Stock issued or issuable upon
conversion thereof) shall be entitled the right of first refusal,
pursuant to the provisions of Section 4, to purchase a pro rata
part of New Securities that the Company proposes to sell and issue
to any public or private utility company or any of their
affiliates. Clauses (iii) and (iv) shall not be applicable to any
sales of securities to any utility company or any of its
affiliates, or any officer, director or employee thereof.
(c) The following text shall be added to the end of subsection
4(c):
Notwithstanding the above, for purposes of issuances of New
Securities (x) to any public or private utility company or any of
their affiliates, or (y) of any Subsidiary of the Company as
provided in subsection 4(h) herein, in the event that the total
remaining New Securities sought to be purchased during this second
round exceeds the remaining shares available, each such
Fully-Exercising Holder of Series CC Shares shall be eligible to
purchase the number of the remaining New Securities equal to (i)
the number of shares of Common Stock held by and into which such
Fully-Exercising Holder's Series CC Preferred Stock is then
convertible divided by (ii) the sum of the number of shares of
Common Stock held by and into which all such Fully-Exercising
Holders' (which seek to purchase additional shares) Series CC
Preferred Stock are convertible; multiplied by (iii) the number of
additional New Securities available for purchase.
-4-
<PAGE>
(d) The first sentence of subsection 4(h) shall be amended and
superseded with the following text:
In addition to the rights set forth above, each Series CC Holder
(whether or not such Series CC Holder holds 5,000 shares of Series
CC Preferred Stock or Common Stock issued or issuable upon
conversion thereof) shall have the right of first refusal to
purchase a pro rata share of any New Securities that any
Subsidiary (direct or indirect) of the Company proposes to issue.
6. MISCELLANEOUS. Section 6.4 shall be amended and superseded by the
following text:
ENTIRE AGREEMENT. This Agreement and the Amendment thereto dated
December 22, 1994 (the "Amendment") constitute the full and
entire understanding and agreement between the parties with regard
to the subjects hereof and thereof. This Agreement and the
Amendment shall supersede the Prior Agreement, which agreement
shall be of no further force or effect.
7. GOVERNING LAW. This Amendment shall be governed by and construed
under the laws of the State of California as such laws are applied to contracts
made and to be fully performed entirely within that state between residents of
that state. All disputes arising out of this Amendment shall be subject to the
exclusive jurisdiction and venue of the California State courts of San Mateo
County, California, (or, if there is exclusive federal jurisdiction, the United
States District Court for the Northern District of California) and the parties
consent to the personal and exclusive jurisdiction and venue of these courts.
8. ENTIRE AGREEMENT. This Amendment and the Agreement constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
9. FULL FORCE AND EFFECT. Except as amended hereby, the Agreement
shall remain in full force and effect.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
11. SEVERABILITY. In case any provision of this Amendment shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Amendment shall not in any way be affected or
impaired thereby.
-5-
<PAGE>
The foregoing Amendment to Shareholders' Agreement is hereby executed as
of the date first above written.
CELLNET DATA SYSTEMS, INC.
a California corporation
By: /s/ David L. Perry
---------------------------------------------
David L. Perry
Vice President, General Counsel and Secretary
SHAREHOLDER
--------------------------------------------------
(Print Name)
--------------------------------------------------
(Signature of Holder or Authorized Signatory)
--------------------------------------------------
(Print Name and Title of Authorized Signatory if
Applicable)
AMENDMENT TO SHAREHOLDERS' AGREEMENT
-6-
<PAGE>
AMENDMENT NO. 2
TO SHAREHOLDERS' AGREEMENT
This Amendment so made this 15th day of June, 1995 to the Shareholders'
Agreement dated August 15, 1994, as amended (the "Agreement") by and among
CELLNET DATA SYSTEMS, INC., a California Corporation (the "Company") and the
persons and entities (the "Shareholders") whose names are set forth in Schedule
A attached thereto. For purposes of this amendment, capitalized terms shall
have the same meaning as those terms defined in the Agreement, unless otherwise
provided.
RECITALS
WHEREAS, the Shareholders possess registration rights, information
rights, Board rights, rights of first refusal, and co-sale rights granted under
the Agreement;
WHEREAS, the Company is issuing (the "Offering") 13% Senior Discount
Notes due 2005 (the "Senior Notes") and Warrants (the "Warrants") to purchase
940,000 shares of Common Stock pursuant to a Purchase Agreement dated June 15,
1995, with Smith Barney Inc. as Initial Purchaser (the "Initial Purchaser").
WHEREAS, in order to consummate the Offering, the Company must amend the
Agreement (i) to eliminate certain inconsistent registration rights of the
Holders with rights proposed to be granted to the Initial Purchaser, (ii) to
preclude triggering registration rights upon the registration of the Senior
Notes, and (iii) to preclude triggering certain rights of first refusal of the
Holders upon the issuance of the Warrants.
NOW, THEREFORE, in consideration of the mutual premises and covenants
hereinafter set forth, the Company and the Shareholders agree that the Agreement
is amended by this Amendment, and all parties agree as follows:
1. REGISTRATION RIGHTS. Section 2 of the Agreement shall be amended
as follows:
(a) Sections 2.1(m) through 2.1(s), as amended, shall be
renumbered as Sections 2.1(p) through 2.1(v), respectively, and Sections 2.1(m),
2.1(n), and 2.1(o) shall be added as follows:
"(m) "SENIOR NOTES" shall mean and include the 13% Senior
Discount Notes due June 15, 2005 issued on June 15, 1995 as governed by the
Indenture dated June 15, 1995 between the Company and The Bank of New York as
Trustee.
(n) "SENIOR NOTE WARRANTS" shall mean and include the
warrants issued in connection with the issuance of the Senior Notes on June 15,
1995 pursuant to the Warrant Agreement.
(o) "SENIOR NOTE WARRANT HOLDERS" shall mean and include
any person or persons who holds Senior Note Warrants which were originally
issued, or qualifying transferees under the Warrant Agreement who hold such
warrants."
(b) Sections 2.1(w), 2.1(x) and 2.1(y) shall be added as
follows:
"(w) "WARRANT AGREEMENT" shall mean the Warrant Agreement
dated June 15, 1995 by and between the Company and The Bank of New York as the
Warrant Agent.
(x) "WARRANT REGISTRATION RIGHTS AGREEMENT" shall mean
the Registration Rights Agreement dated June 15, 1995 entered into between the
Company and Smith Barney Inc.
(y) "WARRANT SHARES" shall mean the shares of Common
Stock issued or issuable upon exercise of the Senior Note Warrants."
(c) The last two sentences of Section 2.2(b) shall be amended
and superseded as follows:
"Other holders of Registrable Securities and Warrant Shares
may participate in any offering conducted pursuant to a Series CC
Request for Registration provided that in the event of an
Underwriter's Cutback (as defined herein in Section 2.2(c)), the
Series CC Holders shall receive priority with respect to one third
(1/3) of the shares to be registered; however, if as a result of
an Underwriter's Cutback the Series CC Holders are not allowed to
include in any such registration at least eighty percent (80%) of
their Registrable Securities requested to be registered, then such
registration shall not count as one of the Initiating Series CC
Holders' two Series CC Requests for Registration."
(d) The final two paragraphs of Section 2.2(c) shall be amended
and superseded as follows:
"The Company, together will all Initiating Holders (or
Initiating Series CC Holders if the registration is pursuant to
Section 2.2(b)) proposing to distribute their securities through
such underwriting, shall enter into an underwriting agreement in
customary form with the managing underwriter(s) selected for such
underwriting by a majority in interest of the Initiating Holders
(or Initiating Series CC Holders if the registration is pursuant
to Section 2.2(b)) which underwriter(s)
-2-
<PAGE>
shall be reasonably acceptable to the Company. Notwithstanding
any other provision of this Section 2.2, if the managing
underwriter(s) advises the Initiating Holders (or Initiating
Series CC Holders if the registration is pursuant to Section
2.2(b)), in writing that because the number of shares requested to
be included in the registration exceeds the number which can be
sold in an orderly manner in such offering within a price range
acceptable to the Company or Holders requesting registration, as
the case may be, marketing factors require a limitation of the
number of shares to be underwritten on behalf of Initiating
Holders (or Initiating Series CC Holders if the registration is
pursuant to Section 2.2(b)) (an "Underwriter's Cutback"), then,
subject to the provisions of this Section 2.2(c), all Initiating
Holders (or Initiating Series CC Holders if the registration is
pursuant to Section 2.2(b)) shall be so advised, and the number of
shares of Registrable Securities (and Warrant Shares pursuant to
the exercise of a piggyback registration right under the Warrant
Registration Rights Agreement) that may be included in the
registration and underwriting, if any, shall be allocated, (x) if
the registration is pursuant to Section 2.2(a), (A) two thirds
(2/3) of the shares to be registered to Initiating Holders
participating in the registration and among such Initiating
Holders in proportion, as nearly as practicable to the respective
amount of Registrable Securities obtained as a result of
conversion into Common Stock of Shares held by such Initiating
Holders at the time of filing the registration statement, and (B)
one third (1/3) of the shares to be registered to the Senior Note
Warrant Holders participating in the registration, and (y) if the
registration statement is pursuant to Section 2.2(b), (A) one
third (1/3) of the shares to be registered to the Initiating
Series CC Holders participating in the registration and among such
Initiating Series CC Holders in proportion, as nearly as
practicable to the respective amount of Registrable Securities
obtained as a result of conversion into Common Stock of Series CC
Shares held by such Initiating Series CC Holders at the time of
filing of the registration statement, (B) one third (1/3) of the
shares to be registered to the other Holders of Registrable
Securities participating in the registration and among such
Holders in proportion, as nearly as practicable, to the respective
amount of Registrable Securities (other than shares obtained as a
result of conversion into Common Stock of Series CC Shares) held
by such Holders at the time of filing of the registration
statement, and (C) one third (1/3) of the shares to be registered
to the Senior Note Warrant Holders participating in the
registration. No Registrable Securities (or if applicable,
Warrant Shares) excluded from the underwriting by reason of the
managing underwriter's marketing limitation shall be included in
such registration.
If any Initiating Holder (or Initiating Series CC Holder if
the registration is pursuant to Section 2.2(b)) of Registrable
Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the
Company, the managing underwriter(s) and the Initiating Holders
(or Initiating
-3-
<PAGE>
Series CC Holders if the registration is pursuant to Section
2.2(b)). The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from registration; provided,
however, that, if by the withdrawal of such Registrable Securities
a greater number of Registrable Securities held by other
Initiating Holders (or other Initiating Series CC Holders if the
registration is pursuant to Section 2.2(b)) or Warrant Shares held
by Senior Note Warrant Holders may be included in such
registration (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to all Initiating
Holders (or Initiating Series CC Holders if the registration is
pursuant to Section 2.2(b)) who have included Registrable
Securities in the registration and to all Senior Note Warrant
Holders who have included Warrant Shares in the registration, as
the case may be, the right to include additional Registrable
Securities and Warrant Shares, respectively, in the same
proportion used in determining the underwriter limitation in this
Section 2.2(c)."
(e) The last paragraph of Section 2.2(e) shall be amended and
superseded as follows:
"Other Holders of Registrable Securities or Warrant Shares
may participate in any offering conducted pursuant to a Special
Series CC Request for Registration provided that in the event of
an Underwriter's Cutback, the holders of Series CC Shares shall
receive full priority with respect to all their Registrable
Securities requested to be registered, subject to the right of the
Senior Note Warrant Holders participating in such registration to
have Warrant Shares included in at least one third (1/3) of the
shares to be registered."
(f) The final two paragraphs of Section 2.2(f) shall be amended
and superseded as follows:
"The Company, together with all Special Initiating Series
CC Holders proposing to distribute their securities through such
underwriting, shall enter into an underwriting agreement in
customary form with the managing underwriter(s) selected for such
underwriting by a majority in interest of the Special Initiating
Series CC Holders which underwriter(s) shall be reasonably
acceptable to the Company. Notwithstanding any other provision of
this Section 2.2, if the managing underwriter(s) advises the
Special Initiating Series CC Holders of the necessity for an
Underwriter's Cutback (as defined in Section 2.2(c)), then,
subject to the provisions of this Section 2.2(f), all Special
Initiating Series CC Holders, Eligible Series CC Holders, and any
other participating Holders shall be so advised, and the number of
shares of Registrable Securities and Warrant Shares (if requested
to be included pursuant to the exercise of piggyback registration
rights under the Warrant Registration Rights Agreement) that may
be included in the
-4-
<PAGE>
registration and underwriting, if any, shall be allocated first in
proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Special Initiating Series CC
Holders and Eligible Series CC Holders at the time of filing the
registration statement, subject to the right of the Senior Note
Warrant Holders participating in such registration to have Warrant
Shares included in at least one third (1/3) of the shares to be
registered. No Registrable Securities or Warrant Shares excluded
from the underwriting by reason of the managing underwriter's
marketing limitation shall be included in such registration.
If any Special Initiating Series CC Holder of Registrable
Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the
Company, the managing underwriter(s) and the Special Initiating
Series CC Holders. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from registration;
provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by
other Special Initiating Series CC Holders and Warrant Shares held
by Senior Note Warrant Holders may be included in such
registration (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to all Special
Initiating Series CC Holders who have included Registrable
Securities in the registration and to all Senior Note Warrant
Holders who have included Warrant Shares in the registration the
right to include additional Registrable Securities and Warrant
Shares, respectively, in the same proportion used in determining
the underwriter limitation in this Section 2.2(f)."
(g) The first paragraph of Section 2.3(a) shall be amended and
superseded as follows:
"(a) Notice of Registration to Holders. If at any time
or from time to time, the Company shall determine to register any
of its securities, either for its own account or the account of a
security holder or holders, other than (i) a registration relating
solely to employee benefit plans, (ii) a registration relating
solely to a Commission Rule 145 transaction, or (iii) a
registration relating solely to non-convertible debt securities of
the Company, the Company will:"
(h) Section 2.3(c) shall be amended and superseded as follows:
"(c) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving
an underwriting, the Company shall so advise the Holders as a part
of the written notice given pursuant to Section 2.3(a)(i). In
such event the right of any Holder to registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the
-5-
<PAGE>
underwriting to the extent provided herein. All Holders proposing
to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing
their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2.3, if the
managing underwriter determines the number of shares requested to
be included in the registration exceeds the number which can be
sold in an orderly manner in such offering within a price range
acceptable to the Company or Holders requesting registration, as
the case may be: (i) if such registration is the first offering by
the Company to the general public of its securities for its own
account, the underwriter may exclude some or all Registrable
Securities and Warrant Shares from such registration and
underwriting (provided the securities of other shareholders are
not included therein); (ii) if such registration is other than the
first offering by the Company to the general public of its
securities for its own account, the underwriter may limit the
Registrable Securities held by Holders, securities to be included
pursuant to Section 2.3(b), and Warrant Shares requested to be
included in such registration and underwriting, to an aggregate of
not less than twenty-five percent (25%) of the total number of
securities to be registered in such registration and underwriting;
the Company shall so advise all Holders and the other holders
distributing their securities through such underwriting, and the
number of shares of Registrable Securities, Warrant Shares, and
other securities that may be included in the registration and
underwriting shall be allocated first among all Holders and Senior
Note Warrant Holders thereof in proportion, as nearly as
practicable, to the respective amounts of securities entitled to
inclusion in such registration (on an as-converted basis) held by
such Holders or Senior Note Warrant Holders, as the case may be,
at the time of filing of the registration statement; and (iii) if
such registration is for the account of another security holder
pursuant to a right to demand registration, the underwriter may
limit the Registrable Securities held by Holders, securities to be
included pursuant to Section 2.3(b), and Warrant Shares requested
to be included in such registration and underwriting, and the
number of such shares that may be included in the registration and
underwriting, if any, shall be allocated (A) one third (1/3) of
the shares to be registered to Series CC Holders participating in
the registration and among such Series CC Holders in proportion,
as nearly as practicable to the respective amount of Registrable
Securities obtained as a result of conversion into Common Stock of
Series CC Shares held by such Series CC Holders at the time of
filing of the registration statement, (B) one third (1/3) of the
shares to be registered to the other Holders of Registrable
Securities participating in the registration and among such
Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities (other than shares obtained as a
result of conversion into Common Stock of Series CC Shares) held
by such Holders at the time of filing of the registration
statement and (C) one third (1/3) of the shares to
-6-
<PAGE>
be registered to the Senior Note Warrant Holders participating in
the registration. After such allocation, any additional shares of
Registrable Securities and other securities that may be included
in the registration and underwriting shall be allocated among
other holders thereof in proportion, as nearly as practicable, to
the respective amounts of securities entitled to inclusion in such
registration held by all such other holders. If any Holder or
other holder disapproves of the terms of any such underwriting, he
may elect to withdraw therefrom by written notice to the Company
and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such
registration, but if the registration is the first offering by the
Company to the general public of its securities for its own
account, then the securities so excluded or withdrawn shall not be
transferred in a public distribution prior to 180 days after the
effective date of the registration statement relating thereto."
2. RIGHT OF FIRST REFUSAL ON NEW SECURITIES. Section 4(a) shall be
amended and superseded as follows:
(a) "New Securities" shall mean any Common Stock or any
Preferred Stock of the Company, whether now authorized or not, and any
rights, options, or warrants to purchase said Common Stock or Preferred
Stock, and securities of any type whatsoever that are, or may become,
convertible into Common Stock or Preferred Stock; provided, however, that
"New Securities" does not include (i) securities issuable upon conversion
of or with respect to the Series AA and BB and CC and DD Preferred Stock
subsequently issued; (ii) securities offered to the public pursuant to a
registration statement filed under the Securities Act; (iii) securities
issued pursuant to the acquisition of another corporation by the Company
by merger, purchase of substantially all of the assets, or other
reorganization whereby the Company owns not less than fifty percent (50%)
of the voting power of the surviving corporation; (iv) shares of the
Company's Common Stock (or related options) issued to employees,
officers, directors, consultants, or other persons performing services
for the Company (including, but not by way of limitation, distributors
and sales representatives) pursuant to any stock offering, plan, or
arrangement approved by the non-management members of the Board of
Directors of the Company; (v) any securities issued to a corporate
investor at a price greater than $4.75 per share where the primary
purpose is not to raise equity; (vi) shares of the Company's Common Stock
or Preferred Stock issued to its shareholders in connection with any
stock split, stock dividend, or recapitalization by the Company; (vii)
securities issued upon the exercise of outstanding warrants of the
Company as of the date of this Agreement; or (viii) the Senior Note
Warrants issued in connection with the issuance of the Senior Notes.
Notwithstanding the provisions of Section 4(a)(v), each Series CC Holder
(whether or not such Series CC Holder holds 5,000 shares of Series CC
Preferred Stock or Common Stock issued or issuable upon conversion
thereof) shall be entitled the right of first refusal, pursuant to the
provisions of Section 4, to purchase a pro rata part of New Securities
that
-7-
<PAGE>
the Company proposes to sell and issue to any public or private utility
company or any of their affiliates. Clauses (iii) and (v) shall not be
applicable to any sales of securities to any utility company or any of
its affiliates, or any officer, director or employee thereof.
-8-
<PAGE>
3. MISCELLANEOUS. Section 6.4 shall be amended and superseded by the
following text:
ENTIRE AGREEMENT. This Agreement and the Amendments thereto dated
December 22, 1994 and June 15, 1995 (the "Amendments") constitute
the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. This
Agreement and the Amendments shall supersede the Prior Agreement,
which agreement shall be of no further force or effect.
4. GOVERNING LAW. This Amendment shall be governed by and construed
under the laws of the State of California as such laws are applied to contracts
made and to be fully performed entirely within that state between residents of
that state. All disputes arising out of this Amendment shall be subject to the
exclusive jurisdiction and venue of the California State courts of San Mateo
County, California, (or, if there is exclusive federal jurisdiction, the United
States District Court for the Northern District of California) and the parties
consent to the personal and exclusive jurisdiction and venue of these courts.
5. ENTIRE AGREEMENT. This Amendment and the Agreement constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
6. FULL FORCE AND EFFECT. Except as amended hereby, the Agreement
shall remain in full force and effect.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8. SEVERABILITY. In case any provision of this Amendment shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Amendment shall not in any way be affected or
impaired thereby.
-9-
<PAGE>
The foregoing Amendment to the Shareholders' Agreement is hereby executed
as of the date first above written.
CELLNET DATA SYSTEMS, INC.
a California corporation
By: /s/ David L. Perry
----------------------------------------------
David L. Perry
Vice President, General Counsel and Secretary
SHAREHOLDER
Paul M. Cook and Marcia L. Cook,
Trustees of the Paul and Marcia Cook Living Trust
dated April 21, 1992.
--------------------------------------------------
(Print Name)
/s/ Paul M. Cook
--------------------------------------------------
(Signature of Holder or Authorized Signatory)
Paul M. Cook
--------------------------------------------------
(Print Name and Title of Authorized Signatory if
Applicable)
-10-
<PAGE>
AMENDMENT NO. 3
TO SHAREHOLDERS' AGREEMENT
This Amendment so made this 21st day of November, 1995 to the
Shareholders' Agreement dated August 15, 1994, as amended (the "Agreement"), by
and among CELLNET DATA SYSTEMS, INC., a California Corporation (the "Company")
and the persons and entities (the "Shareholders") whose names are set forth in
Schedule A attached thereto. For purposes of this amendment, capitalized terms
shall have the same meaning as those terms defined in the Agreement, unless
otherwise provided.
RECITALS
WHEREAS, the Shareholders possess registration rights, information
rights, Board rights, rights of first refusal, and co-sale rights granted under
the Agreement;
WHEREAS, the Company issued 13% Senior Discount Notes due 2005 (the
"Original Notes") and Warrants (the "Original Warrants") to purchase 940,000
shares of Common Stock pursuant to a Purchase Agreement dated June 15, 1995,
with Smith Barney Inc. as Initial Purchaser (the "Initial Purchaser").
WHEREAS, the Company is issuing (the "Offering") 13% Senior Discount
Notes due 2005 (the "Additional Notes") (the Original Notes and Additional Notes
are collectively referred to herein as the "Notes") and Warrants (the
"Additional Warrants") to purchase 360,000 shares of Common Stock (the Original
Warrants and Additional Warrants are collectively referred to herein as the
"Warrants") pursuant to a Purchase Agreement dated November 21, 1995 with the
Initial Purchaser.
WHEREAS, in order to consummate the Offering, the Company must amend the
Agreement (i) to eliminate certain inconsistent registration rights of the
Holders with rights proposed to be granted to the Initial Purchaser in
connection with the Offering, (ii) to preclude triggering registration rights
upon the registration of the Additional Notes, and (iii) to preclude triggering
certain rights of first refusal of the Holders upon the issuance of the
Additional Warrants.
NOW, THEREFORE, in consideration of the mutual premises and covenants
hereinafter set forth, the Company and the Shareholders agree that the Agreement
is amended by this Amendment, and all parties agree as follows:
1. REGISTRATION RIGHTS. Section 2 of the Agreement shall be amended
as follows:
(a) Sections 2.1(m) and 2.1(n) shall be replaced with the
following:
"(m) "SENIOR NOTES" shall mean and include the 13% Senior
Discount Notes due June 15, 2005 issued on June 15, 1995 and issued on November
21, 1995 as governed by the
<PAGE>
Indenture dated June 15, 1995, as amended on November 21, 1995 between the
Company and The Bank of New York as Trustee.
(n) "SENIOR NOTE WARRANTS" shall mean and include the
warrants issued in connection with the issuance of the Senior Notes on June 15,
1995 and issued in connection with the issuance of the Senior Notes on November
21, 1995, pursuant to the Warrant Agreement"
(b) Sections 2.1(w) and 2.1(x) shall be replaced as follows:
"(w) "WARRANT AGREEMENT" shall mean the Warrant Agreement
dated June 15, 1995, as amended on November 21, 1995, by and between the Company
and The Bank of New York as the Warrant Agent.
(x) "WARRANT REGISTRATION RIGHTS AGREEMENT" shall mean
the Registration Rights Agreement dated June 15, 1995, as amended on November
21, 1995, entered into between the Company and Smith Barney Inc."
2. MISCELLANEOUS. Section 6.4 shall be amended and superseded by the
following text:
ENTIRE AGREEMENT. This Agreement and the Amendments thereto dated
December 22, 1994, June 15, 1995 and November 21, 1995
(collectively, the "Amendments") constitute the full and entire
understanding and agreement between the parties with regard to the
subjects hereof and thereof. This Agreement and the Amendments
shall supersede the Prior Agreement, which agreement shall be of
no further force or effect.
3. GOVERNING LAW. This Amendment shall be governed by and construed
under the laws of the State of California as such laws are applied to contracts
made and to be fully performed entirely within that state between residents of
that state. All disputes arising out of this Amendment shall be subject to the
exclusive jurisdiction and venue of the California State courts of San Mateo
County, California, (or, if there is exclusive federal jurisdiction, the United
States District Court for the Northern District of California) and the parties
consent to the personal and exclusive jurisdiction and venue of these courts.
4. ENTIRE AGREEMENT. This Amendment and the Agreement constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
5. FULL FORCE AND EFFECT. Except as amended hereby, the Agreement
shall remain in full force and effect.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-2-
<PAGE>
7. SEVERABILITY. In case any provision of this Amendment shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Amendment shall not in any way be affected or
impaired thereby.
-3-
<PAGE>
The foregoing Amendment to the Shareholders' Agreement is hereby executed
as of the date first above written.
CELLNET DATA SYSTEMS, INC.
a California corporation
By: /s/ David L. Perry
-----------------------------------------------
David L. Perry
Vice President, General Counsel and Secretary
SHAREHOLDER
John M. Seidl
--------------------------------------------------
(Print Name)
/s/ John M. Seidl
--------------------------------------------------
(Signature of Holder or Authorized Signatory)
--------------------------------------------------
(Print Name and Title of Authorized Signatory if
Applicable)
-10-
<PAGE>
LEASE
THIS LEASE is made on the 6th day of April, 1989 by and between
WDT-Shoreway hereinafter call Lessor') and Domestic Automation Company
(hereinafter called Lessee').
IN CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED, THE PARTIES AGREE
AS FOLLOWS:
1. PREMISES. Lessor leases to Lessee and Lessee leases from Lessor, upon
the terms and conditions herein set forth, those certain Premises
("Premises") situated in the City of San Carlos, County of San Mateo,
California, as outlined in Exhibit "A" attached hereto and described
as follows: + 22,464 sq. ft, at 125 Shoreway Road, Suite 1000, 94070
2. TERM. The term of this Lease shall be for five (5) years commencing
on July 1, 1989 and ending on June 30, 1994 unless sooner terminated
pursuant to any provision hereof.
3. RENT. Lessee shall pay to Lessor rent for the Premises of Twenty Six
Thousand Nine Hundred Fifty-Seven and 00/100 Dollars ($26,957.00) per
month in lawful money of the United States of America, subject to
adjustment as provided in Section A of this Paragraph. Rent shall be
paid without deduction or offset, prior notice or demand, at such
place as may be designated from time to time by Lessor as follows:
$9,660.00 shall be paid upon execution of the Lease, which sum
represents the amount of the first month's rent. A deposit of
$15,000.00 as a Security Deposit shall be made by Lessee and held by
Lessor pursuant to Paragraph 5 of this Lease and shall also be paid
upon execution of the Lease. [see NOTE 1] $26,957.00 [see Note 2]
shall be paid on July 1, 1989 and in advance on the first (1st) day
of each succeeding calendar month until June 1994. Rent for any period
during the term hereof which is for less than one (1) full month shall
be a pro-rata portion of the monthly rent payment. Lessee
acknowledges that late payment by Lessee to Lessor of rent or any
other payment due Lessor will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of such costs being
extremely difficult and impracticable to fix. Such costs include,
without limitation, processing and accounting charges, and late
charges that may be imposed on Lessor by the terms of any encumbrance
and note secured by any encumbrance covering the Premises. Therefore,
if any installment of rent or other payment due from Lessee is not
received by Lessor within NINE (9) days following the date it is due
and payable, Lessee shall pay to Lessor an additional sum of ten
percent (10%) of the overdue amount as a late charge. The parties
agree that this late charge represents a fair and reasonable estimate
of the costs that Lessor will incur by reason of late payment by
Lessee. Acceptance of any later charge shall not constitute a waiver
of Lessee's default with respect to the overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies available
to Lessor.
NOTE 1: The security deposit shall be increased by Six Thousand and 00/ 100
Dollars ($6,000.00) the earlier of (i) March 15, 1990 or (ii) the return of the
security deposit by Tenant's current sublessor at Vintage Park.
NOTE 2: Except that during months 1 through 6, inclusive, of the term, the
monthly rent shall be $9,660.00.
1
<PAGE>
EXCEPT AS PROVIDED WITHIN, if for any reason whatsoever, Lessor can
not deliver possession of the Premises on the commencement date set
forth in Paragraph 2 above, this Lease shall not be void or voidable,
nor shall Lessor be liable to Lessee for any loss or damage resulting
therefrom; but in such event, Lessee shall not be obligated to pay
rent until possession of the Premises is tendered to Lessee and the
commencement and termination dates of this Lease shall be revised to
conform to the date of Lessor's delivery of possession. EXCEPT AS
PROVIDED WITHIN, In the event that Lessor shall permit Lessee to
occupy the Premises prior to the commencement of this Lease, such
occupancy shall be subject to all of the provisions of this Lease,
including the commencement of rent and obligation to maintain
insurance.
4. OPTION TO EXTEND TERM.
A. Lessee shall have the option to extend the term on all the
provisions contained in this Lease for two (2)-five (5) year
period(s) ("extended term") at an adjusted rental calculated as
provided in Subparagraph B below on conditions that:
a. Lessee has given to Lessor written notice of exercise of
that option ("Option notice") at least seven (7) months, but
not more than twelve (12) months before the expiration of
the initial term, or extended term(s), as the case may be.
b. Lessee is not in default in the performance of any of the
terms and conditions of the Lease on the data of giving the
option Notice, and Lessee is not in default on the date the
extended term is to commence.
2
<PAGE>
SEE PARAGRAPH 35 OF ADDENDUM ATTACHED HERETO AND MADE PART HEREOF.
5. SECURITY DEPOSIT. Lessor acknowledges that Lessee has deposited with
Lessor a Security Deposit in the sum of $ 15,000,00 [see Note *] to
secure the full and faithful performance by Lessee of each term,
covenant, and condition of this Lease. If Lessee shall at any time
fail to make any payment or fail to keep or perform any term,
covenant, or condition on its part to be made or performed or kept
under this Lease, Lessor may, but shall not be obligated to and
without waiving or releasing Lessee from any obligation under this
Lease, use, apply, or retain the whole or any part of said Security
Deposit (a) to the extent of any sum due to Lessor: or (b) to make any
required payment on Lessee's behalf; or (c) to compensate Lessor for
any loss, damage, attorneys' fees or expense sustained by Lessor due
to Lessee's default. In such event, Lessee shall, within five (5)
days of written demand by Lessor, remit to Lessor sufficient funds to
restore the Security Deposit to its original sum. No interest shall
accrue on the Security Deposit. Should Lessee comply with all the
terms, covenants and conditions of this Lease and at the end of the
term of this Lease leave the Premises in the condition required by
this Lease, then said Security Deposit or any balance thereof, less
any sums owing to Lessor, shall be returned to Lessee within fifteen
(15) days after the termination of this Lease and vacancy of the
Premises by Lessee. Lessor can maintain the Security Deposit separate
and apart from Lessor's general funds, or can co-mingle the Security
Deposit with Lessor's general and other funds.
6. USE OF THE PREMISES. The Premises shall be used exclusively for the
purpose of gen. office, administration, R&D, manufacturing and
distribution of electronic parts & other related legal uses as set
forth in the existing zoning ordinances in the City of San Carlos.
Lessee shall not use, or permit the Premises, or any part thereof, to
be used, for any purpose other than the purpose for which the Premises
are hereby leased; and no use shall be made or permitted to be made of
the Premises, nor acts done, which will increase the existing rate of
insurance upon the building in which the Premises are located, (EXCEPT
THAT LESSEE MAY PAY THE COST OF SUCH INSURANCE INCREASE), or cause a
cancellation of any insurance policy covering said building, or any
part thereof, nor shall Lessee sell or permit to be kept, used or
sold, in or about the Premises, any article which may be prohibited by
the standard form of fire insurance policies. Lessee shall not commit,
or suffer to be committed, any waste upon the Premises, or any public
or private nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in the building in which the Premises
are located; nor,without limiting the generality of the foregoing,
shall Lessee allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose.
NOTE *: which shall be increased by Six Thousand and 00/100 Dollars ($6,000.00)
the earlier of (i) March 15, 1990 or (ii) the return of Security Deposit
currently held by sublessor at Vintage Park.
3
<PAGE>
Lessee shall not place any harmful liquids in the drainage system of
the Premises or of the building of which the Premises form a part. No
waste materials or refuse shall be dumped upon or permitted to remain
upon any part of the premises outside of the building property except
in trash containers placed inside exterior enclosures designated for
that purpose by Lessor, or inside the building proper where designated
by Lessor. No material, supplies, equipment, finished or semi-
finished products, raw materials or articles of any nature shall be
stored upon or permitted to remain on any portion of the Premises
outside of the building proper. The term "Hazardous Material" means
any hazardous or toxic substance, material or waste the storage, use,
or disposition of which is or becomes regulated by any local
governmental authority, the State of California or the United States
government. The term "Hazardous Material" includes, without
limitation, any material or substance which is (i) defined as a
"hazardous waste", "extremely hazardous waste" or "restricted
hazardous waste" under Section 25115, 25117 pr 25122.7, or listed
pursuant to Section 25140, of the California Health and Safety Code,
Division 20, Chapter 6.5 (Hazardous Waste Control law), (ii) defined
as a "hazardous substance" under Section 25136 of the California
Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-
Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous
material", "hazardous substance", or "hazardous waste" under Section
25501 of the California Health and Safety Code, Division 20, Chapter
6.95 (Hazardous Materials Release Response Plans and Inventory), (iv)
defined as a "hazardous substance" under Section 25281 of the
California Health and Safety Code, Division 20, Chapter 6.7
(Underground Storage of Hazardous Substances), (v) petroleum, (vi)
asbestos, (vii) listed under Article 9 or defined as hazardous or
extremely hazardous pursuant to Article 11 of Title 22 of the
California Administrative Code, Division 4, Chapter 20, (vii)
designated, as a "hazardous substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ix)
defined as a "hazardous waste" pursuant to Section 1004 of the Federal
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ.
(42 U.S.C. Section 6903), or (x) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. Section 9601 ET SEQ., (42
U.S.C. Section 9601), or (xi) listed or defined as "hazardous waste",
"hazardous substance", or other similar designation by any regulatory
scheme of the State of California or the United States Government.
Lessee, at its sole cost shall comply with all laws and regulations
relating to its storage, use and disposal of Hazardous Materials on
the Premises. If Lessee does store, use or dispose of any Hazardous
Materials on the Premises, Lessee shall notify Lessor, in writing at
least five (5) days prior to their first appearance on the Premises.
Lessee shall be solely responsible for and shall defend, indemnify and
hold Lessor, and Lessor's partners, officers, employees, successors,
assigns and agents harmless from and against all claims, demands,
damages, costs and liabilities, including attorneys' fees and costs,
arising out of or in connection with the storage, use, or disposal of
Hazardous Materials by Lessee, its agents, employees, or contractors.
If the presence of Hazardous Materials WHICH WERE INTRODUCED, STORED,
DISPOSED OF OR TRANSPORTED IN OR on the Premises caused or permitted
by Lessee, its agents, employees, contractors, or sublessees results
in contamination or deterioration of water or soil resulting in a
level of contamination greater than the safe levels established by any
governmental agency having jurisdiction over such contamination or if
any investigation of conditions, or any clean up, remedial removal or
restoration work is required by any federal, state or local
governmental agency or political subdivision ("Governmental Agency")
because of the level of Hazardous Material in the soil or ground water
WHICH WERE INTRODUCED, STORED, DISPOSED OF OR TRANSPORTED IN OR on the
Premises by Lessee, its agents, employees, contractors, or sublessees,
Lessee shall promptly, and at its sole cost, take any and all action
necessary to investigate and clean up such contamination. At any time
prior to the expiration of the Lease Term, Lessee shall have the right
to conduct appropriate tests of waste and soil
4
<PAGE>
and to deliver to Lessor the results of such tests to demonstrate that
no contamination has occurred as a result of Lessee's use of the
Premises. Lessee shall further be solely responsible for, and shall
defend, indemnity and hold Lessor and Lessor's partners, officers,
employees, successors, assigns and agents harmless from and against,
all claims, demands, damages, costs and liabilities, including
attorneys' fees and costs, arising out of or in connection with any
removal, clean-up and restoration work and materials required
hereunder to return the Premises, the Property of which the Premises
are a part or the surrounding properties to its condition existing
prior to the appearance of the Hazardous Materials WHICH WERE
INTRODUCED, STORED, DISPOSED OF OR TRANSPORTED IN OR ON THE PREMISES
by Lessee, its agents, employees, contractors, or sublessees.
If Lessor has good cause to believe that the Premises or the Property
which the Premises are a part, have or may become contaminated by
Hazardous Materials, Lessor may cause test to be performed, including
wells to be installed on the Premises, and may cause the soil or
ground water to be tested to detect the presence of Hazardous
Materials by the use of such tests as are then customarily used for
such purposes. If Lessee so requests, Lessor shall supply Lessee with
copies of such test results. The cost of such tests of the
installation, maintenance, repair and replacement of such wells shall
be paid by Lessee PROVIDED THAT THE RESULTS OF SUCH TESTS CONFIRM THE
PRESENCE OF ANY HAZARDOUS MATERIALS AND LESSEE, ITS AGENTS, EMPLOYEES,
CONTRACTORS OR SUBLESSEES WHICH WERE INTRODUCED, STORED, DISPOSED OF
OR TRANSPORTED IN OR ON THE PREMISES. Lessee shall have the right at
any time during the Lease term to conduct its own test of the soil
and/or ground water underlying the Property by using such wells so
long as each of the following conditions arc satisfied: (i) such tests
are conducted by Lessee at its own expense, (ii) it repairs any
damages to such wells cause by such test; (iii) it holds Lessor, and
Lessor's partners, officers, employees, assigns, successors and agents
harmless from any cost, liability or claims including reasonable
attorney's fees, from its tests including mechanic's lies as well as
contamination to the Property or surrounding properties including the
soil and groundwater thereunder, and (iv) it timely delivers copies of
the results of such test to Lessor.
The termination of the Lease shall not terminate the parties' rights
and obligations under this Paragraph and the parties hereto expressly
agree that the provisions contained herein shall survive the
termination of Lessee's leasehold estate.
Lessee shall abide by all laws, ordinances and statutes, as they now
exist or may hereafter be enacted by legislative bodies having
jurisdiction thereof, relating to its use and occupancy of the
Premises.
SEE PARAGRAPH 36 OF ADDENDUM ATTACHED HERETO AND MADE PART HEREOF.
7. IMPROVEMENTS. Lessor will, at its sole expense, make improvements to
the Premises as specified in Exhibit "B" attached hereto and by this
reference made a part hereof. Lessor will make reasonable efforts to
complete such improvements prior to July 1,1989.
8. TAXES AND ASSESSMENTS.
A. Lessee shall pay before delinquency any and all taxes,
assessments, license fees and public charges levied, assessed or
imposed upon or against Lessee's fixtures, equipment, furnishes,
furniture, appliances and personal property installed or located
on or within the Premises. Lessee shall cause said fixtures,
equipment, furnishings, furniture, appliances and personal
property to be assessed and billed separately from the real
property of Lessor. If any of Lessee's said personal property
shall be assessed with Lessor's real property, Lessee shall pay
to Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement from Lessor setting forth
the taxes applicable to Lessee's property.
5
<PAGE>
B. All property taxes or assessments levied or assessed or hereafter
levied or assessed, by any governmental authority, against the
Premises or any portion of such taxes or assessments which
becomes due or accrued during the term of this Lease shall be
paid by Lessor. Lessee shall reimburse Lessor for Lessee's
proportionate share of such taxes or assessments within ten (10)
days of receipt of Lessor's invoice demanding such payment.
Lessee's liability hereunder shall be prorated to reflect the
commencement and termination dates of this Lease.
C. LESSOR AGREES NOT TO INITIATE THE FORMATION OF ANY ASSESSMENT
DISTRICT WHEREBY THE RESULTANT EFFECT SHALL BE AN INCREASE IN THE
PROPERTY TAXES DUE TO THE REPAYMENT OF THE ASSESSMENT BONDS. IF
SUCH AN ASSESSMENT DISTRICT IS FORMED, LESSOR AGREES TO USE ITS
BEST EFFORTS, WITHOUT WARRANTY OF SUCCESS, THAT SUCH DISTRICT IS
FINANCED BY AN ASSESSMENT DISTRICT BOND PROVIDING FOR PERIODIC
PAYMENTS AND NOT FINANCED WITH A REQUIREMENT FOR A SINGLE
"LUMP-SUM" PAYMENT.
9. INSURANCE.
A. INDEMNITY. Lessee agrees to indemnify and defend Lessor against
and hold Lessor and Lessor's partners, employees, officers,
assigns and successors harmless from any and all demands, claims,
causes of action, judgments, obligation or liabilities, and all
reasonable expenses incurred in investigating or resisting the
same (including reasonable attorneys' fees), on account of, or
arising out of, the condition, use or occupancy of the Premises.
This Lease is made on the express condition that Lessor shall not
be liable for, or suffer loss by reason of, injury to person or
property, from whatever cause, in any way connected with the
condition, use or occupancy of the Premises specifically
including, without limitation, any liability for injury to the
person or property of Lessee, its agents, officers, employees,
licensees and invitees, EXCEPT THAT SUCH INDEMNITY BY LESSEE OF
LESSOR SHALL NOT INCLUDE AN INDEMNITY FOR RESULTS OF LESSOR'S
NEGLIGENCE OR WILLFUL MISCONDUCT. FURTHERMORE, LESSOR HEREBY
INDEMNIFIES LESSEE AGAINST ANY COST OR CLAIM RESULTING FRONT
LESSOR'S NEGLIGENCE OR WILLFUL MISCONDUCT.
B. LIABILITY INSURANCE. Lessee shall, at the Lessee's expense,
obtain and keep in force during the term of this Lease a policy
of comprehensive public liability insurance insuring Lessor and
Lessee, with cross-liability endorsements, against any liability
arising out of the condition, use or occupancy of the Premises
and all areas appurtenant thereto, including parking areas. Such
insurance shall be in an amount satisfactory to Lessor of not
less than $1,000,000 for bodily injury or death as a result of
any one occurrence, and $500,000 for damage to property as a
result of any one occurrence. The insurance shall be with
companies of Best's Rating Guide of A+9 or better and approved by
Lessor, which approval Lessor agrees not to unreasonably
withhold. Lessee shall deliver to Lessor prior to possession, a
certificate of insurance evidencing the existence of the policy
required hereunder and such certificate shall certify that the
policy (1) names Lessor as an additional insured (2) shall not be
canceled or altered without thirty (30) days prior written notice
to Lessor, (3) insures performance of the indemnity set forth in
Subparagraph (A) above, and (4) the coverage is primary and any
coverage by Lessor is in excess thereto.
C. PROPERTY INSURANCE. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies of insurance coverage
including fire, extended coverage, earthquake and flood, for loss
or damage to the Premises, in the amount of the full replacement
value thereof. Lessee shall pay to Lessor its pro-rata share of
the cost of said insurance within ten (10) days of Lessee's
receipt of Lessor's invoice demanding such payment.
6
<PAGE>
D. MUTUAL WAIVER OF SUBROGATION. Lessee AND LESSOR hereby release
EACH OTHER and its partners, officers, agents, employees and
servants, from any and all claims, demands, loss, expense, or
injury to the Premises or to the furnishings, fixtures,
equipment, caused by or results from perils, events or happenings
OF THE TYPE which are the subject of insurance in force at the
time of such loss OR REQUIRED TO BE CARRIED BY THIS LEASE.
10. OPERATION, MANAGEMENT, SERVICES AND UTILITIES. Lessee shall pay its
share, based upon the percentage of occupancy for all expenses of
operation and management of the Premises and the Property of which the
Premises are a part, including, but not limited to, water, gas, light,
heat, power, electricity, telephone, trash pick-up, property
management, landscaping, sewer charges, and all other services,
supplied to or consumed on the Premises or the Property of which the
Premises are a part. In the event that any such services are billed
directly to Lessor, then Lessee shall reimburse Lessor for such
expenses within ten (10) days of Lessee's receipt of Lessor's invoice
demanding payment. Lessee acknowledges and agrees to reimburse Lessor
an additional five percent (5%) of said expenses in order to
compensate Lessor for accounting and processing services. LESSEE'S
SHARE IS HEREBY AGREED TO 27.13% (+ OR - 22,464 SF/+ OR - 82,816 SF).
SEE PARAGRAPH 37 OF ADDENDUM ATTACHED HERETO AND MADE PART HEREOF.
11. REPAIRS AND MAINTENANCE.
A. Subject to provisions of Paragraph 15, Lessor shall keep and
maintain the roof, paving, structural elements, landscaping,
irrigation, and exterior walls of the building in which the
Premises are located in good order and repair. Lessee shall
reimburse Lessor for its proportionate share of said expenses
within ten (10) days of Lessee's receipt of Lessor's invoice
demanding payment. If, however, any repairs or maintenance are
required because of an act or omission of Lessee, or its agents,
employees or invitees, Lessee shall pay to Lessor upon demand
100% of the costs of such repair or maintenance.
B. Except as expressly provided in Subparagraph (A) above, Lessee
shall, at its sole cost, keep and maintain the entire Premises
and every part thereof, including, without limitation, the
windows, window frames, plate glass, glazing, truck doors, doors,
all door hardware, interior of the Premises, interior walls and
partitions, and the electrical, plumbing, lighting, heating and
air conditioning systems in good and sanitary order, condition
and repair. Lessee shall, at its own expense, for the duration
of this Lease, retain a service company, approved by Lessor, to
provide routine maintenance and repairs of the heating,
ventilation, and air conditioning system.
Should Lessee fail to maintain the Premises or make repairs
required of Lessee hereunder forthwith upon notice from Lessor,
Lessor, in addition to all other remedies available hereunder or
by law, and without waiving any alternative remedies, may make
the same, and in that event, Lessee shall reimburse Lessor as
additional rent for the cost of such maintenance or repairs on
the next date upon which rent becomes due.
Lessee hereby expressly waives the provision of Sub-section 1 of
Section 1932, and Sections 1941 and 1942 of the Civil Code of
California and all rights to make repairs at the expense of
Lessor, as provided in Section 1942 of said Civil Code.
SEE PARAGRAPH 38 OF ADDENDUM ATTACHED HERETO AND MADE PART
HEREOF.
7
<PAGE>
12. ALTERATIONS AND ADDITIONS. Lessee shall not make, or suffer to be
made, any alterations, improvements, or additions in, on, or about, or
to the Premises or any part thereof, without the prior written consent
of Lessor and without a valid building permit issued by the
appropriate governmental authority. Lessor retains, at his sole
option, the right to perform all repairs, alterations, improvements or
additions in, on, about, or to said Premises or any part thereof.
LESSEE SHALL HAVE THE RIGHT TO MAKE SUCH ALTERATION WITH ONLY TEN (10)
DAYS ADVANCE NOTICE TO LESSOR AND BY A VALID BUILDING PERMIT (IF
NECESSARY), PROVIDED THE AGGREGATE COST OF SUCH ALTERATION(S), IN ANY
YEAR, SHALL NOT EXCEED TEN THOUSAND DOLLARS ($10,000). As a condition
to giving such consent, Lessor may require that Lessee agree to remove
any such alterations, improvements or additions at the termination of
this Lease, and to restore the Premises to their prior condition. Any
alteration, addition or improvement to the Premises, except movable
furniture and trade fixtures not affixed to the Premises, shall become
the property of Lessor upon installation, and shall remain upon and be
surrendered with the Premises at the termination of this Lease.
Lessor can elect, however, within thirty (30) days before expiration
of the term or within five (5) days after termination of the term, to
require Lessee to remove any alterations, additions or improvements
that Lessee has made to the Premises. If Lessor so elects, Lessee
shall restore the Premises to the condition designated by Lessor in
its election, before the last day of the term, or within thirty (30)
days after notice of election is given, whichever is later.
Alterations and additions which are not to be deemed as trade fixtures
include heating, lighting, electrical systems, air conditioning,
partitioning, electrical signs, carpeting, or any other installation
which has become an integral part of the Premises. In the event
Lessor consents to Lessee's making any alterations, improvements, or
additions, Lessee shall be responsible for the timely posting of
notices of non-responsibility on Lessor's behalf, which shall remain
posted until completion of the alterations, additions or improvements.
Lessee's failure to post notices of non-responsibility as required
hereunder shall be a breach of this Lease.
If, during the term hereof, any alteration, addition or change of any
sort through all or any portion of the Premises or of the building of
which the Premises form a part, is required by law, regulation,
ordinance or order of any public agency, Lessee, at its sole cost and
expense, shall promptly make the same.
13. ACCEPTANCE OF THE PREMISES AND COVENANT TO SURRENDER. EXCEPT AS
PROVIDED WITHIN, by entry and taking possession of the Premises
pursuant to this Lease, Lessee accepts the Premises as being in good
and sanitary order, condition and repair, and accepts the Premises in
their condition existing as of date of such entry, and Lessee further
accepts any tenant improvements to be constructed by Lessor, if any,
as being completed in accordance with the plans and specifications for
such improvements.
Lessee agrees on the last day of the term hereof, or on sooner
termination of this Lease, to surrender the Premises, together with
all alterations, additions and improvements which may have been made
in, to, or on the Premises by Lessor or Lessee, unto Lessor in good
and sanitary order, condition and repair, excepting for such wear and
tear as would be normal for the period of the Lessee's occupancy AND
HAZARDOUS MATERIALS (OTHER THAN THOSE STORED, USED, GENERATED OR
DISPOSED OF BY LESSEE IN/OR ABOUT THE PREMISES). Lessee, on or before
the end of the term or sooner termination of this Lease, shall remove
all its personal property and trade fixtures from the Premises, and
all property not so removed shall be deemed to be abandoned by Lessee.
Lessee further agrees that at the end of the term or sooner
termination of this Lease, Lessee at its sole expense, shall have the
carpets steam cleaned, the vinyl floors waxed, the concrete floors
mopped, the walls and columns painted, any damaged ceiling title
replaced, light lenses and ballasts in good order and repair, the
windows cleaned, the drapes/blinds cleaned, and any damaged doors
replaced.
8
<PAGE>
If the Premises are not surrendered at the end of the term or sooner
termination of this Lease, Lessee shall indemnify Lessor against loss
or liability resulting from delay by Lessee in so surrendering the
Premises, including, without limitation, any claims made by any
succeeding tenant founded on such delay EXCEPT THAT IF SUCH DELAY IS
CAUSED BY LESSOR, ITS AGENTS OR EMPLOYEES, THEN LESSEE SHALL NOT BE
LIABLE TO LESSOR FOR ANY SUCH COST OF DELAY.
SEE PARAGRAPH 39 OF ADDENDUM ATTACHED HERETO AND MADE PART HEREOF.
14. DEFAULT. In the event of any breach of this Lease by the Lessee, or an
abandonment of the Premises by the Lessee, the Lessor has the option
of (1) removing all persons and property from the Premises and
repossessing the Premises, in which case any of the Lessee's property
which the Lessor removes from the Premises may be stored in a public
warehouse or elsewhere at the cost of, and for the account of Lessee,
or (2) allowing the Lessee to remain in full possession and control of
the Premises. If the Lessor chooses to repossess the Premises, the
Lease will automatically terminate in accordance with the provisions
of California Civil Code, Section 1951.2. In the event of such
termination of the Lease, the Lessor may recover from the Lessee: (1)
the worth at the time of award of the unpaid rent which had been
earned at the time of termination, including interest at the maximum
rate an individual is permitted by law to charge; (2) the worth at the
time of award of the amount by which the unpaid rent which would have
been earned after termination until the time of award exceeds the
amount of such rental loss that the Lessee proves could have been
reasonably avoided, including interest at the maximum rate an
individual is permitted by law to charge; (3) the worth at the time of
award of the amount by which the unpaid rent for the balance of the
term after the time of award exceeds the amount of such rental loss
that the Lessee proves could be reasonably avoided; and (4)any other
amount necessary to compensate the Lessor for all the detriment
proximately caused by the Lessee's failure to perform his obligations
under the Lease or which, in the ordinary course of things, would be
likely to result therefrom. "The worth at the time of the award", as
used in (1) and (2)of this paragraph, is to be computed by allowing
interest at the maximum rate an individual is permitted by law to
charge. "The worth at the time of the award", as referred to in (3)
of this paragraph, is to be computed by discounting the amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time
of the award, plus one percent (1%).
If the Lessor chooses not to repossess the Premises, but allows the
Lessee to remain in full possession and control of the Premises, but
allows in accordance with provisions of California Civil Code, Section
1951.4, the Lessor may treat the Lease as being in full force and
effect, and may collect from the Lessee all rents as they become due
through the termination date of the Lease, as specified in the Lease.
For the purpose of this paragraph, the following do not constitute a
termination of Lessee's right to possession:
A. Acts of maintenance or preservation, or effect to relet the
property.
B. The appointment of a receiver on the initiative of the Lessor to
protect this interest under this Lease.
Lessee shall be liable immediately to Lessor for all costs Lessor
incurs in reletting the Premises, including, without limitation,
brokers' commission, expenses of remodeling the Premises required by
the reletting, and like costs. Reletting can be for a period shorter
or longer than the remaining term of this Lease. Lessee shall pay to
Lessor the rent due under this Lease on the dates the rent is due,
less the rent Lessor receives from this Lease unless Lessor notifies
Lessee that Lessor elects to terminate this Lease. After Lessee's
default and for as long as Lessor does not terminate Lessee's right to
possession of the Premises, if Lessee obtains Lessor's consent, Lessee
shall have the right to assign or sublet its interest in this Lease,
but Lessee shall not be released from liability. Lessor's consent to
a proposed assignment or subletting shall not be unreasonably
withheld.
9
<PAGE>
If Lessor elects to relet the Premises as provided in this Paragraph,
rent that Lessor receives from reletting shall be applied to the
payment of:
First, any indebtedness from Lessee to Lessor other than rent due
from Lessee;
Second, all cost, including for maintenance, incurred by Lessor
in reletting;
Third, rent due and unpaid under this Lease. After deducting the
payments referred to in this Paragraph, any sum remaining from
the rent Lessor receives from reletting shall be held by Lessor
and applied in payment of future rent as rent becomes due under
this Lease. In no event shall Lessee be entitled to any excess
rent received by Lessor. If, on the date rent is due under this
Lease, the rent received from reletting is less than the rent due
on that date, Lessee shall pay to Lessor, in addition to the
remaining rent due, all costs including for maintenance, Lessor
incurred in reletting that remain after applying the rent
received form the Reletting, as provided in this Paragraph.
Lessor at any time after Lessee commits a default, can cure the
default at Lessees cost. If Lessor at any time, by reason of Lessee's
default, pays any sum or does any act that requires the payment of any
sum, the sum paid by Lessor shall be due immediately from Lessee to
Lessor at the time the sum is paid, and if paid at a later date shall
bear interest at the time the sum is paid, and if paid at a later date
shall bear interest at the maximum rate an individual is permitted by
law to charge from the date the sum is paid by Lessor until Lessor is
reimbursed by Lessee. The sum, together with interest on it, shall be
additional rent.
Rent not paid when due shall bear interest at the maximum rate an
individual is permitted by law to charge from the date due until paid.
15. DESTRUCTION. In the event the Premises are destroyed in whole or in
part from any cause, Lessor may, at its option:
A. Rebuild or restore the Premises to their condition prior to the
damage or destruction; or
B. Terminate the Lease.
LESSOR SHALL give to Lessee notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild
and restore the Premises, or to terminate this Lease; IF Lessor shall
have elected to rebuild or restore them, in which event Lessor agrees,
at its expense, promptly to rebuild or restore the Premises to its
condition prior to the damage or destruction. LESSOR AGREES TO PROVIDE
LESSEE WITH ITS PROJECTED SCHEDULE OF SUCH REPAIRS WITH ITS TIMELY
WRITTEN NOTICE TO LESSEE OF ITS ELECTION TO REBUILD. IF LESSOR ELECTS
TO TERMINATE THIS LEASE, THE TERMINATION SHALL BE EFFECTIVE AS OF SUCH
DATE OF DESTRUCTION AND ANY MONIES PAID BY LESSEE SUBSEQUENT TO THE
DATE OF DESTRUCTION SHALL BE RETURNED TO LESSEE. IF LESSOR'S PROJECTED
SCHEDULE ESTABLISHES THAT THE TIME TO REBUILD IS TO BE IN EXCESS OF
ONE-HUNDRED EIGHTY (180) DAYS, OR Lessor does not complete the
rebuilding or restoration within one hundred eighty (180) days
following the date of destruction, (such period of time to be extended
for delays caused by the fault or neglect of Lessee or because of acts
of God, acts of public agencies, labor disputes, strikes, fires,
freight embargoes, rainy or stormy weather, inability to obtain
materials, supplies or fuels, acts of contractors or subcontractors,
or delay of the contractors or subcontractors due to such causes or
other contingencies beyond the control of Lessor), then Lessee shall
have the right to terminate this Lease by giving fifteen (15) days
prior written notice to Lessor. Lessor's obligation to rebuild or
restore shall not include restoration of Lessee's trade fixtures,
equipment, merchandise, or any improvements, alterations or additions
made by Lessee to the Premises.
Unless this Lease is terminated pursuant to the foregoing provisions,
this Lease shall remain in full force and effect. Lessee hereby
expressly waives the provisions of Section 1932, Subdivision 2, and
Section 1933, Subdivision 4, of the California Civil Code.
10
<PAGE>
In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than 33-1/3 percent of
the replacement cost thereof, Lessor may elect to terminate this
Lease, whether the Premises be injured or not.
LESSOR AND LESSEE SHALL EACH HAVE THE RIGHTS TO TERMINATE THE LEASE IF
(I) ANY DAMAGE TO THE PREMISES OCCURS DURING THE LAST YEAR OF THE TERM
OF THE LEASE AND (II) IT IS ESTIMATED BY LESSOR THAT NECESSARY REPAIRS
WILL NOT BE COMPLETED WITHIN SIXTY (60) DAYS FROM THE DATE OF SUCH
DAMAGE, UNLESS LESSEE HAS AN OPTION TO EXTEND THE TERM OF THE LEASE
AND LESSEE EXERCISES SUCH OPTION WITHIN THIRTY (30) DAYS OF THE DATE
OF SUCH DAMAGE.
16. CONDEMNATION. If any part of the Premises shall be taken for any
public or quasi-public use, under any statute or by right of eminent
domain, or private purchase in lieu thereof, and a part thereof
remains, which is susceptible of occupation hereunder, this Lease
shall, as to the part so taken, terminate as of the date title shall
vest in the condemnor or purchaser, and the rent payable hereunder
shall be adjusted so that the Lessee shall be required to pay for the
remainder of the term only such portion of such rent as the value of
the part remaining after such taking bears to the value of the entire
Premises prior to such taking. Lessor AND LESSEE shall have the
option to terminate this Lease in the event that such taking causes a
reduction in rent payable hereunder by fifty percent (50%) or more.
If all of the Premises or such part thereof be taken so that there
does not remain a portion susceptible for occupation hereunder, as
reasonably necessary for Lessee's conduct of its business as
contemplated in this Lease, this Lease shall thereupon terminate. if a
part or all of the Premises be taken, all compensation awarded upon
such taking shall go to the Lessor, and the Lessee shall have no claim
thereto, and the Lessee hereby irrevocably assigns and transfers to
the Lessor any right to compensation or damages to which the Lessee
may become entitled during the term hereof by reason of the purchase
or condemnation of all or a part of the Premises. Each party waives
the provisions of Code of Civil Procedure, Section 1265.130, allowing
either party to petition the superior court to terminate this Lease in
the event of a partial taking of the Premises.
17. FREE FROM LIENS. Lessee shall (1) pay for all labor and services
performed for materials used by or furnished to Lessee, or any
contractor employed by Lessee with respect to the Premises, and (2)
indemnify, defend and hold Lessor and the Premises harmless and free
from any liens, claims, demands, encumbrances, or judgments created or
suffered by reason of any labor or services performed for materials
used by or furnished to Lessee or any contractor employed by Lessee
with respect to the Premises, and (3) give notice to Lessor in writing
five (5) days prior to employing any laborer or contractor to perform
services related, or receiving materials for use upon the Premises,
and (4) shall post, on behalf of Lessor, a notice of non-responsibility
in accordance with the statutory requirements of California Civil Code,
Section 3094, or any amendment thereof. In the event an improvement
bond with a public agency in connection with the above is required to
be posted, Lessee agrees to include Lessor as an additional obligee.
IN NO EVENT SHALL LESSEE BE RESPONSIBLE FOR INDEMNIFYING LESSOR, OR
HOLDING LESSOR FREE FROM LIENS FOR WORK CONTRACTED BY LESSOR FOR THE
INITIAL BUILD-OUT AS CONTEMPLATED IN EXHIBIT "B" HEREOF.
18. COMPLIANCE WITH LAWS. Lessee shall, at its own cost, comply with and
observe all requirements of all municipal, county, state and federal
authority now in force, or which may hereafter be in force, pertaining
to the use and occupancy of the Premises. SHOULD ANY MODIFICATIONS TO
THE PREMISES BE REQUIRED BECAUSE OF LESSEE'S USE OF THE SAME, LESSEE
SHALL BE RESPONSIBLE FOR THE COST OF SUCH MODIFICATIONS. IN NO EVENT
SHALL LESSEE BE REQUIRED TO PAY ANY PORTION OF THE COST OF COMPLIANCE
WITH LAWS OR CODES STRICTLY RELATING TO BUILDINGS.
11
<PAGE>
19. SUBORDINATION. Lessee agrees that this Lease shall, at the option of
Lessor, be subjected and subordinated to any mortgage, deed of trust,
or other instrument of security, which has been or shall be placed on
the land and building, or land or building of which the Premises form
a part, and this subordination is hereby made effective without any
further act of Lessee or Lessor PROVIDED THE HOLDER OF ANY SUCH
MORTGAGE, DEED OF TRUST, OR OTHER INSTRUMENT OF SECURITY, PROVIDES
LESSEE WITH A NONDISTURBANCE OF ATTORNMENT AGREEMENT IN A FORM
REASONABLY SATISFACTORY TO LESSEE. The Lessee shall, at any time
hereinafter, on demand, execute any instruments, releases or other
documents that may be required by a mortgagee, mortgagor, or trustor,
or beneficiary under any deed of trust, for the purpose of subjecting
or subordinating this Lease to the lien of any such mortgage, deed of
trust, or other instrument of security PROVIDED THE HOLDER OF ANY SUCH
MORTGAGE, DEED OF TRUST, OR OTHER INSTRUMENT OF SECURITY, PROVIDES
LESSEE WITH A NON-DISTURBANCE AND ATTORNMENT AGREEMENT IN A FORM
REASONABLY SATISFACTORY TO LESSEE. IF LESSEE REQUESTS A NON-
DISTURBANCE AND ATTORNMENT AGREEMENT ("AGREEMENT") FOR ANY MORTGAGE
HOLDER OF THE SUBJECT PROPERTY, LESSOR AGREES TO USE ITS BEST EFFORTS
TO HAVE SAID MORTGAGE HOLDER PROVIDE LESSEE WITH SUCH AGREEMENT IN
INDUSTRY STANDARD FORM STATING, AMONG OTHER THINGS, THAT SHOULD LESSEE
NOT BE IN DEFAULT UNDER THIS LEASE, LESSEE WILL BE ENTITLED TO ITS
QUIET ENJOYMENT OF LEASED PREMISES. SEE PARAGRAPH 40 OF ADDENDUM
ATTACHED HERETO AND MADE PART HEREOF.
20. ABANDONMENT. Lessee shall not vacate nor abandon the Premises at any
time during the term; and if Lessee shall abandon, vacate or surrender
said Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Lessee and left on the Premises shall
be deemed to be abandoned, at the option of Lessor, except such
property as maybe mortgaged to Lessor; provided, however, that Lessee
shall not be deemed to have abandoned or vacated the Premises so long
as Lessee continues to pay all rents as and when due, and otherwise
performs pursuant to the terms and conditions of this Lease.
21. ASSIGNMENT AND SUBLETTING.
A. LESSOR'S CONSENT REQUIRED. Lessee shall not, either voluntarily
or by operation of law, assign, sell, encumber, pledge or
otherwise transfer all or any part of Lessee's leasehold estate
hereunder or permit the Premises to be occupied by anyone other
than Lessee or Lessee's employees', or sublet the Premises or any
portion thereof, without Lessor's prior written consent in each
instance, which consent may not unreasonably be withheld by
Lessor. In exercising its reasonable discretion, Lessor may
consider all commercially relevant factors involved in the
leasing, subleasing or assignment of the space, including, but
not limited to, the following: (i) the credit worthiness and
financial stability of the prospective assignee or sublessee;
(ii) the projected gross sales of such assignee or sublesee;
(iii) the compatibility of the prospective assignee or sublessee
with Lessor, its property manager, and other tenants in the
Complex; (iv) the references from prior landlords of such
prospective sublessee or assignee; (v) the past history of such
sublessee or assignee with respect to involvement in litigation
and bankruptcy proceedings; (vi) whether the proposed use of the
Premises by the prospective sublessee or assignee falls within
the use permitted under Paragraph 6; (vii) whether the proposed
use is suitable and in keeping with the ambience and tone of the
Complex; and (viii) the impact of said sublessee or assignee and
the proposed use of the Premises on pedestrian and vehicular
traffic and parking facilities. The presence of one negative
factor enumerated above shall be deemed reasonable justification
for Lessor's withholding consent. Lessee shall provide Lessor
with prior notice of any proposed assignment or sublease as
provided in Paragraph 21B. Consent by Lessor to one or more
assignments of this lease or to one or more subletting of the
Premises shall not operate to exhaust Lessor's rights under this
Paragraph. The voluntary or other surrender of this Lease by
Lessee or a mutual cancellation hereof shall not work a merger,
and shall, at the option of Lessor, terminate all or any existing
subleases or subtenancies or shall
12
<PAGE>
operate as an assignment to Lessor of such subleases or
subtenancies. If Lessee is a corporation, or is an
unincorporated association or partnership, the transfer,
assignment or hypothecation of any stock or interest in such
corporation, association or partnership in the aggregate in
excess of FORTY-NINE percent (49%) shall be deemed an assignment
within the meaning and provisions of this Article, EXCEPT THAT
LESSEE MAY TRANSFER ITS STOCK TO AN AFFILIATED CORPORATION
WITHOUT THE CONSENT OF LESSOR. LESSEE SHALL PROVIDE LESSOR WITH
WRITTEN NOTICE IN SUCH EVENT OF TRANSFER TO SAID AFFILIATED
CORPORATION. LESSEE MAY, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT,
BUT WITH WRITTEN NOTICE, SUBLET THE PREMISES AND/OR ASSIGN THE
LEASE TO (I) ANY AFFILIATE OF LESSEE; (II) A SUCCESSOR
CORPORATION RELATED TO LESSEE BY MERGER, CONSOLIDATION,
REORGANIZATION OR GOVERNMENT ACTION: AND/OR (III) A PURCHASER OF
SUBSTANTIALLY ALL OF THE ASSETS OF LESSEE; ANY SUCH TRANSFER
BEING REFERRED TO HEREIN AS AN "AFFILIATE TRANSFER" SO LONG AS
SUCH AFFILIATE, SUCCESSOR OR PURCHASER AGREES IN WRITING TO
GUARANTEE THE PERFORMANCE OF LESSEE UNDER THIS LEASE. In
addition to the rent and all monetary sums normally payable to
Lessor by Lessee hereunder, Lessee agrees to further pay to
Lessor, immediately upon receipt by Lessee, and as additional
rent, one hundred percent (100%) of any monetary consideration
which Lessee would be entitled to receive under any sublease or
assignment permitted herein. LESSEE SHALL BE ENTITLED TO RECOVER
ITS DIRECT THIRD-PARTY DOCUMENTED EXPENSES OF LEASE COMMISSIONS,
ADVERTISING, TENANT IMPROVEMENTS AND LEGAL FEES (LEGAL FEES NOT
TO EXCEED $5,000) PRIOR TO REMITTING TO LESSOR ALL RENT IN EXCESS
OF THE RENT AND OTHER SUMS DUE UNDER THIS LEASE.
B. NOTICE TO LESSOR. If Lessee desires at any time to assign this
Lease or to sublet the Premises or any portion thereof, it shall
first notify Lessor of its desire to do so and shall submit in
writing to Lessor (i) the name of the proposed sublessee or
assignee; (ii) the nature of the proposed sublessee's or
assignee's business to be carried on in the Premises; (iii) the
terms and provisions of the proposed sublease or assignment; and
(iv) such reasonable financial information concerning the
proposed sublessee or assignee as Lessor may need to make a
prudent and considered decision.
C. LESSEE NOT RELEASED. No subletting or assignment, even with the
written consent of Lessor, shall relieve Lessee of its obligation
to pay the rent and perform all of the other obligation to be
performed by Lessee hereunder. Lessee shall indemnify and hold
Lessor harmless from any and all claims, damages, liability and
expenses, including reasonably attorneys' fees and costs arising
out of any claims by brokers or others for commission or finder's
fees with respect to any subletting or assignment by Lessee. The
acceptance of rent by Lessor from any other person shall not be
deemed to be a waiver by Lessor from any provision of this Lease
or to be a consent to any assignment or subletting. Lessee
immediately and irrevocably assigns to Lessor, as security for
Lessee's obligations under this Lease, all rent from any
subletting, and Lessor, as assignee and attorney in fact for
Lessee or receiver for Lessee appointed on Lessor's application
may collect such rent and apply it toward Lessee's obligations
under this Lease, except that, until the occurrence of any act of
default by Lessee, Lessee shall have the right to collect such
rent.
D. INVOLUNTARY ASSIGNMENT. No interest of Lessee in this Lease
shall be assignable by operation of law. Without liability
limiting the foregoing, each of the following acts shall be
considered an involuntary assignment:
i. Transfer of this Lease by testacy or intestacy;
ii. If Lessee is or becomes bankrupt or insolvent, makes an
assignment for the benefit or creditors, or institutes a
proceeding under the Bankruptcy Act in which Lessee is the
bankrupt; or, if Lessee is a partnership or consists of more
than one person or entity; if any general partner of the
partnership or other person or entity is or becomes bankrupt
or insolvent, or makes an assignment for the benefit of
creditors;
13
<PAGE>
iii. The appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days, or
iv. The attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where seizure is not
discharged within thirty (30) days.
An involuntary assignment shall constitute a default by Lessee and
Lessor shall have the right to elect to terminate this Lease, in which
case this Lease shall not be treated as an asset of Lessee.
E. LESSEE TO REIMBURSE FOR EXPENSES. Lessee agrees to reimburse Lessor
upon demand for Lessor's reasonable costs and attorney's fees (without
limitation) incurred in conjunction with the processing, investigation
and documentation of any requested assignment, subletting, transfer,
involuntary assignment, change of ownership or hypothecation of this
Lease or Lessee's interest in and to the Premises, regardless of
whether any request actually results in a permitted assignment,
sublease, or other transfer.
22. PARKING CHARGES. Lessee agrees to pay upon demand, based on its percent of
occupancy of the entire Premises, its pro-rata share of any parking
charges, surcharges, or any other cost hereafter levied or assessed by
local, state or federal governmental agencies in connection with the use of
the parking facilities serving the Premises, including, without limitation,
parking surcharge imposed by or under the authority of the Federal
Environmental Protection Agency.
23. INSOLVENCY OR BANKRUPTCY. Either (a) the appointment of a receiver to take
possession of all or substantially all of the assets of Lessee, or (b) a
general assignment by Lessee for the benefit of creditors. Upon the
happening of any such event, this Lease shall terminate ten (10) days after
written notice of termination from Lessor to Lessee. This section is to be
applied consistent with applicable state and federal law in effect at the
time such event occurs.
24. LESSOR LOAN OR SALE. Lessee agrees, promptly following request by Lessor,
to (a) execute and deliver to Lessor any documents, including estoppel
certificates presented to Lessee by Lessor, (i) certifying that this Lease
is unmodified and in full force and effect, or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified,
is in full force and effect and the date to which the rent and other
charges are paid in advance, if any, and (ii) acknowledging that there are
not, to Lessee knowledge, any uncured defaults on the part of Lessor
hereunder, and (iii) evidencing the status of the Lease as may be required
either by a lender making a loan to Lessor, to be secured by deed of trust
or mortgage covering the Premises, or a purchase of the Premises from
Lessor, and (b) to deliver to Lessor the current financial statements of
Lessee with an option of a certified public accountant, including a balance
sheet and profit and loss statement, for the current fiscal year and the
two immediately prior fiscal years, all prepared in accordance with general
accepted accounting principles consistently applied. Lessee's failure to
deliver an estoppel certificate within FIVE (5) BUSINESS days following
such request shall constitute a default under this Lease and shall be
conclusive upon Lessee that this Lease is in full force and effect and has
not been modified except as may be represented by Lessor. If Lessee fails
to deliver the estoppel certificate within the FIVE (5) BUSINESS days,
Lessee irrevocably constitutes and appoints Lessor as its special attorney-
in-fact to execute and deliver the certificate to any third party.
25. SURRENDER OF LEASE. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger nor
relieve Lessee of any of Lessee's obligations under this Lease, and shall,
at the option of Lessor, terminate all or any existing subleases or
subtenancies, or may, at the option of Lessor, operate as an assignment to
him or any or all such subleases or subtenancies.
14
<PAGE>
26. ATTORNEYS' FEES. If, for any reason, any suit be initiated to enforce any
provision of this Lease, the prevailing party shall be entitled to legal
costs, expert witness expenses and reasonable attorneys' fees as fixed by
the court.
27. NOTICES. All notices to be given to Lessee may be given in writing,
personally or by depositing the same in the United States mail, postage
prepaid, and addressed to Lessee at the said Premises, whether or not
Lessee has departed from, abandoned or vacated the Premises. Any notice or
document required or permitted by this Lease to be given Lessor shall be
addressed to Lessor at the address set forth below, or at such other
address as it may have theretofore specified by notice delivered in
accordance herewith:
Lessor: WDT-SHOREWAY
900 Welch Road, Suite 10
Post Office Box 10098
Palo Alto, California 94303-0854
Lessee: DOMESTIC AUTOMATION COMPANY
125 SHOREWAY ROAD. SUITE 1000
SAN CARLOS, CALIFORNIA
28. TRANSFER OF SECURITY. If any security be given by Lessee to secure the
faithful performance of all or any of the covenants of this Lease on the
part of Lessee, Lessor may transfer and/or deliver the security, as such,
to the purchase of the reversion, in the event that the reversion be sold,
and thereupon Lessor shall be discharged from any further liability in
reference thereto, upon the assumption IN WRITING by such transferee of
Lessor's obligations under this Lease.
29. WAIVER. The waiver by Lessor or Lessee of any breach of any term, covenant
or condition herein contained shall not be deemed to be a waiver of such
term, covenant, or condition herein contained. The subsequent acceptance
of rent hereunder by Lessor shall not be deemed to be a waiver of any
preceding breach by Lessee of any term, covenant, or condition of this
Lease, other than the failure of Lessee to pay the particular rental so
accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.
30. HOLDING OVER. Any holding over after the expiration of the term or any
extension thereof, with the consent of Lessor, shall be construed to be a
tenancy from month-to-month, at a rental of one and one-half times the
previous month's rental rate per month, and shall otherwise be on the terms
and conditions herein specified, so far as applicable.
32. LIMITATION ON LESSOR'S LIABILITY. If Lessor is in default of this Lease,
and as a consequence Lessee recovers a money judgement against Lessor, the
judgement shall be satisfied only out of the proceeds of sale received on
execution of the judgement and levy against the right, title, and interest
of Lessor in the Premises, or in the building, other improvements, and land
of which the Premises are part, and out of rent or other income from such
real property receivable by Lessor or out of the consideration received by
Lessor from the sale or other disposition of all or any part of Lessor's
right, title, and interest in the Premises or in the building, other
improvements, and land of which the Premises are part. Neither Lessor nor
any of the partners comprising the partnership or officers of the
corporation designated as Lessor shall be personally liable for any
deficiency.
15
<PAGE>
33. MISCELLANEOUS.
A. Time is of the essence of this Lease, and of each and all of its
provisions.
B. The term "Building" shall mean the building in which the Premises arc
situated.
C. If the Building is leased to more than one tenant, then each such
tenant, its agents, officers, employees and invitees, shall have the
non-exclusive right (in conjunction with the use of the part of the
building leased to such tenant) to make reasonable use of any
driveways, sidewalks and parking area located on the parcel of land on
which the Building is situated, except such parking area as may from
time to time be leased for exclusive use by other tenant(s).
D. Lessee's such reasonable use of parking area shall not exceed that
percent of the total parking areas which is equal to the ratio which
floor space of the Premises bears to floor space of the Building.*
E. The term "assign" shall include the term "transfer".
F. The invalidity or unenforceability of any provision of this Lease
shall not affect the validity or enforceability of the remainder of
this Lease.
G. All parties hereto have equally participated in the preparation of
this Lease.
H. The headings and title to the paragraphs of this Lease are not a part
of this Lease and shall have no effect upon the construction or
interpretation of any part thereof.
I. Lessor has made no representation(s) whatsoever to Lessee (express or
implied) except as may be expressly stated in writing in this Lease
instrument.
J. This instrument contains all of the agreement and conditions made
between the parties hereto, and may not be modified orally or in any
other manner than by agreement in writing, signed by all of the
parties hereto or their respective successors in interest.
K. It is understood and agreed that the remedies herein given to Lessor
shall be cumulative, and the exercise of any open remedy by Lessor
shall not be to the exclusion of any other remedy.
L. The covenants and conditions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors,
executors, administrators and assigns of all the parties hereto; and
all of the parties hereto shall jointly and severally be liable
hereunder.
M. This Lease has been negotiated by the parties hereto and the language
hereof shall not be construed for or against either party.
N. All exhibits to which reference is made are deemed incorporated into
this Lease, whether or not actually attached.
0. All provisions, whether covenants or conditions, on the part of Lessee
shall be deemed to be both covenants and conditions.
* Lessee shall have the use of 76 parking spaces as shown on Exhibit C.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the date
first above-written
LESSOR: LESSEE:
WDT-SHOREWAY DOMESTIC AUTOMATION COMPANY
By: /S/ [signature] By: /S/ [signature]
---------------------------- ---------------------------
GENERAL PARTNER
16
<PAGE>
WDT SHOREWAY
WDT Development Company
San Carlos,California
[site plan graphic omitted]
<PAGE>
EXHIBIT "B"
Lessor shall provide a building shell which shall include all on-and off-site
work, the structure, windows, two sliding glass door systems and the main
transformer set in place with 208/480 V 3-phase power.
In addition to the building shell, Lessor hereby grants to Lessee an interior
improvement allowance for real property improvements to the demised premises to
be made by Lessor at Lessor's expense. Said cost of such real property shall
include all costs to construct the same as well as all associated architectural,
structural, Title XXIV consultant fees, developer's overhead, city and other
governmental fees and inspection service fees. Said allowance shall be equal to
$561,600 ($25.00 psf x 22,464 sf). Lessor agrees to provide up to an additional
$112,320 ($5.00 psf x 22,464 sf) for purposes of real property improvements. In
the event the actual cost of such real property improvements is less than or
more than $561,600, the rent shall be adjusted by 2.25 cents for every $1.00
over or under $561,600; in no event, however, shall the adjustment exceed 11.25
cents ($5.00 psf x 2.25 cents). For example, if the actual cost is $606,528
($27.00 psf) the monthly rent shall be increased by $1,011 (4.5 cents x 22,464
sf). Said real property interior improvements shall not include "Herman
Miller" type partitions.
4/7/89
<PAGE>
ADDENDUM TO THAT CERTAIN LEASE AGREEMENT
BY AND BETWEEN DOMESTIC AUTOMATION COMPANY ("LESSEE")
AND WDT-SHOREWAY ("LESSOR")
DATED APRIL 6, 1989
34. COMMENCEMENT OF LEASE TERM. The term of this Lease shall commence the
latter of (i) July 1, 1989, or (ii) substantial completion of the interior
improvements as outlined in Exhibit "B". Substantial completion shall mean
Lessor's material completion of the improvements so that Lessee may occupy
the Premises without material interference from Lessor's contractors.
However, should the Lease and final plans be executed after April 29, 1989,
or should Lessee, its employees, officers, contractors, agents or suppliers
interfere with Lessor or its contractors in constructing the improvements
as per Exhibit "B", then this Lease shall commence July 1, 1989.
In the event Lessor is unable to complete the interior improvements as per
Exhibit "B" by September 30, 1989, (acts of God, strikes, war or delays
beyond Lessor's control excepted), Lessee shall have the right, by giving
Lessor ten (10) days advance written notice, to terminate this Lease and
all monies paid pursuant to the Lease by Lessee to Lessor shall be returned
to Lessee.
Within twenty-five (25) days from commencement of the term, Lessee shall
deliver to Lessor a written "punch list" defining those items or areas
requiring repair. Lessor agrees to diligently prosecute such repair as
soon as reasonably possible after receipt of Lessee's written "punch list".
35. RENT IN OPTION TO EXTEND TERM. Base rent shall be calculated as follows
for the extended terms: Lessee shall pay to Lessor a sum of ninety-five
percent (95%) of the Fair Market Rent Value of the Premises at the time the
extended term shall commence using surrounding, comparable space between
Menlo Park (south) to San Mateo/Foster City (north) to determine said Fair
Market Rental Value. The parties shall have fifteen (15) days to make and
agree on said base rental.
If the parties are unable to agree on the minimum monthly base rent for the
extended term within said fifteen (15) day period, then each party, within
ten (10) days and by giving notice to the other party, shall appoint a
licensed real estate appraiser (MAI) with at least five (5) years' full-
time commercial appraisal experience in the area in which the Premises are
located to appraise and set the minimum monthly rent for the Market Rental
Value formula specific in the above paragraph. If a party does not appoint
an appraiser within ten (10) days after the other party has given notice of
the name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set the minimum monthly rent for the extended term. If
the two appraisers are appointed by the parties as stated in this paragraph,
they shall meet promptly and attempt to set the minimum monthly rent for the
extended term. If they are unable to agree within twenty (20) days after the
second appraiser has been appointed, they shall elect a third appraiser
meeting the qualifications stated in this paragraph within ten (10) days
after the last day the two appraisers are given to set the minimum monthly
rent. The cost of said appraisers shall be borne by Lessor and Lessee as
each appointed and divide equally the cost of the third appraiser.
Within five (5) days after the selection of the third appraiser, a majority
of the appraisers shall set the minimum monthly rent for the extended term.
If a majority of the appraisers are unable to set the minimum monthly rent
within the stipulated period of time, the three (3) appraisers shall be
added together and their total divided by three (3); the resulting quotient
shall be the minimum monthly rent for the Premises during the extended
term. Said minimum monthly rental as set by the appraisers shall be
binding upon the parties hereto and in no event shall the rent be less than
the rent paid in the last month prior to such extended term. Lessee shall
have no other right to extend the term beyond the two (2) extended terms
herein granted.
1
<PAGE>
36. HAZARDOUS MATERIALS/USE OF PREMISES:
A. Lessee shall have no obligation to clean up, or to comply with any law
regarding, or to reimburse, indemnify, defend, release or hold Lessor
harmless with respect to, any hazardous materials or wastes discovered
on the Premises which were not introduced into the Premises, or
stored, disposed of or transported in or on the Premises, by Lessee
its employees, agents or contractors.
B. Lessor hereby agrees to indemnify and hold Lessee harmless of and from
any and all liability, claims, damages, losses or causes of action
whatsoever by reason of any hazardous materials in, on or about the
Premises prior to the Commencement Date.
C. If the Premises should become not reasonably suitable for Lessee's use
for the purposes specified in Paragraph 6 of the Lease as a
consequence of cessation of utilities (except for the actions or
inactions of Lessee) and such cessation of utilities persist for three
(3) business days after Lessor's receipt of written notice from
Lessee), or the presence of hazardous or toxic materials or wastes in
or about the Premises, the Building or the Project, so long as such
hazardous materials were not introduced into the Premises, the
Building or the Project by Tenant, its employees, agents, contractors
or invitees (collectively, an "Interfering Event"), then Lessee shall
be entitled to an abatement of rent to the extent that the Interfering
Event interferes with or limits such use of the Premises by Tenant.
If the Interfering Event cannot be corrected, or if the damage
resulting therefrom cannot be repaired, so that the Premises will be
reasonably suitable for Tenant's intended use within One Hundred
Twenty (120) days following the occurrence or commencement of such
Interfering Event, then Lessee shall have the right to terminate the
Lease, by giving written notice to Landlord of its exercise of such
right at any time after the expiration of said one hundred twenty
(120) day period from such occurrence of such Interfering Event.
37. EXPENSES.
A. In no event shall common area expenses include: (i) ground lease
payments, (ii) mortgage payments, (iii) costs of capital
improvements except as provided in the Lease, or (iv)
depreciation of building service equipment.
B. Notwithstanding anything to the contrary contained in the Lease,
in no event shall Lessee have any obligation to pay directly, or
to reimburse Lessor for, all or any portion of any of the
following claims, loesses, fees, charges, costs and expenses
(collectively, "Costs"):
i. Costs occasioned by the act or omission, or any violation of
any applicable law, by Lessor or any other occupant of the
Building, or their respective agents, employees or
contractors;
ii. Cost occasioned by fire, windstorm or other casualty, or by
the exercise of the power of eminent domain;
iii. Costs of correcting any construction defect in the Premises,
the Building, or because of any failure on the part of
Lessor or any other third party to comply with any or
underwriter's requirement, or with any applicable rule,
regulation, statute, ordinance, law or code affecting the
Premises, the Building as of the Commencement Date;
iv. Costs incurred to investigate the presence or suspected or
alleged presence of any hazardous or toxic materials or
wastes, or to respond to any claim of any contamination or
damage occurring because of any hazardous or toxic materials
or wastes, costs to remove any such materials or wastes from
the Building, and any judgments or other Costs incurred by
Lessor in connection with any exposure to or release of any
such materials or wastes, except to the extend cause by
Lessee's use, storage, generation or disposal of any such
material or waste.
2
<PAGE>
38. REPAIRS AND MAINTENANCE. Lessee shall not be responsible for the
performance or any cost of repair and maintenance: (i) necessitated by the
acts or omissions of Lessor or its agents, employees or contractors; (ii)
necessitated by the acts of other Lessees in the Building or the Project or
their respective agents, employees or contractors; (iii) necessitated by
the occurrence of any act of God or any insurable casualty or the exercise
of the power of eminent domain; (iv) because of construction defects in the
Premises, the Tenant Improvements, or the Building; (v) required as a
consequence of any defect, whether latent or not, in the construction of
the Premises, or the Building; (vi) arising form a failure to materially
construct the Premises, the Tenant Improvements, or the Building in
accordance with all law and any plans approved by Lessee; (vii) for which
Lessor has a right of reimbursement from others; or (viii) which would
constitute a capital expense, improvement or replacement under generally
accepted accounting principles and all of the preceding shall be performed
by Lessor, at its sole cost and expense, except as otherwise permitted or
provided in the Lease.
39. EARLY ENTRY/ACCEPTANCE OF PREMISES.
A. Lessee and it agents and contractors shall be permitted to enter the
Premises prior to the Commencement Date for the purpose of installing
Lessee's trade fixtures and equipment, telephone equipment, security
systems and cabling for computers. Lessee shall also have access to
the Premises for the purpose of moving in (but not operating)
equipment that has been delivered for Lessee's use in the Premises,
which equipment may be moved into a stored in an area within the
Premise, designated by Lessor, in such a manner so as not to interfere
with Lessor's construction of the Tenant Improvements. In addition,
Lessee or its agents may enter the Premises at any reasonable time
prior to the Commencement Date for the purpose of inspecting the
course of construction of the Tenant Improvements. Any entry or
installation work or equipment, by Lessee and its agents in the
Premises pursuant to this paragraph shall (i) be undertaken at
Lessee's sole risk, (ii) not interfere with or delay Lessor's work in
the Premises, and (iii) not be deemed occupancy or possession of the
Premises for purposes of the Lease.
B. Acceptance of Premises:
i. Notwithstanding anything herein or in the Lease to the contrary,
Lessee's acceptance of the Premises (whether in writing or
otherwise) shall not be deemed a waiver of Lessee's right to have
all defects in materials, labor, design, construction and
equipment repaired at Lessor's sole cost and expense.
ii. Lessee shall promptly notify Lessor in writing of any defect in
construction or in the operation of any equipment (but not
Lessee's trade fixtures or equipment installed in the Premises by
Lessee at it sole expense) upon becoming aware of such defect,
and Lessor shall promptly thereafter commence the cure of such
defect and prosecute such cure to completion with due diligence
at Lessor's sole cost and expense.
iii. Effective upon completion of the Premises and all work to be
performed by Landlord therein, Landlord does hereby warrant that
the construction of the Premises any Tenant Improvements was
performed in material accordance with the plans therefor in a
good and workmanlike manner, and that all materials and equipment
furnished materially conform to said plans and are new and
otherwise of good quality.
3
<PAGE>
40. SUBORDINATION. So long as Lessee is not in default under the Lease, Lessee
shall have the right of quiet enjoyment of the Premises, subject to the
terms of the Lease, without interruption or hindrance by Landlord or any
other person claiming through or by Lessor. Upon written request from
Lessee, Lessor shall use its best efforts to obtain a written agreement
from each holder of senior lien or senior security instrument (whether now
or hereafter existing) affecting the Premises, recognizing Lessee's rights
under the Lease and agreeing not to disturb Lessee's possession of the
Premises under the Lease so long as Lessee is not in default hereunder.
41. RIGHT OF FIRST REFUSAL TO LEASE ADDITIONAL SPACE.
A. Lessor hereby grants to Lessee a right of first refusal (the "Right of
First Refusal") to lease any space which becomes available in either
of the buildings located at 75 and 125 Shoreway Road, San Carlos,
California (the "Adjacent Space"). If Lessor proposes to lease, or
grant a right of possession in, the Adjacent Space, or any portion
thereof, to a third party, Lessor may do so only after first offering
to lease the Adjacent space, or such portion thereof as Lessor
proposes to lease to the third party, (the "Offered Adjacent Space")
to Lessee o the terms and conditions set forth in this paragraph.
B. TERM OF FIRST RIGHT OF REFUSAL. The term of this Right of First
Refusal shall commence upon execution of the Lease and shall continue
until the expiration or earlier termination of the lease considering
any renewal periods.
C. NOTICE OF INTENT TO LEASE. Landlord shall give written notice of its
intent to lease, or grant a right of possession in, the Offered
Adjacent Space to Lessee ("Lessor's Notice"). Lessor's Notice shall be
delivered to Lessee in the manner specified in paragraph 27 of the
Lease. Lessor's Notice shall set forth the identity of the
prospective lessee, the form of lease Lessor intends to use (in the
event it is different than the form used herein), and the following
basic business terms upon which Landlord is willing to lease the
Offered Adjacent Space to the prospective Lessee (collectively the
"Basic Business Terms"): (i) the description of the offered Adjacent
Space; (ii) the lease term; (iii) the interior improvements Landlord
is willing to construct or that it will require to be constructed;
(iv) the method of payment for such improvements; (v) the base rent
for the initial term of the lease and the formula, if any, to be used
to determine such rent (including, if applicable, Lessee's share of
taxes, assessments, operating expenses, insurance costs, and the
like); (vi) any option(s) to extend the lease term and the rent to be
charged during such extension period; (vii) any option(s) to lease
other space in the project and the rent and other terms of the lease
to be consummated upon exercise of such option.
D. EXERCISE OF FIRST RIGHT OF REFUSAL. Lessee may elect to exercise its
First right of Refusal by giving Lessor written notice of such
election on/or before the third (3rd) business day following actual
receipt of Lessor's Notice. Lessee's failure to give written notice
of an election to exercise tits Right of First Refusal within the
three (3) business day period shall be deemed a waiver of its Right of
First Refusal with respect to the particular lease transaction and the
proposed Lessee described in Lessor's Notice. Lessee's waiver of its
Right of First Refusal with respect to any particular proposed lease
transaction, shall not be deemed a waiver of Lessee's right of First
Refusal with respect to any other proposed lease transaction
concerning the Adjacent Space or any other proposed lease transaction
concerning the Offered Adjacent Space.
E. TERMS OF LEASE. Upon Lessee's exercise of the Right of First Refusal,
Lessor shall lease to Lessee and Lessee shall lease from Lessor the
Offered Adjacent Space on the Basic Business Terms stated in Lessor's
Notice. The parties also shall execute a written lease in the same
form as the Lease, modified to incorporate the Basic Business Terms
set forth in Lessor's Notice and to eliminate any terms of the Leases
that are inconsistent with the Basic Business Terms.
4
<PAGE>
F. LESSOR'S RIGHT TO LEASE. If Lessee does not indicate in writing its
election to lease the Offered Adjacent Space in accordance with
subparagraph D within the allowed time period, Lessor thereafter shall
have the right to lease the Offered Adjacent Space to the prospective
Lessee identified in Lessor's Notice; provided (i) the lease is
materially ("materially" shall man that the rent is at least ninety-
five percent (95%) of the rent or tenant improvements allowance so
stated in the written notice to Lessor) consummated on the same Basic
Business Terms set forth in Lessor's Notice and on such other terms as
are contained in the form of lease included with Lessor's Notice
consummated on/or before the ninety (90) days following delivery of
Lessor's Notice. After expiration of the ninety (90) day period, any
lease transaction shall be deemed a new determination by Lessor to
lease the Offered Adjacent Space and no interest in the Offered
Adjacent Space may be consummated, unless Lessee is first offered the
right to lease such space in accordance with the provisions of this
Right of First Refusal.
42. BROKERAGE COMMISSION. Lessor expressly acknowledges and agrees that it
shall be solely liable for the payment of any and all brokers' commissions
and/or finder's fees payable in connection with the execution of the Lease
(including but not limited to any commission or fee due as set forth in any
addendum attached to the Lease with regard thereto), and Lessee shall have
no liability or obligation therefor. Lessee hereby represents and warrants
that it has not dealt with any other brokerage firm other than Cornish &
Carey Commercial.
43. SIGNAGE. Lessee shall be entitled to place signage on the existing
monument sign as well as on-building provided that Lessor shall grant its
approval, which approval shall not be unreasonably withheld and further,
provided that the Lessee has received all permits and approvals from all
governmental agencies. Lessee shall, upon the termination or earlier
expiration of this Lease, remove all such signage and restore the affected
area.
44. Lessor shall deliver the demised premises to Lessee with an interior
ambient noise level in lessee's lobby of that approximately equal to the
noise level in the lobby of Fox & Carskadon (75 Shoreway, Suite 1000).
Accepted and Agreed: Accepted and Agreed:
LESSEE LESSOR.
By: /S/ [signature unreadable] By: /S/ [signature unreadable]
--------------------------- ---------------------------
Authorized Officer General Partner
DOMESTIC AUTOMATION WDT-SHOREWAY
Date: 5/4/89 Date: 4/28/1989
------- --------
5
<PAGE>
ADDENDUM II
TO THAT CERTAIN LEASE DATED APRIL 6, 1989 BY AND BETWEEN WDT-SHOREWAY, LESSOR,
AND DOMESTIC AUTOMATION COMPANY, LESSEE.
To that certain Lease, the following wording is added:
45. It is Lessee's desire to occupy plus or minus 22,272 additional square feet
of space located at the rear of 75 Shoreway Road, San Carlos, California
and plus or minus 6,150 additional square feet of space directly contiguous
to Lessee's current space at 125 Shoreway Road, San Carlos, California
(see Exhibit C).
46. USE OF PREMISES.
The premises shall be used exclusively for the purpose of general
office/research and development, warehousing normal and customary to the
electronic industry.
47. TERM.
This lease term shall be for forty-five (45) months, commencing October 1,
1990, and ending June 30, 1994.
48. OPTION TO EXTEND TERM.
A. Lessee shall have the option to extend the term on all the provisions
contained in this Lease for two (2) five (5) year periods with the monthly
rent for the option period at 95% of fair market rent for the premises at
the commencement of the option period in question, provided that:
(a) Lessee has given to Lessor written notice of exercise of that
option ("option notice") at least six (6) months before
expiration of the initial term or extended term(s) as the case
may be.
(b) Lessee is not in default in the performance of any of the terms
and conditions of the Lease on the date of giving the option
notice, and Lessee is not in default on the date that the
extended term is to commence.
In the event Lessor and Lessee cannot agree on the fair market rental
rate for the premises within thirty (30) days after Lessee delivers to
Lessor its written notice of exercise of the option, the fair market rental
rate for the Premises during the option period in question shall be
determined by the appraisal procedures set for the in subparagraph B below.
B. Within thirty (30) days after the expiration of said thirty (30) day
period, Lessor and Lessee shall jointly appoint a disinterested, qualified
real estate appraiser for the purpose of determining the fair market rental
rate for the premises at the commencement of the option period, or failing
this joint action, shall each separately designate a disinterested
qualified real estate appraiser and, within fifteen (15) days after their
appointment, the two (2) designated appraisers shall jointly designate a
third similarly disinterested qualified real estate appraiser. Failure of
either Lessor or Lessee to appoint an appraiser within the time allowed
shall be deemed equivalent to appointing the
<PAGE>
appraiser appointed by the other party. If, within fifteen (15) days after
their appointment, the two (2) designated appraisers shall not be able to
agree on a third appraiser, the third appraiser shall be appointed by the
American Institute of Real Estate Appraisers. Each of the appraisers
appointed shall be either a MAI appraiser affiliated with the American
Institute of Real Estate, or an ASA appraiser affiliated with the American
Society of Real Estate Appraisers or an SREA appraiser affiliated with the
Society of Real Estate Appraisers, and shall have at least five (5) years
experience in real estate appraising and shall be familiar with real estate
values and appraisal procedures in the County of San Mateo, California. On
the first working day after the commencement of the fifth (5th) calendar
month prior to the then expiration date of the term of this Lease, the
three (3) appraisers shall get together with the Lessor's attorney, unless
a different time or place is mutually agreed upon by the parties. At such
meeting, the three (3) appraisers shall deliver to Lessor and Lessee sealed
envelopes, their appraisals of the fair market rental rate for the premises
at the commencement of the option period in question. The appraisal
farthest from the median of the three appraisals shall be disregarded and
the mathematical average of the remaining two appraisals shall be deemed to
be the fair market rental rate for the premises and shall be binding and
conclusive. Lessor and Lessee shall each pay the cost and expenses of the
appraiser appointed by it, and shall share equally the expenses and costs
of the third appraiser. After the determination of the fair market rental
rate pursuant to the foregoing appraisal procedures, but prior to four (4)
months prior to the termination date, of this Lease, Tenant may withdraw
its election to extend the term of this Lease.
49. RENT
Lessee shall pay Lessor rent for the premises the first day of each month
without deduction or offset, prior notice, or demand, at such place as may
be designated from time to time by Lessor as follows:
75 SHOREWAY ROAD
Monthly
-------
Term Size Rent/Square Foot Rent Due
---- ---- ---------------- --------
0-6 months 5,525 $1.10 NNN/Month $ 6,078.00
7-9 months 11,050 $1.10 NNN/Month $12,155.00
10-12 months 19,000 $1.10 NNN/Month $20,900.00
13-45 months 22,272 $1.10 NNN/Month $24,499.00
125 SHOREWAY ROAD
Monthly
-------
Term Size Rent/Square Foot Rent Due
---- ---- ---------------- --------
0-45 6,150 $.60 NNN/Month $3,690.00
<PAGE>
50. TENANT IMPROVEMENTS
75 Shoreway Road: Any tenant improvements up to $10.00/square foot
($222,720.00) shall be provided by Lessor and be amortized at 12% over the
remaining term of the lease to be paid by Lessee monthly.
125 Shoreway Road: (6,150 square feet) If desire during the lease term, any
tenant improvements up to $25.00 per square foot ($153,750.00) shall be
provided by Lessor and be amortized at 12% interest over the remaining term
of the lease to be paid by Lessee monthly.
51. OPERATING EXPENSES
Operating expenses shall remain the same as the base lease.
52. PARKING
The parking ratio shall be 4/1000.
53. RIGHT OF SECOND REFUSAL
Lessee shall have a right of second refusal on any adjacent space and shall
have a right of second refusal to purchase the property.
54. NOTIFICATION BY LESSOR
Lessor shall use best effort to notify Lessee of any space coming available
within the project prior to marketing such space.
55. BROKERAGE FEES
Lessor shall be solely responsible for leasing commission due Blickman
Turkus and Cornish & Carey per a separate agreement.
All other terms and conditions of the base lease remain in full force and
effect.
AGREED AND ACCEPTED:
LESSOR LESSEE
WDT - SHOREWAY DOMESTIC AUTOMATION COMPANY
/S/ Howard J. White. III /S/ Thomas A. Rota
- ------------------------------ ----------------------
Howard J. White, III Authorized Officer
Date: 9/20/90 Date: 13 September 1990
-------------------------- ------------------
<PAGE>
EXHIBIT C HIGHWAY 101
WDT SHOREWAY 75-125 SHOREWAY ROAD
SAN CARLOS, CALIFORNIA ALB 8/27/90
[site plan graphic omitted]
<PAGE>
ADDENDUM III
TO THAT CERTAIN LEASE DATED APRIL 6, 1989, BY AND BETWEEN WDT - SHOREWAY,
LESSOR, AND DOMESTIC AUTOMATION COMPANY, LESSEE.
To that certain Lease the following wording is added:
56. TENANT IMPROVEMENTS
Referral is made to Paragraph 50 (Tenant Improvements) of Addendum II.
Lessor, at the request and approval of Lessee, has installed a display room
at 125 Shoreway Road. The total cost for installation of said room is
$29,309,00.
Balance of tenant improvements at 125 Shoreway Road remaining under terms
of the lease is: $124,441.00.
An additional $29,309.00 in tenant improvements has been provided by
Lessor, which will result in an additional monthly rent assessment of
$858.00 over the term of the lease. Lessee shall include the additional
assessment in the payment of his base rent which is due on the first day of
each month commencing January 1, 1991. All late fees outlined in Paragraph
Three (3) of the base Lease shall be applicable to the tenant improvement
reimbursement payment also.
AGREED AND ACCEPTED:
LESSOR LESSEE
WDT - SHOREWAY DOMESTIC AUTOMATION COMPANY
/S/ Howard J. White, III /S/ Thomas A. Rota
- ------------------------ ------------------
Howard J. White, III Thomas A. Rota
General Partner Vice President, Finance
Date: 1/15/91 Date: 1/15/91
------------------- --------------
<PAGE>
ADDENDUM IV-REVISED
(SUPERSEDES ADDENDUM III)
TO THAT CERTAIN LEASE DATED APRIL 6, 1989, BY AND BETWEEN WDT - SHOREWAY,
LESSOR, AND DOMESTIC AUTOMATION COMPANY, LESSEE.
To that certain Lease the following wording is added:
56. TENANT IMPROVEMENTS
Referral is made to Paragraph 50 (TENANT IMPROVEMENTS) of Addendum II.
Lessor, at the request and approval of Lessee, has installed improvements
(including, but not limited to display room at 125 Shoreway and
communications trench with conduit and other special improvements at 75
Shoreway Road). The total cost to date for installation of said
improvements is $105,143.00.
This additional $105,143.00 in tenant improvements has been provided by
Lessor, and will result in an additional monthly rent assessment of
$3,202.19 over the term of the lease. Lessee shall include the additional
assessment in the payment of his base rent which is due on the first day of
each month commencing March 1, 1991. All late fees outlined in Paragraph
Three (3) of the base Lease shall be applicable to the tenant improvement
reimbursement payment also.
All other terms and conditions of the base lease remain in full force and
effect.
AGREED AND ACCEPTED:
LESSOR LESSEE
WDT - SHOREWAY DOMESTIC AUTOMATION COMPANY
/S/ Howard J. White, III /S/ Thomas A. Rota
- ------------------------- ------------------------
Howard J. White, III Thomas A. Rota
General Partner Vice President, Finance
Date: 3/19/91 Date: 3/11/91
------------------- -------------------
<PAGE>
ADDENDUM V - (REVISED)
(SUPERSEDES ADDENDUM IV)
TO THAT CERTAIN LEASE DATED APRIL 6,1989, BY AND BETWEEN WDT -
SHOREWAY, LESSOR, AND DOMESTIC AUTOMATION COMPANY, LESSEE.
To that certain Lease the following wording is added:
57. TENANT IMPROVEMENTS
Referral is made to Paragraph 50 (TENANT IMPROVEMENTS) of Addendum II.
Lessor, at the request and approval of Lessee, has installed improvements
(including, but not limited to display room at 125 Shoreway Road and
communications trench with conduit and other special improvements at 75
Shoreway Road). The total cost to date for installation of said
improvements is $117,016.00.
This new total of $117,016.00 in tenant improvements has been provided by
Lessor, and will result in an additional monthly rent assessment of
$3,587.69 over the term of the lease. Lessee shall include the additional
assessment in the payment of his base rent which is due on the first day of
each month commencing June 1, 1991. All late fees outlined in Paragraph
Three (3) of the base Lease shall be applicable to the tenant improvement
reimbursement payment also.
All other terms and conditions of the base Lease remain in full force and
effect.
AGREED AND ACCEPTED:
LESSOR LESSEE
WDT-SHOREWAY DOMESTIC AUTOMATION COMPANY
/S/ Howard J. White /S/ Thomas A Rota
- ------------------- -----------------
Howard J. White, III Thomas A. Rota
General Partner Vice President, Finance
Date: 5/31/91 Date: 5/21/91
------------- -------------
<PAGE>
ADDENDUM VI
TO THAT CERTAIN LEASE DATED APRIL 6, 1989, BY AND BETWEEN WDT -
SHOREWAY, LESSOR AND DOMESTIC AUTOMATION COMPANY, LESSEE.
To that certain Lease the following wording is added:
58. TERMINATION OF LEASE FOR PARTIAL SPACE
Lessor and Lessee hereby agree to terminate that portion of the lease of
plus or minus 6,150 square feet of warehouse space as shown on attached
Exhibit D, at 125 Shoreway Road, San Carlos, California.
59. RENT FOR REMAINING SPACE (Superseded by Addendum VII)
All other terms and conditions of the base Lease remain in full
force and effect.
AGREED AND ACCEPTED:
LESSOR LESSEE
WDT - SHOREWAY DOMESTIC AUTOMATION COMPANY
/S/ Howard J. White, III /S/ Paul M. Cook
- ------------------------ --------------------------
Howard J. White, III Authorized Officer
General Partner
Date: 10/14/92 Date: 9 Oct 92
------------------ ----------------
<PAGE>
EXHIBIT D
WDT SHOREWAY
75-125 SHOREWAY ROAD
SAN CARLOS, CA 8/27/90
[site plan graphic omitted]
<PAGE>
ADDENDUM VII
To that certain Lease dated April 6, 1989, by and between WDT-Shoreway, Lessor,
and Domestic Automation Company, Lessee.
Both Lessor and Lessee hereby agree to amend that certain Lease as follows:
60. RENT FOR REMAINING SPACE
Rent for plus or minus 5,007 square feet of warehouse space now occupied by
Domestic Automation in that certain building commonly known as 125 Shoreway
shall be adjusted for the remainder of the Lease term as follows:
commencing October 1, 1992, rent shall be reduced from $1.20/sf/mo/NNN to
$.80/sf/mo/NNN.
The total monthly rent payment made by Domestic Automation commencing
October 1, 1992 shall be as follows:
125 SHOREWAY
Office Space @ $1.20/sf/mo/NNN +17,457 sq ft $ 20,948.00
Warehouse Space @ $.80/sf/mo/NNN + 5,007 sq ft 4,005.00
Additional Rent Assessed-TI's 1,585.00
Additional Rent Assessed-TI's 858.00
Total Rent, 125 Shoreway $ 27,396.00
75 SHOREWAY
Office Space @ $ 1.10/sf/mo/NNN +22,272 sf ft $24,499.00
Additional Rent Assessed-TI's 2,729.69
Total Rent, 75 Shoreway $27,228.69
TOTAL MONTHLY RENT PAYMENT: $54,624.69
All other terms and conditions of the Lease shall remain in full force and
effect.
AGREED AND ACCEPTED:
Lessor: Lessee:
WDT-SHOREWAY DOMESTIC AUTOMATION COMPANY
/S/ Howard J. White, III /S/ Paul M. Cook
- ------------------------ ----------------------------
Howard J. White, III Paul M. Cook
General Partner Chairman & CEO
Date: 10/5/92 Date: 1 OCT 92
-------------- -----------------------
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement ("Amendment") is effective as of
July 1, 1994 (the "Effective Date") by and between WDT-Shoreway, as Lessor,
and CellNet Data Systems, Inc. (formerly Domestic Automation Company) as
Lessee who agree as follows:
1. RECITALS: This Agreement is entered into with respect to the following
facts and objectives:
A. Lessor and Lessee entered into that certain written lease
agreement dated April 6, 1989 for the property commonly known as 125 Shoreway
Road, Suite 1000, San Carlos, California, as amended by that certain Addendum To
That Certain Lease Agreement By And Between Domestic Automation Company and WDT
- -Shoreway Dated April 6, 1989, as amended by that certain Addendum 11, executed
on September 20, 1994 and September 13, 1994, as amended by that certain
Addendum 11, executed on January 1, 1991 and January 15 1991 , as amended by
that certain Addendum IV - Revised, executed on March 19,1991 and March 11 ,
1991 and May 21, 1991, as amended by that certain Addendum VI, executed on
October 14, 1992 and October 9, 1992 and as further amended by that certain
Addendum VII, executed on October 5, 1992 and October 1, 1992 (collectively, the
"Lease").
B. Lessee has changed its name from Domestic Automation Company to
CellNet Data Systems, Inc. Lessor and Lessee now desire to change the name of
Lessee to CellNet Data Systems, Inc., a California corporation, to reflect said
change.
C. Lessor now further desires to lease to Lessee and Lessee now
desires to lease from Lessor that certain approximately six thousand one hundred
fifty (6,150) square feet of warehouse space located at 125 Shoreway Road, San
Carlos (the "Additional Space"), California which space Lessee formerly leased
from Lessor pursuant to the Lease and as to which space Lessee and Lessor
terminated the Lease pursuant to Addendum VI.
<PAGE>
D. Lessor and Lessee now further desire to extend the term of the
Lease for a term of four (4) years, commencing on July 1, 1994, and expiring on
June 30, 1998.
E. Lessor now further desires to provide to Lessee an allowance of
Two Hundred Thousand Dollars ($200,000) to construct mutually acceptable
improvements in the Premises on the terms and conditions set forth below.
F. Lessor further desires to grant to Lessee an option to lease that
certain approximately fifteen thousand two hundred ninety six (15,296) square
feet of space presently leased and occupied by Fox & Carskadon located at 75
Shoreway, San Carlos, California and as designated as option Area - D on EXHIBIT
C attached hereto ("Option Area - D") on the terms and conditions set forth
below.
2. NAME CHANGE: The name of Lessee is changed from Domestic Automation
Company to CellNet Data Systems, Inc., a California corporation.
3. ADDITIONAL SPACE: Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor the Additional Space. Accordingly, the Premises shall mean
the following:
22,272 sq. ft of office space at 75 Shoreway Road
17,457 sq, ft. of office space at 125 Shoreway Road
5,007 sq. ft. of warehouse space at 125 Shoreway Road
6,150 sq. ft. of warehouse space at 125 Shoreway Road
4. LEASE EXTENSION: The Lease term is hereby extended to June 30, 1998.
5. RENT: Rent, as described in Paragraph 3 of the Lease shall be as
follows:
A. Commencing on July 1, 1994 and continuing thereafter through June
30, 1997, monthly rent shall equal one and 10/100 dollars ($1.10) per square
foot of office space (I.E., Forty Three Thousand Seven Hundred Two
<PAGE>
Dollars ($43,702) per month) and sixty cents ($0.60) per square foot of
warehouse space (I.E., Six Thousand Six Hundred Ninety Four Dollars ($6,694) per
month).
B. Commencing on July 1, 1997 and continuing thereafter until June
30, 1998, monthly rent shall equal One and 15/100 dollars ($1.15) per square
foot of office space (I.E., Forty Five Thousand Six Hundred Eighty Eight Dollars
($45,688) per month) and sixty five cents ($0.65) per square foot of warehouse
space (I.E. Seven Thousand Two Hundred Fifty Two Dollars ($7,252) per month).
6. TENANT IMPROVEMENT ALLOWANCE: Lessor shall provide to Lessee an
allowance of Two Hundred Thousand Dollars ($200,000) (the "Allowance") to
construct, on or before twenty-four (24) months following the Effective Date
and/or during the first twenty-four (24) months of any extensions of the
Lease, improvements in the Premises (including the Additional Space and any
other space which Lessee in the future may lease from Lessor). Any
improvements constructed using all of any portion of the Allowance shall be
approved by Lessor, which approval shall not be unreasonably withheld or
delayed. If Lessee uses all or any portion of the Allowance in constructing
said improvements, Lessee shall reimburse Lessor for the same in the form of
monthly installments of additional rent. The portion of the Allowance so
used shall be amortized over the term of the Lease, including any extensions
thereof, and shall bear interest at the rate of two percent per annum (2%)
over the Bank of America Reference Rate, which rate shall be adjusted
quarterly. If Lessee terminates the Lease prior June 30, 1998, the
unamortized balance of said funds shall be immediately due and payable.
7. OPTION TO LEASE: Lessor hereby grants to Lessee an option to lease (the
"Option") Option Area - D on the following terms and conditions.
A. Lessee may exercise the Option only by giving Landlord written
notice ("Lessee's Notice") of its intention to do so on or before July 1,
1996, but no earlier that July 1, 1995.
<PAGE>
B. Immediately upon receipt of Lessee's Notice, Lessor shall, at
Lessor's sole cost and expense, use reasonable good faith efforts to negotiate
and execute a written lease termination agreement with Fox & Carskadon for
Option Area - D, which agreement shall provide for the termination of such lease
and surrender of possession by the tenant thereunder so that Option Area - D
would be available no later that twelve (12) months after Lessors receipt of
Lessee's Notice (the "Delivery Period"). Notwithstanding the foregoing, unless
Lessee agrees otherwise, the lease for Option Area shall not commence sooner
than the later of (i) six (6) months following the date that Lessor receives
Lessee's Notice or (ii) three (3) months following the date that Fox & Carskadon
vacates Option Area -D (the "Option Commencement Period").
(i) If Lessor executes said lease termination agreement enabling
Lessor to deliver possession to Lessee during the Delivery Period, then Lessor
shall lease to Lessee and Lessee shall lease from Lessor Option Area - D by
executing an amendment to the Lease which amendment shall provide for the
following terms and conditions;
(a) The definition of the Premises shall be amended to
provide that the Premises includes Option Area - D.
(b) The term of the Lease shall be extened for a term of
five (5) years, commencing on the date that Option Area - D is delivered to
Lessee in the condition required pursuant to Subparagraph 7 (B) (i) (c) of this
Amendment (the "Option Area - D Commencement Date").
(c) Rent for the Premises (including Option Area - D) shall
be as follows, as applicable:
(1) Commencing on the Option Area - D Commencement
Date and continuing thereafter through and including June 30, 1997, monthly rent
shall equal One and 10/100 Dollars ($1.10) per square foot of office space and
Sixty Cents ($0.60) per square foot of warehouse space.
<PAGE>
(2) Commencing on July 1, 1997 and continuing
thereafter through and including June 30, 1998, monthly rent shall equal
One and 15/100 Dollars ($1.15) per square foot of office space and
Sixty-Five Cents ($.65) per square foot of warehouse space.
(3) Commencing on July 1, 1998 and continuing
thereafter through and including June 30, 1999, monthly rent shall equal One and
18/100 ($1.18) per square foot of office space and Sixty Five Cents ($0.65) per
square foot of warehouse space.
(4) Commencing on July 1, 1999 and continuing
thereafter through and including June 20, 2000, monthly rent shall equal One and
23/100 Dollars ($1.23) per square foot of office space and Sixty Eight Cents
($0.68) per square foot of warehouse space.
(5) Commencing on July 1, 2000 and continuing
thereafter through and including June 30, 2001, monthly rent shall equal One and
28/100 ($1.28) per square foot of office space and Seventy Cents ($0.70) per
square foot of warehouse space.
(6) Commencing on July 1, 2001 and continuing
thereafter through and including June 30, 2002, monthly rent shall equal One and
33/100 ($1.33) per square foot of office space and Seventy Three Cents ($0,73)
per square foot of warehouse space.
(ii) Notwithstanding the foregoing, if Lessor fails to execute
such lease termination agreement on June 30, 1997 after Lessor's receipt of
Lessee's Notice than Lessee shall have the option to terminate the Lease
effective as of June 30, 1997 by notifying Lessor of its intention to do so
provided that Lessee pays to Lessor on June 30, 1997, Two Hundred Eleven
Thousand Seventy Hundred Sixty Dollars ($211,760) (equivalent to four (4)
months' rent) plus an additional amount equal to Lessor's reasonable estimation
of additional rent which would be payable by Lessee during said four (4) month
period pursuant to Paragraph 8B, 9C and 10 of the Lease.
8. NO FURTHER AMENDMENT: Except as amended herein, all other terms and
conditions of the Lease shall remain unchanged.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First
Amendment to Lease Agreement as of the day and year first above written.
LESSOR:
WDT-SHOREWAY
By: /S/ [signature unreadable]
---------------------------
Its: GP
---------------------------
LESSEE:
CELLNET DATA SYSTEMS, INC.
By: /S/ Paul M. Cook
---------------------------
Its: CEO
---------------------------
<PAGE>
EXHIBIT C
WDT SHOREWAY
SHOREWAY BUSINESS PARK
[site plan graphic omitted]
<PAGE>
4. RENT: Rent, as described in Paragraph 3 of the Lease shall be as follows:
PERIOD MONTHLY RENT/NNN (see attached
breakdown on Exhibit D)
SECOND AMENDMENT TO LEASE AGREEMENT
This Second Amendment to Lease Agreement ( Amendment') is effective as of
April 1, 1995 (the Effective Date') by and between WDT-Shoreway, as Lessor, and
CellNetdata Systems, Inc. (formerly Domestic Automation Company) as Lessee who
agree as follows:
1. Recitals:. This Agreement is entered into with respect to the following
facts and objectives:
A. Lessor and Lessee entered into that certain written lease agreement
dated April 6, 1989 for the property commonly known as 125 Shoreway Road, Suite
1000, San Carlos, California, as amended by that certain Addendum To That
Certain Lease Agreement By and Between Domestic Automation Company and WDT-
Shoreway Dated April 6, 1989, as amended by that certain Addendum II, executed
on September 20, 1994 and September 13, 1994, as amended by that certain
Addendum III, executed on January 1, 1991 and January 15, 1991 as amended by
that certain Addendum IV - Revised, executed on March 19, 1991 and March 7,
1991, as amended by that certain Addendum V, executed on May 31, 1991 and May
21, 1991, as amended by that certain Addendum VI, executed on October 14, 1992
and October 9, 1992, as amended by that certain Addendum VII, executed on
October 5, 1992 and October 1, 1992, and as amended by that certain First
Amendment to Lease Agreement, executed on July 1, 1994 (collectively, the
Lease').
B. Lessee desires to exercise its Option to Lease from Lessor that
certain approximately fifteen thousand two hundred ninety-six (15,296) square
feet of office space located at 75 Shoreway Road, San Carlos, California as
designated as Option Area D on EXHIBIT C attached hereto (the Additional
Space') on the terms and conditions set forth below.
2. ADDITIONAL Space: Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor the Additional Space. Accordingly, the Premises shall mean the
following:
15,296 sq. ft. of office space at 75A Shoreway Road
22,272 sq. ft. of office space at 75B Shoreway Road
17,457 sq. ft. of office space at 125 Shoreway Road
5,007 sq. ft. of warehouse space at 125 Shoreway Road
6,150 sq. ft. of warehouse space at 125 Shoreway Road
66,182 SQUARE FEET
3. LEASE EXTENSION: The Lease term is hereby extended to December 31, 2000.
<PAGE>
of the Lease relating to the initial Security Deposit shall likewise apply to
the additional Security Deposit.
8. NO FURTHER AMENDMENT: Except as amended herein, all other terms and
conditions of the Lease shall remain unchanged.
IN WITNESS WHEREOF, the parties have executed this First Amendment to Lease
Agreement as of me day and year first written above.
LESSOR;
WDT-SHOREWAY
By: /S/ [signature unreadable]
Its: General Partner
LESSEE:
CELLNET DATA SYSTEMS, INC.
By: /s/ [signature unreadable]
Its: Vice President
3
<PAGE>
EXHIBIT D
CELLNET DATA SYSTEMS
BREAKDOWN OF RENT
<TABLE>
<CAPTION>
From To 75 Office F&C Rent 125 Office 125 TI TOTAL
Differential Warehouse Assessment* MONTHLY
PAYMENT
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
4/1/95 12/31/96 41,324.80 993.00 19,202.70 6,694.20 5,299.93 73,514.63
1/1/97 12/31/97 43,203.20 993.00 20,075.55 7,252.05 5,299.93 76,823.73
1/1/98 6/30/98 44,330.24 993.00 20,599.26 7,252.05 5,299.93 78,474.48
7/1/98 12/31/98 44,330.24 993.00 21,599.26 7,252.05 0.00 73,174.55
1/1/99 12/31/99 46,208.64 993.00 21,472.11 7,586.76 0.00 76,260.51
1/1/00 12/31/00 48,087.04 993.00 22,344.96 7,809.90 0.00 79,234.90
*For TI's completed in 1994
</TABLE>
<PAGE>
CELLNET DATA SYSTEMS, INC.
1992 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the 1992 Stock Plan
(the "Plan") shall have the same defined meanings in this Notice of Grant.
John M. Seidl
165 Atherton Avenue
Atherton, CA 94027
You have been granted the right to purchase Common Stock of the Company
pursuant to an Incentive Stock Option Agreement or Agreements which the Company
has amended to accelerate your ability to exercise, subject to the Company's
repurchase option, ongoing Continuous Status as an Employee or Consultant (as
described in the Plan and the attached Restricted Stock Purchase Agreement), as
follows:
Date of Grant August 1, 1994
Price Per Share $0.50
Total Number of Shares
Subject to Option
which are subject to
Accelerated Exercise 200,000
By your signature and the signature of the Company's representative below,
you and the Company agree that this Stock Purchase Right is granted under and
governed by the terms and conditions of the Plan, the Incentive Stock Option
Agreement ("the "Option Agreement") and the Restricted Stock Purchase Agreement
attached hereto as Exhibit A-1, each of which is hereby incorporated herein by
reference. You further agree to execute the Restricted Stock Purchase Agreement
as a condition to purchasing any shares under this Stock Purchase Right.
<PAGE>
GRANTEE: CELLNET DATA SYSTEMS, INC.
/s/ John M. Seidl By: /s/ David Perry
- ----------------------- ------------------------------------------------
Signature Title: Vice President, General Counsel and Secretary
John M. Seidl
- -----------------------
Print Name
<PAGE>
EXHIBIT A-1
CELLNET DATA SYSTEMS, INC.
1992 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
THIS AGREEMENT is made as of December 27, 1994, at San Carlos, California,
between CellNet Data Systems, Inc., a California corporation (the "Company"),
and John M. Seidl (the "Purchaser").
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
employee or consultant of the Company, and the Purchaser's continued
participation is considered by the Company to be important for the Company's
continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser stock
purchase rights subject to the terms and conditions of the Plan and the Notice
of Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
THEREFORE, the parties agree as follows:
I. SALE OF STOCK. The Company hereby agrees to sell to the Purchaser
and the Purchaser hereby agrees to purchase shares of the Company's Common
Stock (the "Shares"), at the per share purchase price and as otherwise
described in the Notice of Grant.
II. PAYMENT OF PURCHASE PRICE. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check or promissory note in the form of Exhibit D to the Option
Agreement.
III. REPURCHASE OPTION.
(a) In the event the Purchaser's Continuous Status as an Employee or
Consultant terminates for any or no reason (including
<PAGE>
death or disability) before all of the Shares are released from the Company's
repurchase option (see Section 4), but not in the event of Purchaser's change in
status from Employee to Consultant or Consultant to Employee, the Company shall,
upon the date of such termination (as reasonably fixed and determined by the
Company) have an irrevocable, exclusive option for a period of ninety (90) days
from such date to repurchase up to that number of shares which constitute the
Unreleased Shares (as defined in Section 4) at the original purchase price per
share (the "Repurchase Price"). Said option shall be exercised by the Company
by delivering written notice to the Purchaser or the Purchaser's executor (with
a copy to the Escrow Holder (as defined in Section 6)) and, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Shares being repurchased and all rights
and interests therein or relating thereto, and the Company shall have the right
to retain and transfer to its own name the number of Shares being repurchased by
the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares.
IV. RELEASE OF SHARES FROM REPURCHASE OPTION.
(a) 100,000 of the Shares shall be immediately fully vested and not
subject to the Company's repurchase option and 100,000 of the Shares shall be
released from the Company's repurchase option after August 1, 1995, provided
that the Purchaser's Continuous Status as an Employee or Consultant has not
terminated prior to the date of any such release.
-2-
<PAGE>
(b) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's repurchase
option are referred to herein as the "Released Shares." The Released Shares
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
V. RESTRICTION ON TRANSFER. Except for the escrow described in Section 6
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's repurchase option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
VI. ESCROW OF SHARES.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Company's
repurchase option under Section 3 above, the Purchaser shall, upon execution of
this Agreement, deliver and deposit with an escrow holder designated by the
Company (the "Escrow Holder") the share certificates representing the Unreleased
Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held
by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company
and Purchaser attached as Exhibit A-3 hereto, until such time as the Company's
repurchase option expires. As a further condition to the Company's obligations
under this Agreement, the spouse of Purchaser, if any, shall execute and deliver
to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
-3-
<PAGE>
(c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.
VII. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Released Shares that are
held by Purchaser or any transferee (either being sometimes referred to herein
as the "Holder") may be sold or otherwise transferred (including transfer by
gift or operation of law), the Company or its assignee(s) shall have a right of
first refusal to purchase such shares (the "Offered Shares") on the terms and
conditions set forth in this Section (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Offered Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Offered Shares to be transferred to each Proposed
-4-
<PAGE>
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Offered Shares (the "Offered Price"), and
the Holder shall offer the Offered Shares at the Offered Price to the Company or
its assignee(s).
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("Purchase Price") for the
Offered Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within thirty (30) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within one hundred twenty (120) days
after the date of the Notice and provided further that any such sale or other
transfer is effected in accordance with any applicable securities laws and the
Proposed Transferee agrees in writing that the provisions of this Section shall
continue to apply to the Offered Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
-5-
<PAGE>
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Offered Shares held by the Holder may be sold or
otherwise transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Offered Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Offered
Shares so transferred subject to the provisions of this Agreement, including but
not limited to this Section and Section 3, and there shall be no further
transfer of such Offered Shares except in accordance with the terms of this
Section.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Offered Shares at the time of the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933 (the "1933 Act").
VIII. LEGENDS.
(a) Purchaser understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER
-6-
<PAGE>
SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN AGREEMENTS, COVENANTS AND RESTRICTIONS IN REGARD TO
THE TRANSFER OF SUCH SHARES, AS PROVIDED IN THE PROVISIONS
OF A SHAREHOLDERS' AGREEMENT, A COPY OF WHICH IS ON FILE IN
THE OFFICE OF THE SECRETARY OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
180 DAY LOCK-UP FOLLOWING THE CORPORATION'S INITIAL PUBLIC
OFFERING. A COPY OF THE LOCK-UP IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to
-7-
<PAGE>
accord the right to vote or pay dividends to any purchaser or other transferee
to whom such Shares shall have been so transferred.
IX. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
X. TAX CONSEQUENCES. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the purchase price for the Shares and the Fair
Market Value of the Shares as of the date any restrictions on the Shares lapse.
In this context, "restriction" includes the right of the Company to buy back the
Shares pursuant to its repurchase option. The Purchaser understands that the
Purchaser may elect to be taxed at the time the Shares are purchased rather than
when and as the Company's repurchase option expires by filing an election under
Section 83(b) of the Code with the I.R.S. within thirty (30) days from the date
of purchase. The form for making this election is attached as Exhibit A-5
hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER
SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
XI. LOCKUP AGREEMENT. In consideration for the sale of the Shares by the
Company, the Purchaser agrees that in connection with the first registration of
the Company's securities whether for its own account or otherwise, not to sell,
make any short sale of, loan, grant any option for the purchase of, grant an
interest in,
-8-
<PAGE>
or otherwise dispose of any Shares or any other securities of the Company (other
than those included in the registration, if any) without the prior written
consent of the Company or underwriters managing the offering, as the case may
be, for such period of time (not to exceed 180 days or such shorter time as the
officers and directors have agreed to) from the date of the initial public
offering, pursuant to an effective registration statement, as the Company or the
underwriters may specify; provided, however, that such Purchaser shall be
relieved of its obligations under this provision unless all executive officers,
directors and five percent (5%) or more shareholders of the Company enter into
similar agreements.
XII. GENERAL PROVISIONS.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement, subject to the terms and conditions of the Plan,
the Incentive Stock Option Agreement and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of Common
Stock by the Purchaser. Subject to Section 13(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
(c) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or
-9-
<PAGE>
entities, and all covenants and agreements hereunder shall inure to the benefit
of, and be enforceable by the Company's successors and assigns. The rights and
obligations of the Purchaser under this Agreement may only be assigned with the
prior written consent of the Company.
(d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE RELEASE OF SHARES FROM
THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY
BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY
(NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE
OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, the Incentive Stock Option
Agreement and hereby accepts this Agreement subject to all of the terms and
provisions thereof. Purchaser has reviewed the Plan, the Incentive Stock Option
Agreement and this Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing this Agreement and fully understands
all provisions of this Agreement. Purchaser agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising
-10-
<PAGE>
under the Plan, the Incentive Stock Option Agreement or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
PURCHASER: CELLNET DATA SYSTEMS, INC.
/s/ John M. Seidl By: /s/ David Perry
- ---------------------------- -------------------------------
Signature Title: Vice President, General Counsel
and Secretary
JOHN M. SEIDL
- ----------------------------
Print Name
-11-
<PAGE>
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto _______________________________________________________________
__________________________ (__________) shares of the Common Stock of CellNet
Data Systems, Inc. standing in my name of the books of said corporation
represented by Certificate No. _____ herewith and do hereby irrevocably
constitute and appoint ___________________________________________ to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between________________________ and the undersigned
dated ______________, 19__.
Dated:______________, 19__
Signature:_____________________________
<PAGE>
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
-13-
<PAGE>
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
December 27, 1994
David L. Perry, Esq.
Corporate Secretary
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Dear Mr. Perry:
As Escrow Agent for both CellNet Data Systems, Inc., a California
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
<PAGE>
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be person-
-2-
<PAGE>
ally liable for any act you may do or omit to do hereunder as Escrow Agent or as
attorney-in-fact for Purchaser while acting in good faith, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the new Secretary
of this Company shall be automatically appointed the successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in
-3-
<PAGE>
respect hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
PURCHASER: John M. Seidl
165 Atherton Avenue
Atherton, CA 94027
ESCROW AGENT: Corporate Secretary
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-4-
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
CELLNET DATA SYSTEMS, INC.
By: /s/___________________________________
Title: Vice President and General Counsel
PURCHASER:
__________________________________________
/s/_______________________________________
(Typed or Printed Name)
ESCROW AGENT:
___________________________________________
Corporate Secretary
-5-
<PAGE>
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of CellNet Data Systems, Inc., as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the
exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Agreement.
Dated:__________________, 19__
_____________________________________
<PAGE>
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
-7-
<PAGE>
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;
-8-
<PAGE>
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."
-9-
<PAGE>
CELLNET DATA SYSTEMS, INC.
1992 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the 1992 Stock Plan
(the "Plan") shall have the same defined meanings in this Notice of Grant.
James J. Jennings
57 Capra Way
San Francisco, CA 94123
You have been granted the right to purchase Common Stock of the Company
pursuant to an Incentive Stock Option Agreement or Agreements which the Company
has amended to accelerate your ability to exercise, subject to the Company's
repurchase option and your ongoing Continuous Status as an Employee or
Consultant (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Date of Prior Grant July 13, 1994
Price Per Share $.50
Total Number of Shares
Subject to Option
which are subject to
Accelerated Exercise 72,000
By your signature and the signature of the Company's representative below,
you and the Company agree that this Stock Purchase Right is granted under and
governed by the terms and conditions of the Plan, the Incentive Stock Option
Agreement (the "Option Agreement") and the Restricted Stock Purchase Agreement
attached hereto as Exhibit A-1, each of which is hereby incorporated herein by
reference. You further agree to execute the Restricted Stock Purchase Agreement
as a condition to purchasing any shares under this Stock Purchase Right.
<PAGE>
GRANTEE: CELLNET DATA SYSTEMS, INC.
/s/ James J. Jennings By: /s/ David Perry
__________________ ___________________
Signature Title: Vice President, General Counsel
and Secretary
James J. Jennings
__________________
Print Name
EXHIBIT A-1
CELLNET DATA SYSTEMS, INC.
1992 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
THIS AGREEMENT is made as of August 1, 1995, at San Carlos, California,
between CellNet Data Systems, Inc., a California corporation (the "Company"),
and James J. Jennings (the "Purchaser").
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
employee or consultant of the Company, and the Purchaser's continued
participation is considered by the Company to be important for the Company's
continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser stock
purchase rights subject to the terms and conditions of the Plan and the Notice
of Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
THEREFORE, the parties agree as follows:
I. SALE OF STOCK. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per share purchase price and as otherwise described in
the Notice of Grant.
<PAGE>
II. PAYMENT OF PURCHASE PRICE. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check or promissory note in the form of Exhibit D to the Option
Agreement.
III. REPURCHASE OPTION.
(a) In the event the Purchaser's Continuous Status as an Employee or
Consultant terminates for any or no reason (including death or disability)
before all of the Shares are released from the Company's repurchase option (see
Section IV), but not in the event of Purchaser's change in status from Employee
to Consultant or Consultant to Employee, the Company shall, upon the date of
such termination (as reasonably fixed and determined by the Company) have an
irrevocable, exclusive option for a period of ninety (90) days from such date to
repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section IV) at the original purchase price per share (the
"Repurchase Price"). Said option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section VI)) and, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Shares being repurchased and all rights
and interests therein or relating thereto, and the Company shall have the right
to retain and transfer to its own name the number of Shares being repurchased by
the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares.
-2-
<PAGE>
IV. RELEASE OF SHARES FROM REPURCHASE OPTION.
(a) 4,500 of the Shares beginning October 13, 1995 shall be
immediately fully vested and not subject to the Company's repurchase option and
4,500 of the Shares shall be released from the Company's repurchase option every
three months thereafter, provided that the Purchaser's Continuous Status as an
Employee or Consultant has not terminated prior to the date of any such release.
(b) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's
repurchase option are referred to herein as the "Released Shares." The Released
Shares shall be delivered to the Purchaser at the Purchaser's request (see
Section VI).
V. RESTRICTION ON TRANSFER. Except for the escrow described in
Section VI or transfer of the Shares to the Company or its assignees
contemplated by this Agreement, none of the Shares or any beneficial interest
therein shall be transferred, encumbered or otherwise disposed of in any way
until the release of such Shares from the Company's repurchase option in
accordance with the provisions of this Agreement, other than by will or the laws
of descent and distribution.
VI. ESCROW OF SHARES.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Company's
repurchase option under Section III above, the Purchaser shall, upon execution
of this Agreement, deliver and deposit with an escrow holder designated by the
Company (the "Escrow Holder") the share certificates representing the Unreleased
Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held
by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company
and Purchaser attached as Exhibit A-3 hereto, until such time as the Company's
repurchase option expires. As a further condition to the Company's
-3-
<PAGE>
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.
VII. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Released Shares that are
held by Purchaser or any transferee (either being sometimes referred to herein
as the "Holder") may be sold or otherwise transferred (including transfer by
gift or operation of law), the Company or its assignee(s) shall have a right of
first refusal to purchase such shares (the "Offered Shares") on the terms
-4-
<PAGE>
and conditions set forth in this Section (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Offered Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Offered Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Offered Shares (the "Offered Price"), and
the Holder shall offer the Offered Shares at the Offered Price to the Company or
its assignee(s).
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("Purchase Price") for the
Offered Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within thirty (30) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise
-5-
<PAGE>
transfer such Offered Shares to that Proposed Transferee at the Offered Price or
at a higher price, provided that such sale or other transfer is consummated
within one hundred twenty (120) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Offered Shares in
the hands of such Proposed Transferee. If the Shares described in the Notice
are not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Offered Shares held by the
Holder may be sold or otherwise transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Offered Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Offered
Shares so transferred subject to the provisions of this Agreement, including but
not limited to this Section and Section III, and there shall be no further
transfer of such Offered Shares except in accordance with the terms of this
Section.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Offered Shares at the time of the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933 (the "1933 Act").
VIII. LEGENDS.
(a) Purchaser understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing
-6-
<PAGE>
ownership of the Shares together with any other legends that may be required by
the Company or by applicable state or federal securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO
THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN AGREEMENTS, COVENANTS AND RESTRICTIONS IN REGARD TO
THE TRANSFER OF SUCH SHARES, AS PROVIDED IN THE PROVISIONS
OF A SHAREHOLDERS' AGREEMENT, A COPY OF WHICH IS ON FILE IN
THE OFFICE OF THE SECRETARY OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
180 DAY LOCK-UP FOLLOWING THE CORPORATION'S INITIAL PUBLIC
OFFERING. A COPY OF THE LOCK-UP IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached hereto as Attachment 1.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to
-7-
<PAGE>
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and that, if the Company transfers its own securities,
it may make appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
IX. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
X. TAX CONSEQUENCES. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the purchase price for the Shares and the Fair
Market Value of the Shares as of the date any restrictions on the Shares lapse.
In this context, "restriction" includes the right of the Company to buy back the
Shares pursuant to its repurchase option. The Purchaser understands that the
Purchaser may elect to be taxed at the time the Shares are purchased rather than
when and as the Company's repurchase option expires by filing an election under
Section 83(b) of the Code with the I.R.S. within thirty (30) days from the date
of purchase. The form for making this election is attached as Exhibit A-5
hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE
-8-
<PAGE>
ELECTION UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
XI. LOCKUP AGREEMENT. In consideration for the sale of the Shares by the
Company, the Purchaser agrees that in connection with the first registration of
the Company's securities whether for its own account or otherwise, not to sell,
make any short sale of, loan, grant any option for the purchase of, grant an
interest in, or otherwise dispose of any Shares or any other securities of the
Company (other than those included in the registration, if any) without the
prior written consent of the Company or underwriters managing the offering, as
the case may be, for such period of time (not to exceed 180 days or such shorter
time as the officers and directors have agreed to) from the date of the initial
public offering, pursuant to an effective registration statement, as the Company
or the underwriters may specify; provided, however, that such Purchaser shall be
relieved of its obligations under this provision unless all executive officers,
directors and five percent (5%) or more shareholders of the Company enter into
similar agreements.
XII. GENERAL PROVISIONS.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement, subject to the terms and conditions of the Plan,
the Incentive Stock Option Agreement and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of Common
Stock by the Purchaser. Subject to Section 13(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given by
either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement
-9-
<PAGE>
or such other address as a party may request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
(c) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE RELEASE OF SHARES FROM
THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO SECTION IV HEREOF IS EARNED
ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER).
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE
OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
-10-
<PAGE>
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, the Incentive Stock Option
Agreement and hereby accepts this Agreement subject to all of the terms and
provisions thereof. Purchaser has reviewed the Plan, the Incentive Stock Option
Agreement and this Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing this Agreement and fully understands
all provisions of this Agreement. Purchaser agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan, the Incentive Stock Option Agreement or
this Agreement. Purchaser further agrees to notify the Company upon any change
in the residence indicated in the Notice of Grant.
PURCHASER: CELLNET DATA SYSTEMS, INC.
/S/ James J. Jennings By: /S/ David Perry
_________________ _______________
Signature Title: Vice President, General Counsel
and Secretary
James J. Jennings
__________________
Print Name
-11-
<PAGE>
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto ________________________________________________________________
_________________________________________________________________ (__________)
shares of the Common Stock of CellNet Data Systems, Inc. standing in my name
of the books of said corporation represented by Certificate No. _____ herewith
and do hereby irrevocably constitute and appoint _____________________________
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between CellNet Data Systems, Inc. and the undersigned
dated August 1, 1995.
Dated: __________, 19__
Signature: ____________________
<PAGE>
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
-13-
<PAGE>
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
August __, 1995
David L. Perry, Esq.
Corporate Secretary
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Dear Mr. Perry:
As Escrow Agent for both CellNet Data Systems, Inc., a California
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
<PAGE>
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be person-
-2-
<PAGE>
ally liable for any act you may do or omit to do hereunder as Escrow Agent or as
attorney-in-fact for Purchaser while acting in good faith, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the new Secretary
of this Company shall be automatically appointed the successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in
-3-
<PAGE>
respect hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
PURCHASER: James J. Jennings
57 Capra Way
San Francisco, CA 94123
ESCROW AGENT: Corporate Secretary
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-4-
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
CELLNET DATA SYSTEMS, INC.
By: _____________________________________
Title: VICE PRESIDENT AND GENERAL COUNSEL
PURCHASER:
___________________________________________
(Signature)
___________________________________________
(Typed or Printed Name)
ESCROW AGENT:
___________________________________________
Corporate Secretary
<PAGE>
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of CellNet Data Systems, Inc., as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the
exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Agreement.
Dated: ____________, 19____
________________________
<PAGE>
EXHIBIT A-5
ELECTION UNDER SECTION 83(B)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: James J. Jennings SPOUSE:
ADDRESS: 57 Capra Way San Francisco, CA 94123
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR: December 31, 1995
2. The property with respect to which the election is made is described as
follows: 72,000 shares (the "Shares") of the Common Stock of CellNet Data
Systems, Inc. (the "Company").
3. The date on which the property was transferred is: August 1, 1995
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares as
follows: 4,500 of the Shares beginning October 13, 1995 shall be
immediately fully vested and not subject to the Company's repurchase option
and 4,500 of the Shares shall be released from the Company's repurchase
option every three months thereafter, provided that the Purchaser's
Continuous Status as an Employee or Consultant has not terminated prior to
the date of any such release.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $72,000
6. The amount (if any) paid for such property is: $36,000
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
<PAGE>
Dated: ____________________
______ Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: _____________________
______ Spouse of Taxpayer
-8-
<PAGE>
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
-9-
<PAGE>
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that
-10-
<PAGE>
qualification requirement by subdivision (f) of Section 25102; provided
that any such transfer is on the condition that any certificate evidencing
the security issued to such transferee shall contain the legend required by
this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."
<PAGE>
CELLNET DATA SYSTEMS, INC.
1992 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the 1992 Stock Plan
(the "Plan") shall have the same defined meanings in this Notice of Grant.
Philip H. Mallory
1543 Beach Park Blvd.
Foster City, CA 94404
You have been granted the right to purchase Common Stock of the Company
pursuant to an Incentive Stock Option Agreement or Agreements which the Company
has amended to accelerate your ability to exercise, subject to the Company's
repurchase option and your ongoing Continuous Status as an Employee or
Consultant (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Date of Prior Grant December 7, 1994
Price Per Share $1.00
Total Number of Shares
Subject to Option
which are subject to
Accelerated Exercise 85,000
By your signature and the signature of the Company's representative below,
you and the Company agree that this Stock Purchase Right is granted under and
governed by the terms and conditions of the Plan, the Incentive Stock Option
Agreement (the "Option Agreement") and the Restricted Stock Purchase Agreement
attached hereto as Exhibit A-1, each of which is hereby incorporated herein by
reference. You further agree to execute the Restricted Stock Purchase Agreement
as a condition to purchasing any shares under this Stock Purchase Right.
<PAGE>
GRANTEE: CELLNET DATA SYSTEMS, INC.
/s/ Philip H. Mallory By: /s/ David Perry
- ----------------------- --------------------------------------------
Signature Title: Vice President, General Counsel
and Secretary
Philip H. Mallory
- -----------------------
Print Name
EXHIBIT A-1
CELLNET DATA SYSTEMS, INC.
1992 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
THIS AGREEMENT is made as of July 21, 1995, at San Carlos, California,
between CellNet Data Systems, Inc., a California corporation (the "Company"),
and Philip H. Mallory (the "Purchaser").
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
employee or consultant of the Company, and the Purchaser's continued
participation is considered by the Company to be important for the Company's
continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser stock
purchase rights subject to the terms and conditions of the Plan and the Notice
of Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
THEREFORE, the parties agree as follows:
I. SALE OF STOCK. The Company hereby agrees to sell to the Purchaser
and the Purchaser hereby agrees to purchase shares of the Company's Common
Stock (the "Shares"), at the per share purchase price and as otherwise
described in the Notice of Grant.
<PAGE>
II. PAYMENT OF PURCHASE PRICE. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check or promissory note in the form of Exhibit D to the Option
Agreement.
III. REPURCHASE OPTION.
(a) In the event the Purchaser's Continuous Status as an Employee or
Consultant terminates for any or no reason (including death or disability)
before all of the Shares are released from the Company's repurchase option (see
Section IV), but not in the event of Purchaser's change in status from Employee
to Consultant or Consultant to Employee, the Company shall, upon the date of
such termination (as reasonably fixed and determined by the Company) have an
irrevocable, exclusive option for a period of ninety (90) days from such date to
repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section IV) at the original purchase price per share (the
"Repurchase Price"). Said option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section VI)) and, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Shares being repurchased and all rights
and interests therein or relating thereto, and the Company shall have the right
to retain and transfer to its own name the number of Shares being repurchased by
the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares.
-2-
<PAGE>
IV. RELEASE OF SHARES FROM REPURCHASE OPTION.
(a) 8,500 of the Shares shall be immediately fully vested and not
subject to the Company's repurchase option and 4,250 of the Shares shall be
released from the Company's repurchase option every three months thereafter
(beginning June 7, 1995), provided that the Purchaser's Continuous Status as an
Employee or Consultant has not terminated prior to the date of any such release.
(b) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's repurchase
option are referred to herein as the "Released Shares." The Released Shares
shall be delivered to the Purchaser at the Purchaser's request (see Section VI).
V. RESTRICTION ON TRANSFER. Except for the escrow described in
Section VI or transfer of the Shares to the Company or its assignees
contemplated by this Agreement, none of the Shares or any beneficial interest
therein shall be transferred, encumbered or otherwise disposed of in any way
until the release of such Shares from the Company's repurchase option in
accordance with the provisions of this Agreement, other than by will or the laws
of descent and distribution.
VI. ESCROW OF SHARES.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Company's
repurchase option under Section III above, the Purchaser shall, upon execution
of this Agreement, deliver and deposit with an escrow holder designated by the
Company (the "Escrow Holder") the share certificates representing the Unreleased
Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held
by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company
and Purchaser attached as Exhibit A-3 hereto, until such time as the Company's
repurchase option expires. As a further condition to the Company's
-3-
<PAGE>
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.
VII. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Released Shares that are
held by Purchaser or any transferee (either being sometimes referred to herein
as the "Holder") may be sold or otherwise transferred (including transfer by
gift or operation of law), the Company or its assignee(s) shall have a right of
first refusal to purchase such shares (the "Offered Shares") on the terms
-4-
<PAGE>
and conditions set forth in this Section (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Offered Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Offered Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Offered Shares (the "Offered Price"), and
the Holder shall offer the Offered Shares at the Offered Price to the Company or
its assignee(s).
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("Purchase Price") for the
Offered Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within thirty (30) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise
-5-
<PAGE>
transfer such Offered Shares to that Proposed Transferee at the Offered Price or
at a higher price, provided that such sale or other transfer is consummated
within one hundred twenty (120) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Offered Shares in
the hands of such Proposed Transferee. If the Shares described in the Notice
are not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Offered Shares held by the
Holder may be sold or otherwise transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Offered Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Offered
Shares so transferred subject to the provisions of this Agreement, including but
not limited to this Section and Section III, and there shall be no further
transfer of such Offered Shares except in accordance with the terms of this
Section.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Offered Shares at the time of the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933 (the "1933 Act").
VIII. LEGENDS.
(a) Purchaser understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing
-6-
<PAGE>
ownership of the Shares together with any other legends that may be required by
the Company or by applicable state or federal securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN AGREEMENTS, COVENANTS AND RESTRICTIONS IN REGARD TO
THE TRANSFER OF SUCH SHARES, AS PROVIDED IN THE PROVISIONS
OF A SHAREHOLDERS' AGREEMENT, A COPY OF WHICH IS ON FILE IN
THE OFFICE OF THE SECRETARY OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
180 DAY LOCK-UP FOLLOWING THE CORPORATION'S INITIAL PUBLIC
OFFERING. A COPY OF THE LOCK-UP IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached hereto as Attachment 1.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to
-7-
<PAGE>
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and that, if the Company transfers its own securities,
it may make appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
IX. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
X. TAX CONSEQUENCES. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the purchase price for the Shares and the Fair
Market Value of the Shares as of the date any restrictions on the Shares lapse.
In this context, "restriction" includes the right of the Company to buy back the
Shares pursuant to its repurchase option. The Purchaser understands that the
Purchaser may elect to be taxed at the time the Shares are purchased rather than
when and as the Company's repurchase option expires by filing an election under
Section 83(b) of the Code with the I.R.S. within thirty (30) days from the date
of purchase. The form for making this election is attached as Exhibit A-5
hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE
-8-
<PAGE>
ELECTION UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
XI. LOCKUP AGREEMENT. In consideration for the sale of the Shares by the
Company, the Purchaser agrees that in connection with the first registration of
the Company's securities whether for its own account or otherwise, not to sell,
make any short sale of, loan, grant any option for the purchase of, grant an
interest in, or otherwise dispose of any Shares or any other securities of the
Company (other than those included in the registration, if any) without the
prior written consent of the Company or underwriters managing the offering, as
the case may be, for such period of time (not to exceed 180 days or such shorter
time as the officers and directors have agreed to) from the date of the initial
public offering, pursuant to an effective registration statement, as the Company
or the underwriters may specify; provided, however, that such Purchaser shall be
relieved of its obligations under this provision unless all executive officers,
directors and five percent (5%) or more shareholders of the Company enter into
similar agreements.
XII.GENERAL PROVISIONS.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement, subject to the terms and conditions of the Plan,
the Incentive Stock Option Agreement and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of Common
Stock by the Purchaser. Subject to Section 13(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement
-9-
<PAGE>
or such other address as a party may request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
(c) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE RELEASE OF SHARES FROM
THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO SECTION IV HEREOF IS EARNED
ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER).
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE
OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
-10-
<PAGE>
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, the Incentive Stock Option
Agreement and hereby accepts this Agreement subject to all of the terms and
provisions thereof. Purchaser has reviewed the Plan, the Incentive Stock Option
Agreement and this Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing this Agreement and fully understands
all provisions of this Agreement. Purchaser agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan, the Incentive Stock Option Agreement or
this Agreement. Purchaser further agrees to notify the Company upon any change
in the residence indicated in the Notice of Grant.
PURCHASER: CELLNET DATA SYSTEMS, INC.
/s/ Philip H. Mallory By: David Perry
- --------------------------- --------------------------------------
Signature Title: Vice President, General Counsel
and Secretary
Philip H. Mallory
- ---------------------------
Print Name
-11-
<PAGE>
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, ______________, hereby sell, assign and transfer unto
_____________ (__________) shares of the Common Stock of CellNet Data Systems,
Inc. standing in my name of the books of said corporation represented by
Certificate No. _____ herewith and do hereby irrevocably constitute and appoint
_____________________________________________ to transfer the said stock on the
books of the within named corporation with full power of substitution in the
premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between CellNet Data Systems, Inc. and the undersigned
dated July 21, 1995.
Dated: _____________ , 19__
Signature: __________________________________
<PAGE>
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
-13-
<PAGE>
EXHIBIT A-3
-----------
JOINT ESCROW INSTRUCTIONS
July __, 1995
David L. Perry, Esq.
Corporate Secretary
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Dear Mr. Perry:
As Escrow Agent for both CellNet Data Systems, Inc., a California
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
<PAGE>
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be person-
-2-
<PAGE>
ally liable for any act you may do or omit to do hereunder as Escrow Agent or as
attorney-in-fact for Purchaser while acting in good faith, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the new Secretary
of this Company shall be automatically appointed the successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in
-3-
<PAGE>
respect hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
PURCHASER: Philip H. Mallory
1543 Beach Park Blvd.
Foster City, CA 94404
ESCROW AGENT: Corporate Secretary
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-4-
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
CELLNET DATA SYSTEMS, INC.
By:_________________________________
Title: VICE PRESIDENT AND GENERAL COUNSEL
PURCHASER:
____________________________________
(Signature)
____________________________________
(Typed or Printed Name)
ESCROW AGENT:
____________________________________
Corporate Secretary
-5-
<PAGE>
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________ , spouse of ___________________, have read and approve the
foregoing Agreement. In consideration of granting of the right to my spouse to
purchase shares of CellNet Data Systems, Inc., as set forth in the Agreement, I
hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: ______________, 19__
________________________________
<PAGE>
EXHIBIT A-5
ELECTION UNDER SECTION 83(B)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of CellNet Data
Systems, Inc. (the "Company").
3. The date on which the property was transferred is: ________
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares as
follows:
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$___________
6. The amount (if any) paid for such property is:
$___________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
Dated: ______________________________
Taxpayer
____________
<PAGE>
The undersigned spouse of taxpayer joins in this election.
Dated:
_________ ________________________
Spouse of Taxpayer
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in
-8-
<PAGE>
violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification
-9-
<PAGE>
requirement of Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102; provided that any such transfer
is on the condition that any certificate evidencing the security issued to such
transferee shall contain the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."
-10-
<PAGE>
CELLNET DATA SYSTEMS, INC.
1992 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the 1992 Stock Plan
(the "Plan") shall have the same defined meanings in this Notice of Grant.
Larsh M. Johnson
2774 Union Street #4
San Francisco, CA 94123
You have been granted the right to purchase Common Stock of the Company
pursuant to an Incentive Stock Option Agreement or Agreements which the Company
has amended to accelerate your ability to exercise, subject to the Company's
repurchase option and your ongoing Continuous Status as an Employee or
Consultant (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Date of Prior Grant July 13, 1994
Price Per Share $.50
Total Number of Shares
Subject to Option
which are subject to
Accelerated Exercise 30,000
By your signature and the signature of the Company's representative below,
you and the Company agree that this Stock Purchase Right is granted under and
governed by the terms and conditions of the Plan, the Incentive Stock Option
Agreement (the "Option Agreement") and the Restricted Stock Purchase Agreement
attached hereto as Exhibit A-1, each of which is hereby incorporated herein by
reference. You further agree to execute the Restricted Stock Purchase Agreement
as a condition to purchasing any shares under this Stock Purchase Right.
<PAGE>
GRANTEE: CELLNET DATA SYSTEMS, INC.
/s/ Larsh M. Johnson By: /s/ David Perry
- -------------------------- --------------------------------------
Signature Title: Vice President, General Counsel
and Secretary
Larsh M. Johnson
- --------------------------
Print Name
EXHIBIT A-1
CELLNET DATA SYSTEMS, INC.
1992 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
THIS AGREEMENT is made as of August 1, 1995, at San Carlos, California,
between CellNet Data Systems, Inc., a California corporation (the "Company"),
and Larsh M. Johnson (the "Purchaser").
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
employee or consultant of the Company, and the Purchaser's continued
participation is considered by the Company to be important for the Company's
continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser stock
purchase rights subject to the terms and conditions of the Plan and the Notice
of Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
THEREFORE, the parties agree as follows:
I. SALE OF STOCK. The Company hereby agrees to sell to the Purchaser
and the Purchaser hereby agrees to purchase shares of the Company's Common
Stock (the "Shares"), at the per share purchase price and as otherwise
described in the Notice of Grant.
<PAGE>
II. PAYMENT OF PURCHASE PRICE. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check or promissory note in the form of Exhibit D to the Option
Agreement.
III. REPURCHASE OPTION.
(a) In the event the Purchaser's Continuous Status as an Employee or
Consultant terminates for any or no reason (including death or disability)
before all of the Shares are released from the Company's repurchase option (see
Section IV), but not in the event of Purchaser's change in status from Employee
to Consultant or Consultant to Employee, the Company shall, upon the date of
such termination (as reasonably fixed and determined by the Company) have an
irrevocable, exclusive option for a period of ninety (90) days from such date to
repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section IV) at the original purchase price per share (the
"Repurchase Price"). Said option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section VI)) and, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Shares being repurchased and all rights
and interests therein or relating thereto, and the Company shall have the right
to retain and transfer to its own name the number of Shares being repurchased by
the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares.
-2-
<PAGE>
IV. RELEASE OF SHARES FROM REPURCHASE OPTION.
(a) 6,000 of the Shares shall be immediately fully vested and not
subject to the Company's repurchase option and 1,500 of the Shares shall be
released from the Company's repurchase option every three months thereafter
(beginning July 13, 1995), provided that the Purchaser's Continuous Status as an
Employee or Consultant has not terminated prior to the date of any such release.
(b) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's repurchase
option are referred to herein as the "Released Shares." The Released Shares
shall be delivered to the Purchaser at the Purchaser's request (see Section VI).
V. RESTRICTION ON TRANSFER. Except for the escrow described in
Section VI or transfer of the Shares to the Company or its assignees
contemplated by this Agreement, none of the Shares or any beneficial interest
therein shall be transferred, encumbered or otherwise disposed of in any way
until the release of such Shares from the Company's repurchase option in
accordance with the provisions of this Agreement, other than by will or the laws
of descent and distribution.
VI. ESCROW OF SHARES.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Company's
repurchase option under Section III above, the Purchaser shall, upon execution
of this Agreement, deliver and deposit with an escrow holder designated by the
Company (the "Escrow Holder") the share certificates representing the Unreleased
Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held
by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company
and Purchaser attached as Exhibit A-3 hereto, until such time as the Company's
repurchase option expires. As a further condition to the Company's
-3-
<PAGE>
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.
VII. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Released Shares that are
held by Purchaser or any transferee (either being sometimes referred to herein
as the "Holder") may be sold or otherwise transferred (including transfer by
gift or operation of law), the Company or its assignee(s) shall have a right of
first refusal to purchase such shares (the "Offered Shares") on the terms
-4-
<PAGE>
and conditions set forth in this Section (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Offered Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Offered Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Offered Shares (the "Offered Price"), and
the Holder shall offer the Offered Shares at the Offered Price to the Company or
its assignee(s).
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("Purchase Price") for the
Offered Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within thirty (30) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise
-5-
<PAGE>
transfer such Offered Shares to that Proposed Transferee at the Offered Price or
at a higher price, provided that such sale or other transfer is consummated
within one hundred twenty (120) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Offered Shares in
the hands of such Proposed Transferee. If the Shares described in the Notice
are not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Offered Shares held by the
Holder may be sold or otherwise transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Offered Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Offered
Shares so transferred subject to the provisions of this Agreement, including but
not limited to this Section and Section III, and there shall be no further
transfer of such Offered Shares except in accordance with the terms of this
Section.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Offered Shares at the time of the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933 (the "1933 Act").
VIII. LEGENDS.
(a) Purchaser understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing
-6-
<PAGE>
ownership of the Shares together with any other legends that may be required by
the Company or by applicable state or federal securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN AGREEMENTS, COVENANTS AND RESTRICTIONS IN REGARD TO
THE TRANSFER OF SUCH SHARES, AS PROVIDED IN THE PROVISIONS
OF A SHAREHOLDERS' AGREEMENT, A COPY OF WHICH IS ON FILE IN
THE OFFICE OF THE SECRETARY OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
180 DAY LOCK-UP FOLLOWING THE CORPORATION'S INITIAL PUBLIC
OFFERING. A COPY OF THE LOCK-UP IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached hereto as Attachment 1.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to
-7-
<PAGE>
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and that, if the Company transfers its own securities,
it may make appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
IX. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
X. TAX CONSEQUENCES. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the purchase price for the Shares and the Fair
Market Value of the Shares as of the date any restrictions on the Shares lapse.
In this context, "restriction" includes the right of the Company to buy back the
Shares pursuant to its repurchase option. The Purchaser understands that the
Purchaser may elect to be taxed at the time the Shares are purchased rather than
when and as the Company's repurchase option expires by filing an election under
Section 83(b) of the Code with the I.R.S. within thirty (30) days from the date
of purchase. The form for making this election is attached as Exhibit A-5
hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE
-8-
<PAGE>
ELECTION UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
XI. LOCKUP AGREEMENT. In consideration for the sale of the Shares by the
Company, the Purchaser agrees that in connection with the first registration of
the Company's securities whether for its own account or otherwise, not to sell,
make any short sale of, loan, grant any option for the purchase of, grant an
interest in, or otherwise dispose of any Shares or any other securities of the
Company (other than those included in the registration, if any) without the
prior written consent of the Company or underwriters managing the offering, as
the case may be, for such period of time (not to exceed 180 days or such shorter
time as the officers and directors have agreed to) from the date of the initial
public offering, pursuant to an effective registration statement, as the Company
or the underwriters may specify; provided, however, that such Purchaser shall be
relieved of its obligations under this provision unless all executive officers,
directors and five percent (5%) or more shareholders of the Company enter into
similar agreements.
XII. GENERAL PROVISIONS.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement, subject to the terms and conditions of the Plan,
the Incentive Stock Option Agreement and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of Common
Stock by the Purchaser. Subject to Section 13(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement
-9-
<PAGE>
or such other address as a party may request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
(c) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE RELEASE OF SHARES FROM
THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO SECTION IV HEREOF IS EARNED
ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER).
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE
OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
-10-
<PAGE>
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, the Incentive Stock Option
Agreement and hereby accepts this Agreement subject to all of the terms and
provisions thereof. Purchaser has reviewed the Plan, the Incentive Stock Option
Agreement and this Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing this Agreement and fully understands
all provisions of this Agreement. Purchaser agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan, the Incentive Stock Option Agreement or
this Agreement. Purchaser further agrees to notify the Company upon any change
in the residence indicated in the Notice of Grant.
PURCHASER: CELLNET DATA SYSTEMS, INC.
/s/ By: /s/
- -------------------------- ----------------------------
Signature Title: Vice President, General
Counsel and Secretary
/s/
- --------------------------
Print Name
-11-
<PAGE>
EXHIBIT A-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto_________________________________________________________________
___________________________ (__________) shares of the Common Stock of CellNet
Data Systems, Inc. standing in my name of the books of said corporation
represented by Certificate No. _____ herewith and do hereby irrevocably
constitute and appoint __________________________________________ to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between CellNet Data Systems, Inc. and the undersigned
dated August 1, 1995.
Dated: __________, 19__
Signature: ______________________________
<PAGE>
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
-13-
<PAGE>
EXHIBIT A-3
-----------
JOINT ESCROW INSTRUCTIONS
August __, 1995
David L. Perry, Esq.
Corporate Secretary
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Dear Mr. Perry:
As Escrow Agent for both CellNet Data Systems, Inc., a California
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
<PAGE>
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be person-
-2-
<PAGE>
ally liable for any act you may do or omit to do hereunder as Escrow Agent or as
attorney-in-fact for Purchaser while acting in good faith, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the new Secretary
of this Company shall be automatically appointed the successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in
-3-
<PAGE>
respect hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
PURCHASER: Larsh M. Johnson
2774 Union Street #4
San Francisco, CA 94123
ESCROW AGENT: Corporate Secretary
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-4-
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
CELLNET DATA SYSTEMS, INC.
By:
_____________________________________
Title: Vice President and General
Counsel
PURCHASER:
---------------------------------
(Signature)
---------------------------------
(Typed or Printed Name)
ESCROW AGENT:
---------------------------------
Corporate Secretary
-5-
<PAGE>
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of CellNet Data Systems, Inc., as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the
exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Agreement.
Dated: ___________, 19__
_________________________________
<PAGE>
EXHIBIT A-5
ELECTION UNDER SECTION 83(B)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: Larsh M. Johnson SPOUSE:
ADDRESS: 2774 Union Street #4 San Francisco, CA 94123
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR: December 31, 1995
2. The property with respect to which the election is made is described as
follows: 30,000 shares (the "Shares") of the Common Stock of CellNet Data
Systems, Inc. (the "Company").
3. The date on which the property was transferred is: August 1, 1995
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares as
follows: 6,000 of the Shares shall be immediately fully vested and not
subject to the Company's repurchase option and 1,500 of the Shares shall be
released from the Company's repurchase option every three months thereafter
(beginning July 13, 1995), provided that the Purchaser's Continuous Status
as an Employee or Consultant has not terminated prior to the date of any
such release.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $30,000
6. The amount (if any) paid for such property is: $15,000
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
<PAGE>
Dated:
___________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated:
___________________________________
Spouse of Taxpayer
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
-8-
<PAGE>
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
-9-
<PAGE>
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102; provided that any such transfer is on the
condition that any certificate evidencing the security issued to such
transferee shall contain the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."
-10-
<PAGE>
AGREEMENT BY AND BETWEEN
AXONN CORPORATION AND
DOMESTIC AUTOMATION COMPANY
UNITED STATES OF AMERICA
STATE OF LOUISIANA
PARISH OF ORLEANS
THIS AGREEMENT is between Axonn Corporation, a Louisiana corporation,
having its principal offices at 101 W. Robert E. Lee Boulevard, New Orleans,
Louisiana, 70124 (hereinafter referred to as "LICENSOR") and Domestic Automation
Company, a California corporation, having its principal offices at 125 Shoreway
Road, San Carlos, California, 94070 (hereinafter referred to as "LICENSEE").
W I T N E S S E T H:
WHEREAS, LICENSOR owns INTELLECTUAL PROPERTY covering spread spectrum radio
devices;
WHEREAS, LICENSEE desires to obtain from LICENSOR, a worldwide, license and
right under such INTELLECTUAL PROPERTY to use, modify, manufacture, have
manufactured, sell, lease and otherwise distribute PRODUCTS in the UDS Market
worldwide;
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, the parties agree as follows:
1. DEFINITIONS. As used herein, the term:
(a) "ADDITIONAL DEVICES" shall mean NEXT GENERATION DEVICES in whose
development LICENSEE has financially participated as per Section 4(a) of this
Agreement. Such ADDITIONAL DEVICES shall, as mutually agreed, include but shall
not be limited to:
(i) Repeater/Transceiver
(ii) Special Antennas and Diversity Techniques
<PAGE>
(iii) Frequency Hopping Transceiver appropriate for WAN
(iv) Lower cost, smaller ASIC version of Frequency Hopper
(v) Higher data rate Spread Spectrum Radio for WAN
(b) "CellNet" shall mean a communication system developed and
marketed by LICENSEE.
(c) "DELIVERABLES" shall mean:
DELIVERABLES due upon license execution include LICENSOR'S
existing non-customized spread spectrum receiver and transmitter devices and the
following:
(i) Schematics therefor;
(ii) PCB artworks therefor;
(iii) Software object code therefor;
(iv) Assembly drawings therefor;
(v) Test and alignment procedures therefor;
(vi) Parts list with vendor names and costs therefor;
(vii) Interface specifications therefor;
(viii) LICENSOR'S standard non-customized transmitter and
electronic components having a direct material parts cost of approximately [*]
and not including the battery, the PCB, or connector costs.
(ix) LICENSOR'S standard non-customized receiver and electronic
components having a direct materials parts cost of approximately [*]
and not including the PCB, or connector costs.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-2-
<PAGE>
(x) LICENSOR'S standard non-customized PC application and
testing programs for LICENSEE'S internal use.
(d) "DEFECT/DEFECTS" shall mean a deviation from SPECIFICATION or any
other mutually agreed to modifications to SPECIFICATION that is so material it
prevents the economical commercial marketing of the PRODUCT.
(e) "DEVICE" shall mean a spread spectrum radio wireless system
developed by LICENSOR as it currently exists and all modifications and
IMPROVEMENTS of such system to be used in the Utility Distribution and Services
Market ("UDS") defined in Section 1(p) and which meets SPECIFICATION 6.18.GI5
including the proprietary processes, proprietary technical and other
information, and INTELLECTUAL PROPERTY rights relating thereto, whether or not
patentable under the patent laws of the United States or any foreign country.
(f) "FIRST PROJECT PROTOTYPE" shall mean the prototype to be
developed by LICENSOR pursuant to the development program set forth in Section 7
below, which may be made with wire jumpers, or with generally accepted prototype
assembly procedures.
(g) "FIRST PRODUCT PROTOTYPE ACCEPTANCE" shall mean Licensor
demonstrating a PROTOTYPE which is absent of DEFECTS and performs to a mutually
agreed upon specification.
(h) "IMPROVEMENT" means LICENSOR'S initiated Engineering Change Order
level updates (hereinafter an Engineering Change Order shall be referred to as
an "ECO"), modifications and changes to any DEVICE, ADDITIONAL DEVICE OR NEXT
GENERATION DEVICE licensed to LICENSEE that are distributed to other licensees,
including, but not limited to, cut circuit trace, add jumper/trace and/or
component, software updates, including new code to enhance performance or that
will otherwise update existing products. IMPROVEMENTS also include ECO level
updates, including, but not limited to, hardware component changes which require
only minor software modification, if any, and/or software changes which require
only minor hardware changes, if any. The term IMPROVEMENT does not include
technical work which requires large investments of capital or labor to effect
and excludes improvements which are incompatible with existing systems or
subsystems or which require major layout and/or software revision to
incorporate. For purposes of this agreement, the term
-3-
<PAGE>
large investments of capital or labor shall mean technical work which requires
and/or necessitates the expenditure of $30,000 in cash or billable services
(regardless or whether such services were actually billed by LICENSOR) and/or
any combination of the two. The term IMPROVEMENT also does not include a CHANGE
for LICENSEE as set forth in Section 6. IMPROVEMENTS are provided to LICENSEE
at no additional cost except for incidental expenses which include, but are not
limited to, photocopying, telephone costs, mailing and transcribing information
to LICENSEE.
(i) "INTELLECTUAL PROPERTY" means PATENT RIGHTS, CONFIDENTIAL
INFORMATION, copyrights, mask work rights, trade secret rights and any other
intellectual property rights which LICENSOR may possess during the term of this
Agreement.
(j) "NEXT GENERATION DEVICES" are new spread spectrum radio devices
or DEVICES which have undergone major modifications initiated by or on behalf of
LICENSOR (i) resulting from large investments or capital or labor (as that term
is defined in Section 1(h)), or (ii) which alter the basic character or function
of DEVICES making them incompatible with existing systems or subsystems, or
(iii) which require incorporation of major changes in hardware or software.
IMPROVEMENTS and CHANGES are not NEXT GENERATION DEVICES.
(k) "PRODUCT" shall mean any spread spectrum radio device which
results from, is based upon, uses or contains INTELLECTUAL PROPERTY including,
without limitation, the DEVICE and ADDITIONAL DEVICES or other NEXT GENERATION
DEVICES which LICENSEE obtains under this Agreement. PRODUCTS may only be sold
to the UDS Market.
(l) "PATENT RIGHTS" shall mean patents and patent applications of all
countries owned or licensed by LICENSOR to the extent the claims thereof cover
any DEVICE and/or ADDITIONAL DEVICE, including any additions, continuations,
continuations-in-part, divisions, reissues or extensions based thereon. The
patents issued which relate to DEVICE and/or ADDITIONAL DEVICE shall be listed
on Exhibit 1, which shall be updated throughout the term of this Agreement.
-4-
<PAGE>
(m) "ROYALTY/ROYALTIES" shall mean an amount to be paid by LICENSEE
to LICENSOR pursuant to the terms of Section 3 of this Agreement.
(n) "SPECIFICATION" means the specification 6.18.GI5 attached as
Exhibit 1 including any IMPROVEMENT thereto.
(o) "SUBLICENSEE" means any entity which has entered into a
sublicense arrangement with LICENSEE whereby the sublicense agreement grants
such SUBLICENSEE the right to manufacture and sell PRODUCT to any entity selling
to the UDS Market for the sole purpose of incorporating PRODUCT into CellNet
compatible devices.
(p) The Utility Distribution and Services Market "UDS" means all
functions associated with managing the transmission and distribution network,
demand-side management programs and customer service applications of
electricity, gas and water utilities, including substation, feeder and customer
site power demand automation or the equivalent thereof. Specific UDS
applications include monitoring of field equipment, automatic meter reading,
real-time pricing, remote connect/disconnect, appliance monitoring and control,
load management and customer information services or the equivalent thereof.
The following applications are specifically excluded from the UDS Market: Fire
and Security, access control, voice communication, and time of flight
measurement applications.
2. GRANT.
(a) Upon the terms and conditions set forth herein, LICENSOR hereby
grants to LICENSEE
(i) a worldwide, exclusive license and right, with the right to
grant and authorize sublicenses pursuant to subparagraph (b) below, under
LICENSOR'S INTELLECTUAL PROPERTY to use, modify, manufacture, have manufactured,
sell, lease and otherwise dispose of spread spectrum communication systems under
the control of, or contracted by, electricity, gas and water utilities in
managing the transmission and distribution network and demand-side management
programs. For the purposes of this Section 2(a)(i) only:
"Transmission and Distribution Network" shall mean:
-5-
<PAGE>
Controlling transmission lines, substations and feeder
circuits
Remote meter reading
Two way communication with metering devices
Capacitor bank control
Feeder switching control
Power factor control
Voltage control, and
"Demand-side Management" shall mean:
Load control in real time by a utility of an end use device
(e.g. Air Conditioner, Refrigerator, Water Heater)
Time of use monitoring and measurement (load profiling)
Real time pricing (active) (Communication to customer of
utility prices that change on a daily, hourly or other
periodic basis)
Time of use billing (passive) (Measurement of utility
consumption to enable billing with prices that vary
depending on the time of day at which consumption occurred)
Real time billing (Communication to the customer of
consumption or billing data within any given time period
e.g. month, day, hour or minute)
Utility rate applications (Communication of customer
identification, pricing, consumption and billing information
between the utility and its customers)
-6-
<PAGE>
Remote connect and disconnect (Remote start or
discontinuation of utility service either logically via
reading the utility meter, or actually via communication
with a device on the utility meter that shuts off or turns
on delivery of utility service)
Energy theft detection
Real time bill processing (Communication back to the utility
by the customer of some or all of the following information
required for bill processing: authorization to transfer
funds; approval of bill; identification of account, bank or
other entity to bill; security code to authorize use of a
customer's particular account, or identity of customer.)
Power restoration notification
The following applications are expressly excluded from use of
spread spectrum radio devices in transmission and distribution networks: fire
and security, access control, voice communication, and time of flight
measurement applications
and,
(ii) a worldwide, non-exclusive license and right, with the right
to grant and authorize sublicenses pursuant to subparagraph (b) below, under
LICENSOR'S INTELLECTUAL PROPERTY to use, modify, manufacture, have manufactured,
sell, lease and otherwise distribute PRODUCTS in the UDS Market.
Nothing in this Agreement shall preclude LICENSOR from licensing
INTELLECTUAL PROPERTY to or with Dicon Systems, Ltd. or Disys, Ltd. for use in
the one-way communication of automatic meter readings.
(b) LICENSOR, subject to its rights contained herein, hereby consents
to the sublicensing by LICENSEE of the INTELLECTUAL PROPERTY to use,
manufacture, have manufactured, sell, lease and otherwise distribute PRODUCTS to
SUBLICENSEES. The grant of the
-7-
<PAGE>
licenses to LICENSEE as well as the grant of the right to LICENSEE to sublicense
to SUBLICENSEES hereunder is contingent on LICENSEE and all SUBLICENSEES having
totally complied with the terms of this Agreement such that there are no
conditions which would permit termination by LICENSOR of LICENSEE or such
SUBLICENSEES pursuant to Section 2(d) or Section 10. Additionally, LICENSEE may
only grant SUBLICENSEES rights to use, modify, manufacture, have manufactured,
sell, lease and otherwise distribute PRODUCTS to the UDS Market for the sole
purpose of incorporating the PRODUCTS into CellNet compatible devices. It is
understood that LICENSEE'S right to grant sublicenses hereunder includes the
right to grant exclusive sublicenses within the scope of the exclusive license
granted to LICENSEE under Section 2(a)(i) above; provided that such sublicenses
are limited in scope so as to grant rights to only a limited portion of
LICENSEE'S total rights under such license; and provided further that such
sublicenses provide that any exclusive sublicenses granted by LICENSEE shall
automatically convert to nonexclusive in the event the license under Section
2(a)(i) becomes nonexclusive.
(c) Notwithstanding LICENSOR'S grant to LICENSEE of the right to
sublicense to entities subject to the aforereferenced qualifications, the right
to sublicense is not unqualified. More particularly, LICENSEE is required to
notify and request the approval of LICENSOR, in writing, of every entity to whom
LICENSEE is interested in sublicensing INTELLECTUAL PROPERTY; provided that
LICENSOR shall only have the right to withhold approval in the event that the
entity to which LICENSEE proposes to grant a sublicense (i) appears on the list
attached hereto in Exhibit 3, (ii) is involved, at the time of the request to
sublicense is made, in the development, manufacture or sale of spread spectrum
radio devices, (iii) is focused on the development, manufacture or sale of
products in the fire detection and security markets, or (iv) is an entity with
whom LICENSOR or its licensee in the fire and security business, Life Point
Systems Limited Partnership, has had more than introductory discussions with
respect to such entity obtaining license rights to the INTELLECTUAL PROPERTY
during the two (2) year period directly preceding the date LICENSEE submits its
written request; provided that where LICENSOR claims the existence of such prior
contacts, LICENSOR shall be required to provide evidence of these earlier
contacts. In any event, LICENSOR may unreasonably withhold consent to any
entity that falls within categories
-8-
<PAGE>
(i)-(iv) enumerated above; provided that LICENSOR shall have thirty (30) days
from the date of notice to approve or disapprove any potential SUBLICENSEE.
Failure to respond within such thirty (30) day period shall be deemed to be
approval to grant a sublicense to such entity.
(d) To the extent that the provisions of this Agreement apply to a
SUBLICENSEE, LICENSEE warrants the discharge of all of SUBLICENSEE'S obligations
hereunder; provided that LICENSEE shall be deemed to have fulfilled its
obligations under this Agreement to cure a breach by a SUBLICENSEE with regard
to such SUBLICENSEE'S performance of the terms of this agreement if LICENSEE
takes and continues to pursue diligent efforts to cure such breach, including
without limitation the payment of royalties due from such SUBLICENSEE hereunder
and to take legal or other action against such SUBLICENSEE to restrain such
SUBLICENSEE from pursuing such breaching behavior. LICENSEE shall reimburse
LICENSOR for reasonable costs incurred by LICENSOR in assisting LICENSEE in
pursuing a remedy with such a SUBLICENSEE in breach. LICENSEE agrees that it
will use its best efforts to ensure that all SUBLICENSEES abide by the terms of
their sublicense agreements and will keep LICENSOR apprised of its activities to
enforce such provisions with particular SUBLICENSEE.
(e) In addition, LICENSEE shall ensure that LICENSOR will have the
right to enforce such agreements as a third party beneficiary, and LICENSEE
agrees that (i) LICENSOR may join LICENSEE as a named plaintiff in any suit
brought by LICENSOR against SUBLICENSEES (ii) LICENSEE will take such other
actions, give such information and render such aid, at LICENSOR'S request, as
may be necessary to allow LICENSOR to bring and prosecute such suits.
(f) LICENSEE agrees to include in any sublicense agreement that, upon
termination of a sublicense agreement, all rights of such former SUBLICENSEE to
use LICENSOR'S INTELLECTUAL PROPERTY shall immediately cease and such former
SUBLICENSEE shall immediately render unusable all portions of INTELLECTUAL
PROPERTY then under its control and shall immediately destroy or deliver to
LICENSEE each and every other part of such INTELLECTUAL PROPERTY in the
SUBLICENSEE'S possession.
-9-
<PAGE>
(g) LICENSOR agrees to offer to LICENSEE license rights to NEXT
GENERATION DEVICES developed by LICENSOR during the term of this Agreement, but
which are not ADDITIONAL DEVICES, subject to all the terms and conditions of
this Agreement, with the exception of any initial license fee and royalty rate
which shall be mutually negotiated by the parties in good faith. Such agreement
may be documented by way of Attachment to this Agreement.
3. ROYALTY.
(a) As partial consideration for the license granted under Section
2(a), LICENSEE agrees to pay [*] to be paid upon completion of the
following milestones, in installments as follows:
(i) Upon signing of Memo of Understanding, a copy of which is
attached hereto as Exhibit 4 and made a part hereof - [*] cash already
received;
(ii) Upon signing of this Agreement - [*];
(iii) Upon information transfer - [*] which shall be
paid in twelve (12) monthly installments beginning on the date that the
DELIVERABLES are transferred to LICENSEE with [*]
interest being charged on the unpaid balance; and
(iv) Upon FIRST PROJECT PROTOTYPE ACCEPTANCE - [*] which
shall be paid in nine (9) monthly installments beginning on the date of
LICENSEE'S acceptance of the FIRST PROJECT PROTOTYPE pursuant to Section 7(e)
below, with [*] interest being charged on the unpaid balance.
(b) As partial consideration for the rights granted to it hereunder,
LICENSEE agrees to pay LICENSOR a ROYALTY on PRODUCTS leased, sold or otherwise
distributed by LICENSEE or any of its SUBLICENSEES. The ROYALTY rate for each
PRODUCT shall be determined based upon what kind of DEVICE such PRODUCT is, as
determined according to the Table set forth below:
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-10-
<PAGE>
Product Type Rate Per Product
-------------- ----------------
Transmitter [*]
Receiver [*]
Transceiver [*]
The parties will agree to negotiate corresponding ROYALTY rates for ADDITIONAL
DEVICES having significantly different functionality from the three product
types recorded in the above Table. For any such ADDITIONAL DEVICE, the parties
agree that they shall agree on such new ROYALTY rate prior to commencement of
LICENSEE funded development of such a new ADDITIONAL DEVICE. Notwithstanding
the foregoing, no ROYALTY shall be due on PRODUCTS provided to others as samples
or demonstration units, used for Product development purposes, or returned to
LICENSEE or its SUBLICENSEES for refund. ROYALTIES paid on PRODUCTS returned
for refund shall be creditable against future ROYALTIES.
(c) Additionally, the ROYALTY due on each DEVICE, ADDITIONAL DEVICE
or NEXT GENERATION DEVICE which incorporates IMPROVEMENTS contributed by
LICENSOR may be increased as set forth below. The increase in the ROYALTY due
on such improved DEVICES shall be calculated at [*] of the
estimated amount by which the then prevailing total manufactured cost for a
100,000 quantity batch of a given DEVICE (adjusted for any change such as
transferring any functionality from the DEVICE and the inclusion of that
functionality elsewhere separate from the DEVICE) is, as a result of
IMPROVEMENTS contributed by LICENSOR, less than the total manufactured cost for
a 100,000 quantity batch of the given DEVICE prior to the implementation of
ADDITIONAL DEVICES or IMPROVEMENTS contributed by LICENSOR. This ROYALTY will
be computed annually at the close of business on the last day of each calendar
year and be due and payable on or before March 31 following the end of the
calendar year. To ensure that the original estimations on which these
additional ROYALTY payments are based were correct, the ROYALTY rate shall be
adjusted based upon the actual manufacturing costs incurred by LICENSEE during
the manufacture of the first 100,000 units. Any additional payments or refunds
to ROYALTIES paid on such first 100,000 units based upon the adjustment in
ROYALTY payments shall be promptly paid by LICENSEE or may be credited against
future ROYALTIES to be paid by LICENSEE to LICENSOR, as appropriate; provided
that in the event a
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-11-
<PAGE>
credit is obtained, the amount creditable against any one ROYALTY payment shall
not exceed [*] of such ROYALTY payment.
(d) In return for the exclusive rights granted, LICENSEE shall commit
to make annual minimum ROYALTY payments to LICENSOR in the amount of [*] for
the calendar year 1994, [*] for the calendar year 1995 and [*] for
each calendar year thereafter. Should LICENSEE fail to make said minimum
ROYALTY payments, LICENSOR shall serve written notice on LICENSEE that the
minimum payment for the particular year has not been made, and if LICENSEE does
not cure such deficiency within thirty (30) days of receipt of notice, the
license granted hereunder shall become a non-exclusive license.
(e) ROYALTY payments are due in full for all PRODUCTS shipped in a
quarter within forty five (45) days after the end of such quarter.
(f) In the event that no PATENT RIGHTS exist in a given country
relative to a DEVICE sold in that country, and any product which would infringe
such PATENT RIGHTS had such PATENT RIGHTS existed in said country is offered for
sale in the UDS Market by any entity other than LICENSEE or a SUBLICENSEE, or
should, through no fault of LICENSEE OR SUBLICENSEE, the CONFIDENTIAL
INFORMATION relative to a DEVICE sold in a particular country where no PATENT
RIGHTS exist relative to said DEVICE become available to and deployed by third
parties participating in the UDS Market in that particular country, then
LICENSOR and LICENSEE agree to review and consider a downward adjustment to the
amount of ROYALTIES payable by LICENSEE to LICENSOR with respect to that said
PRODUCT in that country.
(g) PRODUCT is deemed sold or leased at the time of first invoicing
or, if not, invoiced, at the time of first shipment, delivery, or other transfer
to a party other than LICENSEE, or when first actually put into use, including
use by LICENSEE, whichever occurs first, excluding internal use by LICENSEE.
For purposes of determining ROYALTIES, a lease shall be deemed a sale.
(h) During the term of this Agreement, LICENSEE shall deliver to
LICENSOR, within forty-five (45) days after the end of each calendar quarter, a
royalty report indicating the number of
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-12-
<PAGE>
PRODUCTS, sold in the preceding calendar quarter and the computation of the
ROYALTY due and payable. Each royalty report shall be accompanied by the
payment of the corresponding ROYALTIES due LICENSOR, less any taxes or other
charges withheld.
(i) Overdue payments hereunder shall be subject to a late payment
charge calculated at an annual prime rate (as quoted by Citibank, N.A., New
York, U.S.A.), plus two (2) percentage points during delinquency. If the amount
of such charge exceeds the maximum permitted by law, such charge shall be
reduced to such maximum.
(j) LICENSEE shall keep full and true books of account and other
records in sufficient detail so that the ROYALTIES payable to LICENSOR hereunder
can be properly ascertained. LICENSEE agrees, on the request of LICENSOR no
more frequently than two times per year, and at LICENSOR'S expense, to permit an
independent certified public accountant, selected by LICENSOR and to whom
LICENSEE has no reasonable objection, to have access to such books and records
as may be necessary to determine, in respect of any accounting period ending not
more than three (3) years prior to the date of such request, the correctness of
any report or payment under this Agreement, or to obtain information as to the
amounts payable in the case of failure of LICENSEE to report. Any such
accountant entitled hereunder to examine the books of LICENSEE shall be entitled
to make such examination at LICENSEE'S business premises during reasonable
business hours and shall be entitled to disclose only the amount of discrepancy,
if any, due LICENSOR. LICENSOR shall promptly furnish a copy of such
accountant's calculations to LICENSEE, and unless LICENSOR shall receive from
LICENSEE a written objection within thirty (30) days thereafter, with respect to
the calculations of such accountant, the report of such accountant as to the
correctness of any report or amounts payable hereunder shall be conclusive and
binding upon the parties hereto for all the purposes of this Agreement. In the
event of a discrepancy of three (3) percent or less underpayment is found, the
fees, costs and expenses by the accountant shall be borne by LICENSOR;
otherwise, the costs shall be borne by LICENSEE. Lastly, if a discrepancy is
discovered that is in LICENSEE'S favor, i.e., the LICENSEE overpaid ROYALTIES
payable to LICENSOR hereunder, such excess amounts shall be repaid by LICENSOR
to LICENSEE. LICENSEE,
-13-
<PAGE>
however, will not be entitled to a "late payment charge" or interest on this
amount.
4. FURTHER CONSIDERATION.
(a) Both LICENSEE and LICENSOR have an expressed interest in actively
pursuing the development of ADDITIONAL DEVICES. LICENSEE will provide
additional funding for its support, at LICENSOR'S standard rates as referenced
in Section 6(b), of such mutually agreed development projects to be conducted
by LICENSOR in accordance with the following minimum funding schedule.
SCHEDULE:
Commencing no later than the calendar quarter commencing October 1, 1992,
LICENSEE shall fund development project(s) with LICENSOR in an amount not
less than [*] in the first calendar quarter, then an amount not less
than [*] per calendar quarter for each of eight successive calendar
quarters, followed by one calendar quarter in an amount not less than
[*]; or [*] in aggregate whichever first occurs. Should LICENSEE
default in its obligations under this Section 4(a), and such default shall
not be cured within sixty (60) days after written notice thereof is given
by LICENSOR to LICENSEE, then the grant per Section 2(a)(i) of this
Agreement shall become non-exclusive. Nothing in these terms shall be
deemed to preclude LICENSOR and LICENSEE from mutually agreeing to
commitments in excess of the above declared minimums and/or duration.
It is the understanding of the parties that LICENSOR shall own the resulting
designs and patents, without limitation, and be entitled to use, modify, sell,
lease and otherwise dispose of such ADDITIONAL DEVICES and INTELLECTUAL PROPERTY
related thereto in any market other than the market exclusively licensed to
LICENSEE under Section 2(a)(i) of this Agreement.
(b) In recognition of the anticipated co-operation between LICENSOR
and LICENSEE in optimizing, cost reducing, integrating and developing innovative
ADDITIONAL DEVICES for deployment in the UDS Market, LICENSEE will at execution
of this Agreement grant to LICENSOR warrants to acquire 100,000 shares of
LICENSEE'S
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-14-
<PAGE>
Common Stock at a price of $1.00 per share. Said warrants shall issue in five
equal installments on the first through the fifth anniversary of the execution
date of this Agreement on condition that LICENSOR continues to meet mutually
agreed upon development objectives.
5. OBLIGATIONS OF LICENSOR.
(a) LICENSOR agrees to provide LICENSEE upon execution of this
Agreement with DELIVERABLES.
(b) LICENSOR guarantees that the transmitter and receiver per the
DELIVERABLES meet FCC part 15.126, Rules for Spread Spectrum Unlicensed
Operation. In the event that either the transmitter and/or the receiver should
fail to meet such Rules, and such failure shall not be cured within sixty (60)
days after written notice thereof is given by LICENSEE to LICENSOR, then all
amounts paid by the LICENSEE to the LICENSOR will be refunded within thirty (30)
days thereafter.
(c) LICENSOR agrees to provide IMPROVEMENTS to LICENSEE during the
term of this Agreement.
(d) LICENSOR agrees to provide NEXT GENERATION DEVICES to LICENSEE
subject to the provisions of Section 2(e) during the term of this Agreement.
(e) LICENSOR agrees that the filing of patent applications is an
essential step in sustaining PATENT RIGHTS, and LICENSOR will actively record
and witness invention disclosures in a timely fashion to enable such filings.
LICENSOR will promptly advise LICENSEE of LICENSOR'S decision whether or not to
file patent applications in the U.S.A. and those other countries in which
LICENSOR proposes to file such patent applications. LICENSOR agrees further
that with respect to all countries in which LICENSOR elects not to file patent
applications, LICENSEE may, at LICENSEE'S expense, file such applications in the
name of LICENSOR. In the event that LICENSEE has elected to file patent
applications in the name of LICENSOR, LICENSEE shall, upon issuance of any such
patent, share equally with LICENSOR in any subsequent royalty payments which may
accrue from LICENSEE to LICENSOR as owner of said patent
-15-
<PAGE>
until LICENSEE has recovered the filing expenses relating to that patent.
6. RIGHTS AND OBLIGATIONS OF LICENSEE.
(a) LICENSEE shall have the right to make modifications, improvements
or enhancements, including ASIC developments (a "CHANGE") to the DEVICE either
by submitting to LICENSOR a request for a CHANGE or by implementing the CHANGE
itself. The implementation of any such CHANGE shall not be deemed to be the
development of an ADDITIONAL DEVICE or any IMPROVEMENT. Any CHANGE implemented
by LICENSEE at its option may be provided to LICENSOR solely for the purposes of
enabling LICENSOR to perform support services as provided herein. If LICENSEE
independently implements a CHANGE, any warranties made by LICENSOR in favor of
LICENSEE will not apply to such CHANGE.
(b) If LICENSEE submits a request for a CHANGE to LICENSOR, such
request shall be in writing. LICENSEE shall pay all engineering costs incurred
for such customization to LICENSEE'S specifications or manufacturing
requirements which shall be billed and accounted for bi-weekly and due net 10
days, on the following basis, namely:
Senior Engineer [*]
Engineer [*]
Programmer [*]
Technician [*]
Research Associate [*]
Project Engineer [*]
and Support [*]
Any miscellaneous buy-out time or materials will be billed at
[*]. All travel necessitated by
and/or requested by LICENSEE shall be billed at [*]
of the above rates and no more than [*] being
charged on any one day.
Within twenty (20) business days of receipt of such request, LICENSOR will
provide LICENSEE with an estimate to implement the CHANGE based on the hourly
rates and costs set forth above. Upon
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-16-
<PAGE>
receipt of a Purchase Order or written authorization from LICENSEE, LICENSOR
shall implement the requested CHANGE in accordance with a schedule to be
mutually agreed upon.
(c) All right, title and interest in and to INTELLECTUAL PROPERTY
created prior to the effective date of this Agreement shall belong to and/or
remain the property of the party who developed, created or otherwise then owns
such INTELLECTUAL PROPERTY and, except for grant of a license to LICENSEE under
Section 2, no license is implied or granted herein to any such existing
INTELLECTUAL PROPERTY except as provided explicitly herein.
All work done by LICENSOR in connection with a CHANGE at LICENSEE'S
written request will be at LICENSEE'S expense as set forth in Section 6(b). Any
resulting INTELLECTUAL PROPERTY created by the parties jointly or individually
in connection with such CHANGE and paid for by LICENSEE shall belong to
LICENSEE. LICENSOR agrees to assign (or cause to be assigned) and does hereby
assign and deliver fully to LICENSEE any INTELLECTUAL PROPERTY RIGHTS which
LICENSOR may obtain as part of developing such CHANGE.
The INTELLECTUAL PROPERTY described above as belonging to LICENSEE shall be
limited to circuit board artworks, resulting optimized biasing resistor and
capacitor coupling values or specific, unique LICENSEE application interfaces.
Any other areas will be mutually agreed to and, specifically listed in a
separate writing signed by the parties. This Section 6 does not, however,
preclude LICENSOR from providing similar engineering services to other
customers, without using any of the INTELLECTUAL PROPERTY of LICENSEE.
(d) LICENSEE shall not be precluded from using LICENSOR'S standard
radio communications protocols, however, LICENSOR agrees to modify LICENSOR'S
standard radio communications protocols to LICENSEE'S specification upon request
by LICENSEE. Such protocols shall be designed with the assistance of LICENSOR
to prevent interference with, or acceptability to, other licensees and
sublicensees of LICENSOR.
(e) It is acknowledged and agreed by LICENSEE that should a PRODUCT
based on LICENSOR'S INTELLECTUAL PROPERTY not be competitive and should LICENSEE
desire to commence the development
-17-
<PAGE>
of an alternative spread spectrum device (hereinafter: "NEW DEVICE") not covered
by LICENSOR'S INTELLECTUAL PROPERTY RIGHTS, such development shall only be
conducted by employees, subcontractors, agents or assigns of LICENSEE who have
not had access to LICENSOR'S INTELLECTUAL PROPERTY licensed herein (including
source code to LICENSOR'S software included in a DEVICE) and such NEW DEVICE
cannot use/infringe on LICENSOR'S INTELLECTUAL PROPERTY, save that LICENSOR
acknowledges and agrees that any such NEW DEVICE would and may transmit and
receive on the same frequencies, have the same spread spectrum parameters and
the same packet data format as employed in other DEVICES manufactured for or by
LICENSEE. It is further acknowledged by LICENSEE that to the extent that any
NEW DEVICE employs the same spread spectrum parameters or data format, and such
spread spectrum parameters are covered by valid claims of any of LICENSOR'S
patents, LICENSEE shall be obligated to continue Section 3(b) ROYALTY payments
to LICENSOR. LICENSOR in turn acknowledges that LICENSEE shall not be
restricted in any other non-spread spectrum radio development which does not
violate LICENSOR'S valid patents or use LICENSOR'S SOURCE CODE.
7. FIRST DEVELOPMENT PROJECT.
(a) LICENSOR agrees to use its best efforts to develop the FIRST
PROJECT PROTOTYPE according to the specifications set forth in Exhibit 5
attached hereto ("DEVELOPMENT SPECIFICATIONS") and in accordance with the
schedule and milestones set forth in Exhibit 6 attached hereto ("Schedule").
Such development shall be deemed a CHANGE made by LICENSOR at the request of
LICENSEE subject to the provisions of Section 6(b) or (c) above, as well as the
terms of this Section 7.
(b) LICENSOR will be responsible for the day to day management and
operation of activities with respect to the development of the FIRST PROJECT
PROTOTYPE. However, LICENSOR agrees to provide LICENSEE with written reports
regarding its work as reasonably requested by LICENSEE, but no more often than
monthly. Representatives of LICENSOR and LICENSEE will meet on a regular basis
at such times and at such locations as are mutually agreed in order to discuss
the status and progress of the development of the FIRST PROJECT PROTOTYPE.
-18-
<PAGE>
(c) Upon completion of a milestone, LICENSOR shall deliver to
LICENSEE the deliverables required to complete such milestone as identified in
the Schedule and the DEVELOPMENT SPECIFICATIONS ("Project Deliverables").
LICENSEE shall have thirty (30) days to review the FIRST PROJECT PROTOTYPE to
verify there are no DEFECTS. If the delivered FIRST PROJECT PROTOTYPE contains
a DEFECT, such failure or DEFECT is to be communicated in writing by LICENSEE to
LICENSOR and LICENSOR shall from the receipt of notification of such failure,
use its best efforts to effect a cure for the DEFECT and to meet the DEVELOPMENT
SPECIFICATIONS within sixty (60) days and redeliver the FIRST PROJECT PROTOTYPE
FOR LICENSEE'S inspection according to the procedure specified above. If upon
redelivery after such sixty (60) day period, the FIRST PROJECT PROTOTYPE is not
acceptable to LICENSEE, LICENSEE may, at its discretion, allow LICENSOR
additional time necessary to cure DEFECT and resubmit the FIRST PROJECT
PROTOTYPE to LICENSEE for acceptance. LICENSEE shall continue to pay all
engineering costs during extensions authorized by LICENSEE.
(d) In the event LICENSOR cannot effect a cure within the sixty (60)
day period (and any extension thereof), LICENSEE shall have the right to either
(i) terminate this Agreement without obligation to pay the fee due under Section
3(a)(iv) upon First PROTOTYPE ACCEPTANCE and return to LICENSOR, any and all
INTELLECTUAL PROPERTY, DELIVERABLES and other information transferred/supplied
by LICENSOR to LICENSEE; provided that LICENSEE'S payment obligations under
Section 3(a)(iii) shall survive, or (ii) obtain rights to use such uncompleted
FIRST PROJECT PROTOTYPE as is and continue the licenses granted hereunder upon
payment to LICENSOR of the fee under Section 3(a)(iv) which would have been due
upon FIRST PROJECT PROTOTYPE ACCEPTANCE, as well as any and all fees due per
this Agreement. In the event LICENSEE chooses to continue this Agreement, upon
payment of the fee due under 3(a)(iv) fee, LICENSOR shall provide LICENSEE with
copies of all designs, drawings, prototypes, TRANSMITTER SOFTWARE (as defined in
Section 7(e)) and any other work in progress directly related to the development
of the FIRST PROJECTED PROTOTYPE, whereupon LICENSEE may complete development if
it chooses.
(e) (i) LICENSOR agrees that after FIRST PROJECT PROTOTYPE
ACCEPTANCE, and the payment by LICENSEE of all amounts due thereon, LICENSOR
shall provide LICENSEE the source code and
-19-
<PAGE>
related documents for the power-meter transmitter software as customized for
LICENSEE ("TRANSMITTER SOFTWARE") as per the terms and conditions contained
within Section 8(c) of this Agreement. If, however, at any point subsequent to
FIRST PROJECT PROTOTYPE ACCEPTANCE but prior to the payment of all amounts due
by LICENSEE upon FIRST PROJECT PROTOTYPE ACCEPTANCE, LICENSOR has agreed to
provide a CHANGE, as requested by LICENSEE as per Section 6, and LICENSOR has
failed to provide such CHANGE by the mutually agreed upon schedule, provided
such failure is not caused by LICENSEE, and LICENSEE has given written notice of
such breach to LICENSOR and LICENSOR has failed to cure such breach within
ninety (90) days thereafter, LICENSOR shall make available to the LICENSEE the
source code and related documentation to TRANSMITTER SOFTWARE pursuant to the
terms set forth in Section 8(c) of this Agreement.
(ii) With regard to this source code for LICENSOR'S receiver
"master" and "slave" software as customized by LICENSOR for LICENSEE
(hereinafter referred to as "ESCROW MATERIAL"), LICENSOR will agree to deposit,
in a sealed package, ESCROW MATERIAL, pursuant to a mutually agreed upon escrow
agreement (hereinafter referred to as "ESCROW AGREEMENT") with a bank or other
mutually agreed upon third party within thirty (30) days after payment of all
amounts required by LICENSEE TO LICENSOR upon FIRST PROJECT PROTOTYPE
ACCEPTANCE. A representative of LICENSEE shall have the right to observe the
sealing and delivery activities to ensure that the required software and
documentation is included.
The ESCROW AGREEMENT shall provide for the following:
(A) LICENSEE shall have the right to all of the ESCROW
MATERIAL upon the occurrence of any of the following:
(1) Liquidation of LICENSOR; or
(2) Filing of insolvency or bankruptcy of LICENSOR
whether voluntary or involuntary which is not
dismissed within sixty (60) days thereafter;
(3) Appointment of a trustee or receiver for LICENSOR.
-20-
<PAGE>
(B) In addition, LICENSEE shall have the right to a portion
of the ESCROW MATERIAL upon the occurrence of the
following:
(1) In the event none of the conditions of Section
7(d)(i) has occurred; and
(2) LICENSEE has requested a CHANGE, per Section 6 and
such change is a material change capable of
realization and a documented DEFECT is found in
the receiver code; and
(3) LICENSOR has not agreed to provide such CHANGE;
and
(4) LICENSEE has given written notice of such to
LICENSOR; and
(5) LICENSOR has failed to complete such CHANGE within
three (3) months after a mutually agreed upon
milestone as per the Schedule.
(C) LICENSEE shall also have the right to receive the
ESCROWED MATERIALS in the event LICENSOR fails to cure
DEFECT within three (3) months after written notice of
such DEFECT from LICENSEE.
(D) LICENSEE shall have the right to the ESCROW MATERIAL,
by giving notice to the ESCROW AGENT with a copy to the
LICENSOR, stating the basis for demand to the ESCROW
MATERIAL. The ESCROW MATERIAL shall be made available
to LICENSEE in accordance with Section 8(c) of this
Agreement. The ESCROW AGENT shall have no
responsibility to determine the truth of any statement
made to it, except to determine the identity of the
parties.
-21-
<PAGE>
(E) Upon release of the ESCROW MATERIAL, or any portion
thereof, the ESCROW AGENT shall notify LICENSOR.
(F) The ESCROW AGENT'S fees and all costs related to this
escrow arrangement shall be borne by LICENSEE, with
LICENSEE having the right to choose the ESCROW AGENT,
subject to the convenience of LICENSOR.
8. CONFIDENTIAL INFORMATION.
(a) As used in this Agreement, the term "Confidential Information"
shall mean any information disclosed by one party to the other pursuant to this
Agreement which is in written, graphic, machine readable or other tangible form
and is marked "Confidential", "Proprietary" or in some other manner to indicate
its confidential nature. Confidential Information may also include oral
information disclosed by one party to the other pursuant to this Agreement,
provided that such information is designated as confidential at the time of
disclosure and reduced to a written summary by the disclosing party, within
thirty (30) days after its oral disclosure, which is marked in a manner to
indicate its confidential nature and delivered to the receiving party.
Confidential Information transferred pursuant to that Nondisclosure Agreement
between the parties dated February 18, 1992 shall be deemed as Confidential
Information under this Agreement, and the provisions of this Section 8 shall be
deemed to replace such Agreement.
(b) Each party shall treat as confidential all Confidential
Information of the other party, shall not use such Confidential Information
except as expressly set forth herein or otherwise authorized in writing, shall
implement reasonable procedures to prohibit the disclosure, unauthorized
duplication, misuse or removal of the other party's Confidential Information and
shall not disclose such Confidential Information to any third party except as
may be necessary and required in connection with the rights and obligations of
such party under this Agreement, and subject to confidentiality obligations at
least as protective as those set forth herein. Without limiting the foregoing,
each of the parties shall use at least the same procedures and degree of care
which it uses to prevent the disclosure of its own confidential information
-22-
<PAGE>
of like importance to prevent the disclosure of Confidential Information
disclosed to it by the other party under this Agreement, but in no event less
than reasonable care.
(c) If, as and when LICENSEE is in receipt of source code information
and/or all documents related to the TRANSMITTER SOFTWARE or the ESCROWED
MATERIAL (hereinafter collectively referred to as "SOURCE CODE"), such SOURCE
CODE shall remain in a locked area under the control of Larsh Johnson or Paul
Cook (hereinafter referred to as the "SOURCE CODE COORDINATOR"). The SOURCE
CODE COORDINATOR and LICENSEE agree to only use the SOURCE CODE under carefully
controlled conditions for the purposes set forth in this Agreement and to inform
all employees who are given access to the SOURCE CODE by LICENSEE that such
materials are confidential trade secrets of LICENSOR and are licensed to
LICENSEE by LICENSOR as such. The SOURCE CODE COORDINATOR and LICENSEE shall
restrict access to only those employees which are identified to LICENSOR in
advance according to the procedure listed in the next sentence of LICENSEE who
have agreed to be bound by a confidentiality obligation which incorporates the
protections and restrictions as set forth herein, and who have a need to know in
order to carry out the purposes of this Agreement. If LICENSEE desires to
change SOURCE CODE COORDINATORS, LICENSEE shall request authorization to make
such change by providing LICENSOR with notice of the transfer of authority
together with a representation that such new SOURCE CODE COORDINATOR agrees to
be bound by confidentiality obligations which incorporate the protection and
restrictions contained herein. LICENSOR agrees to review such request in good
faith and shall accept or reject LICENSEE'S proposal within twenty (20) days of
receipt of request. SOURCE CODE COORDINATOR and LICENSEE agree that as a
precondition to access to SOURCE CODE, LICENSOR is to be given written notice of
a malfunction with the SOURCE CODE and LICENSOR is not able to remedy the
malfunction within five (5) business days of receipt of notice. LICENSEE agrees
to keep a written records of those persons accessing such materials and will
store such materials in a locked area under the control of the SOURCE CODE
COORDINATOR when not in use. The SOURCE CODE COORDINATOR and LICENSEE shall
provide LICENSOR with written notice of the names of the individuals who have
access to such materials and shall take all actions required to recover any such
materials in the event of loss or misappropriation, or to otherwise prevent
their unauthorized disclosure or use. LICENSEE shall be fully
-23-
<PAGE>
responsible for the conduct of all its employees, contractors, agents,
representatives and visitors, who may in any way breach this agreement, such
responsibility to include, but not be limited to, pursuing injunctive relief to
prevent further violations of this Agreement, as well as indemnifying and
holding LICENSOR harmless as a result of a loss, misappropriation, unauthorized
disclosure or use of the SOURCE CODE.
(d) Notwithstanding the above, neither party shall have liability to
the other with regard to any Confidential Information of the other which:
(i) was generally known and available in the public domain at
the time it was disclosed or becomes generally known and available in the public
domain through no fault of the receiver;
(ii) was known to the receiver at the time of disclosure as shown
by the files of the receiver in existence at the time of disclosure;
(iii) is disclosed with the prior written approval of the
discloser;
(iv) was independently developed by the receiver without any use
of the Confidential Information and by employees or other agents of the receiver
who have not been exposed to the Confidential Information, provided that the
receiver can demonstrate such independent development by documented evidence
prepared contemporaneously with such independent development;
(v) becomes known to the receiver from a source other than the
discloser without breach of this Agreement by the receiver and otherwise not in
violation of the discloser's rights; or
(vi) is disclosed pursuant to the order or requirement of a
court, administrative agency, or other governmental body; provided, that the
receiver shall provide prompt, advanced notice thereof to enable the discloser
to seek a protective order or otherwise prevent such disclosure.
-24-
<PAGE>
(e) Each party shall obtain the execution of proprietary non-
disclosure agreements with its employees, agents and consultants having access
to Confidential Information of the other party, and shall diligently enforce
such agreements, or shall be responsible for the actions of such employees,
agents and consultants in this respect.
(f) If either party breaches any of its obligations with respect to
confidentiality and unauthorized use of Confidential Information hereunder, the
other party shall be entitled to equitable relief to protect its interest
therein, including but not limited to injunctive relief, as well as money
damages.
9. MARKING.
(a) LICENSEE agrees to affix to each PRODUCT or the PACKAGE
containing such PRODUCT or to an insertion slip in the package with each PRODUCT
a legible notice reading: "Licensed under one or more of the following
Patents", followed by a list of patent numbers applicable to such PRODUCT taken
from attached Exhibit 1 or as otherwise instructed by LICENSOR.
(b) Neither the granting of the license herein or the acceptance of
royalties hereunder shall constitute an approval of or acquiescence in
LICENSEE'S practices with respect to trademarks, trade names, corporation names,
advertising, or similar practices with respect to the PRODUCT, nor does the
granting of any license hereunder constitute an authorization or approval of, or
acquiescence in the use of any trade name or trademark of LICENSOR or its
affiliates in connection with the manufacture, advertising, or marketing of
PRODUCT; and LICENSOR hereby expressly reserves all rights with respect thereto.
10. DURATION AND TERMINATION/CANCELLATION.
(a) Unless otherwise terminated/canceled as hereinafter set forth,
this Agreement and the licenses under PATENT RIGHTS shall continue from the date
of execution of this Agreement through the expiry date of the last to expire of
any one of the PATENT RIGHTS. The Agreement may be extended on similar terms
upon the mutual agreement of LICENSOR and LICENSEE.
-25-
<PAGE>
(b) LICENSOR shall have the right to terminate this Agreement upon
notice if LICENSEE shall at any time default in its performance of any
obligation hereunder, and such default is not cured within sixty (60) days after
written notice thereof is given by LICENSOR to LICENSEE. LICENSEE shall provide
LICENSOR in every sublicense agreement, an equivalent right to terminate such
SUBLICENSEE'S rights to the INTELLECTUAL PROPERTY licensed hereunder. LICENSEE
or SUBLICENSEE shall have the right to cure any such default up to, but not
after, the giving of such notice of termination/cancellation.
(c) LICENSOR shall have the right to terminate/cancel this Agreement
by giving written notice of termination/cancellation to LICENSEE in the event of
any one of the following, such termination/cancellation being effective upon
receipt of such notice or five (5) days after such notice is mailed, whichever
is earlier:
(i) Liquidation of LICENSEE;
(ii) Insolvency or bankruptcy of LICENSEE, whether voluntary or
involuntary; provided that if involuntary, LICENSOR may only terminate this
Agreement under this Section 10 if such bankruptcy proceeding is not dismissed
within sixty (60) days of filing.
(iii) Failure of LICENSEE to satisfy any judgement against it
relative to this Agreement; or
(iv) Appointment of a trustee or receiver for LICENSEE unless
previously agreed to in writing by LICENSOR.
(d) The waiver of any default under this Agreement by LICENSOR shall
not constitute a waiver of the right to terminate/cancel this Agreement for any
subsequent or like default, and the exercise of the right of
termination/cancellation shall not impose any liability by reason of
termination/cancellation nor have the effect of waiving any damages to which
LICENSOR might otherwise be entitled.
(e) Termination/cancellation of this Agreement, shall in no manner
interfere with, affect or prevent the collection by LICENSOR of any and all sums
of money due to it under this Agree-
-26-
<PAGE>
ment. Upon termination/cancellation of this Agreement for any reason,
LICENSEE'S payments required by Section 3, but not yet due, shall become
immediately due and payable, and LICENSEE'S inventory of DEVICE's for which
payments are not yet required by Section 3 shall either, at LICENSEE'S option,
(i) be included in LICENSEE'S and SUBLICENSEES' payments as though sales of such
DEVICE had taken place prior to termination/cancellation of this Agreement; or
(ii) be destroyed, provided appropriate certification is given to LICENSOR by an
officer of LICENSEE.
(f) LICENSEE shall have the right to terminate this Agreement upon
notice if LICENSOR shall at any time default in its performance of any
obligation hereunder, and such default is not cured within sixty (60) days after
written notice thereof is given by LICENSEE to LICENSOR. LICENSOR shall have
the right to cure any such default up to, but not after, the giving of such
notice of termination/cancellation.
(g) LICENSEE shall have the right to terminate/cancel this Agreement
by giving written notice of termination/cancellation to LICENSOR in the event of
any one of the following, such termination/cancellation being effective upon
receipt of such notice or five days after such notice is mailed, whichever is
earlier:
(i) Liquidation of LICENSOR;
(ii) Insolvency or bankruptcy of LICENSOR, whether voluntary or
involuntary; provided that if involuntary, LICENSOR may only terminate this
Agreement under this Section 10 if such bankruptcy proceeding is not dismissed
within sixty (60) days of filing.
(iii) Failure of LICENSOR to satisfy any judgement against it
relative to this Agreement; or
(iv) Appointment of a trustee or receiver for LICENSOR unless
previously agreed to in writing by LICENSEE.
(h) The waiver of any default under this Agreement by LICENSEE shall
not constitute a waiver of the right to terminate/cancel this Agreement for any
subsequent or like default, and the exercise of the right of
termination/cancellation shall not
-27-
<PAGE>
impose any liability by reason of termination/cancellation nor have the effect
of waiving any damages to which LICENSEE might otherwise be entitled.
(i) This Agreement shall survive the termination of any sublicense
agreement with a SUBLICENSEE by LICENSOR provided LICENSEE is not in default
under this Agreement. Additionally, any sublicense agreement shall survive
termination of this Agreement with LICENSEE; provided that effective immediately
upon termination of this Agreement, LICENSOR shall have the right to enforce
directly all provisions of LICENSEE'S agreements with its SUBLICENSEES with
respect to use of LICENSOR'S INTELLECTUAL PROPERTY and ROYALTY payments pursuant
to the terms of Section 2(d); and provided further that all such licenses with
SUBLICENSEES with respect to LICENSOR'S INTELLECTUAL PROPERTY shall be deemed
converted to nonexclusive licenses. LICENSEE agrees to include provisions in
its sublicense agreements to confirm such rights.
11. WARRANTIES.
(a) LICENSOR warrants to LICENSEE, that it has the right, power and
authority to enter into this Agreement and to grant the license rights granted
hereunder.
(b) LICENSOR warrants that the making of this Agreement by LICENSOR
does not violate any agreement, rights or obligations existing between LICENSOR
and any other person or entity with the exception that a cross license of United
States Letters Patent Number 4,977,577 has been granted to Dicon Systems which
grants Dicon Systems a worldwide, non-exclusive license to use, manufacture,
have manufactured, a product based upon, in whole or in part, United States
Patent Number 4,977,577 and any continuations, divisions, re-issues, re-
examinations and foreign counterparts to the extent such action relates solely
to United States Patent Number 4,977,577.
(c) LICENSOR warrants that during the term of this Agreement, and for
so long as the license granted under Section 2(a)(i) remains exclusive, LICENSOR
shall not license any INTELLECTUAL PROPERTY to any person or entity other than
LICENSEE for the implementation specified in Section 2(a)(i) of this Agreement,
save that nothing in this Agreement shall preclude LICENSOR
-28-
<PAGE>
from licensing INTELLECTUAL PROPERTY to or with Dicon Systems, Ltd. or Disys,
Ltd. for use in the one-way communication of automatic meter readings.
(d) LICENSOR warrants that a transmitter and receiver manufactured
using DELIVERABLES will meet Federal Communications Commission Part 15.126 Rules
for Spread Spectrum Unlicensed Operation.
(e) LICENSOR warrants that DELIVERABLES provided per Section 1(c)
will be free from DEFECTS. If a DEFECT is found LICENSOR will correct DEFECT
and provide updated DELIVERABLES.
(f) LICENSEE agrees to name LICENSOR as an additional insured on its
general liability insurance coverage and hold LICENSOR harmless to the extent of
any potential liabilities which may arise from LICENSEE'S exploitation of
PRODUCTS unless and to the extent that such damages or injuries are due to the
intentional act or gross negligence of LICENSOR. LICENSEE agrees to send
LICENSOR a copy of an insurance binder noting LICENSOR as an additional insured
on LICENSEE'S general liability insurance coverage.
12. MISCELLANEOUS.
(a) PATENT INFRINGEMENT.
(i) LICENSOR, at its own expense, will defend any claims of
patent infringement against the INTELLECTUAL PROPERTY being licensed under this
Agreement. In the case a resulting judgement is made against LICENSEE/LICENSOR,
then LICENSOR will be liable to assist in damage payments with a limit of
seventy five (75) percent of all payments collected from LICENSEE under the
provisions of Section 3 of this Agreement. As of the effective date, to the
best of LICENSOR'S knowledge, the use of the licensed information will neither
infringe any patent, copyright, mask right, nor incorporate proprietary
information belonging to any third party. LICENSOR shall have full control of
the defense of any such suit, and LICENSEE shall render all reasonable
assistance to LICENSOR in connection with any suit to be defended by LICENSOR
and shall have the right to be represented therein by advisory counsel of its
choice at its expense.
-29-
<PAGE>
(ii) In the event that LICENSEE, in exercising the rights granted
under this Agreement, shall be unable to continue to exercise the rights under
this Agreement as a result of the existence of patents or other intellectual
property rights now held or which will be held by others in the field, LICENSOR
may, to minimize its liability under Section 12(a)(1) above, at its sole option
and expense, either: (i) procure for LICENSEE the right to exercise its rights
as granted herein, or (ii) replace or modify the infringing technology so that
it is functionally equivalent but non-infringing products.
(b) PATENT PROTECTION. (i) LICENSOR shall always have the right to
prosecute any entity it believes infringes upon its INTELLECTUAL PROPERTY.
LICENSEE is obligated to render all reasonable assistance requested by LICENSOR
in connection with any action being pursued by LICENSOR; (ii) In the event that
LICENSEE advises LICENSOR of a potential infringement upon LICENSOR'S
INTELLECTUAL PROPERTY and LICENSOR elects not to exercise its right per (i)
above, then LICENSEE shall have the right to prosecute any entity it believes
infringes upon LICENSOR'S INTELLECTUAL PROPERTY doing business in the UDS
Market. LICENSOR is obligated to render all reasonable assistance requested by
LICENSEE at LICENSEE's expense in connection with any action being pursued by
LICENSEE including, without limitation, allowing LICENSEE to name LICENSOR as a
named party where such is required in order to bring an action against an
infringer; and (iii) LICENSEE, at its own expense, has the right to prosecute
any entity which LICENSEE believes infringes upon any technology owned by
LICENSEE pursuant to Section 6 of this Agreement. LICENSOR shall render all
reasonable assistance to LICENSEE in connection with any suit relating to
INTELLECTUAL PROPERTY to be defended by LICENSEE including, without limitation,
allowing LICENSEE to name LICENSOR a named party where such is required in order
to bring an action against an infringer and shall have the right to be
represented therein by advisory counsel of its choice at its expense. LICENSEE
shall have full control of the defense of any such suit involving a potential
infringement of its products using the licensed technology to the extent it does
not conflict with an action by LICENSOR, but LICENSEE shall not be free to
settle the same without the consent of LICENSOR, which consent shall not be
unreasonably withheld. Where LICENSEE brings an action against an infringer
under (ii) above, LICENSEE shall have
-30-
<PAGE>
the right to retain all amounts incurred at settlement or as a result of a
judgment rendered in such case.
13. NOTICES.
(a) All notices, requests, demands and other communications under
this Agreement or in connection therewith shall be given to or be made upon the
respective parties hereto as follows:
TO LICENSEE:
Domestic Automation Company
125 Shoreway Road
San Carlos, CA 94070
Attn: Paul M. Cook, Chairman & CEO
TO LICENSOR:
Axonn Corporation
101 W. Robert E. Lee Boulevard
2nd Floor
New Orleans, LA 70124
Attn: H. Britton Sanderford, Jr., President
Michael L. Eckstein, Esq.
829 Baronne Street
New Orleans, LA 70113
(b) All notices, requests, demands and other communications given or
made in accordance with the provision of this Agreement shall be in writing,
shall be forwarded by registered mail and shall be deemed to have been given
when received by addressee, or upon tender where delivery cannot be accomplished
due to some fault of addressee.
14. CONSTRUCTION AND ASSIGNMENT.
(a) This Agreement shall be binding upon and inure to the benefit of
LICENSOR, its legal representatives, successors, heirs, and assigns. Nothing
contained herein shall prevent LICENSOR from assigning this Agreement to any
successor entity acquiring all or substantially all of its assets whether by
sale,
-31-
<PAGE>
merger, operation or otherwise (including all rights in the INTELLECTUAL
PROPERTY). Additionally, LICENSOR shall have the right to assign or pledge to
any person, without the necessity of obtaining the consent of LICENSEE, all or
any portion of the royalties due LICENSOR hereunder. Also, LICENSOR shall have
the right to assign this Agreement to any entity in which Axonn or H. Britton
Sanderford, Jr., the current president of LICENSOR, owns more than 51% of the
outstanding shares entitled to vote or other controlling equity interest,
subject to LICENSEE'S reasonable approval that such assignee is reasonably
capable of and willing to perform LICENSOR'S obligations under this Agreement.
(b) This Agreement shall be binding upon and inure to the benefit of
LICENSEE its legal representatives, successors, heirs and assigns, and may be
assigned by LICENSEE, without approval from LICENSOR, to any successor entity
acquiring all or substantially all of its assets whether by sale, merger,
operation or otherwise.
(c) This Agreement shall be deemed to be a contract made under the
laws of the State of Louisiana, United States of America, and for all purposes
shall be interpreted in its entirety in accordance with the laws of said State.
No litigation between the signatories to this Agreement shall be instituted or
conducted in any court other than a competent court in the State of Louisiana.
The parties hereby consent to service of process and their agents appointed
herein for such purpose, and agree not to contest the jurisdiction and choice of
law agreed upon in this clause for any reason. In the event this Agreement is
translated into any language other than the English language for any purpose,
the parties agree that the English version shall be the governing version.
(d) Neither LICENSOR nor LICENSEE shall be deemed a joint venturer or
partner of the other nor shall this document be deemed to constitute the parties
hereto to be an association, partnership, unincorporated business or other
separate entity.
(e) At any time or from time to time on and after the date of this
Agreement, each party shall, at the request of the other party (i) deliver to
the requesting party such records, data or other documents consistent with the
provisions of this Agreement, (ii) execute, and deliver or cause to be
delivered, all such
-32-
<PAGE>
assignments, consents, documents or further instruments of transfer or license,
and (iii) take or cause to be taken all such other actions, as the requesting
party may reasonably deem necessary or desirable in order for the requesting
party to obtain the full benefits of this Agreement and the transactions
contemplated hereby.
15. MODIFICATION. This Agreement embodies all of the understandings and
obligations between the parties with respect to the subject matter hereof. No
amendment or modification of this Agreement shall be valid or binding upon the
parties unless made in writing, signed on behalf of each of the parties by their
respective proper officers thereto duly authorized and validated.
16. COMPLIANCE WITH LAWS.
(a) Any payment which requires governmental approval or permission
under Foreign Exchange Control Law or other law, if any, shall be made in
accordance with such law.
(b) LICENSEE agrees to comply with all provisions of the Export
Administration Regulations of the United States Department of Commerce, as they
currently exist and as they may be amended from time to time.
(c) This Agreement may be executed in two (2) or more counterparts,
all of which, taken together, shall be regarded as one and the same instrument.
IN WITNESS WHEREOF the representatives hereunto duly authorized on behalf
of LICENSOR have set their hands hereto this 21 day of August,
1992, and the representatives hereunto duly authorized on behalf of LICENSEE
have set their hands hereto this _____ day of ____________, 1992.
-33-
<PAGE>
DOMESTIC AUTOMATION COMPANY AXONN CORPORATION
By: /S/ Alan H. Bushell By: /S/ H. Britton Sanderford, Jr.
--------------------------- -------------------------------
Alan H. Bushell H. Britton Sanderford, Jr.
Title: Vice President Title: President
Attest: Attest:
/S/ [Signature] /S/ [Signature]
- -------------------------------- --------------------------------
-34-
<PAGE>
EXHIBIT 1
DEVICES AND ADDITIONAL DEVICES
<PAGE>
EXHIBIT 2
SPECIFICATION 6.18.GI5
<PAGE>
EXHIBIT 3
SCHEDULE OF RESTRICTED ENTITIES
[*]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
<PAGE>
EXHIBIT 4
MEMORANDUM OF UNDERSTANDING
<PAGE>
EXHIBIT 5
DEVELOPMENT SPECIFICATIONS
<PAGE>
EXHIBIT 6
DEVELOPMENT SCHEDULE
<PAGE>
ADDENDUM TO THE AGREEMENT BETWEEN
DOMESTIC AUTOMATION COMPANY
AND
AXONN CORPORATION
This Addendum ("Addendum") is entered into as of 8 Nov. 93 ("Effective
Date") by and between DOMESTIC AUTOMATION COMPANY, a California corporation with
principal offices at 125 Shoreway Road, San Carlos, California 94070 ("DAC"),
and AXONN CORPORATION, a Louisiana corporation with principle offices at 101 W.
Robert E. Lee Boulevard, New Orleans, Louisiana 70124 ("Axonn")
WHEREAS, DAC and Axonn entered into that certain Agreement dated August 21,
1992, ("Agreement"), wherein Axonn granted DAC certain rights to manufacture,
use and sell spread spectrum radio products in the UDS MARKET as defined
therein.
WHEREAS, Axonn has previously entered into that certain Agreement with Life
Point Systems Limited Partnership ("Life Point") dated May 12, 1989, together
with any subsequent amendments thereto (collectively, the "Axonn/Life Point
Agreement") wherein Axonn has granted Life Point an exclusive license under much
of the same technology licensed by Axonn to DAC in the Axonn/DAC Agreement to
manufacture, use and sell spread spectrum radio products in the FIRE/SECURITY
MARKET (as defined below) which may or may not include all improvements which
Axonn may make to its spread spectrum technology;
WHEREAS, DAC has entered into a license agreement with Life Point on even
date herewith ("DAC/Life Point Agreement") under which Life Point is granting
DAC certain rights to manufacture, use and sell spread spectrum radio products
in the FIRE/SECURITY MARKET;
WHEREAS, DAC wants to ensure that it shall have the right to utilize any of
the spread spectrum technology which it is licensed under the Agreement in the
FIRE/SECURITY MARKET if such technology is not licensed by Axonn to Life Point,
and Axonn is willing to provide DAC with this assurance:
NOW, THEREFORE IN CONSIDERATION OF THE COVENANTS AND CONDITIONS CONTAINED
HEREIN, THE PARTIES AGREE AS FOLLOWS.
<PAGE>
A. Axonn agrees that to the extent that any ADDITIONAL DEVICES,
IMPROVEMENTS or additions to the INTELLECTUAL PROPERTY ("NEW TECHNOLOGY") which
are licensed by Axonn to DAC hereunder are not included in the exclusive license
granted by Axonn to LIFE POINT SYSTEMS for the FIRE/SECURITY MARKET under the
LIFE POINT AGREEMENT, then Axonn agrees that it shall grant, and does hereby
grant, to DAC a worldwide, nonexclusive right and license (including the right
to sublicense to SUBLICENSEES (as defined in the Agreement) under such NEW
TECHNOLOGY to use, modify, manufacture, have manufactured, sell, lease and
otherwise distribute PRODUCTS in the FIRE/SECURITY MARKET.
B. For purposes of this Addendum, the "FIRE/SECURITY MARKET" shall mean the
following:
1. use of PRODUCTS with UL 985, UL 217, or UL 268 or the like,
smoke/heat initiating detectors, automatic elevator return, sprinkler waterflow
monitoring devices, automatic smoke evacuation systems, pull station monitoring
devices, remote siren activation and automatic door closure devices when used in
conjunction with a local receiving UL 1023, UL 1076, UL 864, UL 985 or
equivalent UL or non UL panel; and
2. use of PRODUCTS with contact input perimeter protection devices,
IR, ultrasonic or microwave motion detection or the like, break glass detection,
entry/exit keypad interface for system activation/deactivation and
panic/emergency button alarms when used in conjunction with a local receiving UL
1023, UL 1637, UL 1076 residential or commercial equivalent or equivalent UL or
non UL fire/security/emergency annunciator panel or system.
C. The parties understand and acknowledge that many PRODUCTS which DAC
may sell or lease in the FIRE/SECURITY MARKET (as defined in the DAC/Life Point
Agreement) may also have uses in the UDS MARKET, and the parties wish to ensure
that DAC will not be obligated to pay royalties to both Axonn and Life Point
upon the sale or lease of any single PRODUCT. Therefore, where a PRODUCT is
first sold or leased to a customer in the FIRE/SECURITY MARKET under the rights
granted to DAC under the DAC/Life Point Agreement for which DAC has paid Life
Point a ROYALTY to Life Point under such agreement, and the customer may also
use the PRODUCT in the UDS MARKET, DAC shall have no obligation to pay Axonn a
ROYALTY under the DAC/Axonn Agreement. However, where an obligation to pay
-2-
<PAGE>
a ROYALTY upon the sale or lease of a PRODUCT arises simultaneously under both
the DAC/Axonn Agreement and the DAC/Life Point Agreement, DAC shall be obligated
to only pay the ROYALTY due under the DAC/Axonn Agreement, and no ROYALTY shall
be due under the DAC/Life Point Agreement.
D. Except as specifically provided above, the terms and the conditions of
the DAC/Axonn Agreement shall remain in full force and effect. Any terms not
specifically defined herein shall have the meanings set forth in the DAC/Axonn
Agreement.
Agreed:
AXONN CORPORATION DOMESTIC AUTOMATION COMPANY
By: /s/ H. Britton Sanderford, Jr. By: /s/ Paul M. Cook
------------------------------ ------------------------------
Title President Title: CEO
-------------------------- ------------------------------
-3-
<PAGE>
SECOND ADDENDUM TO THE AGREEMENT
BETWEEN
DOMESTIC AUTOMATION COMPANY
AND AXONN CORPORATION
This Addendum ("Addendum") is entered into as of 8 Nov. 93 ("Effective
Date") by and between DOMESTIC AUTOMATION COMPANY, a California corporation with
principal offices at 125 Shoreway Road, San Carlos, California 94070 ("DAC"),
and AXONN CORPORATION, a Louisiana corporation with principal offices at 101 W.
Robert E. Lee Boulevard, New Orleans, Louisiana 90124 ("Axonn").
WHEREAS, DAC and Axonn entered into that certain Agreement dated August 21,
1992 together with any subsequent amendments thereto ("Agreement"), wherein
Axonn granted DAC certain rights to manufacture, use and sell spreads spectrum
radio products in the UDS MARKET as defined therein; and
WHEREAS, DAC's CELLNET SYSTEM wide area communications network, once
installed, for the purpose of providing services to the UDS MARKET, may serve as
a backbone for the provision of other services not related to the UDS MARKET
using Axonn's spread spectrum radio technology; and
WHEREAS, both parties believe it would be mutually beneficial to maximize
the number of royalty bearing products which DAC distributes and therefore to
grant DAC the right to distribute spread spectrum radio products based on Axonn
spread spectrum technology for applications outside the UDS MARKET provided that
they are sold in such non-UDS applications only for use with DAC's CELLNET
SYSTEM; and
NOW THEREFORE, in consideration of the covenants and conditions contained
herein, the parties agree to include the following provisions as part of the
Agreement as follows:
1. ADDITIONAL DEFINITIONS. The following changes shall be made to the
definitions included in Section 1:
(a) Section 1(b), the definition of "CELLNET SYSTEM" shall be
modified to read as follows:
<PAGE>
(b) "CELLNET SYSTEM" shall mean a wide area (greater than 50
square miles) communication system developed and marketed by
LICENSEE primarily for the purpose of servicing the UDS MARKET
and which may be expanded on a secondary function basis. The
architecture of the CELLNET SYSTEM is cellular in nature, where
Cell Masters of greater range control and/or communicate with the
cell masters of smaller, nestled cells, which, ultimately,
control, communicate with and/or monitor a number of individual
end points.
(b) Section 1(o), the definition of "SUBLICENSEE" shall be modified
to read as follows:
(o) "SUBLICENSEE", for purposes of the UDS MARKET, means any
entity which has entered into a sublicense arrangement with
LICENSEE whereby the sublicense agreement grants such SUBLICENSEE
the right to manufacture and sell PRODUCT to any entity selling
to the UDS MARKET for the sole purpose of incorporating PRODUCT
into CELLNET compatible devices. With regard to the NON-UDS
MARKET, the right to grant sublicenses to SUBLICENSEES for the
sole purpose of manufacturing, using and selling PRODUCTS in
CELLNET SYSTEM compatible devices outside the UDS MARKET shall be
limited to SUBLICENSEES which (i) have as their primary business
activity either the UDS MARKET or are a manufacturer of utility
meters ("UDS Companies"), (ii) are AFFILIATES of such UDS
Companies, or (iii) are AFFILIATES of LICENSEE. SUBLICENSEES
shall not have the right to grant further sublicenses.
(c) Add the following as a new definition at the end of Section 1:
(q) "AFFILIATE" of a party (the "Subject") shall mean an entity
that through one or more intermediaries, controls, is controlled
by or is under common control with the Subject. For
corporations, "Control" shall mean, among other things, the
direct
-2-
<PAGE>
ownership of more than fifty percent (50%) of its outstanding voting securities.
For partnerships, control shall mean among other things, the ownership of a
controlling partnership interest in excess of fifty percent (50%).
2. LICENSE. Section 2(a) of the Agreement shall be deemed to be amended
to add the following license as Section 2(a)(iii):
(iii) LICENSOR hereby grants to LICENSEE a worldwide, nonexclusive
right and LICENSE, with the right to grant and authorize
sublicenses pursuant+ to Agreement and any amendment to the
Agreement and specifically including, but not limited to
Section 2(b)++ and 2(c) of the Agreement and subject to
Paragraphs 3(a) and 3(b) of this Addendum, under the
LICENSOR'S INTELLECTUAL PROPERTY to use, modify,
manufacture, have manufactured, sell, lease and otherwise
distribute PRODUCTS for applications outside of the
UDS MARKET; provided that such PRODUCTS are used to
communicate to a CELLNET SYSTEM.
+ Agreement and any amendment to the Agreement and specifically
including, but not limited to,
++ and 2(c)
3. RESTRICTIONS. The following restrictions shall apply to the license
grant under Paragraph 2 above, not withstanding any terms and conditions to the
contrary in the Agreement:
(a) The parties understand and acknowledge that the applications
outside the UDS MARKET which DAC may exploit using CELLNET SYSTEM under this
license may include, without limitation: traffic signal
control/synchronization; pager message receipt verification; copier and other
machine service signaling; one and two way digital data communications (e.g.
e-mail); vending machine monitoring; point of sale credit authorization and/or
transaction processing, including lottery ticket sales and off track betting;
information and entertainment access control and billing, including impulse pay
per view cable television; automated vehicle monitoring and tracking; and home
health marketing. DAC agrees to notify Axonn of the initiation of negotiations
for exploitation of the PRODUCTS in an application outside the UDS MARKET which
Axonn had not previously been notified about, and the parties shall decide at
that time whether such application fits into the Personal/Residential or
Commercial/Industrial category.
-3-
<PAGE>
(b) Notwithstanding anything in the Agreement or any Addendum to the
Agreement to the contrary, the license shall not grant DAC any right to
manufacture, use or sell PRODUCTS for time of flight measurement, voice
communications or fire, security and access control applications.
4. EXCLUDED SUBLICENSEES. Exhibit 3 to the Agreement shall be amended to
include those entities listed on Exhibit A attached hereto. DAC's rights to
grant sublicenses to these entities shall be limited as provided in Section 2(c)
of the Agreement.
5. CONSIDERATION.
(a) As partial consideration for the license granted under this
addendum, DAC agrees to pay Axonn a pre-paid license fee of [*], the first
[*] of which shall be paid by DAC within fifteen (15) days after the
Effective Date of this Addendum, and the remaining [*] shall be paid by DAC
within forty five (45) days after the Effective Date.
(b) The full amount of all pre-paid license fees paid under Paragraph
5(a) above shall be creditable against up to [*] of ROYALTIES
payable by DAC to Axonn under the Agreement until such time as the credits taken
by DAC under this Paragraph 5(b) shall equal the full amount of pre-paid license
fees paid by DAC to Axonn under Paragraph 5(a) above.
(c) LICENSEE agrees to pay LICENSOR a royalty on each PRODUCT sold or
leased by it outside the UDS MARKET pursuant to the rights granted under the
license set forth in Paragraph 2 above based upon (i) what kind of device the
PRODUCT is and (ii) the primary environment for which such PRODUCT is deployed,
as set forth in the following table:
PERSONAL/RESIDENTIAL MIXED COMMERCIAL/INDUSTRIAL
Transmitter: [*] [*] [*]
Receiver: [*] [*] [*]
Transceiver: [*] [*] [*]
ROYALTIES on Products sold in the UDS MARKET shall continue to be those set
forth in Section 3 of the Agreement.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-4-
<PAGE>
(A) Whether a PRODUCT is best classified as used in a
Personal/Residential environment or a Commercial/Industrial environment shall be
based upon the viewpoint of a neutral third party familiar with the wireless
communications industry. For purposes of this Agreement, the parties agree as
follows:
(i) Personal/Residential applications shall be those
applications which are embodied in PRODUCTS utilized by individual
consumers for their use on their persons, in the home or in their
automobile. For purposes of this Agreement, the parties agree that
information and entertainment access control and billing, including impulse
pay for view cable television and home health monitoring shall be deemed
Personal/Residential applications.
(ii) Commercial/Industrial applications are those applications,
whether private or public related, which are not Residential/Personal
applications which are associated with the business activity.
Applications installed are intended for use inside hotels, offices,
manufacturing facilities, stadiums, hospitals or other commercial
structures shall be deemed to be a Commercial/Industrial application.
The parties agree that traffic signal control/synchronization; copier
and other machines service signalling; and point of sale credit
authorization and/or transaction and processing, including lottery
ticket sales and off-track betting shall be deemed
commercial/industrial applications.
(iii) "Mixed" applications shall be those applications which the
parties can envision substantial uses in both the Personal/Residential
and Commercial/Industrial areas. For purposes of this Agreement, the
parties agree that pager message receipt verification, one and two way
digital data communications (e.g. e-mail) and automatic vehicle
monitoring and tracking shall be deemed Mixed applications.
(iv) Additional applications identified by LICENSOR to LICENSEE
pursuant to Section 3 above shall be categorized as they are
identified.
-5-
<PAGE>
(B) Where the parties are unable to agree as to the proper
classification of a PRODUCT, such dispute in itself shall not be deemed a breach
of this Agreement, but rather the question of which category such PRODUCT
properly falls in shall be settled as provided below:
(C) For any dispute as to proper classification of a Product, the
parties shall first attempt to first negotiate in good faith a written
resolution of such dispute for a period not to exceed thirty (30) days from the
date of receipt of a party's request for such negotiation. Such negotiations
shall be conducted by Chief Executive Officers of each party, or other senior
officer appointed by the CEO who have authorization to resolve any such dispute.
In the event the parties cannot negotiate a written resolution to such dispute
during this thirty(30) day negotiation period, the parties shall then submit
such dispute or claim to nonbinding mediation with Judicial Arbitration &
Mediation Services ("JAMS") in Santa Clara County, California. The mediation
may be initiated by the written request of either party to the other party,
shall commence within fifteen (15) days of receipt of such notice and shall be
conducted in accordance with the standard mediation procedures established by
JAMS, unless otherwise agreed by the parties. The mediation shall not exceed a
period of thirty (30) days. Each party shall bear its own expenses in any such
mediation; provided that the parties shall split the costs charged by JAMS.
(D) The parties understand and acknowledge that PRODUCTS sold for
applications outside the UDS MARKET may, by their requirement to be integrated
with a CELLNET SYSTEM owned or leased to a customer in the UDS MARKET, also
fall within the definition of PRODUCTS on which royalties are due under Section
3(b) of the Agreement, and the parties wish to ensure that they will not be
obligated to pay two royalties to Axonn upon the sale or lease of a single
PRODUCT. Therefore, DAC shall pay ROYALTIES under Section 2(b) of the Agreement
on all PRODUCTS which have application within the UDS MARKET, and shall pay
ROYALTIES under Paragraph 5(c) of this Addendum on those PRODUCTS which have no
application within the UDS MARKET other than communication with a CELLNET
SYSTEM; provided that in no event shall two royalties be due upon the sale of a
single PRODUCT.
-6-
<PAGE>
6. ACKNOWLEDGEMENT. Except as specifically provided above, the terms and
conditions of the Agreement shall remain in full force and effect and the rights
granted herein shall be subject to the terms and conditions therein. Any terms
not specifically defined herein shall have the meaning set forth in the
Agreement.
DOMESTIC AUTOMATION CORPORATION AXONN CORPORATION
By: /s/ Paul M. Cook By: /s/ H. Britton Sanderford, Jr.
-------------------------- ------------------------------
Name: Paul M. Cook Name: H. Britton Sanderford, Jr.
-------------------------- ------------------------------
Title: CEO Title: President
-------------------------- -----------------------------
-7-
<PAGE>
ATTACHMENT 2(g) CONTAINING THE SECOND UNITED STATES OF AMERICA
NEXT GENERATION LICENSE AGREEMENT
BY AND BETWEEN
STATE OF LOUISIANA
CELLNET DATA SYSTEMS, INC.
AND
PARISH OF ORLEANS
AXONN CORPORATION
THIS attachment (the "Attachment") contains the Second Next Generation
License Agreement ("NGL") entered into as of this twenty fifth day of March,
1996 ("effective date") by and between CellNet Data Systems, Inc., a California
corporation with principal offices at 125 Shoreway Road, San Carlos, California
94070 ("CellNet") and Axonn Corporation, a Louisiana corporation with principal
offices at 101 West Robert E. Lee Boulevard, New Orleans, Louisiana 70124
("Axonn").
W I T N E S S E T H:
WHEREAS, CellNet and Axonn had entered into that certain agreement dated
August 21, 1992 together with any subsequent amendments thereto ("Agreement")
wherein Axonn granted CellNet certain rights to manufacture, use and sell spread
spectrum radio products in the UDS market as well as other fields of use;
<PAGE>
WHEREAS, Agreement provides that Axonn will agree to offer to CellNet,
license rights to NEXT GENERATION DEVICES developed by Axonn during the term of
the Agreement, subject to all of the terms and conditions of the Agreement, with
the exception of any initial license fee and royalty rate as well as other
agreed upon modifications to the Agreement which will be mutually negotiated by
the parties by way of an attachment to the Agreement;
WHEREAS, Axonn has developed a digital spread spectrum transceiver
technology that has significant performance advantages over the original
"ADDITIONAL DEVICE" spread spectrum transceiver and the cost of the development
of this technology was in excess of [ * ], qualifying it as a NEXT
GENERATION DEVICE;
WHEREAS, Agreement provides that to the extent any INTELLECTUAL PROPERTY is
licensed by Axonn to CellNet which is not included in the exclusive license
granted by Axonn to Life Point Systems Limited Partnership ("Life Point") for
the FIRE/SECURITY MARKET under the license agreement by and between Axonn and
Life Point ("NEW TECHNOLOGY"), CellNet is to be granted a worldwide, non-
exclusive right and license under such NEW TECHNOLOGY as the term is defined in
the Agreement to use, modify, manufacture, have manufactured, sell and otherwise
distribute PRODUCTS in FIRE/SECURITY MARKET;
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-2-
<PAGE>
WHEREAS, Agreement provides that in the event any INTELLECTUAL PROPERTY
licensed by Axonn to CellNet subsequently becomes included in the exclusive
license granted by Axonn to Life Point for the FIRE/SECURITY MARKET, the terms
of any licenses granted by Axonn to CellNet for such INTELLECTUAL PROPERTY will
remain unchanged, and if CellNet is paying Axonn a ROYALTY for PRODUCTS based on
such INTELLECTUAL PROPERTY, CellNet will not be required to pay any ROYALTY to
Life Point for such PRODUCTS;
WHEREAS, CellNet desires to incorporate this NEXT GENERATION DEVICE
technology into its PRODUCT, and each party agrees as follows:
1. GRANT.
Axonn grants CellNet: (1) a non-exclusive license to make, modify,
manufacture, have manufactured, sell, lease and otherwise dispose of the digital
transceiver product developed by Axonn ("NG TRANSCEIVER DEVICE") which utilizes
patents and patents pending listed on Exhibit A to this Addendum in accordance
with the terms and conditions contained within the Agreement, and (2) an
exclusive license, to the extent specifically noted and provided for within
Section 2(a)(i) of the Agreement, with respect to the NG TRANSCEIVER DEVICE in
the fields of use specified in such Section 2(a)(i). This NGL is limited to the
fields of use as defined in Agreement.
2. CONSIDERATION.
(a) As partial consideration for the NGL granted pursuant to this
Attachment, CellNet agrees to pay Axonn a license
-3-
<PAGE>
fee of [ * ] to be paid per the milestone schedule in Exhibit B, namely:
(i) Payment of [ * ] to Axonn will occur upon execution of
this Attachment by CellNet and Axonn.
(ii) Payment of [ * ] to Axonn will occur upon completion of
the PRELIMINARY DESIGN REVIEW MILESTONE.
(iii) Payment of [ * ] to Axonn for the PROTOTYPE DVT REVIEW
MILESTONE will occur within 2 days of the completion of such PROTOTYPE
DVT REVIEW MILESTONE unless CellNet has notified Axonn of a DEFECT
with the Prototype DVT Review Deliverables within such 2 day period
after the completion of the PROTOTYPE DVT REVIEW MILESTONE. If
CellNet notifies Axonn of a DEFECT, the provisions of subsection 2(b)
below shall apply.
(iv) Payment of [ * ] to Axonn for the DELIVERY OF BETA
DOCUMENTATION MILESTONE will occur within 2 days of the completion of
such DELIVERY OF BETA DOCUMENTATION MILESTONE unless CellNet has
notified Axonn of a DEFECT with the Beta Documentation Deliverables
within such 2
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-4-
<PAGE>
day period after the DELIVERY OF BETA DOCUMENTATION MILESTONE. If
CellNet notifies Axonn of a DEFECT, the provisions of Section 2(b)
below shall apply.
In the event that Axonn completes the DELIVERY OF BETA
DOCUMENTATION MILESTONE before the scheduled date (the "Scheduled
Date") for completion of such milestone as listed in Exhibit B, for
every week that Axonn completes such DELIVERY OF BETA DOCUMENTATION
MILESTONE in advance of the Scheduled Date, the payment for completion
of the DELIVERY OF BETA DOCUMENTATION MILESTONE shall increase by
[ * ] (up to a maximum increase of [ * ]) and the aggregate
Incentive Royalty Payment (defined in Section 2(d) below) shall
decrease by [ * ] (up to a maximum decrease of [ * ]).
(v) Payment of [ * ] to Axonn for the BETA DVT REVIEW
MILESTONE will occur at the earlier of: (1) 2 days after the
completion of the BETA DVT MILESTONE ("BDR Payment Date 1"), or (2) 90
days after the date of the DELIVERY OF BETA DOCUMENTATION MILESTONE
("BDR Payment Date 2") unless CellNet has notified Axonn of a DEFECT
with such Beta DVT Review before the earlier to occur of either BDR
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-5-
<PAGE>
Payment Date 1 or BDR Payment Date 2. If CellNet notifies Axonn of a
DEFECT, the provisions of Section 2(b) below shall apply.
(vi) Payment of [ * ] to Axonn will occur upon completion of the
RELEASE OF FINAL DOCUMENTATION MILESTONE.
(b) In the event CellNet informs Axonn of a DEFECT pursuant to the
procedures outlined in subsections 2(a)(iii) - (v) above, the milestone that
corresponds to the payment that was to have been made in such subsection (the
"Corresponding Milestone") will be deemed to have not occurred and Axonn will
undertake to correct such DEFECT. Once Axonn has determined that it has
corrected such DEFECT and has resubmitted the Corresponding Milestone
deliverables to CellNet, such Corresponding Milestone will be deemed complete,
and the payment for such Corresponding Milestone will be made subject to the
procedures stated in subsections 2(a)(iii)-(v) above.
(c) Upon completion of a milestone, Axonn shall deliver to CellNet
the deliverables as noted in Exhibit C required to complete such milestone as
identified in the schedule noted in Exhibit B. In the event Axonn fails to
complete any milestone
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-6-
<PAGE>
within ninety (90) days after the date such milestone was to be completed as per
Exhibit B, or a deliverable due under a milestone includes a DEFECT, as defined
in Agreement, then notwithstanding Section 2(b) above, CellNet may complete the
development of the NG TRANSCEIVER DEVICE if it chooses and Axonn would not be
entitled to the remainder of the milestone payments, provided such delay of
completion or DEFECT is not caused by CellNet. In the event CellNet decides to
complete the development of the NG TRANSCEIVER DEVICE, Axonn shall promptly
deliver to CellNet any prototypes, documentation, and technical materials
related to the NG TRANSCEIVER DEVICE which are necessary for CellNet to complete
the development of the NG TRANSCEIVER DEVICE to the extent such materials have
not already been provided. Notwithstanding the above, if Axonn has diligently
pursued correction of the DEFECT or completion of the scheduled milestone then
Axonn may request an appropriate time extension from CellNet to cure such DEFECT
and/or provide such milestone deliverables and such grant of an extension cannot
be unreasonably withheld.
(d) In consideration for Axonn's timely completion of the
DELIVERY OF BETA DOCUMENTATION MILESTONE, CellNet is also required to pay Axonn
an Incentive Royalty Payment which initially shall be equal to [ * ].
The Incentive Royalty Payment will be decreased by any amounts advanced to Axonn
pursuant to
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-7-
<PAGE>
Section 2(a)(iv) above for early completion of the DELIVERY OF BETA
DOCUMENTATION MILESTONE. In addition, the Incentive Royalty Payment will be
decreased by [ * ] (a "Late Penalty") for every month that the completion of
the BETA DVT REVIEW MILESTONE is delayed beyond the scheduled date for
completion of such milestone as listed in Exhibit B, provided that any delay
relating to such milestone was not caused by CellNet or by act of God or force
majeure or other cause beyond Axonn's control. In no event shall the Incentive
Royalty Payment be less than $0. Notwithstanding the foregoing, no Late Penalty
will be applied to the Incentive Royalty Payment in the event that: (1) Axonn
completes the DELIVERY OF BETA DOCUMENTATION MILESTONE on or before September 1,
1996, and (2) CellNet fails to inform Axonn, within ninety (90) days of the date
Axonn completes the DELIVERY OF BETA DOCUMENTATION MILESTONE, of any DEFECT in
the deliverables associated with such DELIVERY OF BETA DOCUMENTATION MILESTONE,
or with any DEFECT in achieving the BETA DVT REVIEW MILESTONE.
If the Incentive Royalty Payment is greater than $0 at the time that
CellNet commences production of NG TRANSCEIVER DEVICES, CellNet shall pay the
Incentive Royalty Payment to Axonn as follows: for each of the first [ * ] NG
Transceiver Devices
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-8-
<PAGE>
produced by CellNet, CellNet will pay Axonn an amount equal to the Incentive
Royalty Payment, divided by [ * ].
(e) As additional consideration, the transceiver ROYALTY to be paid
upon the sale, lease or disposition of any transceiver utilizing INTELLECTUAL
PROPERTY associated with this NGL shall be increased [ * ] per transceiver.
(f) In the event CellNet chooses to complete the NG TRANSCEIVER
DEVICE development and successfully completes the BETA DVT REVIEW MILESTONE
prior to the expiration of 15 months from the date such milestone was to have
been completed as listed in Exhibit B, CellNet shall pay Axonn an amount equal
to the Incentive Royalty Payment that Axonn would have earned based on the date
that CellNet successfully completes the BETA DVT REVIEW MILESTONE, plus all
milestone payments that were not paid to Axonn, less all documented engineering
development expenses incurred by CellNet. Additionally, under no circumstances
will Axonn be required to refund any previously paid milestone payments.
Notwithstanding the foregoing, no Late Penalty will be applied to the Incentive
Royalty Payment in the event that: (1) Axonn completes the DELIVERY OF BETA
DOCUMENTATION MILESTONE on or before September 1, 1996, and (2) CellNet fails to
inform Axonn, within ninety (90) days of the date Axonn completes the DELIVERY
OF BETA DOCUMENTATION MILESTONE, of any DEFECT in the deliverables
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-9-
<PAGE>
associated with such DELIVERY OF BETA DOCUMENTATION MILESTONE, or with any
DEFECT in achieving the BETA DVT REVIEW MILESTONE.
3. SOURCE CODE.
(a) Axonn's SOURCE CODE is its best and closest secret. With regard
to the disclosure of the "SOURCE CODE" information, such information shall be
provided to Larsh Johnson or such other individual noted as the "SOURCE CODE
COORDINATOR". The SOURCE CODE COORDINATOR and CellNet agree to only use the
SOURCE CODE under carefully controlled conditions for the purposes set forth in
the Agreement and to inform all employees and agreed upon consultants who are
given access to the SOURCE CODE by CellNet that such materials are confidential
trade secrets of Axonn and are licensed to CellNet by Axonn as such. The SOURCE
CODE COORDINATOR and CellNet shall restrict access to only those employees which
are identified to Axonn in advance according to the procedures listed in the
Agreement and such employees shall have agreed to be bound by confidentiality
obligation which incorporates the protections and restrictions as set forth in
the Agreement and who have a need to know in order to carry out the purposes of
the Agreement. The Source Code may NOT be disclosed to consultants, agents or
other individuals or companies that are not employees of CellNet without
-10-
<PAGE>
the written consent of Axonn and such consent may be unreasonably denied.
(b) CellNet shall be provided the source code for the ADDITIONAL
DEVICE at the earlier to occur of: (1) two weeks after the completion of the
Prototype DVT Review Milestone, pursuant to the deliverables specified for such
milestone in Exhibit C; or (2) ninety days following the date that the Prototype
DVT Review Milestone was to have been completed, as specified in Exhibit B.
Such source code information shall be controlled by CellNet in accordance with
the terms of the Agreement and this Attachment.
4. TREATMENT OF HOPPER.
The "Hopper," which was partially funded by CellNet, is to be treated
as a NEXT GENERATION DEVICE. Upon development of a NEXT GENERATION DEVICE
incorporating the hopper technology, Axonn will offer such technology to
CellNet, in accordance with the Agreement, and will discount the up-front fees
by [ * ].
5. PURCHASE RIGHTS.
Axonn shall be granted the right to purchase the NG TRANSCEIVER
DEVICES from CellNet at CellNet's direct cost plus a [ * ] overhead percentage
adder.
6. PROMOTION.
Axonn is to be informed of CellNet's business activities and future
plans when appropriate, and additionally, CellNet will
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-11-
<PAGE>
mention Axonn as licensor in all appropriate press releases, brochures and
promotional materials. This promotional enclosure shall begin on or before one
(1) year subsequent to the successful field installation of the new
transceivers.
7. SPECIFICATIONS AND DELIVERABLES.
A. TRANSCEIVER TECHNICAL SPECIFICATIONS
The transceiver technical specifications areas mutually agreed
upon are noted on Exhibit D.
B. TRANSCEIVER COST
The Transceiver production costs are to be estimated in
quantities of [ * ] annually and total direct materials costs may not exceed
[ * ] including PCB and excluding the costs of the housing and connectors.
CellNet will provide costs for all standard CellNet part numbers.
Axonn will present a costed Bill of Materials at each Milestone
for CellNet's review.
C. DELIVERABLES
Deliverables mutually agreed upon are noted on Exhibit C.
Deliverables at each Milestone will be per CellNet's Product Life Cycle manual.
The PLC, DFT and DFX manuals shall be provided to Axonn and agreed to prior to
execution and shall then be frozen. Specifically included are the following:
1. All source code for the NG TRANSCEIVER DEVICE;
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-12-
<PAGE>
2. Complete Theory of Operations for all RF and Digital
Circuitry, Signal Processing, and Control Logic as implemented in firmware;
3. Documented Lab View-based receiver simulation software that
matches actual unit performance and includes an instruction manual;
4. PCB layouts in PADS 2000 format on or before the DELIVERY OF
BETA DOCUMENTATION MILESTONE;
5. Bill of Materials with CellNet part Numbers. CellNet will
contribute to this effort;
6. Complete Source Control specifications for all components
not on CellNet's current Approved Vendor List. All critical component
parameters and tolerances to be called out in this specification.
D. MANUFACTURABILITY
100% PCB test point availability, to be determined based on size
and performance trade-offs. All materials used in the design will be sourced
first from CellNet's Approved Vendor List. Single-sourced and custom components
to be approved by CellNet at the PRELIMINARY DESIGN REVIEW MILESTONE and such
approval cannot be unreasonably withheld. Deliverables must meet CellNet DFX
requirements or be approved prior to THE COMPLETE ALPHA
-13-
<PAGE>
DOCUMENTATION MILESTONE, such approval cannot be unreasonably withheld.
E. DEVELOPMENT PROCESS AND PROJECT MANAGEMENT
1. At each Milestone, Axonn will commit two (2) days of the
Development Team's time to present and review the Deliverables with CellNet and
address any questions that arise. Additional time will be billed hourly.
2. Axonn will provide two (2) hours no charge per week for
project updates (via a visit or conference call) between Axonn's Project Manager
and CellNet's Project Manager.
3. At the PRELIMINARY DESIGN REVIEW MILESTONE, the RF, Digital
and Firmware designs are to be presented. Prior to the Design Review, Axonn
will deliver a Preliminary Theory of Operation and design documentation package
in order for CellNet's engineers to prepare. Axonn will deliver formal Theory
of Operation by completion of the RELEASE OF FINAL DOCUMENATION MILESTONE.
4. All Milestone DVT Plans will be mutually agreed to by Axonn
and CellNet. Conceptually, each DVT will be designed to verify operation over
voltage and temperature for successively higher levels of performance and under
more demanding stress levels. First proto tests shall be conducted at Axonn and
witnessed by CellNet staff (at CellNet's option), whose time shall
-14-
<PAGE>
be made available to coincide with Axonn's schedules. Alpha DVT Tests will be
conducted at Axonn and Beta DVT tests shall be performed at CellNet, whereby
Axonn will have the right, at its own expense, to send an engineer to witness
part or all of CellNet's DVT process.
The alpha build will be performed by Axonn and the beta build will be performed
by CellNet.
Four alpha units built by Axonn will be used for Alpha DVT and four beta units
built by CellNet will be used for Beta DVT.
-15-
<PAGE>
This Attachment may be executed in counterparts, and a facsimile copy of this
Attachment, signed by either party and transmitted to the other party, shall
constitute a binding signature to this Attachment.
Offered To: CELLNET DATA SYSTEMS
Offered By: /s/ H. Britton Sanderford Jr.
-----------------------------
Date: 3/25/96
-----------------------------
H. Britton Sanderford, Jr.
AXONN CORPORATION
President
Accepted By: /s/ John M. Seidl
-----------------------------
Date: 3/25/96
-----------------------------
John M. Seidl
CELLNET DATA SYSTEMS
President and Chief
Executive Officer
-16-
<PAGE>
EXHIBIT A
NG TRANSCEIVER DEVICE
Patents and Patents Pending
[*]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-17-
<PAGE>
EXHIBIT B
MILESTONE SCHEDULE
MILESTONE DATE COMPLETED PAYMENT DUE
Execution of Attachment [*] [*]
Preliminary Design Review [*] [*]
Start Prototype DVT+ [*] [*]
Prototype DVT Review [*] [*]
Complete Alpha Documentation+ [*] [*]
Alpha Units Available+ [*] [*]
Complete Alpha DVT and review+ [*] [*]
Delivery of Beta Documentation [*] [*]
Beta Units Available+ [*] [*]
Complete Beta DVT+ [*] [*]
Beta DVT Review [*] [*]
Release Final Documentation [*] [*]
[ * ]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-18-
<PAGE>
EXHIBIT C
AXONN DSP TRANSCEIVER DELIVERABLES
25 MARCH 1996
ASSUMPTIONS
Full hand-off of design to Cellnet in Cellnet format
Axonn does proto and alpha DVT and redesign as required
Cellnet does beta DVT and field tests as required
Cellnet does FCC compliance
Cellnet does PGE certification test
Axonn does reliability prediction and redesign as required
Cellnet does reliability burn-in and redesign as required following production
Axonn does all documentation except market forecast, product plan, product cost,
MPIs, MCC hardware
manual modifications, PGE certification test plan and report, manufacturing
plan, Cellnet Beta DVT and
field test procedures and reports and labels.
Design Review includes manufacturability and testability reviews
Axonn builds 5 alpha units, Cellnet builds 5 alpha and 20 beta units
PROJECT MILESTONES (see Exhibit B)
AXONN DELIVERABLES
PRELIMINARY DESIGN REVIEW DELIVERABLES
1 WEEK PRIOR TO PRELIMINARY DESIGN REVIEW
Preliminary Specifications in hardcopy
Preliminary Prototype Test Plan in hardcopy
Receiver Simulation in Labview
Prototype Schematics in hardcopy
RF
Digital
Prototype Firmware Source Listings in hardcopy
Preliminary Theory of Operations in hardcopy
Prototype Block Diagrams in hardcopy
RF
Digital
Firmware
Prototype Gerber Files including silkscreen
RF
Digital
List of Exceptions to Cellnet DFX Guidelines in hardcopy limited to
Testability, section 2, Datatest mechanical and electrical ATE guidelines,
Printed Circuit Design Rules, section 3,
List of sole or single source parts in prototype in hardcopy
List of parts with performance not specified over full temperature range in
prototype in hardcopy
-19-
<PAGE>
PROTOTYPE DVT REVIEW DELIVERABLES
2 WEEKS AFTER COMPLETION OF PROTOTYPE DVT REVIEW
Action Items from Design Review in Word
Summary of Resolution of Design Review Action Items in Word
Project Schedule in Microsoft Project
Product Specification in Word
Block Diagrams in Micrographics Designer exported for Autocad
Firmware
RF
Digital
Alpha DVT Test Plan and Procedures in Word
Theory of Operations including algorithm descriptions, design tradeoffs, design
margins, circuit and
firmware operation, timing diagrams in Word, Spice and Monte Carlo simulations
Firmware
RF
Digital
Schematics and Schematic Netlists in Protel
Component Library
RF
Digital
Costed Bill of Materials in Word
RF
Digital
Top
Source Control Drawings for all parts not in Cellnet's Approved Vendor List in
Autocad
Reliability prediction with 10% stress and 25 degree C temperature in Bellcore
format
List of sole or single source parts in Word
List of parts with performance not specified over full temperature range in Word
Firmware Source Code in Assembly Language
Firmware Link and Load Scripts in DOS
Firmware Object Code in Intel Hex
Fabrication Drawings in Autocad
RF
Digital
Shields
Gerber Plots in Protel
RF
Digital
PC Layouts in Protel
RF
Digital
Assembly Drawings in Autocad
RF
Digital
Top
DVT Test Results in Word
Prototype
One functional prototype NG TRANSCEIVER DEVICE meeting Specification as measured
during the Prototype DVT
-20-
<PAGE>
DELIVERY OF BETA DOCUMENTATION DELIVERABLES
Action Items from Alpha DVT Review in Word
Summary of Resolution of Alpha DVT Review Action Items in Word
Product Specification in Word
Receiver Simulations in Labview
Final Block Diagrams in Micrographics Designer exported to Autocad
Firmware
RF
Digital
Theory of Operations in Word
Firmware
RF
Digital
Final Schematics and Schematic Netlists in Orcad
Component Library
RF
Digital
Final Costed Bill of Materials in Word
RF
Digital
Top
Source Control Drawings for all parts not in Cellnet's Approved Vendor List in
Autocad
Reliability prediction with 10% stress and 25 degree C temperature in Bellcore
format
Final list of sole or single source parts in Word
Final list of parts with performance not specified over full temperature range
in Word
Firmware Source Code in Assembly Language
Firmware Object Code in Intel Hex
Final Fabrication Drawings in Autocad
RF
Digital
Shields
Final Gerber Plots in Pads
RF
Digital
Final PC Layouts in Pads
RF
Digital
Final Assembly Drawings in Autocad
RF
Digital
Top
Alpha DVT Test Results in Word
Two Alpha NG TRANSCEIVER DEVICES meeting Specifications as measured during the
Alpha DVT
-21-
<PAGE>
FINAL DOCUMENTATION DELIVERABLES
ONE MONTH AFTER COMPLETION OF BETA DVT REVIEW
Final Product Specification in Word
Final Receiver Simulations in Labview
Final Theory of Operations in Word
Final Source Control Drawings for all parts not in Cellnet's Approved Vendor
List in Autocad
Final reliability prediction with 10% stress and 25 degree C temperature in
Bellcore format
Final Firmware Source Code in Assembly Language
Final Firmware Object Code in Intel Hex
Production Test Procedures including expected voltages and timing at circuit
nodes in Word
RF
Digital
-22-
<PAGE>
Exhibit D
DSP Transceiver Specification
Document #: 0556-0200-SP0
Date: 26 MAR 96
Prepared by:
Axonn Corporation
101 W. Robert E. Lee Boulevard
Suite 202
New Orleans, LA 70124
PH: (504) 282-8119
-23-
<PAGE>
[*]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-24-
<PAGE>
AGREEMENT BY AND BETWEEN UNITED STATES OF AMERICA
LIFE POINT SYSTEMS LIMITED
PARTNERSHIP STATE OF LOUISIANA
AND
CELLNET DATA SYSTEMS, INC. PARISH OF ORLEANS
THIS AGREEMENT is between Life Point Systems Limited Partnership, a
Delaware limited partnership, represented herein by its General Partner, Life
Point Systems, Inc., a Louisiana corporation having its principal offices at
101 W. Robert E. Lee Boulevard, New Orleans, Louisiana 70124 (hereinafter
referred to as "LICENSOR") and CellNet Data Systems, Inc., a California
corporation, having its principal offices at 125 Shoreway Road, San Carlos,
California 94070 (hereinafter referred to as "LICENSEE").
WITNESSETH:
WHEREAS, LICENSOR has an exclusive license under certain INTELLECTUAL
PROPERTY to use, manufacture, have manufactured, sell, lease and sublease
PRODUCTS with right to grant sublicenses;
WHEREAS, LICENSEE has, pursuant to that certain Agreement between LICENSEE
and LICENSOR's licensor, Axonn Corporation ("AXONN") dated May 12, 1989 ("AXONN-
DAC AGREEMENT"), obtained a license under certain intellectual property rights
which include the INTELLECTUAL PROPERTY to manufacture, have manufactured, use
and sell products similar to, and which may include, the PRODUCTS licensed
hereunder in the UDS Market (as defined in the AXONN-DAC AGREEMENT);
WHEREAS, LICENSEE desires to obtain from LICENSOR, a worldwide,
non-exclusive sublicense and right under the INTELLECTUAL
CONFIDENTIAL
<PAGE>
PROPERTY to use, modify, manufacture, have manufactured, sell, lease and
sublease PRODUCTS in the FIRE/SECURITY MARKET worldwide;
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, the parties agree as follows:
1. DEFINITIONS. As used herein, the term:
(a) "Affiliate" of a party (the "Subject") shall mean an entity that
directly through one or more intermediaries, controls, is controlled by or is
under common control with the Subject. For corporations, "Control" shall mean,
among other things, the direct ownership of more than fifty percent (50%) of its
outstanding voting securities. For partnerships, "control" shall mean, among
other things, the ownership of a controlling partnership interest in excess of
fifty percent (50%).
(b) "CELLNET SYSTEM" shall mean a wide area (greater than 50 square
miles) communication system developed and marketed by LICENSEE primarily for the
purpose of servicing the UDS Market and which may be expanded on a secondary
function basis. The architecture of the CELLNET SYSTEM is cellular in nature,
where Cell Masters of greater range, control and/or communicate with the cell
masters of smaller, nestled cells, which, ultimately, control, communicate
and/or monitor a number of individual end points.
(c) "DELIVERABLES" shall include LICENSOR'S existing non-customized
receiver and transmitter and the following:
(i) Schematics therefor;
(ii) PCB artworks therefor;
(iii) Software object code therefor;
-2-
CONFIDENTIAL
<PAGE>
(iv) Assembly drawings therefor;
(v) Test and alignment procedures therefor;
(vi) Parts list with vendor names and costs therefor;
(vii) Interface specifications therefor;
(viii) Manufacturing information for LICENSOR's standard
non-customized transmitter and electronic components
having a direct material parts cost of approximately
[ * ] volume and not including the battery,
the PCB, or connector cost.
(ix) Manufacturing information for LICENSOR's standard
non-customized receiver and electronic component costs
having a direct materials parts cost of approximately
[ * ] volume and not including the PCB, or
connector costs.
(x) LICENSOR's standard non-customized PC application and
testing programs for LICENSEE's internal use.
(d) "DEFECT/DEFECTS" shall mean a deviation from SPECIFICATION or any
other mutually agreed to modifications to SPECIFICATION that is so material it
prevents the economical commercial marketing of the PRODUCT.
(e) "DEVICE" shall mean any of LICENSOR'S spread spectrum radio
wireless devices interfaced with CELLNET SYSTEM for
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-3-
CONFIDENTIAL
<PAGE>
use in the FIRE/SECURITY MARKET as such devices currently exists, and any NEXT
GENERATION DEVICES or ADDITIONAL DEVICES (as defined in the AXONN-DAC AGREEMENT)
licensed to LICENSEE pursuant to Section 2(f) below, and all (1) modifications,
enhancements, upgrades and extensions thereof made to meet LICENSOR
SPECIFICATIONS (see Exhibit 1), (2) IMPROVEMENTS to all of the above, including
the proprietary processes, proprietary technical and other information, and
INTELLECTUAL PROPERTY rights relating thereto, whether or not patentable under
the patent laws of the United States or any foreign country. Specifically
excluded are time-of-flight, radio location/direction finding applications and
voice communication over the spread spectrum radio link.
(f) "FIRE/SECURITY MARKET" shall include the following:
(1) The fire application of this license includes use of
PRODUCTS with UL 985, UL 217, or UL 268 or the like, smoke/heat initiating
detectors, automatic elevator return, sprinkler waterflow monitoring devices,
automatic smoke evacuation systems, pull station monitoring devices, remote
siren activation and automatic door closure devices when used in conjunction
with a local receiving UL 1023, UL 1076, UL 864, UL 985 or equivalent UL or non
UL panel.
(2) The security applications include use of PRODUCTS with
contact input perimeter protection devices, IR, ultrasonic or microwave motion
detection or the like, break glass detection, entry/exit keypad interface for
system activation/deactivation and panic/emergency button alarms when used
-4-
CONFIDENTIAL
<PAGE>
in conjunction with a local receiving UL 1023, UL 1637, UL 1076 residential or
commercial equivalent or equivalent UL or non UL fire/security/emergency
annunciator panel or system.
(3) Additional applications include medical alert signaling and
premises access control.
(g) "IMPROVEMENT" means LICENSOR initiated Engineering Change Order
level updates (hereinafter an Engineering Change Order shall be referred to as
an "ECO"), modifications and changes to any DEVICE licensed to LICENSEE that are
distributed to other licensees, including, but not limited to, cut circuit
trace, add jumper/trace and/or component, software updates including new object
code to enhance performance that will update existing products. IMPROVEMENTS
also include ECO level updates, including, but not limited to, hardware
component changes which require only minor software modifications, if any,
and/or software changes which require only minor hardware changes, if any. The
term IMPROVEMENT does not include technical work which requires large
investments of capital or labor to effect and excludes improvements which are
incompatible with existing systems or subsystems which require major layout
and/or software revision to incorporate. For purposes of this Agreement, the
term "large investments of capital or labor" shall mean technical work which
required, cost and/or necessitated the expenditure of [ * ], in cash or
billable services (regardless of whether such services were actually billed by
LICENSOR) and/or any combination of the two. The term IMPROVEMENT also does not
include a CHANGE for LICENSEE as set forth in Section 6.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-5-
CONFIDENTIAL
<PAGE>
Technical information relating to such IMPROVEMENTS shall be provided to
LICENSEE at no additional cost except for incidental expenses which include, but
are not limited to, photocopying, telephone costs, mailing and transcribing
information to LICENSEE.
(h) "INTELLECTUAL PROPERTY" shall include all of LICENSOR's PATENT
RIGHTS, CONFIDENTIAL INFORMATION and COPYRIGHTS.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 7(a) below.
"COPYRIGHT" shall mean all copyrightable works, including mask
works, as covered by 17 U.S.C., etc.
(i) "NET SALES" shall mean gross receipts of LICENSEE determined in
accordance with generally accepted accounting principles which are directly
attributable to the distribution, licensing or other like disposition of the
PRODUCTS, net of all separately stated taxes (other than taxes on income),
interest and other finance charges paid by customers, customs duties and other
governmental charges, transportation, insurance and storage charges, and
discounts; and less refunds actually paid in connection with PRODUCT returns.
For the sale, distribution or other like disposition of PRODUCTS integrated into
a larger assembly with other hardware or software products (e.g. integrated as
part of a panel), the NET SALES attributable to the PRODUCT shall be based upon
the ratio of the list prices for the PRODUCT and the other components of the
integrated product as stand alone products, provided that where there is no list
price for a component, the
-6-
CONFIDENTIAL
<PAGE>
percentage of NET SALES attributable to the PRODUCT shall mutually agreed upon
by the parties in good faith.
(j) "NEXT GENERATION DEVICES" are DEVICES which have undergone major
modifications initiated by or on behalf of LICENSOR (i) resulting from large
investments of capital or labor (as that term is defined in Section 1(f)) or
(ii) which alters the basic character or function of current DEVICES, making
them incompatible with existing systems, or (iii) which require incorporation of
major changes in hardware or software. IMPROVEMENTS are not NEXT-GENERATION
DEVICES.
(k) "PRODUCT" shall mean a product which results from or is based
upon, uses or contains INTELLECTUAL PROPERTY including, without limitation,
DEVICES licensed hereunder.
(l) "PATENT RIGHTS" shall mean patents and patent applications of all
countries to the extent the claims thereof cover any DEVICE or NEXT GENERATION
DEVICES, issued as of the Effective Date including any additions, continuations,
continuations in part, divisions, reissues or extensions based thereon. The
patents issued which relate to DEVICES issued as of the Effective Date are
listed on Exhibit 2, which list shall be updated throughout the term of this
Agreement.
(m) "ROYALTY/ROYALTIES" shall mean those amounts to be paid by
LICENSOR to LICENSEE upon sale of PRODUCTS pursuant to Section 3 of this
Agreement.
(n) "SIMILARLY SITUATED LICENSEE" shall mean a party to whom LICENSOR
has granted a worldwide license to make, use and sell
-7-
CONFIDENTIAL
<PAGE>
products similar to LICENSEE's PRODUCTS, which did not involve a license
agreement in which LICENSOR received, as part of the consideration with such
other licensee, any patent rights, licenses, rights to use know-how or technical
information, nor involved a license agreement in which LICENSOR receives a
significant equity participation in such other licensee.
(o) "SPECIFICATION" means the technical specification attached as
Exhibit 1 including any supplements, CHANGES and/or IMPROVEMENT thereto.
(p) "SUBLICENSEE" means any entity which has entered into a
sublicense arrangement with LICENSEE whereby the sublicense agreement grants
such SUBLICENSEE the right to manufacture, use and sell PRODUCTS for the sole
purpose of incorporating such PRODUCT into CELLNET SYSTEM compatible devices.
The right to grant sublicenses to SUBLICENSEES for the manufacture, use and sale
of PRODUCTS in CELLNET SYSTEM compatible devices shall be limited to
SUBLICENSEES which (i) have as their primary business activity either the UDS
MARKET or are a manufacturer of utility meters, (ii) are AFFILIATES of such
entities, or (iii) are AFFILIATES of LICENSEE. SUBLICENSEES shall not have the
right to grant further sublicenses.
(q) The "Utility Distribution and Services Market" or "UDS MARKET"
means all functions associated with managing the transmission and distribution
network, demand-side management programs and customer service applications of
electricity, gas and water utilities, including substation, feeder and customer
site
-8-
CONFIDENTIAL
<PAGE>
power demand automation or the equivalent thereof. Specific UDS applications
include monitoring of field equipment, automatic meter reading, real-time
pricing, remote connect/disconnect, appliance monitoring and control, load
management and customer information services or the equivalent thereof. The
following applications are specifically excluded from the UDS Market: Fire and
Security, access control, voice communication, and time of flight measurement
applications.
2. GRANT.
(a) Upon the terms and conditions set forth herein, LICENSOR hereby
grants to LICENSEE a worldwide, nonexclusive right and license (including the
right to sublicense to SUBLICENSEES) under the INTELLECTUAL PROPERTY to use,
modify, manufacture, have manufactured, sell, lease and otherwise distribute
PRODUCTS in the FIRE/SECURITY MARKET.
(b) LICENSOR hereby consents to the granting by LICENSEE to
SUBLICENSEES of worldwide, nonexclusive sublicenses under the INTELLECTUAL
PROPERTY to use, modify, manufacture, have manufactured, sell and lease and
otherwise distribute PRODUCTS in the FIRE/SECURITY MARKET, subject to the
restrictions contained within this Section 2(a). The grant to LICENSEE of a
worldwide, non-exclusive license as well as the grant of the right to LICENSEE
to sublicense to SUBLICENSEES, is contingent on LICENSEE and all SUBLICENSEES
having totally complied with the terms of this Agreement such that there are no
conditions which would permit
-9-
CONFIDENTIAL
<PAGE>
termination by LICENSOR of LICENSEE or such SUBLICENSEES pursuant to
Section 2(d) or Section 10.
(c) Notwithstanding LICENSOR'S grant to LICENSEE of the right to
sublicense to entities subject to the aforereferenced qualifications, the right
to sublicense is not unqualified. More particularly, LICENSEE is required to
notify LICENSOR, in writing, of every entity to whom LICENSEE is interested in
sublicensing INTELLECTUAL PROPERTY, and LICENSOR shall have the right to
withhold approval of such SUBLICENSEE only in the event that the entity to which
LICENSEE proposes to grant a sublicense (i) appears on the list attached hereto
in Exhibit 3, (ii) is involved, at the time of the request to sublicense is
made, in the development, manufacture or sale of spread spectrum radio devices,
(iii) is focused on the development, manufacture or sale of products in the
FIRE/SECURITY MARKET, or (iv) is an entity with whom LICENSOR or its licensor,
AXONN, has had more than introductory discussions with respect to such entity
obtaining license rights to the INTELLECTUAL PROPERTY during the two (2) year
period directly preceding the date LICENSEE submits its written request;
provided that where LICENSOR claims the existence of such prior contacts,
LICENSOR shall be required to provide evidence of these earlier contacts. In
any event, LICENSOR may unreasonably withhold consent to any entity that falls
within categories (i)-(iv) enumerated above. LICENSOR shall have thirty (30)
days from the date of notice to approve or disapprove any potential SUBLICENSEE.
Failure to
-10-
CONFIDENTIAL
<PAGE>
respond within such period shall be deemed to be approval to grant a sublicense
to such entity.
(d) To the extent the provisions of this Agreement apply to a
SUBLICENSEE, LICENSEE warrants the discharge of all of the SUBLICENSEE'S
obligations hereunder; provided that LICENSEE shall be deemed to have fulfilled
its obligations under this Agreement to cure a breach by a SUBLICENSEE with
regard to such SUBLICENSEE's performance of the terms of this agreement if
LICENSEE takes and continues to pursue diligent efforts to cure such breach,
including without limitation the payment of royalties due from such SUBLICENSEE
hereunder and to take legal or other action against such SUBLICENSEE to restrain
such SUBLICENSEE from pursuing such breaching behavior. LICENSEE shall
reimburse LICENSOR for reasonable costs incurred by LICENSOR in assisting
LICENSEE in pursuing a remedy with such a SUBLICENSEE in breach. LICENSEE
agrees that it will use its best efforts to ensure that all SUBLICENSEES abide
by the terms of their sublicense agreements and will keep LICENSOR apprised of
its activities to enforce such provisions with particular SUBLICENSEE. In
addition, LICENSEE shall ensure that LICENSOR will have the right to enforce
such agreements as a third party beneficiary, and LICENSEE agrees that
(i) LICENSOR may join LICENSEE as a named plaintiff in any suit brought by
LICENSOR against SUBLICENSEES, (ii) LICENSEE will take such other actions, give
such information and render such aid, at LICENSOR's request, as may be necessary
to allow LICENSOR to bring and prosecute such suits.
-11-
CONFIDENTIAL
<PAGE>
(e) LICENSEE agrees that it shall provide in each sublicense
agreement that, when a SUBLICENSEE ceases to be such, all rights of such former
SUBLICENSEE to use LICENSOR'S INTELLECTUAL PROPERTY shall immediately cease and
such former SUBLICENSEE shall immediately render unusable all portions of
INTELLECTUAL PROPERTY then under its control and shall immediately destroy or
deliver to LICENSEE each and every other part of such INTELLECTUAL PROPERTY in
the SUBLICENSEE'S possession.
(f) LICENSOR agrees to offer to LICENSEE license rights to NEXT
GENERATION DEVICES developed by LICENSOR during the term of this Agreement
subject to all the terms and conditions of this Agreement, with the exception of
any initial license fee and royalty rate which shall be mutually negotiated by
the parties in good faith which fee and royalty rate shall be the same as any
other SIMILARLY SITUATED LICENSEE. Such agreement may be documented by way of
Attachment to this Agreement. Additionally, to the extent that any ADDITIONAL
DEVICES (as defined in the AXONN-DAC AGREEMENT), IMPROVEMENTS or additions to
the INTELLECTUAL PROPERTY which are licensed to LICENSEE by AXONN under the
AXONN-DAC AGREEMENT are licensed by AXONN to LICENSOR for use in the
FIRE/SECURITY MARKET, such ADDITIONAL DEVICES, IMPROVEMENTS or additions to the
INTELLECTUAL PROPERTY shall be automatically included as DEVICES, IMPROVEMENTS
or INTELLECTUAL PROPERTY hereunder and licensed by LICENSOR to LICENSEE under
the terms and conditions of this Agreement.
-12-
CONFIDENTIAL
<PAGE>
3. ROYALTY.
(a) As partial consideration for the license granted under Section 2,
LICENSEE agrees to pay an initial license fee of [ * ] at the execution of
this Agreement. Notwithstanding the foregoing, LICENSOR understands and
acknowledges that this [ * ] payment was made by LICENSEE to AXONN ON
LICENSOR's behalf under the AXONN-DAC AGREEMENT and that upon the Effective Date
of this Agreement, AXONN shall pay LICENSOR such [ * ] in fulfillment of such
obligation.
(b) As compensation for the license, as provided under Section 2(a)
and Section 2(b), LICENSEE agrees to pay [ * ]. The [ * ] fee shall
be paid over eighteen (18) months in eighteen (18) equal payments effective
April 1, 1994, with all payments in arrears paid on the Effective Date, and all
subsequent payments due on the same day of the subsequent months until the full
amount is paid. [ * ] compound interest shall be charged on the
unpaid balance beginning upon the Effective Date. LICENSEE may prepay the
upfront license fee which remains due at any time without penalty.
(c) As additional consideration for the licenses granted herein,
LICENSEE shall pay a royalty on each Product Sold, leased or otherwise disposed
of by it under the rights granted under the license set forth in Section 2
above. Such royalty shall be calculated to be the lower of either:
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-13-
CONFIDENTIAL
<PAGE>
(i) the royalties set forth in the chart below based upon (x) what kind of
device the PRODUCT is and (y) the primary environment for which such
PRODUCT is deployed:
PERSONAL/RESIDENTIAL MIXED COMMERCIAL/INDUSTRIAL
-------------------- ----- ---------------------
Transmitter: [ * ] [ * ] [ * ]
Receiver: [ * ] [ * ] [ * ]
Transceiver: [ * ] [ * ] [ * ]
(ii) a royalty equal to [ * ] of Net Sales for PRODUCTS sold for
use in the Personal/Residential, Mixed or Commercial/Industrial
Markets respectively; provided that where a PRODUCT is not sold, but
rather is leased or otherwise disposed of, the Net Sales for such
PRODUCT shall be deemed to be LICENSEE's total cost for the complete
manufacture and test of such PRODUCT plus [ * ];
provided that such royalty shall not be less than [ * ]
of the rate for such Product type specified in the chart contained in
paragraph (i) above.
Whether a PRODUCT is best classified as used in a Personal/Residential
environment, a Commercial/Industrial environment or may be used in both (a Mixed
environment) shall be based upon the viewpoint of a neutral third party familiar
with the wireless communications industry; provided that the parties agree that
for purposes of this Agreement, Commercial/Industrial PRODUCTS shall include,
but shall not be limited to a Product sold for use in the non-residential market
under the UL 268/864 Underwriters
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-14-
CONFIDENTIAL
<PAGE>
Laboratories or equivalent non-residential use listed system, and Mixed PRODUCTS
shall include long range transmitters and transceivers incorporated into an
alarm system located at or in a protected premises which signal a central alarm
station located at a site outside the premises.
Where the parties are unable to agree as to the proper classification of a
PRODUCT, such dispute in itself shall not be deemed a breach of this Agreement,
but rather the question of which category such PRODUCT properly falls in shall
be determined according to the following procedure.
For any dispute as to proper classification of a Product, the parties shall
first attempt to negotiate in good faith a written resolution of such dispute
for a period not to exceed thirty (30) days from the date of receipt of a
party's request for such negotiation. Such negotiations shall be conducted by
Chief Executive Officers of each party, or other senior officer appointed by the
CEO who have authorization to resolve any such dispute. In the event the
parties cannot negotiate a written resolution to such dispute during this
thirty(30) day negotiation period, the parties shall then submit such dispute or
claim to nonbinding mediation with Judicial Arbitration & Mediation Services
("JAMS") in Santa Clara County, California. The mediation may be initiated by
the written request of either party to the other party, shall commence within
fifteen (15) days of receipt of such notice and shall be conducted in accordance
with the standard mediation procedures established by JAMS, unless otherwise
agreed by the parties. The
-15-
CONFIDENTIAL
<PAGE>
mediation shall not exceed a period of thirty (30) days. Each party shall bear
its own expenses in any such mediation; provided that the parties shall split
the costs charged by JAMS.
(d) Notwithstanding the foregoing, no ROYALTY shall be due on
PRODUCTS provided to others as samples or demonstration units, used for Product
development purposes, or returned to LICENSEE or its SUBLICENSEES for refund.
ROYALTIES paid on PRODUCTS returned for refund shall be creditable against
future ROYALTIES.
(e) The parties understand and acknowledge that many PRODUCTS which
LICENSEE may sell or lease under the rights granted under the AXONN-DAC
AGREEMENT may also have uses in the FIRE/SECURITY MARKET and the parties wish to
ensure that LICENSEE will not be obligated to pay ROYALTIES to both LICENSOR and
AXONN upon the sale or lease of any single PRODUCT. Therefore, where a PRODUCT
is sold or leased to a customer pursuant to the rights granted under the
AXONN-DAC AGREEMENT for which LICENSEE has become obligated to pay a ROYALTY to
AXONN under the AXONN-DAC AGREEMENT, and the customer may also use the PRODUCT
in the FIRE/SECURITY MARKET, LICENSEE shall have no obligation to pay LICENSOR a
ROYALTY under this Agreement so long as LICENSEE actually pays the ROYALTY due
AXONN under the AXONN-DAC AGREEMENT.
(f) A PRODUCT shall be deemed sold or leased at the time of first
invoicing or, if not invoiced, at the time of first shipment, delivery or other
transfer to other than LICENSEE, or when first actually put into use, including
use by LICENSEE, whichever
-16-
CONFIDENTIAL
<PAGE>
occurs first, excluding internal use by LICENSEE. For purposes of determining
ROYALTIES, a lease shall be deemed a sale.
(h) Should LICENSEE acquire the right under this Agreement to pursue
infringers of LICENSOR'S INTELLECTUAL PROPERTY, if LICENSEE pursues an infringer
to judgement, LICENSEE shall pay LICENSOR a royalty equal to [ * ] of
the amount received by LICENSEE from any such infringer as damages for the
infringement of LICENSOR'S INTELLECTUAL PROPERTY rights, less legal fees and
other expenses incurred in pursuing such action. In no event will any damages
awarded with respect to infringement of any of LICENSEE'S intellectual property
be included in the calculation of royalties due under this subparagraph 3(h).
(g) During the term of this Agreement, LICENSEE shall deliver to
LICENSOR, within forty-five (45) days after the end of each calendar quarter, a
ROYALTY report indicating the NET SALES from the sale of PRODUCTS in the
preceding calendar quarter and the computation of the ROYALTY due and payable
thereon. Each ROYALTY report shall be accompanied by the payment of the
corresponding ROYALTIES due LICENSOR, less any taxes or other charges withheld.
Overdue payments hereunder shall be subject to a late payment charge calculated
at an annual prime rate (as quoted by Citibank, N.A., New York, U.S.A.), plus
two (2) percentage points during delinquency. If the amount of such charge
exceeds the maximum permitted by law, such charge shall be reduced to such
maximum.
(h) LICENSEE shall keep full and true books of account and other
records in sufficient detail so that the ROYALTIES
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-17-
CONFIDENTIAL
<PAGE>
payable to LICENSOR hereunder can be properly ascertained for a period of three
(3) years after the payment to which they pertain. LICENSEE agrees, on the
request of LICENSOR no more frequently than two times per year, and at
LICENSOR'S expense, to permit an independent certified public accountant,
selected by LICENSOR and to whom LICENSEE has no reasonable objection, to have
access to such books and records as may be necessary to determine, in respect of
any accounting period ending not more than three (3) years prior to the date of
such request, the correctness of any report or payment under this Agreement, or
to obtain information as to the amounts payable in the case of failure of
LICENSEE to report. Any such accountant entitled hereunder to examine the books
of LICENSEE shall be entitled to make such examination at LICENSEE'S business
premises during reasonable business hours, and shall be entitled to disclose
only the amount of discrepancy, if any, due LICENSOR. LICENSOR shall promptly
furnish a copy of such accountant's calculations to LICENSEE, and unless
LICENSOR shall receive from LICENSEE a written objection within thirty (30) days
thereafter, with respect to the calculations of such accountant, the report of
such accountant as to the correctness of any report or amount payable hereunder
shall be conclusive and binding upon the parties hereto for all the purposes of
this Agreement. In the event a discrepancy of three percent (3%) or less
underpayment is found, the fees, costs and expenses by the accountant shall be
borne by LICENSOR; otherwise, the costs shall be borne by LICENSEE. Lastly, if
a discrepancy is discovered that is in LICENSEE'S favor, i.e.,
-18-
CONFIDENTIAL
<PAGE>
the LICENSEE overpaid ROYALTIES payable to LICENSOR hereunder, such excess
amounts shall be repaid by LICENSOR to LICENSEE, but LICENSEE will not be
entitled to a "late payment charge" or interest on this amount.
4. OBLIGATIONS OF LICENSOR.
(a) LICENSOR agrees to provide LICENSEE upon execution of this
Agreement with DELIVERABLES. Additionally, LICENSOR shall provide LICENSEE with
equivalent technical information for any (i) IMPROVEMENTS when such IMPROVEMENTS
are made generally available by LICENSOR to its other licensees in the
FIRE/SECURITY MARKET, and (ii) NEXT GENERATION DEVICES or other NEW TECHNOLOGY
upon LICENSOR's grant to LICENSEE of a license to such.
(b) LICENSOR guarantees that the transmitter and receiver per the
DELIVERABLES meet FCC part 15.126, Rules for Spread Spectrum Unlicensed
Operation, as well as NFPA 72-A for COMMERCIAL fire applications. In the event
that either the transmitter and/or the receiver should fail to meet such Rules,
and such failure shall not be cured within sixty (60) days after written notice
thereof is given by LICENSEE to LICENSOR, then all amounts paid by the LICENSEE
to the LICENSOR will be refunded within thirty (30) days thereafter.
(c) LICENSOR agrees to provide IMPROVEMENTS to LICENSEE during the
term of this Agreement.
5. NEXT GENERATION TECHNOLOGY. Certain enhancements, changes,
modifications, and the like, other than an IMPROVEMENT initiated by LICENSOR, or
a CHANGE as defined in Section 6, may
-19-
CONFIDENTIAL
<PAGE>
result in a NEXT GENERATION DEVICE. In the event LICENSOR offers to license
technology related to such NEXT GENERATION DEVICE, it shall offer such NEXT
GENERATION DEVICES to LICENSEE subject to the provisions of Section 2(f)
containing terms and conditions comparable to those offered other SIMILARLY
SITUATED LICENSEES.
6. RIGHTS AND OBLIGATIONS OF LICENSEE.
(a) LICENSEE shall have the right to make modifications, improvements
or enhancements (including ASIC development) (a "CHANGE") to the DEVICES
licensed hereunder either by submitting to LICENSOR a request for a CHANGE or by
implementing the CHANGE itself. Any CHANGE implemented by LICENSEE at its
option may be provided to LICENSOR solely for the purposes of enabling LICENSOR
to perform support services as provided herein, and no such delivery will
constitute a license by LICENSEE to LICENSOR to make use of such CHANGE. If
LICENSEE implements a CHANGE, any warranties made by LICENSOR in favor of
LICENSEE will not apply to such change to the extent they relate to such CHANGE.
(b) If LICENSEE submits a request for a CHANGE to LICENSOR, such
request shall be in writing. Within twenty (20) business days of receipt of
such request, LICENSOR will provide LICENSEE with an estimate to implement the
CHANGE based on the hourly rates and costs set forth in Section 6(c) below.
Upon receipt of a Purchase Order or written authorization from LICENSEE,
LICENSOR shall implement the requested CHANGE in accordance with a schedule to
be mutually agreed upon.
-20-
CONFIDENTIAL
<PAGE>
(c) If LICENSEE requests a CHANGE, LICENSEE shall pay all engineering
costs incurred for such customization to LICENSEE'S specifications or
manufacturing requirements which shall be billed and accounted for bi-weekly and
due net 10-days, on the following basis, namely:
Senior Engineer [ * ]
Engineer [ * ]
Programmer [ * ]
Technician [ * ]
Research Associate [ * ]
Project Engineer [ * ] and
Support [ * ]
The above rates may be changed upon thirty (30) days notice to and
agreement between the parties.
Any miscellaneous buy-out time or materials will be billed at
[ * ]. All travel necessitated by and/or requested by
LICENSEE shall be billed at [ * ] of the above rates and no more
than [ * ] hours being charged on any one day.
(d) All right, title and interest in and to INTELLECTUAL PROPERTY
created prior to the effective date of this Agreement shall belong to and/or
remain the property of the party who developed, created or presently owns such
INTELLECTUAL PROPERTY and, except for grant of a license to LICENSEE under
Section 2 or as otherwise explicitly provided herein, no license is implied or
granted herein to any such existing INTELLECTUAL PROPERTY.
All work done by LICENSOR in connection with a CHANGE at LICENSEE'S
written request will be at LICENSEE'S expense as set forth in (c) of this
Section 6. Any resulting INTELLECTUAL
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the
omitted portions.
-21-
CONFIDENTIAL
<PAGE>
PROPERTY created by the parties jointly or individually in connection with such
CHANGE and paid for by LICENSEE shall belong to LICENSEE. LICENSOR agrees to
assign (or cause to be assigned) and does hereby assign and deliver fully to
LICENSEE any INTELLECTUAL PROPERTY which LICENSOR may obtain as part of
developing such CHANGE.
The INTELLECTUAL PROPERTY described in the immediately preceding
paragraph that is to belong to LICENSEE, shall be limited to circuit board
artworks, resulting optimized biasing resistor and capacitor coupling values or
specific, unique LICENSEE application interfaces. Any other areas will be
mutually agreed to and, specifically listed in a separate writing signed by the
parties. This Section 6 does not, however, preclude LICENSOR from providing
similar engineering services to other customers, without using any of the
INTELLECTUAL PROPERTY of LICENSEE.
(e) LICENSEE shall not be precluded from using LICENSOR'S standard
radio communications protocols, however, LICENSOR agrees to modify LICENSOR'S
standard radio communications protocols to LICENSEE'S specification upon request
by LICENSEE. Such protocols shall be designed with the assistance of LICENSOR
to prevent interference with, or acceptability to, other licensees and
sublicensees of LICENSOR.
(f) It is acknowledged and agreed by LICENSEE that should a PRODUCT
based on LICENSOR'S INTELLECTUAL PROPERTY not be competitive and should LICENSEE
desire to commence the development of an alternative spread spectrum device
(hereinafter: "NEW
-22-
CONFIDENTIAL
<PAGE>
DEVICE") not covered by LICENSOR'S INTELLECTUAL PROPERTY, such development shall
only be conducted by employees, subcontractors, agents or assigns of LICENSEE
who have not had access to LICENSOR'S INTELLECTUAL PROPERTY licensed herein
(including source code to LICENSOR'S software included in a DEVICE) and such NEW
DEVICE cannot use/infringe on LICENSOR'S INTELLECTUAL PROPERTY, save that
LICENSOR acknowledges and agrees that any such NEW DEVICE would and may transmit
and receive on the same frequencies, have the same spread spectrum parameters
and the same packet data format as employed in other DEVICES manufactured for or
by LICENSEE. It is further acknowledged by LICENSEE that to the extent that any
NEW DEVICE employs the same spread spectrum parameters or data format, and such
spread spectrum parameters are covered by valid claims of any of LICENSOR'S
patents, LICENSEE shall be obligated to continue Section 3(b) ROYALTY payments
to LICENSOR. LICENSOR in turn acknowledges that LICENSEE shall not be
restricted in any other non-spread spectrum radio development which does not
violate LICENSOR'S valid patents or use LICENSOR'S software source code in any
such NEW DEVICE.
7. CONFIDENTIAL INFORMATION.
(a) As used in this Agreement, the term "Confidential Information"
shall mean any information disclosed by one party to the other pursuant to this
Agreement which is in written, graphic, machine readable or other tangible form
and is marked "Confidential", "Proprietary" or in some other manner to indicate
its confidential nature. Confidential Information may also include
-23-
CONFIDENTIAL
<PAGE>
oral information disclosed by one party to the other pursuant to this Agreement,
provided that such information is designated as confidential at the time of
disclosure and reduced to a written summary by the disclosing party, within
thirty (30) days after its oral disclosure, which is marked in a manner to
indicate its confidential nature and delivered to the receiving party.
Confidential Information shall also include information that may be disclosed by
AXONN to LICENSEE on behalf of LICENSOR as long as such disclosure is labeled as
provided herein.
(b) Each party shall treat as confidential all Confidential
Information of the other party, shall not use such Confidential Information
except as expressly set forth herein or otherwise authorized in writing, shall
implement reasonable procedures to prohibit the disclosure, unauthorized
duplication, misuse or removal of the other party's Confidential Information and
shall not disclose such Confidential Information to any third party except as
may be necessary and required in connection with the rights and obligations of
such party under this Agreement, and subject to confidentiality obligations at
least as protective as those set forth herein. Without limiting the foregoing,
each of the parties shall use at least the same procedures and degree of care
which it uses to prevent the disclosure of its own confidential information of
like importance to prevent the disclosure of Confidential Information disclosed
to it by the other party under this Agreement, but in no event less than
reasonable care.
-24-
CONFIDENTIAL
<PAGE>
(c) Notwithstanding the above, neither party shall have liability to
the other with regard to any Confidential Information of the other which:
(i) was generally known and available in the public domain at
the time it was disclosed or becomes generally known and available in the public
domain through no fault of the receiver;
(ii) was known to the receiver at the time of disclosure as shown
by the files of the receiver in existence at the time of disclosure;
(iii) is disclosed with the prior written approval of the
discloser;
(iv) was independently developed by the receiver without any use
of the Confidential Information and by employees or other agents of the receiver
who have not been exposed to the Confidential Information, provided that the
receiver can demonstrate such independent development by documented evidence
prepared contemporaneously with such independent development;
(v) becomes known to the receiver from a source other than the
discloser without breach of this Agreement by the receiver and otherwise not in
violation of the discloser's rights; or
(vi) is disclosed pursuant to the order or requirement of a
court, administrative agency, or other governmental body; provided, that the
receiver shall provide prompt, advanced notice thereof to enable the discloser
to seek a protective order or otherwise prevent such disclosure.
-25-
CONFIDENTIAL
<PAGE>
(d) Each party shall obtain the execution of proprietary
non-disclosure agreements with its employees, agents and consultants having
access to Confidential Information of the other party, and shall diligently
enforce such agreements, or shall be responsible for the actions of such
employees, agents and consultants in this respect.
(e) If either party breaches any of its obligations with respect to
confidentiality and unauthorized use of Confidential Information hereunder, the
other party shall be entitled to equitable relief to protect its interest
therein, including but not limited to injunctive relief, as well as money
damages.
8. MARKING.
(a) LICENSEE agrees to affix to each PRODUCT or the package
containing such PRODUCT or to an insertion slip in the package with each
PRODUCT, a legible notice reading: "Licensed under one or more of the following
Patents," followed by a list of patent numbers applicable to such PRODUCT taken
from attached Exhibit 2 or as otherwise instructed by LICENSOR.
(b) Neither the granting of the license herein or the acceptance of
ROYALTIES hereunder shall constitute an approval or acquiescence in LICENSEE'S
practices with respect to trademarks, trade names, corporation names,
advertising, or similar practices with respect to the PRODUCT, nor does the
granting of any license hereunder constitute an authorization or approval of, or
acquiescence in the use of any tradename or trademark of LICENSOR or its
affiliates in connection with the manufacture, advertising, or
-26-
CONFIDENTIAL
<PAGE>
marketing of PRODUCT; and LICENSOR hereby expressly reserves all rights with
respect thereto.
9. DURATION AND TERMINATION/CANCELLATION.
(a) Unless otherwise terminated/canceled as hereinafter set forth,
this Agreement and the licenses under PATENT RIGHTS shall continue from the date
of execution of this Agreement through the expiry date of the last to expire of
any one of the PATENT RIGHTS. The Agreement may be extended on similar terms
upon the mutual agreement of LICENSOR and LICENSEE.
(b) LICENSOR shall have the right to terminate this Agreement upon
notice if LICENSEE shall at any time default in its performance of any
obligation hereunder, and such default is not cured within sixty (60) days after
written notice thereof is given by LICENSOR to LICENSEE. LICENSEE shall provide
LICENSOR in every sublicense agreement, an equivalent right to terminate such
SUBLICENSEE'S rights to the INTELLECTUAL PROPERTY licensed hereunder. LICENSEE
or SUBLICENSEE shall have the right to cure any such default up to, but not
after, the giving of such notice of termination/cancellation.
(c) LICENSOR shall have the right to terminate/cancel this Agreement
by giving written notice of termination/cancellation to LICENSEE in the event of
any one of the following, such termination/cancellation being effective upon
receipt of such notice or five (5) days after such notice is mailed, whichever
is earlier:
(i) Liquidation of LICENSEE;
-27-
CONFIDENTIAL
<PAGE>
(ii) Insolvency or bankruptcy of LICENSEE, whether voluntary or
involuntary; provided that if involuntary, LICENSOR may only terminate this
Agreement under this Section 10 if such bankruptcy proceeding is not dismissed
within sixty (60) days of filing.
(iii) Failure of LICENSEE to satisfy any judgement against it
relative to this Agreement; or
(iv) Appointment of a trustee or receiver for LICENSEE unless
previously agreed to in writing by LICENSOR.
(d) The waiver of any default under this Agreement by LICENSOR shall
not constitute a waiver of the right to terminate/cancel this Agreement for any
subsequent or like default, and the exercise of the right of
termination/cancellation shall not impose any liability by reason of
termination/cancellation nor have the effect of waiving any damages to which
LICENSOR might otherwise be entitled.
(e) Termination/cancellation of this Agreement, shall in no manner
interfere with, affect or prevent the collection by LICENSOR of any and all sums
of money due to it under this Agreement. Upon termination/cancellation of this
Agreement for any reason, LICENSEE'S payments required by Section 3, but not yet
due, shall become immediately due and payable, and LICENSEE'S inventory of
DEVICE's for which payments are not yet required by Section 3 shall either, at
LICENSEE'S option, (i) be included in LICENSEE'S and SUBLICENSEES' payments as
though sales of such DEVICE had taken place prior to termination/cancellation of
this Agreement; or
-28-
CONFIDENTIAL
<PAGE>
(ii) be destroyed, provided appropriate certification is given to LICENSOR by an
officer of LICENSEE.
(f) LICENSEE shall have the right to terminate this Agreement upon
notice if LICENSOR shall at any time default in its performance of any
obligation hereunder, and such default is not cured within sixty (60) days after
written notice thereof is given by LICENSEE to LICENSOR. LICENSOR shall have
the right to cure any such default up to, but not after, the giving of such
notice of termination/cancellation.
(g) LICENSEE shall have the right to terminate/cancel this Agreement
by giving written notice of termination/cancellation to LICENSOR in the event of
any one of the following, such termination/cancellation being effective upon
receipt of such notice or five days after such notice is mailed, whichever is
earlier:
(i) Liquidation of LICENSOR;
(ii) Insolvency or bankruptcy of LICENSOR, whether voluntary or
involuntary; provided that if involuntary, LICENSOR may only terminate this
Agreement under this Section 10 if such bankruptcy proceeding is not dismissed
within sixty (60) days of filing.
(iii) Failure of LICENSOR to satisfy any judgement against it
relative to this Agreement; or
(iv) Appointment of a trustee or receiver for LICENSOR unless
previously agreed to in writing by LICENSEE.
-29-
CONFIDENTIAL
<PAGE>
(h) The waiver of any default under this Agreement by LICENSEE shall
not constitute a waiver of the right to terminate/cancel this Agreement for any
subsequent or like default, and the exercise of the right of
termination/cancellation shall not impose any liability by reason of
termination/cancellation nor have the effect of waiving any damages to which
LICENSEE might otherwise be entitled.
(i) This Agreement shall survive the termination of any sublicense
agreement with a SUBLICENSEE by LICENSOR provided LICENSEE is not in default
under this Agreement. Additionally, any sublicense agreement shall survive
termination of this Agreement with LICENSEE; provided that effective immediately
upon termination of this Agreement, LICENSOR shall have the right to enforce
directly all provisions of LICENSEE'S agreements with its SUBLICENSEES with
respect to use of LICENSOR'S INTELLECTUAL PROPERTY and ROYALTY payments pursuant
to the terms of Section 2(d). LICENSEE agrees to include provisions in its
sublicense agreements to confirm such rights.
10. WARRANTIES.
(a) RIGHTS TO LICENSE. LICENSOR warrants to LICENSEE, (i) that it
has the exclusive licensing rights to the INTELLECTUAL PROPERTY, and (ii) that
it has the right to enter into this Agreement and to grant the licenses rights
granted hereunder.
(b) FCC COMPLIANCE. LICENSOR warrants that a transmitter and
receiver manufactured using DELIVERABLES will meet
-30-
CONFIDENTIAL
<PAGE>
Federal Communications Commission Part 15.126 Rules for Spread Spectrum
Unlicensed Operation.
(c) DEFECTS. LICENSOR warrants that the DELIVERABLES provided per
Section 4(a) will be free from DEFECTS. If a DEFECT is found LICENSOR will
correct DEFECT and provide updated DELIVERABLES.
(d) INSURANCE. LICENSEE agrees to name LICENSOR as an additional
insured on its general liability insurance coverage and hold LICENSOR harmless
to the extent of any potential liabilities which may arise from LICENSEE'S
exploitation of PRODUCTS unless and to the extent that such damages or injuries
are due to the intentional act or gross negligence of LICENSOR. LICENSEE agrees
to send LICENSOR a copy of an insurance binder noting LICENSOR as an additional
insured on LICENSEE'S general liability insurance coverage.
11. PROTECTION OF INTELLECTUAL PROPERTY.
(a) PATENT INFRINGEMENT.
(i) LICENSOR warrants that as of the effective date, to the best
of LICENSOR'S knowledge, the use of the licensed information will neither
infringe any patent, copyright, mask right, nor incorporate proprietary
information belonging to any third party. LICENSOR, at its own expense, will
defend and (to the extent provided herein) hold LICENSEE harmless against any
claims that INTELLECTUAL PROPERTY being licensed under this Agreement infringes
any patent, copyright, trade secret or other intellectual property right of any
third party. In the case a resulting
-31-
CONFIDENTIAL
<PAGE>
judgement is made against LICENSEE, then LICENSOR's liability for damages
awarded against LICENSEE will be limited to fifty percent (50%) of all ROYALTIES
paid by LICENSEE under the provisions of Section 3 of this Agreement. LICENSOR
shall have full control of the defense of any such suit, and LICENSEE shall
render all reasonable assistance (at LICENSOR's expense) to LICENSOR in
connection with any suit to be defended by LICENSOR and shall have the right to
be represented therein by advisory counsel of its choice at its expense.
(ii) In the event that LICENSEE, in exercising the rights granted
under this Agreement, shall be unable to continue to exercise the rights under
this Agreement as a result of the existence of patents or other intellectual
property rights now held or which will be held by others in the field, LICENSOR
may, to minimize its liability under Section 11(a)(i) above, at its sole option
and expense, either: (i) procure for LICENSEE the right to exercise its rights
as granted herein, or (ii) replace or modify the infringing technology so that
it is functionally equivalent but non-infringing products.
(b) PATENT PROTECTION. (i) LICENSOR shall always have the right to
prosecute any entity it believes infringes upon its INTELLECTUAL PROPERTY.
LICENSEE is obligated to render all reasonable assistance requested by LICENSOR
in connection with any action being pursued by LICENSOR.
-32-
CONFIDENTIAL
<PAGE>
12. NOTICES.
(a) All notices, requests, demands and other communications under
this Agreement or in connection therewith shall be given to or be made upon the
respective parties hereto as follows:
TO LICENSEE: CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Attn: Paul M. Cook, Chairman & CEO
TO LICENSOR: Life Point Systems, Inc.
101 W. Robert E. Lee Boulevard
2nd Floor
New Orleans, LA 70124
Attn: H. Britton Sanderford, Jr.,
President
with a copy to: Michael L. Eckstein, Esq.
829 Baronne Street
New Orleans, LA 70113
(b) All notices, requests, demands and other communications given or
made in accordance with the provisions of this Agreement shall be in writing,
shall be forwarded by registered mail and shall be deemed to have been given
when received by addressee, or upon tender where delivery cannot be accomplished
due to some fault of addressee.
13. ASSIGNMENT.
(a) This Agreement shall be binding upon and inure to the benefit of
LICENSOR, its legal representatives, successors, heirs, and assigns. Nothing
contained herein shall prevent LICENSOR from assigning this Agreement to any
successor entity acquiring all or substantially all of its assets whether by
sale, merger, operation or otherwise (including all rights in the INTELLECTUAL
PROPERTY). Additionally, LICENSOR shall have the
-33-
CONFIDENTIAL
<PAGE>
right to assign or pledge to any person, without the necessity of obtaining the
consent of LICENSEE, all or any portion of the ROYALTIES due LICENSOR hereunder.
Also, LICENSOR shall have the right to assign this Agreement to any entity in
which AXONN or H. Britton Sanderford, Jr., the current president of LICENSOR,
and the other original founding partners of LICENSOR owns more than 51% of the
outstanding shares entitled to vote or other controlling equity interest,
subject to LICENSEE'S reasonable approval that such assignee is reasonably
capable of and willing to perform LICENSOR'S obligations under this Agreement.
(b) This Agreement shall be binding upon and inure to the benefit of
LICENSEE its legal representatives, successors, heirs and assigns, and may be
assigned by LICENSEE, without approval from LICENSOR, to any successor entity
acquiring all or substantially all of its assets whether by sale, merger,
operation or otherwise.
(c) This Agreement shall be deemed to be a contract made under the
laws of the State of Louisiana, United States of America, and for all purposes
shall be interpreted in its entirety in accordance with the laws of said State.
No litigation between the signatories to this Agreement shall be instituted or
conducted in any court other than a competent court in the State of Louisiana.
The parties hereby consent to service of process and their agents appointed
herein for such purpose, and agree not to contest the jurisdiction and choice of
law agreed upon in this clause for any reason. In the event this Agreement is
translated into any
-34-
CONFIDENTIAL
<PAGE>
language other than the English language for any purpose, the parties agree that
the English version shall be the governing version.
(d) Neither LICENSOR nor LICENSEE shall be deemed a joint venturer or
partner of the other nor shall this document be deemed to constitute the parties
hereto to be an association, partnership, unincorporated business or other
separate entity.
14. FURTHER ASSURANCES. At any time or from time to time on and after the
date of this Agreement, each party shall, at the request of the other party
(i) deliver to the requesting party such records, data or other documents
consistent with the provisions of this Agreement, (ii) execute, and deliver or
cause to be delivered, all such assignments, consents, documents or further
instruments of transfer or license, and (iii) take or cause to be taken all such
other actions, as the requesting party may reasonably deem necessary or
desirable in order for the requesting party to obtain the full benefits of this
Agreement and the transactions contemplated hereby.
15. MODIFICATION. This Agreement embodies all of the understandings and
obligations between the parties with respect to the subject matter hereof. No
amendment or modification of this Agreement shall be valid or binding upon the
parties unless made in writing, signed on behalf of each of the parties by their
respective proper officers thereto duly authorized and validated.
-35-
CONFIDENTIAL
<PAGE>
16. COMPLIANCE WITH LAWS.
(a) Any payment which requires governmental approval or permission
under Foreign Exchange Control Law or other law, if any, shall be made in
accordance with such law.
(b) LICENSEE agrees to comply with all provisions of the Export
Administration Regulations of the United States Department of Commerce, as they
currently exist and as they may be amended from time to time.
(c) This Agreement may be executed in two (2) or more counterparts,
all of which, taken together, shall be regarded as one and the same instrument.
-36-
CONFIDENTIAL
<PAGE>
IN WITNESS WHEREOF, the representatives hereunto duly authorized on behalf
of LICENSOR have set their hands hereto this 12th day of August, 1994, and the
representatives hereunto duly authorized on behalf of LICENSEE have set their
hands hereto this 12th day of August, 1994.
LIFE POINT SYSTEMS LIMITED
PARTNERSHIP
By: /s/H. Britton Sanderford, Jr.
------------------------------
H. Britton Sanderford, Jr.,
Title: President of LIFE POINT
SYSTEMS, INC., its General
Partner
Attest:
/s/
- -----------------------------
CELLNET DATA SYSTEMS, INC.
By: /s/ Paul M. Cook
-----------------------------
Paul M. Cook,
Title: Chairman and CEO
Attest:
/s/
- -----------------------------
-37-
CONFIDENTIAL
<PAGE>
EXHIBIT 1
SPECIFICATION 6.18.88-GJ
------------------------
CONFIDENTIAL
<PAGE>
EXHIBIT 2
PATENT RIGHTS
--------------
CONFIDENTIAL
<PAGE>
EXHIBIT 3
SUBSIDIARY LICENSEE/LICENSEES OF LICENSEE
------------------------------------------
CONFIDENTIAL
<PAGE>
July 11, 1994
Mr. James J. Jennings
57 Capra Way
San Francisco, California 94123
Dear Jim:
We are pleased to make this offer of employment to join CellNet Data
Systems as Vice President of Sales and Marketing. Your base compensation will
be paid at the rate of $14,588.33 per month.
This offer assumes you will join us at CellNet Data Systems on or about
August 1, 1994, and assumes that you qualify for employment under the
immigration Reform and Control Act of 1986. Please confirm your acceptance of
our offer by signing and returning this letter to me no later than July 22,
1994. An original copy of this letter is included for you to retain.
Your position will include our standard benefit program summarized by the
enclosed material. Effective August 1, 1994 you will be granted stock options
to purchase 90,000 shares of Common Stock in CellNet Data Systems at $.50 per
share. Stock options become 10% vested six months from your date of hire with
the remainder vesting at 5% quarterly, unless your employment terminates earlier
for any reason.
In addition to the above compensation, this package will include a
performance based bonus plan equal to up to 100% of your base annual salary.
The specifics of this plan will be defined by me, with your input, within 90
days of your joining CellNet Data Systems.
Additionally, I agree that if your employment is terminated for anything
other than "good cause", the Company will continue your salary and benefits for
one year and immediately vest 40% of your remaining unvested stock on your last
day of actual employment.
It is our wish that our association be long-lasting and mutually rewarding.
You should, however, understand that all employees are employed "at-will", which
means that each employee, as well as CellNet Data Systems, has the right to
terminate the employment relationship at any time for any reason, with or
without cause.
<PAGE>
Mr. James J. Jennings
July 11, 1994
Page 2
Jim, CellNet Data Systems has a promising future which requires talented,
dedicated, and motivated people like you to make it successful. We look forward
enthusiastically to your joining our organization.
Sincerely,
/s/ Paul M. Cook
----------------------------------------
Paul M. Cook
President/CEO
I have read this letter and the benefit program information. I accept
CellNet Data Systems offer of employment.
Signature /s/ James Jennings Date 7/22/94
------------------------- -------------------------
<PAGE>
EMPLOYEE
SEVERANCE AGREEMENT
WHEREAS, the Board of Directors of CellNet Data Systems, Inc. (the
"Company") has determined it to be in the best interests of the Company and its
shareholders to provide Company executives holding stock options and restricted
stock purchase agreements with certain protection from events that could occur
in connection with certain chances of control of the Company, and
WHEREAS, to accomplish this objective and encourage such executives to
continue employment with the Company, the Company desires to enter into this
agreement,
NOW THEREFORE, for good and valuable consideration, the Company and the
undersigned individual ("Optionee") hereby agree as follows:
Unless otherwise defined herein, the terms defined in the applicable
Company stock option plans and stock option and restricted stock purchase
agreements shall have the same defined meanings therein.
1. VESTING ACCELERATION ON CHANGE OF CONTROL.
(a) VESTING ACCELERATION. In the event of a "Change of Control",
(i) all of the Optionee's rights to purchase stock under all stock option
agreements with the Company shall be automatically vested in their entirety on
an accelerated basis and be fully exercisable, and (ii) all of the Company's
rights to repurchase unvested stock under all restricted stock purchase
agreements with the Optionee shall lapse in their entirety on an accelerated
basis:
(A) as of the date immediately preceding such "Change of Control" in the
event any such stock option agreement or restricted stock purchase
agreement is or will be terminated or canceled (except by mutual consent)
or any successor to the Company fails to assume and agree to perform all
such stock option agreements and restricted stock purchase agreements as
provided in Section 2(a) hereof at or prior to such time as any such person
becomes a successor to the Company; or
(B) as of the date immediately preceding such "Change of Control" in the
event the Optionee does not or will not receive upon exercise of the
Optionee's stock purchase rights under any such stock option agreement or
in exchange for the Optionee's restricted stock acquired pursuant to any
such restricted stock purchase agreement the same identical securities
and/or other consideration as is received by all other shareholders in any
merger, consolidation, sale, exchange or similar transaction occurring upon
or after such "Change of Control"; or
(C) as of the date immediately preceding any "Involuntary Termination" of
the Optionee occurring upon or after any such "Change of Control"; or
<PAGE>
(D) as of the date six (6) months following the first such "Change of
Control," provided that the Optionee shall have remained an employee of the
Company continuously throughout such six-month period:
whichever shall first occur (all quoted terms as defined below).
(b) CHANGE OF CONTROL. "Change of Control" means the occurrence of
any of the following events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% of more of the total
voting power represented by the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board of Directors of the
Company as a result of which fewer than a majority of the directors are
"Incumbent Directors." "Incumbent Directors" shall mean directors who either
(A) are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board of Directors with the affirmative votes
(either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for election as a director without
objection to such nomination) of at least three-quarters of the Incumbent
Directors at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors of the Company);
or
(iii) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(c) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) a termination by the Company of the Optionee's employment with the Company
other than for Cause; (ii) a material reduction of or variation in the
Optionee's duties, authority or responsibilities, relative to the Optionee's
duties, authority or responsibilities as in effect immediately prior to such
reduction or variation; (iii) a reduction by the Company in the base salary of
the Optionee as in effect immediately prior to such reduction; (iv) a material
reduction by the Company in the kind or level of employee benefits, including
bonuses, to which the Optionee was entitled immediately prior to such reduction,
with the result that the Optionee's overall benefits package is materially
reduced; or (v) the relocation of the Optionee to a facility or a location more
than thirty (30) miles from the Optionee's then present location.
-2-
<PAGE>
(d) CAUSE. "Cause" shall mean (i) any willful act of personal
dishonesty, fraud or misrepresentation taken by the Optionee in connection with
his or her responsibilities as an employee which was intended to result in
substantial gain or personal enrichment of the Optionee as the expense of the
Company and was materially and demonstrably injurious to the Company; (ii) the
Optionee's conviction of a felony on account of any act which was materially and
demonstrably injurious to the Company; or (iii) the Optionee's willful and
continued failure to substantially perform his or her principal duties and
obligations of employment (other than any such failure resulting from incapacity
due to physical or mental illness), which failure is not remedied in a
reasonable period of time after receipt of written notice from the Company. For
the purposes of this Section 1(d), no act or failure to act shall be considered
"willful" unless done or omitted to be done in bad faith and without reasonable
belief that the act or omission was in or not opposed to the best interests of
the Company. Any act or failure to act based upon authority given pursuant to a
resolution duly adopted by the Board of Directors of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be done
or omitted to be done in good faith and in the best interests of the Company.
Notwithstanding anything herein to the contrary, the Optionee shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to the Optionee a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Board of
Directors of the Company at a meeting of the Board called and held for the
purpose (after reasonable notice to the Optionee and an opportunity for the
Optionee with Optionee's counsel to be heard before the Board) finding that in
the good faith opinion of the Board the Optionee was properly terminated for
Cause.
(e) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the Optionee's
continuous status as an employee of the Company terminates by reason of the
Optionee's voluntary resignation (and not Involuntary Termination) or if the
Optionee's continuous status as an employee of the Company is terminated for
Cause, in either case prior to such time as accelerated vesting occurs as
provided in Section 1(a) hereof, then the Optionee shall not be entitled to
receive accelerated vesting under Section 1(a) hereof.
2. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, merger or consolidation) shall
assume the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession.
(b) SUCCESSORS. The terms of this Agreement and all rights of the
Optionee hereunder shall inure to the benefit of, and be enforceable by, the
Optionee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
3. MODIFICATION; WAIVER. No provision of this Agreement shall be
modified or waived unless the modification or waiver is agreed to in writing and
signed by the Optionee and by an authorized officer of the Company (other than
the Optionee).
-3-
<PAGE>
4. ENTIRE AGREEMENT. This Agreement, together with all present and
future stock option agreements and restricted stock purchase agreements entered
into between the Company and the Optionee represent the entire agreement of the
parties hereto with respect to the subject matter thereof. In the event of any
conflict between the terms of this Agreement and the terms of any such present
or future stock purchase agreements, the terms of this Agreement shall prevail.
5. CHOICE OF LAW; ARBITRATION. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
San Francisco, California by three arbitrators in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction. The Company shall bear
all costs and expenses arising out of or in connection with any arbitration
pursuant to this Section 5.
6. NO EMPLOYMENT AGREEMENT. This Agreement shall not constitute an
employment agreement. The Optionee's employment with the Company shall
constitute employment "at-will," unless otherwise provided in some other written
agreement between the Company and the Optionee.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the date and year set
forth below.
COMPANY CELLNET DATA SYSTEMS, INC.
---------------------------------------
By:
---------------------------------------
Date:
---------------------------------------
OPTIONEE
---------------------------------------
Name:
---------------------------------------
Date:
---------------------------------------
-4-
<PAGE>
235,000 UNITS
CONSISTING OF
$235,000,000 AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF
13% SENIOR DISCOUNT NOTES DUE 2005
AND
940,000 WARRANTS TO PURCHASE
940,000 SHARES OF
COMMON STOCK OF
CELLNET DATA SYSTEMS, INC.
PURCHASE AGREEMENT
------------------
June 15, 1995
SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
CellNet Data Systems, Inc., a California corporation (the "COMPANY"),
proposes, upon the terms and conditions set forth in this agreement
("AGREEMENT"), to issue and sell to Smith Barney Inc. (the "INITIAL PURCHASER")
235,000 units (the "UNITS") consisting in the aggregate of (i) $235,000,000
aggregate principal amount at maturity of the Company's 13% Senior Discount
Notes due 2005 (the "NOTES"), and (ii) 940,000 warrants (the "WARRANTS"), each
warrant entitling the holder thereof to purchase initially one (1) share
(collectively, the "WARRANT SHARES") of the Company's Common Stock, no par value
per share (the "COMMON STOCK"). Each Unit will consist of $1,000 aggregate
principal amount at maturity of Notes and four (4) Warrants. The
<PAGE>
-2-
Notes will be issued under an indenture (the "INDENTURE"), to be dated as of
June 15, 1995, between the Company and The Bank of New York, as trustee (the
"TRUSTEE"). The Warrants will be issued under a warrant agreement (the "WARRANT
AGREEMENT"), to be dated as of June15, 1995, between the Company and The Bank
of New York, as warrant agent (the "WARRANT AGENT"). The Notes and the Warrants
are collectively referred to herein as the "SECURITIES." This Agreement, the
Indenture, the Securities, the Warrant Agreement and the Registration Rights
Agreements (as defined herein) are herein collectively referred to as the
"TRANSACTION DOCUMENTS."
The Company wishes to confirm as follows its agreement with the
Initial Purchaser in connection with the purchase and resale of the Securities.
1. PRELIMINARY OFFERING MEMORANDUM AND OFFERING MEMORANDUM. The
Securities will be offered and sold to the Initial Purchaser without
registration under the Securities Act of 1933, as amended (the "ACT"), in
reliance on exemptions therefrom. The Company has prepared a preliminary
offering memorandums, dated May 20, 1995 and June 12, 1995 (collectively, the
"PRELIMINARY OFFERING MEMORANDUM"), and an offering memorandum, dated June 14,
1995 (the "OFFERING MEMORANDUM"), setting forth information regarding the
Company and the Securities. Unless stated herein to the contrary, all
references herein to the Offering Memorandum are to the Offering Memorandum at
the date hereof and do not include any supplement or amendment subsequent
thereto. The Company hereby confirms that it has authorized the use of the
Preliminary Offering Memorandum and the Offering Memorandum in connection with
the offering and resale of the Securities by the Initial Purchaser.
The Company understands that the Initial Purchaser proposes to make
offers and sales (the "EXEMPT RESALES") of the Securities purchased by the
Initial Purchaser hereunder only on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof, as soon as the Initial Purchaser deems
advisable after this Agreement has been executed and delivered, (i) to persons
in the United States whom the Initial Purchaser
<PAGE>
-3-
reasonably believes to be qualified institutional buyers ("QUALIFIED
INSTITUTIONAL BUYERS") as defined in Rule 144A under the Act, as such rule may
be amended from time to time ("RULE 144A"), in transactions under Rule 144A,
(ii) to a limited number of other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of the Act)
("ACCREDITED INVESTORS") in private sales exempt from registration under the Act
and (iii) outside the United States to persons other than U.S. persons in
reliance upon Regulation S ("REGULATION S") under the Act (such persons
specified in clauses (i), (ii) and (iii) being referred to herein as the
"ELIGIBLE PURCHASERS"). As used herein the terms "United States" and "U.S.
persons" have the meaning given them in Regulation S.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Notes will have the registration rights set forth
in the registration rights agreement (the "NOTES REGISTRATION RIGHTS AGREEMENT")
substantially in the form attached hereto as EXHIBIT A, to be dated as of June
15, 1995, by and among the Company and the Initial Purchaser, and that holders
(including subsequent transferees) of the Warrant Shares will have the
registration rights set forth in the registration rights agreement (the
"WARRANTS REGISTRATION RIGHTS AGREEMENT," and together with the Notes
Registration Rights Agreement, the "REGISTRATION RIGHTS AGREEMENTS")
substantially in the form attached hereto as EXHIBIT B, to be dated as of June
15, 1995, by and among the Company and the Initial Purchaser.
The Initial Purchaser covenants and agrees with the Company that it
will deliver an Offering Memorandum in connection with each Exempt Resale (to
the extent made available by the Company) if the Company has not already done so
and will not after the date of this Agreement deliver any other offering
materials other than the Offering Memorandum or any amendment or supplement
thereto in connection with any Exempt Resale without the prior consent of the
Company. In addition, the Initial Purchaser shall advise the Company (which
advise may be by telephone) when its initial distribution of the Securities has
been completed.
<PAGE>
-4-
2. AGREEMENTS TO SELL, PURCHASE AND RESELL.
(a) The Company hereby agrees, subject to all of the terms and
conditions set forth herein, and upon the basis of the representations,
warranties and agreements of the Initial Purchaser, to issue and sell to the
Initial Purchaser and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all of the terms and
conditions set forth herein, the Initial Purchaser agrees to purchase from the
Company all of the Securities at a purchase price equal to $519.941 per Unit;
PROVIDED, HOWEVER that the Initial Purchaser shall have no obligation to take or
pay for any Units, Notes or Warrants to the extent that any person to whom it
intends to effect an Exempt Resale fails or refuses to purchase on the Closing
Date the Securities which such Person was to purchase pursuant to the terms of
such agreed upon Exempt Resale.
(b) The Initial Purchaser has advised the Company that it will offer
the Securities for sale upon the terms and conditions set forth in this
Agreement and in the Offering Memorandum. The Initial Purchaser hereby
represents and warrants to, and agrees with, the Company that the Initial
Purchaser (i) will not solicit offers for, or offer to sell, the Securities by
means of any form of general solicitation or general advertising or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act, and (ii) will solicit offers for the Securities only from, and will offer,
sell or deliver the Securities as part of its initial offering, only to (A)
persons in the United States whom the Initial Purchaser reasonably believes to
be Qualified Institutional Buyers, or if any such person is buying for one or
more institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to the Initial Purchaser that each
such account is a Qualified Institutional Buyer, to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A, in each case,
in transactions under Rule 144A, (B) to a limited number of Accredited Investors
that make the representations to and agreements with the Initial Purchaser
specified in Annex A to the Offering Memorandum in private sales exempt from
registration under the Act and (C) outside the United
<PAGE>
-5-
States to persons other than U.S. persons in reliance on Regulation S.
The Initial Purchaser has advised the Company that it will offer the
Units to Eligible Purchasers at a price initially equal to $532.726 per Unit,
plus accrued interest, if any, on the Notes from the date of issuance of the
Units. Such price may be changed by the Initial Purchaser at any time
thereafter without notice.
(c) The Initial Purchaser represents and warrants that (i) it has not
offered or sold, and will not offer or sell, directly or indirectly, any of the
Securities in the United Kingdom by means of any document, other than to persons
whose ordinary business it is to buy or sell shares or debentures whether as
principal or agent (except in circumstances which do not constitute an offer to
the public within the meaning of the Companies Act of 1985), (ii) it has
complied with and will comply with all applicable provisions of the Financial
Services Act of 1986 with respect to anything done by the Initial Purchaser in
relation to the Securities in, from or otherwise involving the United Kingdom
and (iii) it has only issued or passed on and will only issue or pass on in or
from the United Kingdom to any persons any document received by the Initial
Purchaser in connection with the issue of the Securities if the recipient is of
a kind described in Article 9(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1988, as amended.
(d) The Initial Purchaser represents and warrants that, with respect
to Securities offered and sold or to be offered and sold pursuant to Regulation
S, it has offered and sold the Securities and agrees that it will offer and sell
the Securities (i) as part of its initial distribution at any time and (ii)
otherwise until expiration of the Restricted Period (as defined in Regulation
S), only in accordance with Rule 903 of Regulation S or as otherwise permitted
pursuant to paragraph (c) above. Accordingly, the Initial Purchaser represents
and agrees that with respect to Securities offered and sold or to be offered and
sold pursuant to Regulation S, the Initial Purchaser, its
<PAGE>
-6-
affiliates and any persons acting on its behalf or on behalf of its affiliates
have not engaged or will not engage in any directed selling efforts with respect
to the Securities, and it and its affiliates have complied and will comply with
the offering restrictions requirements of Regulation S. The Initial Purchaser
agrees that, at or prior to confirmation of any sale of Securities pursuant to
Regulation S, it will have sent to each distributor, dealer or person receiving
a selling concession, fee or other remuneration that purchases such Securities
from the Initial Purchaser during the restricted period a confirmation or notice
to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Act"), and may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons (i) as part of their initial distribution at any time or (ii)
otherwise until expiration of the Restricted Period (as defined in
Regulation S under the Act), except in either case in accordance with
Regulation S or Rule 144A under the Act. Terms used above have the
respective meanings given to them in Regulation S under the Act."
The Initial Purchaser understands that the Company and, for the
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 7(c)(xiii) and 7(d) hereof, counsel to the Company and counsel to the
Initial Purchaser, will rely upon the accuracy and truth of the foregoing
representations and agreements and the Initial Purchaser hereby consents to such
reliance.
3. DELIVERY OF THE SECURITIES AND PAYMENT THEREFOR. Delivery to the
Initial Purchaser of and payment for the Securities shall be made at the office
of Cahill Gordon & Reindel, at 10:00 A.M., New York City time, on June 15, 1995
(the "CLOSING DATE"). The place of closing for the Securities and the Closing
Date may be varied by agreement between the Initial Purchaser and the Company.
<PAGE>
-7-
The Securities will be delivered to the Initial Purchaser against
payment of the purchase price therefor by certified or cashier's check or checks
payable to the order of the Company in New York Clearing House (next day) funds
in accordance with written instructions from the Company. The Notes will be
represented by a global security (the "GLOBAL NOTE") and the Warrants will be
represented by a global security (the "GLOBAL WARRANT", and together with the
Global Note, the "GLOBAL SECURITIES") and/or by additional certificated
securities, and will be registered, in the case of each of the Global
Securities, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC"), and in the other cases, in such names and in such denominations as the
Initial Purchaser shall request prior to 1:00 p.m., New York City time, on the
third business day preceding the Closing Date. The Securities to be delivered
to the Initial Purchaser shall be made available to the Initial Purchaser in New
York City for inspection and packaging not later than 9:30 a.m., New York City
time, on the business day next preceding the Closing Date.
4. AGREEMENTS OF THE COMPANY. The Company agrees with the Initial
Purchaser as follows:
(a) During the period of time specified in clause (e) below of this
Section 4 the Company will advise the Initial Purchaser promptly and, if
requested by it, will promptly confirm such advice in writing, of any material
change, or of any event or condition which is reasonably likely to result in a
material change, in the condition (financial or other), business, prospects,
liabilities (contingent or otherwise), properties, net worth, solvency or
results of operations of the Company and the Subsidiaries (as defined herein)
taken as a whole (whether or not arising in the ordinary course of business), or
of the happening of any event, any information becoming known or the existence
of any condition which would require any amendment or supplement to the
Offering Memorandum (as then amended or supplemented) so that the Offering
Memorandum (as so amended or supplemented) would not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to
<PAGE>
-8-
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) The Company will furnish to the Initial Purchaser, without
charge, such number of copies of the Offering Memorandum and any amendments or
supplements thereto, as it may reasonably request.
(c) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which the
Initial Purchaser shall not previously have been furnished a copy of a
reasonable time prior to the making thereof or, at any time prior to the payment
for the Securities on the Closing Date, to which it shall reasonably object
after being so advised.
(d) The Company consents to the use of the Offering Memorandum (and
of any amendment or supplement thereto prepared in accordance with Section 4(c)
hereof) in accordance with the securities or Blue Sky laws of the jurisdictions
in which the Securities are offered by the Initial Purchaser and by all dealers
to whom Securities may be sold, in connection with the offering and sale of the
Securities.
(e) If, at any time prior to completion of the distribution of the
Securities by the Initial Purchaser to Eligible Purchasers, any event shall
occur, any information shall become known or any condition shall exist that in
the judgment of the Company or in the opinion of counsel for the Initial
Purchaser would require any amendment or supplement to the Offering Memorandum
(as then amended or supplemented) so that the Offering Memorandum (as so amended
or supplemented) would not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, the Company will, in each such case subject to Section
4(c) hereof, forthwith prepare, at the sole expense of the Company, an
appropriate supplement or amendment thereto, and will expeditiously furnish to
the Initial
<PAGE>
-9-
Purchaser and dealers that number of copies thereof as they shall request.
(f) The Company will cooperate with the Initial Purchaser and with
its counsel in connection with the qualification of the Securities for offering
and sale by the Initial Purchaser and by dealers under the securities or Blue
Sky laws of such jurisdictions as the Initial Purchaser may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such qualification; PROVIDED, HOWEVER, that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to general service of process in any jurisdiction where it is not now
so subject.
(g) For a period of five (5) years after the Closing Date, the
Company will furnish to the Initial Purchaser (i) as soon as available, a copy
of each quarterly or annual report of the Company mailed to stockholders or
filed with the Securities and Exchange Commission (the "COMMISSION"), and (ii)
from time to time such other information concerning the Company as the Initial
Purchaser may reasonably request.
(h) The Company will apply the net proceeds from the sale of the
Securities in accordance with the description set forth under "Use of Proceeds"
in the Offering Memorandum.
(i) Except as stated in this Agreement and in the Offering
Memorandum, the Company has not taken, nor will it take, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Securities to facilitate
the sale or resale of the Securities. Except as permitted by the Act, the
Company will not distribute any offering material in connection with the Exempt
Resales. The Company will not, and will not permit any person acting on its
behalf to, solicit any offers to buy and will not offer to sell the Securities
by means of any form of general solicitation or general advertising or by
<PAGE>
-10-
means of any directed selling efforts (as defined under Regulation S and the
Commission's releases related thereto).
(j) The Company will use its best efforts to cause the Securities to
be eligible for trading on The PORTAL Market.
(k) From and after the Closing Date, so long as any of the Securities
are outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Act or, if earlier, until three years after the Closing
Date, and during any period in which the Company is not subject to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), the Company will furnish to holders and beneficial owners of the
Securities and prospective purchasers of Securities designated by such holders,
upon request of such holders or beneficial owners or such prospective
purchasers, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Act to permit compliance with Rule 144A in connection with resales of
the Securities.
(l) The Company agrees not to sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Securities in a manner that would
require the registration under the Act of the sale by the Company to the Initial
Purchaser or by the Initial Purchaser to the Eligible Purchasers of the
Securities.
(m) The Company agrees to comply in all material respects with the
terms and conditions of the Registration Rights Agreements, the Warrant
Agreement and all agreements set forth in the representation letters of the
Company to DTC relating to the approval of the Securities by DTC for "book
entry" transfer.
(n) The Company agrees that prior to any registration of the Notes
pursuant to the Notes Registration Rights Agreement, or at such earlier time as
may be so required, the Indenture shall be qualified under the Trust Indenture
Act of 1939 (the "1939 ACT") and will enter into any necessary supplemental
indentures in connection therewith.
<PAGE>
-11-
(o) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared by the Company, a copy of
any unaudited interim consolidated quarterly financial statements of the Company
for any period subsequent to the period covered by the most recent consolidated
financial statements of the Company appearing in the Offering Memorandum.
(p) The Company shall not, until 90 days following the Closing Date,
without the prior written consent of the Initial Purchaser, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or announce
the offering of, any debt securities issued by the Company (other than the
Securities, any debt securities of the Company issued pursuant to the Notes
Registration Rights Agreement in exchange for the Notes and indebtedness
permitted under the Indenture).
(q) The Company will not claim voluntarily, and will, subject to the
fiduciary duties of the Board of Directors of the Company and applicable law,
resist actively any attempts to claim, the benefit of any usury laws against the
holders of any Notes.
(r) The Company will do and perform in all material respects all
things required to be done and performed under this Agreement and the other
Transaction Documents by it on, prior to, and after the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Initial Purchaser on the date hereof and as of
the Closing Date that:
(a) No order or decree preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum or any amendment or supplement thereto, or
any order asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act has been issued, and no
proceeding for that purpose has commenced or is pending or, to the knowledge of
the Company, is contemplated.
<PAGE>
-12-
(b) The Preliminary Offering Memorandum and the Offering Memorandum
as of their respective dates and the Offering Memorandum as of the Closing Date
and any amendment or supplement thereto as of its date and as of the Closing
Date, did not and will not (as of the Closing Date) contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply (i) to statements in or omissions
from the Preliminary Offering Memorandum and Offering Memorandum made in
reliance upon and in conformity with information relating to the Initial
Purchaser furnished to the Company in writing by or on behalf of the Initial
Purchaser expressly for use therein and (ii) statements in or omissions from the
Preliminary Offering Memorandum that are supplemented, revised or added in the
Offering Memorandum. The Company makes no representation or warranty with
respect to any projected financial information or other forecasts except as
provided in Section 5(r) of this Agreement.
(c) The Indenture has been duly and validly authorized by the Company
and, upon its execution, delivery and performance by the Company and assuming
due authorization, execution, delivery and performance by the Trustee, will be a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity; the Indenture
conforms in all material respects to the description thereof in the Offering
Memorandum; and no qualification of the Indenture under the 1939 Act is required
in connection with the offer and sale of the Securities contemplated hereby or
in connection with the Exempt Resales.
(d) The Securities have been duly authorized by the Company, and,
when executed by the Company and, in the case of the Notes, authenticated by the
Trustee in accordance with the Indenture or in the case of the Warrants,
countersigned by the
<PAGE>
-13-
Warrant Agent in accordance with the provisions of the Warrant Agreement, and,
in each case, delivered to the Initial Purchaser against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Company, in the case of
the Notes, entitled to the benefits of the Indenture and, in the case of the
Warrants, entitled to the benefit of the Warrant Agreement and enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and subject to the applicability of general
principles of equity, and the Securities conform in all material respects to the
description thereof in the Offering Memorandum.
(e) When issued in accordance with the terms and conditions contained
in the Warrant Agreement upon exercise of the Warrants, the Warrant Shares will
be duly authorized, validly issued, fully paid and non-assessable and will not
be subject to any preemptive or similar rights. The Warrant Shares have been
duly reserved for issuance in accordance with the terms of the Warrants and the
Warrant Agreement.
(f) The Warrants, when issued and sold, will represent the right to
acquire upon exercise initially not less than approximately 6% of the
outstanding common equity of the Company on a fully diluted basis as of the
Closing Date (fully diluted to be calculated by giving effect to the maximum
number of shares of common equity of the Company deliverable upon exercise,
conversion or exchange of all vested stock options and restricted stock and in
the money warrants outstanding as of the Closing Date including, without
limitation, the Warrants and excluding unvested outstanding stock options and
restricted stock repurchaseable at cost by the Company).
(g) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable
and are free of any preemptive or similar rights and were issued and sold in
compliance in all material respects with all applicable Federal and state
securities laws.
<PAGE>
-14-
(h) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum, and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify could not, singly or in the aggregate with all other such failures,
reasonably be expected to have a material adverse effect on the condition
(financial or other), business, prospects, liabilities (contingent or otherwise)
properties, net worth, solvency or results of operations of the Company and the
Subsidiaries, taken as a whole (any such event, a "MATERIAL ADVERSE EFFECT").
(i) All of the Company's subsidiaries (as defined in the Act) are
referred to herein individually as a "SUBSIDIARY" and collectively as the
"SUBSIDIARIES." Each Subsidiary is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its incorporation, with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum, and is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify or be in good standing could not, singly or in the aggregate
with all other such failures, reasonably be expected to have a Material Adverse
Effect. All of the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and, other than as set forth on SCHEDULE I hereto, are wholly
owned by the Company directly or indirectly through one of the other
Subsidiaries, free and clear of any lien, adverse claim, security interest,
equity or other encumbrance, except as described in the Offering Memorandum.
(j) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against
<PAGE>
-15-
the Company or any of the Subsidiaries or to which the Company or any of the
Subsidiaries or any of their respective properties or assets is subject, that
are not disclosed in the Offering Memorandum and that, if adversely decided,
could, singly or in the aggregate with all other such proceedings, reasonably be
expected to have a Material Adverse Effect or materially affect the issuance of
the Securities or the consummation of any of the transactions contemplated by
the Transaction Documents. Neither the Company nor any Subsidiary is involved
in any strike, job action or labor dispute with any group of employees, and, to
the knowledge of the Company, no such action or dispute is threatened.
(k) No statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency and no injunction, restraining
order or order of any nature by a Federal or state court of competent
jurisdiction to which the Company or any of the Subsidiaries is subject has been
issued or is pending that (x) would interfere with or adversely affect the
issuance of the Securities or (y) would in any manner draw into question the
validity of this Agreement or any other Transaction Document.
(l) To the knowledge of the Company, neither the Company nor the
Subsidiaries has violated any Federal, state or local law relating to
discrimination in hiring, promotion or pay of employees.
(m) Neither the Company nor any of the Subsidiaries is (i) in
violation of (A) its certificate or articles of incorporation or bylaws or other
organizational documents or (B) of any statute, ordinance, law, administrative
or governmental rule or regulation or filing or judgment, injunction, order or
decree of any court or governmental agency or body applicable to the Company or
any of the Subsidiaries or any of their respective properties or assets
(collectively, "LAW AND LEGAL REQUIREMENTS"), except where any such violation
could not, singly or in the aggregate with all other such violations,
reasonably be expected to have a Material Adverse Effect or (ii) in breach of or
in default in the performance of (including any event which, with notice or
lapse of time or both, would constitute a
<PAGE>
-16-
breach of or a default in the performance of) any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness, material agreement, indenture, material lease or other material
instrument to which the Company or any of the Subsidiaries is a party or by
which any of the Company and the Subsidiaries or any of their respective
properties may be bound (collectively, "AGREEMENTS AND INSTRUMENTS"), except (a)
as may be disclosed in the Offering Memorandum or (b) where any such breach or
default could not, singly or in the aggregate with all other such breaches and
defaults, reasonably be expected to have a Material Adverse Effect.
(n) The issuance, offer, sale and delivery of the Securities, the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (it being understood that no representation or
warranty is made with respect to any Consents or Filings, provisions of the
certificate or articles of incorporation or bylaws or other organizational
documents, Agreements or Instruments or Law or Legal Requirements not in
existence on the date hereof or on the Closing Date): (i) equire any consent,
approval, authorization or other order of, or registration or filing with, any
court, regulatory body, administrative agency or other governmental body, agency
or official (collectively, "CONSENTS AND FILINGS"), except (A) such as may be
required under the Act in connection with the performance of the Company's
obligations under the Registration Rights Agreements and the qualification of
the Indenture under the 1939 Act in connection with the consummation of the
transactions contemplated by the Notes Registration Rights Agreement and (B)
compliance with the securities or Blue Sky laws of various jurisdictions; (ii)
conflict with or constitute a breach of or a default under (including any event
which, with notice or lapse of time or both, would constitute a breach of or a
default under), the certificate or articles of incorporation or bylaws or other
organizational documents of the Company or any of the Subsidiaries; (iii)
conflict with or constitute a breach of or a default under (including any event
which, with notice or lapse of time or both,
<PAGE>
-17-
would constitute a breach of or a default under) any Agreement or Instrument,
except any such conflict, breach or default that could not, singly or in the
aggregate with all other such conflicts, breaches and defaults, reasonably be
expected to have a Material Adverse Effect; (iv) violate any Law or Legal
Requirement, except any such violation that could not, singly or in the
aggregate with all other such violations, reasonably be expected to have a
Material Adverse Effect; and (v) result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
the Subsidiaries pursuant to the terms of any Agreement or Instrument.
(o) No consents or waivers from any other person are required for the
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company or, as applicable, any of the Subsidiaries and the
consummation of the transactions contemplated hereby and thereby, other than
such consents and waivers as have been obtained and are in full force and
effect.
(p) Deloitte & Touche LLP, who has certified the consolidated
financial statements of the Company included as part of the Offering Memorandum,
is, to the knowledge of the Company, a firm of independent public accountants
under Rule 101 of the AICPA's Code of Professional Conduct, and its
interpretation and rulings.
(q) The consolidated financial statements of the Company included in
the Offering Memorandum, together with the related notes thereto, (1) are
identical to the consolidated financial statements of the Company upon which
Deloitte & Touche LLP have issued their audit report and which are attached as
Annex A to the comfort letter referred to in Section 7(e) of this Agreement and
(2) present fairly the consolidated financial position, results of operations
and cash flows of the Company, at the dates and for the periods to which they
relate, and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP"). The PRO FORMA financial
information (including the notes thereto) included in the Offering Memorandum
(A) present fairly in all material
<PAGE>
-18-
respects the information shown therein and (B) have been properly computed on
the basis described therein.
(r) The projections contained in the Offering Memorandum have been
prepared by the Company and are based on the reasonable and good faith estimates
and assumptions of the Company and the Company has no reason to believe that
such estimates and assumptions are not fair and reasonable, it being recognized
that projections as to future events are not to be viewed as fact and that
actual results during the period or periods covered by any such projections will
differ from the projected results and that the differences may be material.
(s) The Company has all the requisite power and authority to execute,
deliver and perform each of its obligations under each of the Transaction
Documents; the execution and delivery of, and the performance by the Company of
each of its obligations under, each of the Transaction Documents have been duly
and validly authorized by the Company, and each of the Transaction Documents has
been duly executed and delivered by the Company and constitutes the valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and subject to the applicability of general
principles of equity, and except as rights to indemnity and contribution under
such Transaction Document may be limited by Federal or state securities laws or
principles of public policy.
(t) Except as disclosed in the Offering Memorandum, subsequent to the
date as of which such information is given in the Offering Memorandum, neither
the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into or agreed to enter into any
transaction, whether or not in the ordinary course of business, that is material
to the Company and the Subsidiaries taken as a whole, and there has not been any
material change in the capital stock, or material increase in the short-term or
long-term debt, of the Company or any of the Subsidiaries, or any material
<PAGE>
-19-
adverse change, or any development involving or which could reasonably be
expected to involve a prospective material adverse change, in or affecting the
condition (financial or other), business, prospects, liabilities (contingent or
otherwise), properties, net worth, solvency or results of operations of the
Company and the Subsidiaries, taken as a whole (whether or not arising in the
ordinary course of business), and there have not been dividends or distributions
of any kind declared, paid or made by the Company or any Subsidiary on any class
of its capital stock.
(u) The Company and the Subsidiaries have good and marketable title
to all property (real and personal) described in the Offering Memorandum as
being owned by them (or reflected in the financial statements included in the
Offering Memorandum), free and clear of all liens, claims, security interests or
other encumbrances, except such as are described in the Offering Memorandum and
except for any such lien, claim, security interest or other encumbrance which
could not, singly or in the aggregate with all other liens, claims, security
interests or encumbrances, reasonably be expected to have a Material Adverse
Effect, and all the property described in the Offering Memorandum as being held
under lease by each of the Company and the Subsidiaries is held by it under
valid, subsisting and enforceable leases, with only such exceptions as in the
aggregate are not materially burdensome and do not interfere in any material
respect with the conduct of the business of the Company and the Subsidiaries,
taken as a whole, and no default by the Company or any of the Subsidiaries has
occurred and is continuing thereunder, except such as are described in the
Offering Memorandum or as could not, singly or in the aggregate with all such
other defaults, reasonably be expected to have a Material Adverse Effect, and to
the knowledge of the Company no material defaults by the landlord are existing
under any such lease.
(v) Except as permitted by the Act, the Company has not distributed
and, prior to the later to occur of the Closing Date and completion of the
initial distribution of the Securities (which includes the sale by the Initial
Purchaser), will not distribute any offering material in connection with the
offering
<PAGE>
-20-
and sale of the Securities other than the Preliminary Offering Memorandum and
Offering Memorandum (and any amendment or supplement thereto in accordance with
Section 4(c) hereof).
(w) Except as set forth in the Offering Memorandum, the Company and
each of the Subsidiaries have all such permits, licenses, franchises,
certificates of need and other approvals or authorizations of governmental or
regulatory authorities ("PERMITS") as are necessary under applicable law to own
their respective properties and to conduct their respective businesses in the
manner conducted as of the Closing Date as described in the Offering Memorandum,
except to the extent that the failure to have any such Permit could not, singly
or in the aggregate with all other such failures, reasonably be expected to have
a Material Adverse Effect; the Company and each of the Subsidiaries have
fulfilled and performed, in all material respects, all their respective material
obligations with respect to the Permits, and no event has occurred which allows,
or after notice or lapse of time would allow, revocation or termination thereof
or has resulted or after notice or lapse of time would result in any other
material impairment of the rights of the holder of any such Permit, subject in
each case to such qualification as may be set forth in the Offering Memorandum
and except to the extent that any such revocation or termination could not,
singly or in the aggregate with all other such revocations and terminations,
reasonably be expected to have a Material Adverse Effect; and, except as
described in the Offering Memorandum, none of the Permits contains any
restriction that is materially burdensome to the Company or any of the
Subsidiaries.
(x) To the knowledge of the Company, neither the Company nor any of
the Subsidiaries, nor to the knowledge of the Company, any employee or agent of
the Company or any Subsidiary has made any payment of funds of the Company or
any Subsidiary or received or retained any funds in violation of any law, rule
or regulation, which violation could, singly or in the aggregate with all other
such violations, reasonably be expected to have a Material Adverse Effect.
<PAGE>
-21-
(y) Except as disclosed in the Offering Memorandum, the Company and
each of the Subsidiaries have filed all tax returns required to be filed, and
such returns are true and correct in all material respects, and neither the
Company nor any Subsidiary is in default in the payment of any taxes which were
payable pursuant to said returns or any assessments with respect thereto, except
where the failure to file any such return or make any such payment could not,
singly or in the aggregate with all other such failures, reasonably be expected
to have a Material Adverse Effect. The Company does not know of any material
proposed additional tax assessments against it or any Subsidiary.
(z) Except as provided in the Shareholders' Agreement dated August
15, 1994, no holder of any security of the Company (other than holders of the
Securities) has any right to request or demand registration of any security of
the Company because of the consummation of the transactions contemplated by the
Transaction Documents. Except as described in the Offering Memorandum, other
than the Warrants to be issued and sold pursuant to this Agreement, there are no
outstanding options, warrants or other rights calling for the issuance of, and
there are no commitments or arrangements to issue, any shares of capital stock
of the Company or any of the Subsidiaries or any security convertible into or
exchangeable or exercisable for capital stock of the Company or any of the
Subsidiaries.
(aa) Except as set forth in the Offering Memorandum, the Company and
each of the Subsidiaries own or possess all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Offering Memorandum as being owned by any of them or, to the knowledge of the
Company, necessary for the conduct of their respective businesses (collectively,
the "INTELLECTUAL PROPERTY"), except to the extent that the failure to own or
possess such Intellectual Property could not, singly or in the aggregate with
all such other failures, reasonably be expected to result in any Material
Adverse Effect, and, except as set forth in the Offering Memorandum, the Company
is not aware of any claim to the contrary or any challenge by any other person
to the rights of the Company
<PAGE>
-22-
or any of the Subsidiaries with respect to the foregoing, except to the extent
that any such claim or challenge could not, singly or in the aggregate with all
such other claims or challenges, reasonably be expected to result in any
Material Adverse Effect. To the knowledge of the Company, the use of such
Intellectual Property in connection with the business and operations of the
Company and the Subsidiaries does not infringe on the rights of any person.
(ab) The Company is not and, upon sale of the Securities to be issued
and sold hereby in accordance herewith and the application of the net proceeds
to the Company of such sale as described in the Offering Memorandum under the
caption "Use of Proceeds," will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(ac) When the Securities are issued and delivered pursuant to this
Agreement, such Securities will not be of the same class (within the meaning of
Rule 144A(d)(3) under the Act) as any security of the Company that is listed on
a national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated interdealer quotation system.
(ad) The Company has not directly, or through any agent (provided that
no representation is made as to the Initial Purchaser or any person acting on
its behalf): (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any security (as defined in the Act) that is or will
be integrated with the offering and sale of the Securities in a manner that
would require the registration of the Securities under the Act; (ii) engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the Act) in connection with the offering of the Securities
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising; or (iii) engaged in any
directed selling efforts within the meaning of Rule 903 under the
<PAGE>
-23-
Act and the Commission's Release No. 33-6883. No securities of the same class
as the Notes or Warrants have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.
(ae) Assuming (i) that the representations and warranties in Section 2
hereof are true and correct in all material respects, (ii) that the Initial
Purchaser complies in all material respects with the covenants set forth in
Section 2 hereof and (iii) that each person to whom the Initial Purchaser
offers, sells or delivers the Securities is an Eligible Purchaser, the purchase
and sale of the Securities pursuant hereto (including the Initial Purchaser's
proposed offering of the Securities on the terms and in the manner set forth in
the Offering Memorandum and Section 2 hereof) is exempt from the registration
requirements of the Act.
(af) The Company and the Subsidiaries are in compliance with, and not
subject to any liability under, the common law and all applicable federal,
state, local and foreign laws, regulations, rules, codes, ordinances,
directives, and orders relating to pollution or to protection of public or
employee health or safety or to the environment, including, without limitation,
those that relate to any Hazardous Material (as defined herein) ("ENVIRONMENTAL
LAWS"), except, in each case, where noncompliance or liability, singly or in the
aggregate with all other such noncompliance and liabilities, could not
reasonably be expected to have a Material Adverse Effect. The term "HAZARDOUS
MATERIAL" means any pollutant, contaminant or waste, or any hazardous,
dangerous, or toxic chemical, material, waste, substance or constituent subject
to regulation under any Environmental Law.
(ag) The Company is not, nor will it be, after giving effect to the
issuance of the Securities and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, (i)
insolvent, (ii) left with unreasonably small capital with which to engage in its
anticipated businesses or (iii) incurring debts beyond its ability to pay such
debts as they mature.
<PAGE>
-24-
(ah) The Offering Memorandum, as of its date, and each amendment or
supplement thereto, as of its date, contains all the information specified in,
and meets the requirements of, Rule 144A(d)(4) under the Act.
6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in the Preliminary Offering Memorandum or Offering
Memorandum (including the Exhibits thereto) or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein 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, except, with respect to the Initial Purchaser, insofar as
such losses, claims, damages, liabilities or expenses arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
which has been made therein or omitted therefrom in reliance upon and in
conformity with the information relating to such Initial Purchaser furnished in
writing to the Company by or on behalf of such Initial Purchaser expressly for
use therein. The foregoing indemnity agreement shall be in addition to any
liability which the Company may otherwise have; PROVIDED, HOWEVER, that the
indemnification contained in this paragraph (a) with respect to the Preliminary
Offering Memorandum shall not inure to the benefit of an Initial Purchaser (or
to the benefit of any person controlling such Initial Purchaser) on account of
any such loss, claim, damage, liability or expense arising from the sale of the
Securities by such Initial Purchaser to any person if it is established in the
related proceeding that each untrue statement or alleged untrue statement
contained in, or omission or alleged omission of a material fact from, the
Preliminary Offering Memorandum upon which such loss, claim, damage, liability
or expense is based was completely corrected in the Offering
<PAGE>
-25-
Memorandum and that such Initial Purchaser sold Securities to that person
without sending or giving at or prior to the written confirmation of such sale,
a copy of the Offering Memorandum (as then amended or supplemented), which the
Company has previously furnished sufficient copies thereof to such Initial
Purchaser as required hereby.
(b) If any action, suit or proceeding shall be brought against the
Initial Purchaser or any person who controls the Initial Purchaser in respect of
which indemnity may be sought against the Company, the Initial Purchaser or any
such person who controls the Initial Purchaser shall promptly notify the parties
against whom indemnification is being sought (the "INDEMNIFYING PARTIES"), and
such indemnifying parties shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the indemnified parties and
payment of all reasonable fees and expenses. The Initial Purchaser or any
person who controls the Initial Purchaser shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Initial Purchaser or any such person who controls the Initial
Purchaser unless (i) the indemnifying parties have agreed to pay such fees and
expenses, (ii) the indemnifying parties have failed to assume the defense and
employ counsel reasonably satisfactory to the indemnified parties on a timely
basis, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both the Initial Purchaser or any such
person who controls the Initial Purchaser and any of the indemnifying parties
and the Initial Purchaser or any such person who controls the Initial Purchaser
shall have been advised by its counsel that representation of such indemnified
party and any such indemnifying party by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the indemnifying party shall not
have the right to assume the defense of such action, suit or proceeding on
behalf of the Initial Purchaser or any such person who controls the Initial
Purchaser). It is understood, however, that the
<PAGE>
-26-
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the fees and expenses of only one separate firm
of attorneys (in addition to any local counsel) at any time for the Initial
Purchaser and any such person who controls the Initial Purchaser, which firm
shall be designated in writing by Smith Barney Inc. and be reasonably acceptable
to the Company, and that all such fees and expenses shall be reimbursed on a
monthly basis as provided in paragraph (a) hereof. The indemnifying parties
shall not be liable for any settlement of any such action, suit or proceeding
effected without their written consent (which shall not be unreasonably withheld
or delayed), but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless the Initial Purchaser,
to the extent provided in paragraph (a), and any person who controls the Initial
Purchaser from and against any loss, claim, damage, liability or expense by
reason of such settlement or judgment.
(c) The Initial Purchaser agrees to indemnify and hold harmless the
Company, and its directors and officers, and any person who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the indemnity from the Company to the Initial Purchaser set
forth in paragraph (a) hereof, but only with respect to information relating to
such Initial Purchaser furnished in writing by or on behalf of such Initial
Purchaser expressly for use in the Preliminary Offering Memorandum or Offering
Memorandum or any amendment or supplement thereto. If any action, suit or
proceeding shall be brought against the Company, any of its directors or
officers, or any such controlling person based on the Preliminary Offering
Memorandum or Offering Memorandum, or any amendment or supplement thereto, and
in respect of which indemnity may be sought against the Initial Purchaser
pursuant to this paragraph (c), the Initial Purchaser shall have the rights and
duties given to the Company by paragraph (b) above (except that if the Company
shall have assumed the defense thereof the
<PAGE>
-27-
Initial Purchaser shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the Initial Purchaser's expense), and the
Company, its directors and officers, and any such controlling person shall have
the rights and duties given to the Initial Purchaser by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
the Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable for any reason to an indemnified party under paragraphs (a) or (c)
hereof or is insufficient to hold any such indemnified party completely
harmless in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then an indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchaser on
the other hand from the offering of the Securities, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Initial Purchaser on the other in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Initial Purchaser on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total discounts and commissions received by the Initial Purchaser, in each
case as set forth in the table on the cover page of the Offering Memorandum.
The relative fault of the Company on the one hand and the Initial Purchaser on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
<PAGE>
-28-
Company on the one hand or by the Initial Purchaser on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The Company and the Initial Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 6 were determined by
a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or depending on any such action, suit or
proceeding. Notwithstanding the provisions of this Section 6, the Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total price of the Securities purchased by it exceeds the amount
of any damages which the Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. Each
successor to the Initial Purchaser or any person who controls the Initial
Purchaser, or to the Company, their respective directors or officers or any
person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
6.
<PAGE>
-29-
(g) No indemnifying party shall, without the prior written consent of
the indemnified parties (which consent shall not be unreasonably withheld),
effect any settlement or compromise of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party, or
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional written release of such indemnified
party, in form and substance reasonably satisfactory to such indemnified party,
from all liability on claims that are the subject matter of such proceeding.
7. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The
obligations of the Initial Purchaser to purchase the Securities hereunder is
subject to the fulfillment, in the Initial Purchaser's sole discretion, of the
following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act shall have been issued, and no proceedings for that purpose shall have
been commenced or shall be pending or, to the knowledge of the Company, be
contemplated. No order suspending the sale of the Securities in any
jurisdiction shall have been issued, and no proceedings for that purpose shall
have been commenced or shall be pending or, to the knowledge of the Company,
shall be contemplated.
(b) Subsequent to the date hereof except that the Company shall have
continued to incur substantial operating losses, (i) there shall not have
occurred any material adverse change, or any development involving a prospective
material adverse change, in or affecting the condition (financial or otherwise),
business, prospects, liabilities (contingent or otherwise), properties, assets,
net worth, solvency or results of operations of the Company or any of the
Subsidiaries, and (ii) the conduct of the business and operations of the Company
and the Subsidiaries has not been interfered with by strike,
<PAGE>
-30-
fire, flood, hurricane, accident or other calamity (whether or not insured) and,
except as otherwise stated in the Offering Memorandum, the properties of each of
the Company and the Subsidiaries have not sustained any loss or damage (whether
or not insured) as a result of any such occurrence, except any such
interference, loss or damage which could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(c) The Initial Purchaser shall have received on the Closing Date an
opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel for the Company,
dated the Closing Date and addressed to the Initial Purchaser, in form and
substance satisfactory to Cahill Gordon & Reindel, counsel for the Initial
Purchaser, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of California
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum and is duly registered and qualified to conduct its
business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the
failure so to register or qualify or to be in good standing could not,
singly or in the aggregate with all other such failures, reasonably be
expected to have a Material Adverse Effect;
(ii) Each domestic Subsidiary is a corporation duly organized and
validly existing and in good standing under the laws of the
jurisdiction of its organization, with full corporate power and
authority to own, lease, and operate its properties and to conduct its
business as described in the Offering Memorandum and is duly
registered and qualified to conduct its business and is in good
standing as a foreign corporation in each jurisdiction where the
nature of its properties or the
<PAGE>
-31-
conduct of its business requires such registration or qualification,
except where the failure so to register or qualify or to be in good
standing could not, singly or in the aggregate with all other such
failures, reasonably be expected to have a Material Adverse Effect;
and, to the knowledge of such counsel except as described in the
Offering Memorandum, all the outstanding shares of capital stock of
each of the domestic Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, and are owned by the
Company, directly or through Subsidiaries, free and clear of any
perfected security interest or, to the knowledge of such counsel, any
other security interest, lien, adverse claim, equity or other
encumbrance (except Permitted Liens (as defined in the Indenture)
permitted by the Indenture);
(iii) The authorized capital stock of the Company is as set forth
in the first paragraph under the caption "Description of Capital
Stock" in the Offering Memorandum;
(iv) The Company has corporate power and authority to enter into
this Agreement and the other Transaction Documents and to issue, sell
and deliver the Securities to be sold by it to the Initial Purchaser
as provided herein, and this Agreement and each of the other
Transaction Documents (other than the Securities) have been duly
authorized, executed and delivered by the Company and each of the
Transaction Documents (other than this Agreement) are valid, legal and
binding agreements of the Company, enforceable against the Company in
accordance with their respective terms;
(v) No qualification of the Indenture under the 1939 Act is
required in connection with the offer and sale of the Securities
contemplated hereby or in connection with the Exempt Resales;
(vi) The Securities have been duly and validly authorized by the
Company, and, when executed by the
<PAGE>
-32-
Company and, in the case of the Notes, authenticated by the Trustee in
accordance with the Indenture or in the case of the Warrants,
countersigned by the Warrant Agent in accordance with the terms of the
Warrant Agreement, and, in each case, delivered to the Initial
Purchaser against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company, entitled to
the benefits of, with respect to the Notes, the Indenture and, with
respect to the Warrants, the Warrant Agreement;
(vii) The Warrant Shares have been duly reserved by the
Company for issuance upon exercise of the Warrants in sufficient
number to cover the exercise of all of the Warrants at the initial
number of Warrant Shares deliverable upon exercise of the Warrants,
and the issuance of the Warrant Shares upon exercise of the Warrants
has been duly and validly authorized, and the Warrant Shares, when
paid for and delivered in accordance with the terms of the Warrants
and the Warrant Agreement, will be validly issued, fully paid and
nonassessable, and to such counsel's knowledge no holder of any
securities of the Company has preemptive or similar rights applicable
to the Warrants or the Warrant Shares other than as disclosed in the
Offering Memorandum;
(viii) (x) The offer, sale or delivery of the Securities as of
the Closing Date and (y) the execution, delivery or performance by the
Company of this Agreement and the other Transaction Documents,
compliance by the Company with the provisions hereof or thereof and
consummation by the Company of the transactions contemplated hereby or
thereby do not and will not conflict with and do not and will not
constitute a breach of, or a default under (including any event which,
with notice or lapse of time or both, would be a breach of or a
default under), (a) the certificate or articles of incorporation or
bylaws or other organizational documents of the Company or any of the
Subsidiaries as in effect on
<PAGE>
-33-
the Closing Date or (b) any Agreement or Instrument known to such
counsel as in effect on the Closing Date, except, with respect to this
clause (b) any such conflict, breach or default that could not, singly
or in the aggregate, with all such other conflicts, breaches and
defaults, reasonably be expected to have a Material Adverse Effect,
and other than as described in the Offering Memorandum, will not
result in the creation or imposition of any lien, charge or
encumbrance (except Liens (as defined in the Indenture) permitted by
the Indenture) upon any property or assets of the Company or any of
the Subsidiaries pursuant to the terms of any Agreement or Instrument
known to such counsel as in effect as of the Closing Date, and no such
action will result in any violation of any Law or Legal Requirement in
effect as of the Closing Date which in such counsel's experience are
customarily applicable to transactions of the type contemplated by the
Transaction Documents (assuming compliance with all applicable state
securities and Blue Sky laws and, in the case of the Registration
Rights Agreements, the Act, the Exchange Act and the 1939 Act);
(ix) No Consent or Filing based on Law or Legal Requirements as
in effect on the Closing Date is required on the part of the Company
or any of the Subsidiaries for the valid issuance and sale of the
Securities to the Initial Purchaser as contemplated by this Agreement
or the execution, delivery or performance by the Company and the
Subsidiaries of each of the Transaction Documents, to the extent a
party thereto, except (A) as have been obtained and are in full force
and effect and (B) as may be required under state securities or Blue
Sky laws governing the purchase and distribution of the Securities or
such as may be required under the Act, the Exchange Act or the 1939
Act in connection with the performance by the Company of its
obligations under the Registration Rights Agreements, as to which such
counsel need not express an opinion;
<PAGE>
-34-
(x) To the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or
any of the Subsidiaries, or to which the Company or any of the
Subsidiaries or any of their respective property or assets is subject,
which are not disclosed in the Offering Memorandum and which, if
adversely decided, could, singly or in the aggregate with all other
such proceedings, reasonably be expected to have a Material Adverse
Effect or materially affect the consummation of the transactions
contemplated by the Transaction Documents;
(xi) The statements in the Offering Memorandum, insofar as they
are descriptions of contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are true and accurate
in all material respects and present fairly the information required
to be shown (excluding matters arising under the Communications Act of
1934, as amended, or any rule or regulation of the Federal
Communications Commission thereunder);
(xii) Except as described in the Offering Memorandum and as
provided in the Shareholders' Agreement dated as of August 15, 1994,
to the knowledge of such counsel, no holder of any securities of the
Company (except for the holders of the Securities) or any other person
has the right to have any securities of the Company included in any
registration statement contemplated by the Registration Rights
Agreements;
(xiii) No registration of any of the Securities under the Act
is required for the sale of the Securities to the Initial Purchaser as
contemplated in this Agreement or for the Exempt Resales (assuming (A)
that any person who buys the Securities in the Exempt Resales is an
Eligible Purchaser, (B) the accuracy of the Initial Purchaser's
representations and those of the Company in this Agreement regarding
the absence of general solicitation in connection with the Exempt
Resales and (C) the
<PAGE>
-35-
accuracy of the representations made by each Accredited Investor who
purchases Securities pursuant to an Exempt Resale as set forth in the
letter of representation executed by such Accredited Investor in the
form of Annex A to the Offering Memorandum); and
(xiv) Neither the consummation of the transactions
contemplated hereby nor the sale, issuance, execution or delivery of
the Securities, nor the application of the proceeds therefrom (if
applied as described in the Offering Memorandum under the caption "Use
of Proceeds"), will violate Regulation G (12 C.F.R. Part 207), T (12
C.F.R. Part 220), U (12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System.
The opinion of such counsel shall be limited to the laws of the
United States, the State of California and the internal corporation law of the
State of Delaware.
In giving such opinion, such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and certificates of public
officials; PROVIDED, HOWEVER, that such certificates have been delivered to the
Initial Purchaser prior to the Closing Date. Such opinion shall be subject to
customary exceptions and qualifications.
(d) The Initial Purchaser shall have received on the Closing Date an
opinion of Cahill Gordon & Reindel, counsel for the Initial Purchaser, dated the
Closing Date, addressed to the Initial Purchaser and in form and substance
satisfactory to the Initial Purchaser with respect to the Securities, the
Transaction Documents and such other matters as may be requested by the Initial
Purchaser and satisfactory in form and substance to the Initial Purchaser, and
the Company shall have furnished to such counsel such documents and other
instruments and information as they may reasonably request for the purpose of
enabling them to pass upon such matters.
<PAGE>
-36-
(e) The Initial Purchaser shall have received letters addressed to
the Initial Purchaser, and dated the date hereof and the Closing Date, from
Deloitte & Touche L.L.P., independent certified public accountants for the
Company, substantially in the forms heretofore approved by the Initial
Purchaser.
(f) (i) There shall not have been any material change in the capital
stock of the Company nor any material increase in the consolidated short-term or
consolidated long-term debt of the Company (other than in the ordinary course of
business) from that set forth or contemplated in the Offering Memorandum; (ii)
there shall not have been, since the respective dates as of which information is
given in the Offering Memorandum, except as may otherwise be expressly stated in
the Offering Memorandum, any material adverse change in the condition (financial
or other), business, prospects, liabilities (contingent or otherwise),
properties, net worth, solvency or results of operations of the Company and the
Subsidiaries taken as a whole; (iii) the Company and the Subsidiaries shall not
have any liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries taken as a whole, other than those reflected in the Offering
Memorandum; (iv) each of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date; (v) the Company shall have executed and delivered each
other Transaction Document; and (vi) the Initial Purchaser shall have received a
certificate, dated the Closing Date and signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company (or such
other officers as are acceptable to the Initial Purchaser), to the effect set
forth in this Section 7(f) and in Section 7(g) hereof, to the effect that the
Company is not, nor will it be, after giving effect to the issuance of the
Securities and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, (x) insolvent, (y) left
with unreasonably small capital with which to engage in its anticipated
businesses or (z) incurring debts beyond its ability to pay such debts as they
mature and to the
<PAGE>
-37-
effect that, to the knowledge of such individuals, the Offering Memorandum, and
any amendment or supplement thereto, does not contain any untrue statement of
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(g) The Company shall not have failed at or prior to the Closing Date
to have performed or complied in any material respect with any of its agreements
herein contained and required to be performed or complied with by it hereunder
at or prior to the Closing Date.
(h) The Securities shall have been approved for trading on PORTAL.
(i) The Initial Purchaser shall be satisfied in their sole discretion
with the terms and provisions of the Warrant Agreement.
(j) The Company shall have furnished or caused to be furnished to the
Initial Purchaser such further certificates, documents and opinions as the
Initial Purchaser shall have reasonably requested.
(k) There shall not have been made any amendment or supplement to the
Offering Memorandum to which the Initial Purchaser has objected.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchaser and Cahill Gordon &
Reindel, counsel for the Initial Purchaser.
Any certificate or document signed by any officer of the Company and
delivered to the Initial Purchaser, or to counsel for the Initial Purchaser, at
the Closing, shall be deemed a representation and warranty by the Company to the
Initial Purchaser as to the statements made therein.
<PAGE>
-38-
Acceptance of the proceeds of the issuance and sale of the Securities
shall be a representation and warranty by the Company to the Initial Purchaser
that each of the conditions set forth in clauses (a), (b), (f), (g), (h) and (k)
of this Section 7 have been satisfied or, to the knowledge of the Company,
waived.
8. EXPENSES. (a) Whether or not the purchase and sale of the
Securities hereunder is consummated or this Agreement is terminated pursuant to
Section 9 hereof, the Company agrees to pay the following costs and expenses and
all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, word processing, printing, delivery
and reproduction of the Preliminary Offering Memorandum and the Offering
Memorandum (including financial statements thereto), and each amendment or
supplement to any of them, this Agreement and each of the other Transaction
Documents (including the reasonable disbursements of the Initial Purchaser's
counsel in connection therewith); (ii) the delivery (including postage, air
freight charges and charges for counting and packaging) of such copies of the
Offering Memorandum, the Preliminary Offering Memorandum and all amendments or
supplements as may be reasonably requested for use in connection with the
offering and sale of the Securities as part of the initial distribution thereof
pursuant to Exempt Resales; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Securities, including any stamp
taxes in connection with the original issuance and sale of the Securities; (iv)
the printing (or reproduction) and delivery of the preliminary and supplemental
Blue Sky Memoranda and all other agreements and documents printed (or
reproduced) and delivered in connection with the offering of the Securities; (v)
the application for quotation of the Securities on PORTAL; (vi) the
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of the several states as provided in Section 4(f) hereof (including the
fees, expenses and disbursements of counsel for the Initial Purchaser relating
to the preparation, printing or reproduction, and delivery of the preliminary
and supplemental Blue Sky Memoranda and such qualification); (vii) the
performance by the Company of its obligations under the Warrant Agreement and
<PAGE>
-39-
the Registration Rights Agreements (including fees and expenses of the Trustee,
the Warrant Agent and the transfer agent and registrar of the Warrant Shares,
including fees and expenses of their respective counsel); (viii) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company; (ix) the reasonable fees
and expenses of Cahill Gordon & Reindel, counsel for the Initial Purchaser; and
(x) the reasonable fees and disbursements of Ropes & Gray, counsel for certain
prospective Eligible Purchasers. The Company hereby agrees that it will pay in
full on the Closing Date (or in the event that this Agreement is terminated or
there shall be a failure to consummate the transaction hereunder, upon request
by such counsel) the fees and expenses referred to in clauses (vi), (ix) and (x)
of this Section 8 by delivering to counsel for the Initial Purchaser on such
date a check payable to such counsel in the requisite amount.
(b) If the purchase and sale of the Securities hereunder is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 9 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder other than by
reason of a default by the Initial Purchaser in payment for the Securities on
the Closing Date after all conditions set forth herein have been satisfied, the
Company shall reimburse the Initial Purchaser promptly upon demand for all
out-of-pocket expenses (including reasonable fees and expenses of counsel) that
shall have been incurred by the Initial Purchaser in connection with the
proposed purchase and sale of the Securities and the other transactions
contemplated hereby.
9. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchaser, without
liability on the part of the Initial Purchaser to the Company, by notice to the
Company, if at or prior to the delivery and payment for Securities, (i) trading
in securities
<PAGE>
-40-
generally on the New York Stock Exchange, American Stock Exchange or the Nasdaq
National Market shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York shall have been declared
by either Federal or state authorities, or (iii) there shall have occurred any
outbreak or escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic conditions, the
effect of which on the financial markets of the United States or the market for
the Securities is such as to make it, in the sole judgment of the Initial
Purchaser, impracticable or inadvisable to commence or continue the offering of
the Securities on the terms set forth in the Offering Memorandum or to enforce
contracts for the resale of the Securities by the Initial Purchaser. Notice of
such termination may be given to the Company by telegram, telecopy or telephone
and shall be subsequently confirmed by letter.
10. INFORMATION FURNISHED BY THE INITIAL PURCHASER. The statements
set forth in the last paragraph on the cover page and in the first and fourth
paragraph under the caption "Plan of Distribution" in the Offering Memorandum,
constitute the only information furnished by or on behalf of the Initial
Purchaser as such information is referred to in Sections 5(b) and 6 hereof.
11. MISCELLANEOUS. Except as otherwise provided in Sections 4 and 9
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 125 Shoreway Road, San Carlos, CA 94070, Attention: President and
Corporate Secretary, or (ii) if to the Initial Purchaser, to Smith Barney Inc.,
338 Greenwich Street, New York, New York 10013, Attention: Manager, Investment
Banking Division.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
<PAGE>
-41-
This Agreement has been and is made solely for the benefit of the
Initial Purchaser and the Company, and their respective directors, officers and
the controlling persons referred to in Section 6 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the terms "successors and assigns" as used in this
Agreement shall include a purchaser from the Initial Purchaser of any of the
Securities in such purchaser's status as such purchaser.
12. SURVIVAL. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company set forth
in this Agreement or made by or on behalf of the Company (including, pursuant to
any officer's certificate) pursuant to this Agreement shall remain in full force
and effect, regardless of (i) any investigation made by or on behalf of the
Initial Purchaser, any director, officer, employee or agent of the Initial
Purchaser or any controlling person referred to in Section 6 hereof, and (ii)
delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 8 and 13
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
13. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the law of the State of New York applicable
to contracts made and to be performed within the State of New York.
[Remainder of Page Intentionally Left Blank]
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchaser.
Very truly yours,
CELLNET DATA SYSTEMS, INC.
By: /s/ Paul Manca
---------------------------------
Name: P. Manca
Title: CFO
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
By: /s/ Sean P. Crowley
-----------------------------------
Name: Sean P. Crowley
Title: Managing Director
<PAGE>
SCHEDULE I
CELLNET DATA SYSTEMS, INC.
LESS THAN WHOLLY OWNED SUBSIDIARIES
-----------------------------------
None
<PAGE>
90,000 UNITS
CONSISTING OF
$90,000,000 AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF
13% SENIOR DISCOUNT NOTES DUE 2005
AND
360,000 WARRANTS TO PURCHASE
360,000 SHARES OF
COMMON STOCK OF
CELLNET DATA SYSTEMS, INC.
PURCHASE AGREEMENT
November 21, 1995
SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
CellNet Data Systems, Inc., a California corporation (the "COMPANY"),
proposes, upon the terms and conditions set forth in this agreement ("AGREEMENT
"), to issue and sell to Smith Barney Inc. (the "INITIAL PURCHASER") 90,000
units (the "UNITS") consisting in the aggregate of (i) $90,000,000 aggregate
principal amount at maturity of the Company's 13% Senior Discount Notes due 2005
(the "NOTES"), and (ii) 360,000 warrants (the "WARRANTS"), each warrant
entitling the holder thereof to purchase initially one (1) share (collectively,
the "WARRANT SHARES") of the Company's Common Stock, no par value per share
(the "COMMON STOCK"). Each Unit will consist of $1,000 aggregate principal
amount at maturity of Notes and four (4) Warrants. The
<PAGE>
-2-
Notes will be issued under an indenture (the "INDENTURE"), dated as of June 15,
1995, between the Company and The Bank of New York, as trustee (the "TRUSTEE"),
as amended by the First Supplemental Indenture dated as of November 21, 1995
between the Company and the Trustee (the "FIRST SUPPLEMENTAL INDENTURE"). The
Warrants will be issued under a warrant agreement (the "WARRANT AGREEMENT"),
dated as of June 15, 1995, between the Company and The Bank of New York, as
warrant agent (the "WARRANT AGENT"), as amended by the First Supplemental
Warrant Agreement dated as of November 21, 1995 between the Company and the
Warrant Agent (the "FIRST SUPPLEMENTAL WARRANT AGREEMENT"). The Notes and the
Warrants are collectively referred to herein as the "SECURITIES." This
Agreement, the Indenture, the Securities, the Warrant Agreement, the First
Supplemental Indenture, the First Supplemental Warrant Agreement, the
Registration Rights Agreements (as defined in the third paragraph of Section 1
hereof) and the Registration Rights Agreements Amendments (as defined in the
third paragraph of Section 1 hereof) are herein collectively referred to as the
"TRANSACTION DOCUMENTS."
The Company wishes to confirm as follows its agreement with the
Initial Purchaser in connection with the purchase and resale of the Securities:
1. OFFERING MEMORANDUM AND SUPPLEMENTAL OFFERING MEMORANDUM. The
Securities will be offered and sold to the Initial Purchaser without
registration under the Securities Act of 1933, as amended (the "ACT"), in
reliance on exemptions therefrom. The Company has prepared an offering
memorandum dated June 14, 1995 (the "ORIGINAL OFFERING MEMORANDUM"), a
preliminary supplement to the Original Offering Memorandum dated November 8,
1995 (the "PRELIMINARY SUPPLEMENTAL OFFERING MEMORANDUM") and a supplement to
the Original Offering Memorandum dated November 17, 1995 as supplemented by a
letter dated November 20, 1995 (the "SUPPLEMENTAL OFFERING MEMORANDUM" and
together with the Original Offering Memorandum, the "OFFERING MEMORANDUM"),
setting forth information regarding the Company and the Securities. Unless
stated herein to the contrary, all references herein to the Offering Memorandum
are to the Original Offering Memorandum as supplemented by the Supplemental
Offering Memorandum at the date
<PAGE>
-3-
hereof and do not include any supplement or amendment subsequent thereto. The
Company hereby confirms that it has authorized the use of the Original Offering
Memorandum as supplemented by the Supplemental Offering Memorandum in connection
with the offering and resale of the Securities by the Initial Purchaser.
The Company understands that the Initial Purchaser proposes to make
offers and sales (the "EXEMPT RESALES") of the Securities purchased by the
Initial Purchaser hereunder only on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof, as soon as the Initial Purchaser deems
advisable after this Agreement has been executed and delivered, (i) to persons
in the United States whom the Initial Purchaser reasonably believes to be
qualified institutional buyers ("QUALIFIED INSTITUTIONAL BUYERS") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("RULE
144A"), in transactions under Rule 144A, (ii) to a limited number of other
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) and
(7) under Regulation D of the Act) ("ACCREDITED INVESTORS") in private sales
exempt from registration under the Act and (iii) outside the United States to
persons other than U.S. persons in reliance upon Regulation S ("REGULATION S")
under the Act (such persons specified in clauses (i), (ii) and (iii) being
referred to herein as the "ELIGIBLE PURCHASERS"). As used herein the terms
"United States" and "U.S. persons" have the meaning given them in Regulation S.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Notes will have the registration rights set forth
in the registration rights agreement (the "NOTES REGISTRATION RIGHTS AGREEMENT
") attached hereto as EXHIBIT A-1 , dated as of June 15, 1995, by and among the
Company and the Initial Purchaser as amended by the First Supplemental Notes
Registration Rights Agreement substantially in the form attached hereto as
EXHIBIT A-2 dated as of November 21, 1995 by and among the Company and the
holders of the notes issued under the Indenture on June 15, 1995 (the "NOTES
REGISTRATION RIGHTS AGREEMENT AMENDMENT"), and that holders (including
subsequent transferees) of the Warrant Shares will have the registration rights
set forth in the registration rights
<PAGE>
-4-
agreement (the "WARRANTS REGISTRATION RIGHTS AGREEMENT ," and together with the
Notes Registration Rights Agreement, the "REGISTRATION RIGHTS AGREEMENTS ")
attached hereto as EXHIBIT B-1 , dated as of June 15, 1995, by and among the
Company and the Initial Purchaser as amended by the First Supplemental Warrants
Registration Rights Agreement substantially in the form attached hereto as
EXHIBIT B-2 dated as of November 21, 1995 by and among the Company and the
holders of the warrants issued under the Warrant Agreement on June 15, 1995 (the
"WARRANTS REGISTRATION RIGHTS AGREEMENT AMENDMENT" and together with the Notes
Registration Rights Agreement Amendment, the "REGISTRATION RIGHTS AGREEMENTS
AMENDMENTS").
The Initial Purchaser covenants and agrees with the Company that it
will deliver an Offering Memorandum in connection with each Exempt Resale (to
the extent made available by the Company) if the Company has not already done
so and will not after the date of this Agreement deliver any other offering
materials other than the Offering Memorandum or any amendment or supplement
thereto in connection with any Exempt Resale without the prior consent of the
Company. In addition, the Initial Purchaser shall advise the Company (which
advice may be by telephone) when its initial distribution of the Securities has
been completed.
2. AGREEMENTS TO SELL, PURCHASE AND RESELL.
(a) The Company hereby agrees, subject to all of the terms and
conditions set forth herein, and upon the basis of the representations,
warranties and agreements of the Initial Purchaser, to issue and sell to the
Initial Purchaser and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all of the terms and
conditions set forth herein, the Initial Purchaser agrees to purchase from the
Company all of the Securities at a purchase price equal to $549.231 per Unit;
PROVIDED , HOWEVER that the Initial Purchaser shall have no obligation to take
or pay for any Units, Notes or Warrants to the extent that any person to whom it
intends to effect an Exempt Resale fails or refuses to purchase
<PAGE>
-5-
on the Closing Date the Securities which such Person was to purchase pursuant to
the terms of such agreed upon Exempt Resale.
(b) The Initial Purchaser has advised the Company that it will offer
the Securities for sale upon the terms and conditions set forth in this
Agreement and in the Offering Memorandum. The Initial Purchaser hereby
represents and warrants to, and agrees with, the Company that the Initial
Purchaser (i) will not solicit offers for, or offer to sell, the Securities by
means of any form of general solicitation or general advertising or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act, and (ii) will solicit offers for the Securities only from, and will offer,
sell or deliver the Securities as part of its initial offering, only to (A)
persons in the United States whom the Initial Purchaser reasonably believes to
be Qualified Institutional Buyers, or if any such person is buying for one or
more institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to the Initial Purchaser that each
such account is a Qualified Institutional Buyer, to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A, in each case,
in transactions under Rule 144A, (B) to a limited number of Accredited Investors
that make the representations to and agreements with the Initial Purchaser
specified in Annex A to the Offering Memorandum in private sales exempt from
registration under the Act and (C) outside the United States to persons other
than U.S. persons in reliance on Regulation S.
The Initial Purchaser has advised the Company that it will offer the
Units to Eligible Purchasers at a price initially equal to $562.736 per Unit,
plus the additional accreted value, if any, on the Notes from the date of
issuance of the Units. Such price may be changed by the Initial Purchaser at
any time thereafter without notice.
(c) The Initial Purchaser represents and warrants that (i) it has not
offered or sold, and will not offer or sell, directly or indirectly, any of the
Securities in the United Kingdom by means of any document, other than to persons
whose
<PAGE>
-6-
ordinary business it is to buy or sell shares or debentures whether as principal
or agent (except in circumstances which do not constitute an offer to the public
within the meaning of the Companies Act of 1985), (ii) it has complied with and
will comply with all applicable provisions of the Financial Services Act of 1986
with respect to anything done by the Initial Purchaser in relation to the
Securities in, from or otherwise involving the United Kingdom and (iii) it has
issued or passed on and will issue or pass on in or from the United Kingdom to
any persons any document received by the Initial Purchaser in connection with
the issue of the Securities only if the recipient is of a kind described in
Article 9(3) of the Financial Services Act of 1986 (Investment Advertisements)
(Exemptions) Order 1988, as amended.
(d) The Initial Purchaser represents and warrants that, with respect
to Securities offered and sold or to be offered and sold pursuant to Regulation
S, it has offered and sold the Securities and agrees that it will offer and sell
the Securities (i) as part of its initial distribution at any time and (ii)
otherwise until expiration of the Restricted Period (as defined in Regulation
S), only in accordance with Rule 903 of Regulation S or as otherwise permitted
pursuant to paragraph (c) above. Accordingly, the Initial Purchaser represents
and agrees that with respect to Securities offered and sold or to be offered and
sold pursuant to Regulation S, the Initial Purchaser, its affiliates and any
persons acting on its behalf or on behalf of its affiliates have not engaged or
will not engage in any directed selling efforts with respect to the Securities,
and it and its affiliates have complied and will comply with the offering
restrictions requirements of Regulation S. The Initial Purchaser agrees that,
at or prior to confirmation of any sale of Securities pursuant to Regulation S,
it will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases such Securities from the
Initial Purchaser during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Act"), and may not be offered or
sold within the
<PAGE>
-7-
United States or to, or for the account or benefit of, U.S. persons (i) as
part of their initial distribution at any time or (ii) otherwise until
expiration of the Restricted Period (as defined in Regulation S under the
Act), except in either case in accordance with Regulation S or Rule 144A
under the Act. Terms used above have the respective meanings given to them
in Regulation S under the Act."
The Initial Purchaser understands that the Company and, for the
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 7(c)(xiii) and 7(d) hereof, counsel to the Company and counsel to the
Initial Purchaser, will rely upon the accuracy and truth of the foregoing
representations and agreements and the Initial Purchaser hereby consents to such
reliance.
3. DELIVERY OF THE SECURITIES AND PAYMENT THEREFOR . Delivery to
the Initial Purchaser of and payment for the Securities shall be made at the
office of Cahill Gordon & Reindel, at 10:00 A.M., New York City time, on
November 21, 1995 (the "CLOSING DATE "). The place of closing for the
Securities and the Closing Date may be varied by agreement between the Initial
Purchaser and the Company.
The Securities will be delivered to the Initial Purchaser against
payment of the purchase price therefor by certified or cashier's check or checks
payable to the order of the Company in New York Clearing House (next day) funds
in accordance with written instructions from the Company. The Notes will be
represented by a global security (the "GLOBAL NOTE ") and the Warrants will be
represented by a global security (the "GLOBAL WARRANT ", and together with the
Global Note, the "GLOBAL SECURITIES ") and/or by additional certificated
securities, and will be registered, in the case of each of the Global
Securities, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC "), and in the other cases, in such names and in such denominations as the
Initial Purchaser shall request prior to 1:00 p.m., New York City time, on the
third business day preceding the Closing Date. The Securities to be
<PAGE>
-8-
delivered to the Initial Purchaser shall be made available to the Initial
Purchaser in New York City for inspection and packaging not later than 9:30
a.m., New York City time, on the business day next preceding the Closing Date.
4. AGREEMENTS OF THE COMPANY. The Company agrees with the Initial
Purchaser as follows:
(a) During the period of time specified in clause (e) below of this
Section 4 the Company will advise the Initial Purchaser promptly and, if
requested by it, will promptly confirm such advice in writing, of any
material change, or of any event or condition which is reasonably likely to
result in a material change, in the condition (financial or other),
business, prospects, liabilities (contingent or otherwise), properties, net
worth, solvency or results of operations of the Company and the
Subsidiaries (as defined in Section 5(i) hereof) taken as a whole (whether
or not arising in the ordinary course of business), or of the happening of
any event, any information becoming known or the existence of any condition
which would require any amendment or supplement to the Offering Memorandum
(as then amended or supplemented) so that the Offering Memorandum (as so
amended or supplemented) would not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The Company will furnish to the Initial Purchaser, without
charge, such number of copies of the Offering Memorandum and any amendments
or supplements thereto, as it may reasonably request.
(c) The Company will not make any amendment or supplement to the
Preliminary Supplemental Offering Memorandum or to the Offering Memorandum
of which the Initial Purchaser shall not previously have been furnished a
copy of a reasonable time prior to the making thereof or, at any time prior
to the payment for the Securities on the
<PAGE>
-9-
Closing Date, to which it shall reasonably object after being so advised.
(d) The Company consents to the use of the Offering Memorandum (and
of any amendment or supplement thereto prepared in accordance with Section
4(c) hereof) in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Securities are offered by the Initial Purchaser
and by all dealers to whom Securities may be sold, in connection with the
offering and sale of the Securities.
(e) If, at any time prior to completion of the distribution of the
Securities by the Initial Purchaser to Eligible Purchasers, any event shall
occur, any information shall become known or any condition shall exist that
in the judgment of the Company or in the opinion of counsel for the Initial
Purchaser would require any amendment or supplement to the Offering
Memorandum (as then amended or supplemented) so that the Offering
Memorandum (as so amended or supplemented) would not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, the
Company will, in each such case subject to Section 4(c) hereof, forthwith
prepare, at the sole expense of the Company, an appropriate supplement or
amendment thereto, and will expeditiously furnish to the Initial Purchaser
and dealers that number of copies thereof as they shall request.
(f) The Company will cooperate with the Initial Purchaser and with
its counsel in connection with the qualification of the Securities for
offering and sale by the Initial Purchaser and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchaser
may designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such qualification;
PROVIDED, HOWEVER, that in no event shall the Company be obligated to
qualify to do
<PAGE>
-10-
business in any jurisdiction where it is not now so qualified or to take
any action which would subject it to general service of process in any
jurisdiction where it is not now so subject.
(g) For a period of five (5) years after the Closing Date, the
Company will furnish to the Initial Purchaser (i) as soon as available, a
copy of each quarterly or annual report of the Company mailed to
stockholders or filed with the Securities and Exchange Commission (the
"COMMISSION "), and (ii) from time to time such other information
concerning the Company as the Initial Purchaser may reasonably request.
(h) The Company will apply the net proceeds from the sale of the
Securities in accordance with the description set forth under "Use of
Proceeds" in the Offering Memorandum.
(i) Except as stated in this Agreement and in the Offering
Memorandum, the Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the
Securities to facilitate the sale or resale of the Securities. Except as
permitted by the Act, the Company will not distribute any offering material
in connection with the Exempt Resales. The Company will not, and will not
permit any person acting on its behalf to, solicit any offers to buy and
will not offer to sell the Securities by means of any form of general
solicitation or general advertising or by means of any directed selling
efforts (as defined under Regulation S and the Commission's releases
related thereto).
(j) The Company will use its best efforts to cause the Securities to
be eligible for trading on The PORTAL Market.
(k) From and after the Closing Date, so long as any of the Securities
are outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Act or, if earlier, until three years after the Closing
<PAGE>
-11-
Date, and during any period in which the Company is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), the Company will furnish to holders and beneficial owners
of the Securities and prospective purchasers of Securities designated by
such holders, upon request of such holders or beneficial owners or such
prospective purchasers, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Act to permit compliance with Rule 144A in
connection with resales of the Securities.
(l) The Company agrees not to sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
Act) that would be integrated with the sale of the Securities in a manner
that would require the registration under the Act of the sale by the
Company to the Initial Purchaser or by the Initial Purchaser to the
Eligible Purchasers of the Securities.
(m) The Company agrees to comply in all material respects with the
terms and conditions of the Registration Rights Agreements (as amended by
the Registration Rights Agreements Amendments), the Warrant Agreement (as
amended by the First Supplemental Warrant Agreement) and all agreements set
forth in the representation letters of the Company to DTC relating to the
approval of the Securities by DTC for "book entry" transfer.
(n) The Company agrees that prior to any registration of the Notes
pursuant to the Notes Registration Rights Agreement (as amended by the
Notes Registration Rights Agreement Amendment), or at such earlier time as
may be so required, the Indenture shall be qualified under the Trust
Indenture Act of 1939 (the "1939 ACT ") and will enter into any necessary
supplemental indentures in connection therewith.
(o) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared by the Company, a
copy of any unaudited interim
<PAGE>
-12-
consolidated quarterly financial statements of the Company for any period
subsequent to the period covered by the most recent consolidated financial
statements of the Company appearing in the Offering Memorandum.
(p) The Company shall not, until 90 days following the Closing Date,
without the prior written consent of the Initial Purchaser, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any debt securities issued by the Company (other
than the Securities, any debt securities of the Company issued pursuant to
the Notes Registration Rights Agreement (as amended by the Notes
Registration Rights Agreement Amendment) in exchange for the Notes or any
notes issued pursuant to the Indenture on June 15, 1995 and indebtedness
permitted under the Indenture).
(q) The Company will not claim voluntarily, and will, subject to the
fiduciary duties of the Board of Directors of the Company and applicable
law, resist actively any attempts to claim, the benefit of any usury laws
against the holders of any Notes.
(r) The Company will do and perform in all material respects all
things required to be done and performed under this Agreement and the other
Transaction Documents by it on, prior to, and after the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Initial Purchaser on the date hereof and as of
the Closing Date that:
(a) No order or decree preventing the use of the Preliminary
Supplemental Offering Memorandum or the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act has been issued, and no proceeding for that purpose
has commenced or is pending or, to the knowledge of the Company, is
contemplated.
<PAGE>
-13-
(b) The Preliminary Supplemental Offering Memorandum as of its date,
and the Offering Memorandum as of the date of the Supplemental Offering
Memorandum and as of the Closing Date and any amendment or supplement
thereto as of its date and as of the Closing Date, did not and will not (as
of the Closing Date) contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, except that this representation and warranty
does not apply (i) to statements in or omissions from the Preliminary
Supplemental Offering Memorandum and Offering Memorandum made in reliance
upon and in conformity with information relating to the Initial Purchaser
furnished to the Company in writing by or on behalf of the Initial
Purchaser expressly for use therein and (ii) statements in or omissions
from the Preliminary Supplemental Offering Memorandum that are
supplemented, revised or added in the Offering Memorandum. The Company
makes no representation or warranty with respect to any projected financial
information or other forecasts except as provided in Section 5(r) of this
Agreement.
(c) The Indenture has been duly and validly authorized, executed and
delivered by the Company and, assuming due authorization, execution,
delivery and performance by the Trustee, is a valid and binding agreement
of the Company, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity; the
Indenture, as amended by the First Supplemental Indenture, conforms in all
material respects to the description thereof in the Offering Memorandum;
and no qualification of the Indenture, as amended by the First Supplemental
Indenture, under the 1939 Act is required in connection with the offer and
sale of the Securities contemplated hereby or in connection with the Exempt
Resales. The First Supplemental Indenture has been duly and validly
authorized by the
<PAGE>
-14-
Company and, upon its execution, delivery and performance by the Company
and assuming due authorization, execution, delivery and performance by the
Trustee, will be a valid and binding agreement of the Company, enforceable
in accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally and subject to the applicability of general
principles of equity.
(d) The Securities have been duly authorized by the Company, and,
when executed by the Company and, in the case of the Notes, authenticated
by the Trustee in accordance with the Indenture, as amended by the First
Supplemental Indenture, or in the case of the Warrants, countersigned by
the Warrant Agent in accordance with the provisions of the Warrant
Agreement, as amended by the First Supplemental Warrant Agreement, and, in
each case, delivered to the Initial Purchaser against payment therefor in
accordance with the terms hereof, will have been validly issued and
delivered, and will constitute valid and binding obligations of the
Company, in the case of the Notes, entitled to the benefits of the
Indenture, as amended by the First Supplemental Indenture, and, in the case
of the Warrants, entitled to the benefit of the Warrant Agreement, as
amended by the First Supplemental Warrant Agreement, and enforceable in
accordance with their terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally and subject to the applicability of general
principles of equity, and the Securities conform in all material respects
to the description thereof in the Offering Memorandum.
(e) When issued in accordance with the terms and conditions contained
in the Warrant Agreement, as amended by the First Supplemental Warrant
Agreement, upon exercise of the Warrants, the Warrant Shares will be duly
authorized, validly issued, fully paid and non-assessable and will not be
subject to any preemptive or similar rights. The Warrant Shares have been
duly reserved for issuance in accordance
<PAGE>
-15-
with the terms of the Warrants and the Warrant Agreement, as amended by the
First Supplemental Warrant Agreement.
(f) The Warrants, when issued and sold, will represent the right to
acquire upon exercise initially not less than approximately 2.22% of the
outstanding common equity of the Company on a fully diluted basis as of the
Closing Date (fully diluted to be calculated by giving effect to the
maximum number of shares of common equity of the Company deliverable upon
exercise, conversion or exchange of all vested stock options and restricted
stock and in the money warrants outstanding as of the Closing Date
including, without limitation, the Warrants and excluding unvested
outstanding stock options and restricted stock repurchaseable at cost by
the Company).
(g) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights and were
issued and sold in compliance in all material respects with all applicable
Federal and state securities laws.
(h) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California with full
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum, and is
duly registered and qualified to conduct its business and is in good
standing in each jurisdiction where the nature of its properties or the
conduct of its business requires such registration or qualification, except
where the failure so to register or qualify could not, singly or in the
aggregate with all other such failures, reasonably be expected to have a
material adverse effect on the condition (financial or other), business,
prospects, liabilities (contingent or otherwise) properties, net worth,
solvency or results of operations of the Company and the Subsidiaries,
taken as a whole (any such event, a "MATERIAL ADVERSE EFFECT").
<PAGE>
-16-
(i) All of the Company's subsidiaries (as defined in the Act) are
referred to herein individually as a "SUBSIDIARY " and collectively as the
"SUBSIDIARIES." Each Subsidiary is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its incorporation,
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum, and is duly registered and qualified to conduct its business
and is in good standing in each jurisdiction where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or be in
good standing could not, singly or in the aggregate with all other such
failures, reasonably be expected to have a Material Adverse Effect. All of
the outstanding shares of capital stock of each of the Subsidiaries have
been duly authorized and validly issued, are fully paid and nonassessable,
and are wholly owned by the Company directly or indirectly through one of
the other Subsidiaries, free and clear of any lien, adverse claim, security
interest, equity or other encumbrance, except as described in the Offering
Memorandum.
(j) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of the
Subsidiaries or to which the Company or any of the Subsidiaries or any of
their respective properties or assets is subject, that are not disclosed in
the Offering Memorandum and that, if adversely decided, could, singly or in
the aggregate with all other such proceedings, reasonably be expected to
have a Material Adverse Effect or materially affect the issuance of the
Securities or the consummation of any of the transactions contemplated by
the Transaction Documents. Neither the Company nor any Subsidiary is
involved in any strike, job action or labor dispute with any group of
employees, and, to the knowledge of the Company, no such action or dispute
is threatened.
<PAGE>
-17-
(k) No statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency and no injunction, restraining
order or order of any nature by a Federal or state court of competent
jurisdiction to which the Company or any of the Subsidiaries is subject has
been issued or is pending that (x) would interfere with or adversely affect
the issuance of the Securities or (y) would in any manner draw into
question the validity of this Agreement or any other Transaction Document.
(l) To the knowledge of the Company, neither the Company nor any of
the Subsidiaries has violated any Federal, state or local law relating to
discrimination in hiring, promotion or pay of employees.
(m) Neither the Company nor any of the Subsidiaries is (i) in
violation of (A) its certificate or articles of incorporation or bylaws or
other organizational documents or (B) of any statute, ordinance, law,
administrative or governmental rule or regulation or filing or judgment,
injunction, order or decree of any court or governmental agency or body
applicable to the Company or any of the Subsidiaries or any of their
respective properties or assets (collectively, "LAW AND LEGAL REQUIREMENTS
"), except where any such violation could not, singly or in the aggregate
with all other such violations, reasonably be expected to have a Material
Adverse Effect or (ii) in breach of or in default in the performance of
(including any event which, with notice or lapse of time or both, would
constitute a breach of or a default in the performance of) any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness, material agreement, indenture, material lease or
other material instrument to which the Company or any of the Subsidiaries
is a party or by which any of the Company and the Subsidiaries or any of
their respective properties may be bound (collectively, "AGREEMENTS AND
INSTRUMENTS"), except (a) as may be disclosed in the Offering Memorandum
or (b) where any such breach or default could not, singly or in
<PAGE>
-18-
the aggregate with all other such breaches and defaults, reasonably be
expected to have a Material Adverse Effect.
(n) The issuance, offer, sale and delivery of the Securities, the
execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (it being understood
that no representation or warranty is made with respect to any Consents or
Filings, provisions of the certificate or articles of incorporation or
bylaws or other organizational documents, Agreements or Instruments or Law
or Legal Requirements not in existence on the date hereof or on the Closing
Date): (i) require any consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (collectively,
"CONSENTS AND FILINGS "), except (A) such as may be required under the Act
in connection with the performance of the Company's obligations under the
Registration Rights Agreements and the qualification of the Indenture under
the 1939 Act in connection with the consummation of the transactions
contemplated by the Notes Registration Rights Agreement and (B) compliance
with the securities or Blue Sky laws of various jurisdictions; (ii)
conflict with or constitute a breach of or a default under (including any
event which, with notice or lapse of time or both, would constitute a
breach of or a default under), the certificate or articles of incorporation
or bylaws or other organizational documents of the Company or any of the
Subsidiaries; (iii) conflict with or constitute a breach of or a default
under (including any event which, with notice or lapse of time or both,
would constitute a breach of or a default under) any Agreement or
Instrument, except any such conflict, breach or default that could not,
singly or in the aggregate with all other such conflicts, breaches and
defaults, reasonably be expected to have a Material Adverse Effect; (iv)
violate any Law or Legal Requirement, except any such violation that could
not, singly or in the aggregate with all other such violations, reasonably
be
<PAGE>
-19-
expected to have a Material Adverse Effect; and (v) result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms of
any Agreement or Instrument.
(o) No consents or waivers from any other person are required for the
execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company or, as applicable, any of the
Subsidiaries and the consummation of the transactions contemplated hereby
and thereby, other than such consents and waivers as have been obtained and
are in full force and effect.
(p) Deloitte & Touche LLP, who has certified the consolidated
financial statements of the Company included as part of the Offering
Memorandum, is, to the knowledge of the Company, a firm of independent
public accountants under Rule 101 of the AICPA's Code of Professional
Conduct and its interpretation and rulings.
(q) The consolidated financial statements of the Company included in
the Offering Memorandum, together with the related notes thereto, (1) are
identical to the consolidated financial statements of the Company upon
which Deloitte & Touche LLP have issued their audit report and which are
attached as Annex A to the comfort letter referred to in Section 7(e) of
this Agreement and (2) present fairly the consolidated financial position,
results of operations and cash flows of the Company, at the dates and for
the periods to which they relate, and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
("GAAP "). The PRO FORMA financial information (including the notes
thereto) included in the Offering Memorandum (A) present fairly in all
material respects the information shown therein and (B) have been properly
computed on the basis described therein.
(r) The projections contained in the Offering Memorandum have been
prepared by the Company and are based
<PAGE>
-20-
on the reasonable and good faith estimates and assumptions of the Company
and the Company has no reason to believe that such estimates and
assumptions are not fair and reasonable, it being recognized that
projections as to future events are not to be viewed as fact and that
actual results during the period or periods covered by any such projections
will differ from the projected results and that the differences may be
material.
(s) The Company has all the requisite power and authority to execute,
deliver and perform each of its obligations under each of the Transaction
Documents; the execution and delivery of, and the performance by the
Company of each of its obligations under, each of the Transaction Documents
have been duly and validly authorized by the Company, and each of the
Transaction Documents has been duly executed and delivered by the Company
and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and subject
to the applicability of general principles of equity, and except as rights
to indemnity and contribution under such Transaction Document may be
limited by Federal or state securities laws or principles of public policy.
(t) Except as disclosed in the Offering Memorandum, subsequent to the
date as of which such information is given in the Offering Memorandum,
neither the Company nor any of the Subsidiaries has incurred any liability
or obligation, direct or contingent, or entered into or agreed to enter
into any transaction, whether or not in the ordinary course of business,
that is material to the Company and the Subsidiaries taken as a whole, and
there has not been any material change in the capital stock, or material
increase in the short-term or long-term debt, of the Company or any of the
Subsidiaries, or any material adverse change, or any development involving
or which could reasonably be expected to involve a prospective material
adverse change, in or
<PAGE>
-21-
affecting the condition (financial or other), business, prospects,
liabilities (contingent or otherwise), properties, net worth, solvency or
results of operations of the Company and the Subsidiaries, taken as a whole
(whether or not arising in the ordinary course of business), and there have
not been dividends or distributions of any kind declared, paid or made by
the Company or any Subsidiary on any class of its capital stock.
(u) The Company and the Subsidiaries have good and marketable title
to all property (real and personal) described in the Offering Memorandum as
being owned by them (or reflected in the financial statements, included in
the Offering Memorandum), free and clear of all liens, claims, security
interests or other encumbrances, except such as are described in the
Offering Memorandum (or noted in such financial statements) and except for
any such lien, claim, security interest or other encumbrance which could
not, singly or in the aggregate with all other liens, claims, security
interests or encumbrances, reasonably be expected to have a Material
Adverse Effect, and all the property described in the Offering Memorandum
as being held under lease by each of the Company and the Subsidiaries is
held by it under valid, subsisting and enforceable leases, with only such
exceptions as in the aggregate are not materially burdensome and do not
interfere in any material respect with the conduct of the business of the
Company and the Subsidiaries, taken as a whole, and no default by the
Company or any of the Subsidiaries has occurred and is continuing
thereunder, except such as are described in the Offering Memorandum or as
could not, singly or in the aggregate with all such other defaults,
reasonably be expected to have a Material Adverse Effect, and to the
knowledge of the Company no material defaults by the landlord are existing
under any such lease.
(v) Except as permitted by the Act, the Company has not distributed
and, prior to the later to occur of the Closing Date and completion of the
initial distribution of the Securities (which includes the sale by the
Initial
<PAGE>
-22-
Purchaser), will not distribute any offering material in connection with
the offering and sale of the Securities other than the Offering Memorandum
(and any amendment or supplement thereto in accordance with Section 4(c)
hereof).
(w) Except as set forth in the Offering Memorandum, the Company and
each of the Subsidiaries have all such permits, licenses, franchises,
certificates of need and other approvals or authorizations of governmental
or regulatory authorities ("PERMITS") as are necessary under applicable
law to own their respective properties and to conduct their respective
businesses in the manner conducted as of the Closing Date as described in
the Offering Memorandum, except to the extent that the failure to have any
such Permit could not, singly or in the aggregate with all other such
failures, reasonably be expected to have a Material Adverse Effect; the
Company and each of the Subsidiaries have fulfilled and performed, in all
material respects, all their respective material obligations with respect
to the Permits, and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or has
resulted or after notice or lapse of time would result in any other
material impairment of the rights of the holder of any such Permit, subject
in each case to such qualification as may be set forth in the Offering
Memorandum and except to the extent that any such revocation or termination
could not, singly or in the aggregate with all other such revocations and
terminations, reasonably be expected to have a Material Adverse Effect;
and, except as described in the Offering Memorandum, none of the Permits
contains any restriction that is materially burdensome to the Company or
any of the Subsidiaries.
(x) To the knowledge of the Company, neither the Company nor any of
the Subsidiaries, nor to the knowledge of the Company, any employee or
agent of the Company or any Subsidiary has made any payment of funds of the
Company or any Subsidiary or received or retained any funds in violation of
any law, rule or regulation, which violation
<PAGE>
-23-
could, singly or in the aggregate with all other such violations,
reasonably be expected to have a Material Adverse Effect.
(y) Except as disclosed in the Offering Memorandum, the Company and
each of the Subsidiaries have filed all tax returns required to be filed,
and such returns are true and correct in all material respects, and neither
the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with respect
thereto, except where the failure to file any such return or make any such
payment could not, singly or in the aggregate with all other such failures,
reasonably be expected to have a Material Adverse Effect. The Company does
not know of any material proposed additional tax assessments against it or
any Subsidiary.
(z) Except as provided in the Shareholders' Agreement dated August
15, 1994, no holder of any security of the Company (other than holders of
the Securities) has any right to request or demand registration of any
security of the Company because of the consummation of the transactions
contemplated by the Transaction Documents. Except as described in the
Offering Memorandum, other than the Warrants to be issued and sold pursuant
to this Agreement and the warrants issued on June 15, 1995 pursuant to the
Warrant Agreement, there are no outstanding options, warrants or other
rights calling for the issuance of, and there are no commitments or
arrangements to issue, any shares of capital stock of the Company or any
of the Subsidiaries or any security convertible into or exchangeable or
exercisable for capital stock of the Company or any of the Subsidiaries.
(aa) Except as set forth in the Offering Memorandum, the Company and
each of the Subsidiaries own or possess all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Offering Memorandum as being owned by any of them or, to
<PAGE>
-24-
the knowledge of the Company, necessary for the conduct of their respective
businesses (collectively, the "INTELLECTUAL PROPERTY"), except to the
extent that the failure to own or possess such Intellectual Property could
not, singly or in the aggregate with all such other failures, reasonably be
expected to result in any Material Adverse Effect, and, except as set forth
in the Offering Memorandum, the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company
or any of the Subsidiaries with respect to the foregoing, except to the
extent that any such claim or challenge could not, singly or in the
aggregate with all such other claims or challenges, reasonably be expected
to result in any Material Adverse Effect. To the knowledge of the Company,
the use of such Intellectual Property in connection with the business and
operations of the Company and the Subsidiaries does not infringe on the
rights of any person.
(ab) The Company is not and, upon sale of the Securities to be issued
and sold hereby in accordance herewith and the application of the net
proceeds to the Company of such sale as described in the Offering
Memorandum under the caption "Use of Proceeds," will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(ac) When the Securities are issued and delivered pursuant to this
Agreement, such Securities will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the Company
that is listed on a national securities exchange registered under Section 6
of the Exchange Act or that is quoted in a United States automated
interdealer quotation system.
(ad) The Company has not directly, or through any agent (provided
that no representation is made as to the Initial Purchaser or any person
acting on its behalf): (i) sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any security (as defined in the Act)
that is or will be integrated with the offering and
<PAGE>
-25-
sale of the Securities in a manner that would require the registration of
the Securities under the Act; (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Act) in connection with the offering of the Securities including,
but not limited to, articles, notices or other communications published in
any newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising; or (iii) engaged in any
directed selling efforts within the meaning of Rule 903 under the Act and
the Commission's Release No. 33-6883. No securities of the same class as
the Notes or Warrants have been issued and sold by the Company within the
six-month period immediately prior to the date hereof, other than notes and
warrants substantially identical to the Notes and Warrants issued and sold
pursuant to the transactions contemplated by the Original Offering
Memorandum.
(ae) Assuming (i) that the representations and warranties in Section
2 hereof are true and correct in all material respects, (ii) that the
Initial Purchaser complies in all material respects with the covenants set
forth in Section 2 hereof and (iii) that each person to whom the Initial
Purchaser offers, sells or delivers the Securities is an Eligible
Purchaser, the purchase and sale of the Securities pursuant hereto
(including the Initial Purchaser's proposed offering of the Securities on
the terms and in the manner set forth in the Offering Memorandum and
Section 2 hereof) is exempt from the registration requirements of the Act.
(af) The Company and the Subsidiaries are in compliance with, and not
subject to any liability under, the common law and all applicable federal,
state, local and foreign laws, regulations, rules, codes, ordinances,
directives, and orders relating to pollution or to protection of public or
employee health or safety or to the environment, including, without
limitation, those that relate to any Hazardous
<PAGE>
-26-
Material (as defined herein) ("ENVIRONMENTAL LAWS"), except, in each case,
where noncompliance or liability, singly or in the aggregate with all
other such noncompliance and liabilities, could not reasonably be expected
to have a Material Adverse Effect. The term "HAZARDOUS MATERIAL " means
any pollutant, contaminant or waste, or any hazardous, dangerous, or toxic
chemical, material, waste, substance or constituent subject to regulation
under any Environmental Law.
(ag) The Company is not, nor will it be, after giving effect to the
issuance of the Securities and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
hereby, (i) insolvent, (ii) left with unreasonably small capital with which
to engage in its anticipated businesses or (iii) incurring debts beyond its
ability to pay such debts as they mature.
(ah) The Offering Memorandum, as of its date, and each amendment or
supplement thereto, as of its date, contains all the information specified
in, and meets the requirements of, Rule 144A(d)(4) under the Act.
6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in the Preliminary Supplemental Offering Memorandum or
Offering Memorandum (including the Exhibits thereto) or in any amendment or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein 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, except, with respect to the Initial
Purchaser, insofar as such losses,
<PAGE>
-27-
claims, damages, liabilities or expenses arise out of or are based upon any
untrue statement or omission or alleged untrue statement or omission which has
been made therein or omitted therefrom in reliance upon and in conformity with
the information relating to such Initial Purchaser furnished in writing to the
Company by or on behalf of such Initial Purchaser expressly for use therein.
The foregoing indemnity agreement shall be in addition to any liability which
the Company may otherwise have; PROVIDED, HOWEVER, that the indemnification
contained in this paragraph (a) with respect to the Preliminary Supplemental
Offering Memorandum shall not inure to the benefit of an Initial Purchaser (or
to the benefit of any person controlling such Initial Purchaser) on account of
any such loss, claim, damage, liability or expense arising from the sale of the
Securities by such Initial Purchaser to any person if it is established in the
related proceeding that each untrue statement or alleged untrue statement
contained in, or omission or alleged omission of a material fact from, the
Preliminary Supplemental Offering Memorandum upon which such loss, claim,
damage, liability or expense is based was completely corrected in the Offering
Memorandum and that such Initial Purchaser sold Securities to that person
without sending or giving at or prior to the written confirmation of such sale,
a copy of the Offering Memorandum (as then amended or supplemented), which the
Company has previously furnished sufficient copies thereof to such Initial
Purchaser as required hereby.
(b) If any action, suit or proceeding shall be brought against the
Initial Purchaser or any person who controls the Initial Purchaser in respect of
which indemnity may be sought against the Company, the Initial Purchaser or any
such person who controls the Initial Purchaser shall promptly notify the parties
against whom indemnification is being sought (the "INDEMNIFYING PARTIES"), and
such indemnifying parties shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the indemnified parties and
payment of all reasonable fees and expenses. The Initial Purchaser or any
person who controls the Initial Purchaser shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate in
the defense thereof, but the fees and
<PAGE>
-28-
expenses of such counsel shall be at the expense of the Initial Purchaser or any
such person who controls the Initial Purchaser unless (i) the indemnifying
parties have agreed to pay such fees and expenses, (ii) the indemnifying parties
have failed to assume the defense and employ counsel reasonably satisfactory to
the indemnified parties on a timely basis, or (iii) the named parties to any
such action, suit or proceeding (including any impleaded parties) include both
the Initial Purchaser or any such person who controls the Initial Purchaser and
any of the indemnifying parties and the Initial Purchaser or any such person who
controls the Initial Purchaser shall have been advised by its counsel that
representation of such indemnified party and any such indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of the Initial Purchaser or any such
person who controls the Initial Purchaser). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the fees and expenses of only one separate firm
of attorneys (in addition to any local counsel) at any time for the Initial
Purchaser and any such person who controls the Initial Purchaser, which firm
shall be designated in writing by Smith Barney Inc. and be reasonably acceptable
to the Company, and that all such fees and expenses shall be reimbursed on a
monthly basis as provided in paragraph (a) hereof. The indemnifying parties
shall not be liable for any settlement of any such action, suit or proceeding
effected without their written consent (which shall not be unreasonably withheld
or delayed), but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless the Initial Purchaser,
to the extent provided in paragraph (a), and any person who controls the Initial
Purchaser from and against
<PAGE>
-29-
any loss, claim, damage, liability or expense by reason of such settlement or
judgment.
(c) The Initial Purchaser agrees to indemnify and hold harmless the
Company, and its directors and officers, and any person who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the indemnity from the Company to the Initial Purchaser set
forth in paragraph (a) hereof, but only with respect to information relating to
such Initial Purchaser furnished in writing by or on behalf of such Initial
Purchaser expressly for use in the Preliminary Supplemental Offering Memorandum
or Offering Memorandum or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against the Company, any of its directors or
officers, or any such controlling person based on the Preliminary Supplemental
Offering Memorandum or Offering Memorandum, or any amendment or supplement
thereto, and in respect of which indemnity may be sought against the Initial
Purchaser pursuant to this paragraph (c), the Initial Purchaser shall have the
rights and duties given to the Company by paragraph (b) above (except that if
the Company shall have assumed the defense thereof the Initial Purchaser shall
not be required to do so, but may employ separate counsel therein and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the Initial Purchaser's expense), and the Company, its directors and
officers, and any such controlling person shall have the rights and duties given
to the Initial Purchaser by paragraph (b) above. The foregoing indemnity
agreement shall be in addition to any liability which the Initial Purchaser may
otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable for any reason to an indemnified party under paragraphs (a) or (c)
hereof or is insufficient to hold any such indemnified party completely harmless
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is
<PAGE>
-30-
appropriate to reflect the relative benefits received by the Company on the one
hand and the Initial Purchaser on the other hand from the offering of the
Securities, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Initial Purchaser on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Initial Purchaser on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions
received by the Initial Purchaser, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault of the Company on the
one hand and the Initial Purchaser on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by the Initial
Purchaser on the other hand and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
(e) The Company and the Initial Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 6 were determined by
a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or depending on any such action, suit or
proceeding. Notwithstanding the provisions of this Section 6, the Initial
Purchaser shall not be required to contribute any
<PAGE>
-31-
amount in excess of the amount by which the total price of the Securities
purchased by it exceeds the amount of any damages which the Initial Purchaser
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. Each
successor to the Initial Purchaser or any person who controls the Initial
Purchaser, or to the Company, their respective directors or officers or any
person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
6.
(g) No indemnifying party shall, without the prior written consent of
the indemnified parties (which consent shall not be unreasonably withheld),
effect any settlement or compromise of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party, or
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional written release of such indemnified
party, in form and substance reasonably satisfactory to such indemnified party,
from all liability on claims that are the subject matter of such proceeding.
7. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The
obligations of the Initial Purchaser to purchase the Securities hereunder is
subject to the fulfillment, in the Initial Purchaser's sole discretion, of the
following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of
<PAGE>
-32-
the Offering Memorandum or any amendment or supplement thereto, or any
order asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act shall have been issued,
and no proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Company, be contemplated. No order
suspending the sale of the Securities in any jurisdiction shall have been
issued, and no proceedings for that purpose shall have been commenced or
shall be pending or, to the knowledge of the Company, shall be
contemplated.
(b) Subsequent to the date hereof except that the Company shall have
continued to incur substantial operating losses, (i) there shall not have
occurred any material adverse change, or any development involving a
prospective material adverse change, in or affecting the condition
(financial or otherwise), business, prospects, liabilities (contingent or
otherwise), properties, assets, net worth, solvency or results of
operations of the Company or any of the Subsidiaries, and (ii) the conduct
of the business and operations of the Company and the Subsidiaries has not
been interfered with by strike, fire, flood, hurricane, accident or other
calamity (whether or not insured) and, except as otherwise stated in the
Offering Memorandum, the properties of each of the Company and the
Subsidiaries have not sustained any loss or damage (whether or not insured)
as a result of any such occurrence, except any such interference, loss or
damage which could not, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(c) The Initial Purchaser shall have received on the Closing Date an
opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel for the Company,
dated the Closing Date and addressed to the Initial Purchaser, in form and
substance satisfactory to Cahill Gordon & Reindel, counsel for the Initial
Purchaser, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing
<PAGE>
-33-
under the laws of the State of California with full corporate power
and authority to own, lease and operate its properties and to conduct
its business as described in the Offering Memorandum and is duly
registered and qualified to conduct its business and is in good
standing as a foreign corporation in each jurisdiction where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register
or qualify or to be in good standing could not, singly or in the
aggregate with all other such failures, reasonably be expected to have
a Material Adverse Effect;
(ii) Each domestic Subsidiary is a corporation duly organized
and validly existing and in good standing under the laws of the
jurisdiction of its organization, with full corporate power and
authority to own, lease, and operate its properties and to conduct its
business as described in the Offering Memorandum and is duly
registered and qualified to conduct its business and is in good
standing as a foreign corporation in each jurisdiction where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register
or qualify or to be in good standing could not, singly or in the
aggregate with all other such failures, reasonably be expected to have
a Material Adverse Effect; and, to the knowledge of such counsel
except as described in the Offering Memorandum, all the outstanding
shares of capital stock of each of the domestic Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable,
and are owned by the Company, directly or through Subsidiaries, free
and clear of any perfected security interest or, to the knowledge of
such counsel, any other security interest, lien, adverse claim, equity
or other encumbrance (except Permitted Liens (as defined in the
Indenture) permitted by the Indenture);
<PAGE>
-34-
(iii) The authorized capital stock of the Company is as set
forth in the first paragraph under the caption "Description of Capital
Stock" in the Offering Memorandum;
(iv) The Company has corporate power and authority to enter
into this Agreement and the other Transaction Documents and to issue,
sell and deliver the Securities to be sold by it to the Initial
Purchaser as provided herein, and this Agreement and each of the other
Transaction Documents (other than the Securities) have been duly
authorized, executed and delivered by the Company and each of the
Transaction Documents (other than this Agreement) are valid, legal and
binding agreements of the Company, enforceable against the Company in
accordance with their respective terms;
(v) No qualification of the Indenture under the 1939 Act is
required in connection with the offer and sale of the Securities
contemplated hereby or in connection with the Exempt Resales;
(vi) The Securities have been duly and validly authorized by the
Company, and, when executed by the Company and, in the case of the
Notes, authenticated by the Trustee in accordance with the Indenture,
as amended by the First Supplemental Indenture, or in the case of the
Warrants, countersigned by the Warrant Agent in accordance with the
terms of the Warrant Agreement, as amended by the First Supplemental
Warrant Agreement, and, in each case, delivered to the Initial
Purchaser against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company, entitled to
the benefits of, with respect to the Notes, the Indenture, as amended
by the First Supplemental Indenture, and, with respect to the
Warrants, the Warrant Agreement, as amended by the First Supplemental
Warrant Agreement;
<PAGE>
-35-
(vii) The Warrant Shares have been duly reserved by the Company
for issuance upon exercise of the Warrants in sufficient number to
cover the exercise of all of the Warrants at the initial number of
Warrant Shares deliverable upon exercise of the Warrants, and the
issuance of the Warrant Shares upon exercise of the Warrants has been
duly and validly authorized, and the Warrant Shares, when paid for and
delivered in accordance with the terms of the Warrants and the Warrant
Agreement, as amended by the First Supplemental Warrant Agreement,
will be validly issued, fully paid and nonassessable, and to such
counsel's knowledge no holder of any securities of the Company has
preemptive or similar rights applicable to the Warrants or the Warrant
Shares other than as disclosed in the Offering Memorandum; and the
issuance of the Warrants will not result in any anti-dilution
adjustment under any instrument or agreement known to such counsel
governing any capital stock of the Company;
(viii) (x) The offer, sale or delivery of the Securities as of
the Closing Date and (y) the execution, delivery or performance by the
Company of this Agreement and the other Transaction Documents,
compliance by the Company with the provisions hereof or thereof and
consummation by the Company of the transactions contemplated hereby or
thereby do not and will not conflict with and do not and will not
constitute a breach of, or a default under (including any event which,
with notice or lapse of time or both, would be a breach of or a
default under), (a) the certificate or articles of incorporation or
bylaws or other organizational documents of the Company or any of the
Subsidiaries as in effect on the Closing Date or (b) the Indenture,
the Warrant Agreement, either Registration Rights Agreement, or any
other Agreement or Instrument known to such counsel as in effect on
the Closing Date, except, with respect to this clause (b) any such
conflict, breach or default that could not,
<PAGE>
-36-
singly or in the aggregate, with all such other conflicts, breaches
and defaults, reasonably be expected to have a Material Adverse
Effect, and other than as described in the Offering Memorandum, will
not result in the creation or imposition of any lien, charge or
encumbrance (except Liens (as defined in the Indenture) permitted by
the Indenture) upon any property or assets of the Company or any of
the Subsidiaries pursuant to the terms of any Agreement or Instrument
known to such counsel as in effect as of the Closing Date, and no such
action will result in any violation of any Law or Legal Requirement in
effect as of the Closing Date which in such counsel's experience are
customarily applicable to transactions of the type contemplated by the
Transaction Documents (assuming compliance with all applicable state
securities and Blue Sky laws and, in the case of the Registration
Rights Agreements, the Act, the Exchange Act and the 1939 Act);
(ix) No Consent or Filing based on Law or Legal Requirements as
in effect on the Closing Date is required on the part of the Company
or any of the Subsidiaries for the valid issuance and sale of the
Securities to the Initial Purchaser as contemplated by this Agreement
or the execution, delivery or performance by the Company and the
Subsidiaries of each of the Transaction Documents, to the extent a
party thereto, except (A) as have been obtained and are in full force
and effect and (B) as may be required under state securities or Blue
Sky laws governing the purchase and distribution of the Securities or
such as may be required under the Act, the Exchange Act or the 1939
Act in connection with the performance by the Company of its
obligations under the Registration Rights Agreements (each as amended
by the relevant Registration Rights Agreements Amendments), as to
which such counsel need not express an opinion; all conditions
precedent under the terms of the Indenture, the Warrant Agreement, the
Notes Registration Rights
<PAGE>
-37-
Agreement and the Warrants Registration Rights Agreement have been
satisfied pursuant to the terms on each such document for the valid
execution and delivery by the Company of the First Supplemental
Indenture, the First Supplemental Warrant Agreement, the Notes
Registration Rights Agreement Amendment and the Warrants Registration
Rights Agreement Amendment, respectively;
(x) To the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or
any of the Subsidiaries, or to which the Company or any of the
Subsidiaries or any of their respective property or assets is subject,
which are not disclosed in the Offering Memorandum and which, if
adversely decided, could, singly or in the aggregate with all other
such proceedings, reasonably be expected to have a Material Adverse
Effect or materially affect the consummation of the transactions
contemplated by the Transaction Documents;
(xi) The statements in the Offering Memorandum, insofar as they
are descriptions of contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are true and accurate
in all material respects and present fairly the information required
to be shown (excluding matters arising under the Communications Act of
1934, as amended, or any rule or regulation of the Federal
Communications Commission thereunder);
(xii) Except as described in the Offering Memorandum and as
provided in the Shareholders' Agreement dated as of August 15, 1994,
to the knowledge of such counsel, no holder of any securities of the
Company (except for the holders of the Securities, and the holders of
the notes issued under the Indenture on June 15, 1995 and the holders
of the warrants issued under the Warrant Agreement on June 15, 1995,
as
<PAGE>
-38-
contemplated by the Original Offering Memorandum) or any other person
has the right to have any securities of the Company included in any
registration statement contemplated by the Registration Rights
Agreements;
(xiii) No registration of any of the Securities under the Act is
required for the sale of the Securities to the Initial Purchaser as
contemplated in this Agreement or for the Exempt Resales (assuming (A)
that any person who buys the Securities in the Exempt Resales is an
Eligible Purchaser, (B) the accuracy of the Initial Purchaser's
representations and those of the Company in this Agreement regarding
the absence of general solicitation in connection with the Exempt
Resales and (C) the accuracy of the representations made by each
Accredited Investor who purchases Securities pursuant to an Exempt
Resale as set forth in the letter of representation executed by such
Accredited Investor in the form of Annex A to the Offering
Memorandum); and
(xiv) Neither the consummation of the transactions contemplated
hereby nor the sale, issuance, execution or delivery of the
Securities, nor the application of the proceeds therefrom (if applied
as described in the Offering Memorandum under the caption "Use of
Proceeds"), will violate Regulation G (12 C.F.R. Part 207), T (12
C.F.R. Part 220), U (12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System.
The opinion of such counsel shall be limited to the laws of the United
States, the State of California and the internal corporation law of the
State of Delaware.
In giving such opinion, such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and certificates
of public officials; PROVIDED, HOWEVER, that such certificates
<PAGE>
-39-
have been delivered to the Initial Purchaser prior to the Closing Date.
Such opinion shall be subject to customary exceptions and qualifications.
(d) The Initial Purchaser shall have received on the Closing Date an
opinion of Cahill Gordon & Reindel, counsel for the Initial Purchaser,
dated the Closing Date, addressed to the Initial Purchaser and in form and
substance satisfactory to the Initial Purchaser with respect to the
Securities, the Transaction Documents and such other matters as may be
requested by the Initial Purchaser and satisfactory in form and substance
to the Initial Purchaser, and the Company shall have furnished to such
counsel such documents and other instruments and information as they may
reasonably request for the purpose of enabling them to pass upon such
matters.
(e) The Initial Purchaser shall have received letters addressed to
the Initial Purchaser, and dated the date hereof and the Closing Date, from
Deloitte & Touche L.L.P., independent certified public accountants for the
Company, substantially in the forms heretofore approved by the Initial
Purchaser.
(f) (i) There shall not have been any material change in the capital
stock of the Company nor any material increase in the consolidated
short-term or consolidated long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated in the
Offering Memorandum; (ii) there shall not have been, since the respective
dates as of which information is given in the Offering Memorandum, except
as may otherwise be expressly stated in the Offering Memorandum, any
material adverse change in the condition (financial or other), business,
prospects, liabilities (contingent or otherwise), properties, net worth,
solvency or results of operations of the Company and the Subsidiaries taken
as a whole; (iii) the Company and the Subsidiaries shall not have any
liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the
<PAGE>
-40-
Company and the Subsidiaries taken as a whole, other than those reflected
in the Offering Memorandum; (iv) each of the representations and warranties
of the Company contained in this Agreement shall be true and correct in all
material respects on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date; (v) the Company shall have
executed and delivered each other Transaction Document; and (vi) the
Initial Purchaser shall have received a certificate, dated the Closing Date
and signed on behalf of the Company by the chief executive officer and the
chief financial officer of the Company (or such other officers as are
acceptable to the Initial Purchaser), to the effect set forth in this
Section 7(f) and in Section 7(g) hereof, to the effect that the Company is
not, nor will it be, after giving effect to the issuance of the Securities
and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, (x) insolvent, (y)
left with unreasonably small capital with which to engage in its
anticipated businesses or (z) incurring debts beyond its ability to pay
such debts as they mature and to the effect that, to the knowledge of such
individuals, the Offering Memorandum, and any amendment or supplement
thereto, does not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(g) The Company shall not have failed at or prior to the Closing Date
to have performed or complied in any material respect with any of its
agreements herein contained and required to be performed or complied with
by it hereunder at or prior to the Closing Date.
(h) The Securities shall have been approved for trading on PORTAL.
(i) he Initial Purchaser shall be satisfied in their sole discretion
with the terms and provisions of the Warrant Agreement, the First
Supplemental Indenture, the
<PAGE>
-41-
First Supplemental Warrant Agreement and the Registration Rights Agreements
Amendments.
(j) The Company shall have furnished or caused to be furnished to the
Initial Purchaser such further certificates, documents and opinions as the
Initial Purchaser shall have reasonably requested.
(k) There shall not have been made any amendment or supplement to the
Offering Memorandum (including the Supplemental Offering Memorandum) to
which the Initial Purchaser has objected.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchaser and Cahill Gordon &
Reindel, counsel for the Initial Purchaser.
Any certificate or document signed by any officer of the Company and
delivered to the Initial Purchaser, or to counsel for the Initial Purchaser, at
the Closing, shall be deemed a representation and warranty by the Company to the
Initial Purchaser as to the statements made therein.
Acceptance of the proceeds of the issuance and sale of the Securities
shall be a representation and warranty by the Company to the Initial Purchaser
that each of the conditions set forth in clauses (a), (b), (f), (g), (h) and (k)
of this Section 7 have been satisfied or, to the knowledge of the Company,
waived.
8. EXPENSES . (a) Whether or not the purchase and sale of the
Securities hereunder is consummated or this Agreement is terminated pursuant to
Section 9 hereof, the Company agrees to pay the following costs and expenses and
all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, word processing, printing, delivery
and reproduction of the Preliminary Supplemental Offering Memorandum, the
Original Offering Memorandum and the
<PAGE>
-42-
Supplemental Offering Memorandum (including financial statements thereto), and
each amendment or supplement to any of them, this Agreement and each of the
other Transaction Documents (including the reasonable disbursements of the
Initial Purchaser's counsel in connection therewith); (ii) the delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the Offering Memorandum (including the Supplemental Offering
Memorandum), the Preliminary Offering Memorandum and all amendments or
supplements as may be reasonably requested for use in connection with the
offering and sale of the Securities as part of the initial distribution thereof
pursuant to Exempt Resales; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Securities, including any stamp
taxes in connection with the original issuance and sale of the Securities; (iv)
the printing (or reproduction) and delivery of the preliminary and supplemental
Blue Sky Memoranda and all other agreements and documents printed (or
reproduced) and delivered in connection with the offering of the Securities;
(v) the application for quotation of the Securities on PORTAL; (vi) the
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of the several states as provided in Section 4(f) hereof (including the
fees, expenses and disbursements of counsel for the Initial Purchaser relating
to the preparation, printing or reproduction, and delivery of the preliminary
and supplemental Blue Sky Memoranda and such qualification); (vii) the
performance by the Company of its obligations under the Warrant Agreement, as
amended by the First Supplemental Warrant Agreement, and the Registration Rights
Agreements, as amended by the Registration Rights Agreements Amendments
(including fees and expenses of the Trustee, the Warrant Agent and the transfer
agent and registrar of the Warrant Shares, including fees and expenses of their
respective counsel); (viii) the fees and expenses of the Company's accountants
and the fees and expenses of counsel (including local and special counsel) for
the Company; (ix) the reasonable fees and expenses of Cahill Gordon & Reindel,
counsel for the Initial Purchaser; and (x) the reasonable fees and disbursements
of Ropes & Gray, counsel for certain prospective Eligible Purchasers. The
Company hereby agrees that it will pay in full on the Closing Date (or in the
event that this Agreement
<PAGE>
-43-
is terminated or there shall be a failure to consummate the transaction
hereunder, upon request by such counsel) the fees and expenses referred to in
clauses (vi), (ix) and (x) of this Section 8 by delivering to counsel for the
Initial Purchaser on such date a check payable to such counsel in the requisite
amount.
(b) If the purchase and sale of the Securities hereunder is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 9 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder other than by
reason of a default by the Initial Purchaser in payment for the Securities on
the Closing Date after all conditions set forth herein have been satisfied, the
Company shall reimburse the Initial Purchaser promptly upon demand for all
out-of-pocket expenses (including reasonable fees and expenses of counsel) that
shall have been incurred by the Initial Purchaser in connection with the
proposed purchase and sale of the Securities and the other transactions
contemplated hereby.
9. TERMINATION OF AGREEMENT . This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchaser, without
liability on the part of the Initial Purchaser to the Company, by notice to the
Company, if at or prior to the delivery and payment for Securities, (i) trading
in securities generally on the New York Stock Exchange, American Stock Exchange
or the Nasdaq National Market shall have been suspended or materially limited,
(ii) a general moratorium on commercial banking activities in New York shall
have been declared by either Federal or state authorities, or (iii) there shall
have occurred any outbreak or escalation of hostilities or other international
or domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States or
the market for the Securities is such as to make it, in the sole judgment of the
Initial Purchaser, impracticable or inadvisable to commence or continue the
offering
<PAGE>
-44-
of the Securities on the terms set forth in the Offering Memorandum or to
enforce contracts for the resale of the Securities by the Initial Purchaser.
Notice of such termination may be given to the Company by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
10. INFORMATION FURNISHED BY THE INITIAL PURCHASER. The statements
set forth in [the last paragraph on the cover page and in the first and fourth
paragraph under the caption "Plan of Distribution"] in the Offering Memorandum
Supplement, constitute the only information furnished by or on behalf of the
Initial Purchaser as such information is referred to in Sections 5(b) and 6
hereof.
11. MISCELLANEOUS . Except as otherwise provided in Sections 4 and 9
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 125 Shoreway Road, San Carlos, CA 94070, Attention: President and
Corporate Secretary, or (ii) if to the Initial Purchaser, to Smith Barney Inc.,
338 Greenwich Street, New York, New York 10013, Attention: Manager, Investment
Banking Division.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
This Agreement has been and is made solely for the benefit of the
Initial Purchaser and the Company, and their respective directors, officers and
the controlling persons referred to in Section 6 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the terms "successors and assigns" as used in this
Agreement shall include a purchaser from the Initial Purchaser of any of the
Securities in such purchaser's status as such purchaser.
<PAGE>
-45-
12. SURVIVAL. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company set forth
in this Agreement or made by or on behalf of the Company (including, pursuant to
any officer's certificate) pursuant to this Agreement shall remain in full force
and effect, regardless of (i) any investigation made by or on behalf of the
Initial Purchaser, any director, officer, employee or agent of the Initial
Purchaser or any controlling person referred to in Section 6 hereof, and (ii)
delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 8 and 13
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
13. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of New York applicable to
contracts made and to be performed within the State of New York.
[Remainder of Page Intentionally Left Blank]
<PAGE>
-46-
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchaser.
Very truly yours,
CELLNET DATA SYSTEMS, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
PROMISSORY NOTE
- ----------------- San Carlos, CA
, 1995
------------------ --
FOR VALUE RECEIVED, the undersigned, , promises to pay to
CellNet Data Systems, Inc., a California Corporation (the "Company"), on order,
the principal sum of ( ), together with interest
on the unpaid principal hereof from the date hereof at the rate of six and
04/100 percent (6.04%) per annum.
Principal and interest shall be due and payable five years from the date
hereof. Should the undersigned fail to make full payment of any installment of
principal or interest for a period of 10 days or more after the due date
thereof, or in the event that the undersigned's employment with the Company is
terminated for any reason, or no reason, with or without cause, the whole unpaid
balance on this Note of principal and interest shall become immediately due at
the option of the holder of this Note. Payments of principal and interest shall
be made in lawful money of the United States of America. The undersigned may at
any time prepay all or any portion of the principal or interest owing hereunder.
This Note is subject to the terms of a Restricted Stock Purchase Agreement,
dated as of August 1, 1995. This Note is secured by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
The holder of this Note shall have full recourse against the maker, and
shall not be required to proceed against the collateral securing this Note in
the event of default.
The undersigned understands that the two-year holding period under Rule 144
of the Securities Act of 1933 generally will not begin to run until this Note
has been paid in full.
---------------------------------------------
Print Name
---------------------------------------------
Signature
<PAGE>
EXHIBIT 11.1
CELLNET DATA SYSTEMS, INC.
COMPUTATION OF PRO FORMA NET LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED ----------------------
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ ---------- ----------
<S> <C> <C> <C>
Net loss.................................................................... $ (40,956) $ (12,121) $ (32,313)
------------ ---------- ----------
------------ ---------- ----------
Weighted average common shares outstanding.................................. 1,717 2,057 2,550
Convertible preferred stock (using the "if converted method")............... 12,353 12,353 12,353
Warrants (using the "if converted method").................................. 2,066 2,066 2,066
Common Stock options included pursuant to the Securities and Exchange
Commission's Staff Accounting Bulletin No. 83.............................. 402 402 402
------------ ---------- ----------
Shares used in computing pro forma net loss per share....................... 16,538 16,878 17,371
------------ ---------- ----------
------------ ---------- ----------
Pro forma net loss per share................................................ $ (2.48) $ (0.72) $ (1.86)
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
<PAGE>
Exhibit 21.1
Subsidiary List
Subsidiaries
- ------------
CellNet Data Services, Inc. (Delaware)
CellNet Data Services (IS), Inc. (Delaware)
CellNet Data Services (KC), Inc. (Delaware)
CellNet Data Services (MSP), Inc. (Delaware)
CellNet Data Services (SL), Inc. (Delaware)
CN Frequency (KC), Inc. (Delaware)
CN Frequency (MSP), Inc. (Delaware)
CN Frequency (SL), Inc. (Delaware)
CN WAN Corp. (Delaware)
DAC (UK), Limited (United Kingdom)
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the use in this Registration Statement of CellNet Data
Systems, Inc. on Form S-1 of our report dated February 9, 1996 (April 11, 1996
as to the last sentence of the second paragraph of Note 5 and June 26, 1996 as
to Note 10), appearing in the Prospectus, which is part of this Registration
Statement and to the reference to us under the heading "Experts" in such
Prospectus.
Our audits of the consolidated financial statements referred to in our
aforementioned report also included the consolidated financial statement
schedule of CellNet Data Systems, Inc., listed in Item 16(b). The financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
San Jose, California
August 2, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations
found on pages F-3 and F-4 of the Company's Registration Statement on Form
S-1 and is qualified in its entirety by reference to such consolidated
financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 48018 70730
<SECURITIES> 95779 32237
<RECEIVABLES> 2118 1904
<ALLOWANCES> (25) (25)
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 7539 9129
<DEPRECIATION> (3561) (5590)
<TOTAL-ASSETS> 184306 162653
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
(29486) (29486)
(27195) (27196)
<COMMON> (27608) (27636)
<OTHER-SE> (2118) (2118)
<TOTAL-LIABILITY-AND-EQUITY> (184306) (162653)
<SALES> 1663 127
<TOTAL-REVENUES> 2126 420
<CGS> (1294) (109)
<TOTAL-COSTS> (5129) (3483)
<OTHER-EXPENSES> (33386) (21345)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (4564) (7903)
<INCOME-PRETAX> (40953) (32311)
<INCOME-TAX> (3) (2)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (40956) (32313)
<EPS-PRIMARY> (2.48) (1.86)
<EPS-DILUTED> 0 0
</TABLE>
