<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: APRIL 16, 1997
(DATE OF EARLIEST EVENT REPORTED)
TELULAR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
0-23212
(COMMISSION FILE NUMBER)
DELAWARE 36-3885440
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
920 DEERFIELD PARKWAY, BUFFALO GROVE, ILLINOIS 60089
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(847) 465-4500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 5. OTHER EVENTS.
The copy of the press release issued by Telular Corporation on April 21, 1997
announcing the issuance of Series A Convertible Preferred Stock, attached
hereto as Exhibit 99.4, is incorporated by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following exhibits are filed herewith:
Index
Number Document Name
- ------ -------------
99.1 Securities Purchase Agreement by and between Telular
Corporation and the purchasers of the Series A Convertible
Preferred Stock
99.2 Certificate of Designations, Preferences and Rights of Series
A Convertible Preferred Stock
99.3 Registration Rights Agreement by and between Telular
Corporation and the purchasers of the Series A Convertible
Preferred Stock
99.4 Press Release issued by Telular Corporation on April 21, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Telular Corporation
Date: April 24, 1997 By: /s/ THOMAS M. MASON
-------------------------------------
Thomas M. Mason
Senior Vice President and
Chief Financial Officer
3
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Exhibit Index
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Document Name Number
- ------- ------------- ----------
<S> <C>
99.1 Securities Purchase Agreement by and between
Telular Corporation and the purchasers of the
Series A Convertible Preferred Stock
99.2 Certificate of Designations, Preferences
and Rights of Series A Convertible Preferred Stock
99.3 Registration Rights Agreement by and between
Telular Corporation and the purchasers of the Series
A Convertible Preferred Stock
99.4 Press Release dated April 21, 1997
</TABLE>
4
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EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of April 16,
1997, by and among Telular Corporation, a Delaware corporation, with
headquarters located at 920 Deerfield Parkway, Buffalo Grove, Illinois 60089
(the "COMPANY"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. The Company has authorized the following new series of its
Preferred Stock, $.01 par value per share (the "PREFERRED STOCK"): the
Company's Series A Convertible Preferred Stock (the "SERIES A PREFERRED
STOCK"), which shall be convertible into shares of the Company's Common Stock,
$.01 par value per share (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"), in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of the Series A Preferred Shares,
substantially in the form attached hereto as Exhibit A (the "CERTIFICATE OF
DESIGNATIONS");
C. The Buyers wish to purchase, upon the terms and conditions
stated in this Agreement, an aggregate of up to 10,000 shares of Series A
Preferred Stock in the respective amounts set forth opposite each Buyer's name
on the Schedule of Buyers; and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF SERIES A PREFERRED SHARES.
a. Purchase of Series A Preferred Shares. Subject to
the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the Company shall issue and sell to the Buyers and the Buyers shall
purchase from the Company an aggregate of 10,000 shares of Series A Preferred
Stock (the "SERIES A PREFERRED SHARES"), in the respective amounts set forth
opposite each Buyer's name on the Schedule of Buyers (the "CLOSING"). The per
share purchase price (the "PURCHASE PRICE") of the Series A Preferred Shares
shall be $1,000.00.
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b. Closing Date. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m. Central Standard Time, within five (5)
business days following the date hereof, subject to notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below (or such later date as is mutually agreed to by the Company and
the Buyers). The Closing shall occur on the Closing Date at the offices of
Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661-3693.
c. Form of Payment. On the Closing Date, (i) each
Buyer shall pay the Purchase Price to the Company for the Series A Preferred
Shares to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer, a stock
certificate representing such number of the Series A Preferred Shares which
such Buyer is then purchasing (as indicated opposite such Buyer's name on the
Schedule of Buyers), duly executed on behalf of the Company and registered in
the name of such Buyer or its designee (the "STOCK CERTIFICATES").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only
itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Series A Preferred Shares and (ii) upon conversion of the Series A Preferred
Shares, will acquire the Conversion Shares then issuable, for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making
the representations herein, such Buyer does not agree to hold any Series A
Preferred Shares for any minimum or other specific term and reserves the right
to dispose of Series A Preferred Shares at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a)(3) of Regulation
D.
c. Reliance on Exemptions. Such Buyer understands that
the Series A Preferred Shares and the Conversion Shares are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire
the Series A Preferred Shares and the Conversion Shares.
d. Information. Such Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Series A Preferred Shares and the Conversion Shares which have been requested
by such Buyer. Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due
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diligence investigations conducted by such Buyer or its advisors, if any, or
its representatives shall modify, amend or affect such Buyer's right to rely on
the Company's representations and warranties contained in Section 3 below.
Such Buyer understands that its investment in the Series A Preferred Shares and
the Conversion Shares involves a high degree of risk. Such Buyer has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Series A
Preferred Shares and the Conversion Shares.
e. No Governmental Review. Such Buyer understands that
no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of
the Series A Preferred Shares or the Conversion Shares or the fairness or
suitability of the investment in the Series A Preferred Shares or the
Conversion Shares nor have such authorities passed upon or endorsed the merits
of the offering of the Series A Preferred Shares or the Conversion Shares.
f. Transfer or Resale. Such Buyer understands that
except as provided in the Registration Rights Agreement: (i) the Series A
Preferred Shares and the Conversion Shares have not been and are not being
registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that such securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule thereto); (ii) any sale of such securities made in
reliance on Rule 144 promulgated under the 1933 Act (or a successor rule
thereto) ("RULE 144") may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act)
may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such securities under the
1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
g. Legends. Such Buyer understands that the
certificates or other instruments representing the Series A Preferred Shares
and, until such time as the sale of the Conversion Shares have been registered
under the 1933 Act as contemplated by the Registration Rights Agreement, the
stock certificates representing the Conversion Shares, except as set forth
below, shall bear a restrictive legend in substantially the following form (and
a stop-transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
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SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL,
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Series A Preferred Shares
or the Conversion Shares upon which it is stamped, if, unless otherwise
required by state securities laws, (i) the Conversion Shares are registered for
sale under the 1933 Act, (ii) in connection with a sale transaction, such
holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of
the Series A Preferred Shares or the Conversion Shares may be made without
registration under the 1933 Act, or (iii) such holder provides the Company with
reasonable assurances that the Series A Preferred Shares or the Conversion
Shares can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold. Each Buyer acknowledges, covenants and agrees to sell the
Series A Preferred Shares and the Conversion Shares represented by a
certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) advice of counsel
that such sale is exempt from registration required by Section 5 of the 1933
Act. In the event the above legend is removed from the Series A Preferred
Shares or the Conversion Shares, the Company may, upon reasonable advance
notice to the holder, require that the above legend be placed on any Series A
Preferred Shares or Conversion Shares that cannot then be sold pursuant to an
effective registration statement or Rule 144(k) under the 1933 Act (or any
successor rule thereto).
h. Authorization; Enforcement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of such Buyer and
is a valid and binding agreement of such Buyer enforceable in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country
specified in its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. Organization and Qualification. The Company and its
subsidiaries (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as
a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except to the extent that the
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failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
b. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority
to enter into and perform this Agreement and the Registration Rights Agreement,
and to issue the Series A Preferred Shares and the Conversion Shares in
accordance with the terms hereof and thereof, (ii) the execution and delivery
of this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Series A Preferred Shares and
the reservation for issuance and the issuance of the Conversion Shares issuable
upon conversion thereof, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (iii) this Agreement and the
Registration Rights Agreement have been duly executed and delivered by the
Company, (iv) this Agreement and the Registration Rights Agreement constitute
the valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, and (v)
prior to the Closing Date, the Certificate of Designations has been filed with
the Secretary of State of the State of Delaware and will be in full force and
effect, enforceable against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of 75,000,000 shares of Common
Stock, of which as of April 15, 1997, 31,540,041 shares were issued and
outstanding, and 10,000,000 shares of Preferred Stock, of which as of the date
hereof, no shares were issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), no shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed in
Schedule 3(c), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities and (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement). Except as disclosed in Schedule 3(c), there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Series A Preferred Shares or the
Conversion Shares as described in this Agreement. The Company has furnished to
the Buyer true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "CERTIFICATE
OF INCORPORATION"), and the Company's By-laws, as
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in effect on the date hereof (the "BY-LAWS"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
d. Issuance of Securities. The Series A Preferred
Shares are duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free
from all taxes, liens and charges with respect to the issue thereof and (iii)
entitled to the rights and preferences set forth in the Certificate of
Designations. Not less than 150% of the number of shares of Common Stock
necessary to provide for the issuance of the Conversion Shares based on the
trading price of the Common Stock as of the date hereof have been duly
authorized and reserved for issuance upon conversion of the Series A Preferred
Shares. Upon conversion in accordance with the Certificate of Designations,
the Conversion Shares will be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e),
the execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby will
not (i) result in a violation of the Certificate of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series
of preferred stock of the Company or By-laws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture
or instrument to which the Company or any of its subsidiaries is a party, or
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected. Except as disclosed in Schedule 3(e), neither the Company nor its
subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation, Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock or By-laws or their organizational
charter or by-laws, respectively, or any material contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its subsidiaries. The
business of the Company and its subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance, regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under or contemplated by this Agreement or the
Registration Rights Agreement in accordance with the terms hereof or thereof.
Except as disclosed in Schedule 3(e), all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
f. SEC Documents; Financial Statements. Since January
1, 1996, the Company has filed all reports, schedules, forms, statements and
other documents required to be
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filed by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "1934 ACT") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC DOCUMENTS"). The
Company has delivered to the Buyer or its representative true and complete
copies of the SEC Documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g) or the Company's Quarterly Report on Form 10-Q for the three
months ended December 31, 1996 as filed with the SEC on February 14, 1997,
since December 31, 1996 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company and its
subsidiaries taken as a whole. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's subsidiaries,
wherein an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely affect
the validity or enforceability of, or the authority or ability of the Company
to perform its obligations under, this Agreement or any of the documents
contemplated herein or (iii), except as expressly set forth in the SEC
Documents or in Schedule 3(h), have a material adverse effect on the business,
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operations, properties, financial condition or results of operation of the
Company and its subsidiaries taken as a whole.
i. Acknowledgment Regarding Buyers' Purchase of Series
A Preferred Shares. The Company acknowledges and agrees that each of the
Buyers is acting solely in the capacity of arm's length purchaser with respect
to this Agreement and the transactions contemplated hereby. The Company
further acknowledges that each Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
of the Buyers or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Buyer's purchase of the Series A Preferred Shares or
the Conversion Shares. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
j. Intentionally omitted.
k. No General Solicitation. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or
sale of the Series A Preferred Shares or the Conversion Shares.
l. No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Series A Preferred Shares or the Conversion Shares under
the 1933 Act or cause this offering of Series A Preferred Shares and Conversion
Shares to be integrated with prior offerings by the Company for purposes of the
1933 Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Nasdaq National Market
System.
m. Employee Relations. Neither the Company nor any of
its subsidiaries is involved in any union labor dispute nor, to the knowledge
of the Company or any of its subsidiaries, is any such dispute threatened. None
of the Company's or its subsidiaries' employees is a member of a union and the
Company and its subsidiaries believe that their relations with their employees
are good.
n. Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(n), none of the
Company's trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate in the near future. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name
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rights, patents, patent rights, copyrights, inventions, licenses, service
names, service marks, service mark registrations, trade secret or other similar
rights of others, or of any such development of similar or identical trade
secrets or technical information by others and, except as set forth on Schedule
3(n), there is no claim, action or proceeding being made or brought against, or
to the Company's knowledge, being threatened against, the Company or its
subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
o. Environmental Laws. The Company and its
subsidiaries are (i) in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval.
p. Title. The Company and its subsidiaries have good
and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(p) or such
as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.
q. Insurance. The Company and each of its subsidiaries
are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company believes to
be prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
r. Regulatory Permits. The Company and its
subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
-9-
<PAGE> 10
s. Internal Accounting Controls. The Company and each
of its subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
t. No Materially Adverse Contracts, Etc. Neither the
Company nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the
future to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
u. Tax Status. Except as set forth on Schedule 3(u),
the Company and each of its subsidiaries has made or filed all federal and
state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
v. Certain Transactions. Except as set forth on
Schedule 3(v) and in the SEC Documents and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties
and other than the grant of stock options disclosed on Schedule 3(c), none of
the officers, directors, or employees of the Company is presently a party to
any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
w. Dilutive Effect. The Company understands and
acknowledges that the number of Conversion Shares issuable upon conversion of
the Series A Preferred Shares will increase in certain circumstances. The
Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Series A Preferred Shares in accordance with this
Agreement and the Certificate of Designations is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
-10-
<PAGE> 11
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with
respect to the Series A Preferred Shares and the Conversion Shares as required
under Regulation D and to provide a copy thereof to each Buyer promptly after
such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to qualify the
Series A Preferred Shares and the Conversion Shares for, or obtain exemption
for the Series A Preferred Shares and the Conversion Shares for, sale to the
Buyers at the Closing pursuant to this Agreement under applicable securities or
"Blue Sky" laws of the states of the United States, and shall provide evidence
of any such action so taken to the Buyers on or prior to the Closing Date.
c. Reporting Status. Until the earlier of (i) the date
as of which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares without restriction pursuant
to Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii)
the date on which (A) the Investors shall have sold all the Conversion Shares
and (B) none of the Series A Preferred Shares is outstanding (the "REGISTRATION
PERIOD"), the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds
from the sale of the Series A Preferred Shares for substantially the same
purposes and in substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send
the following to each Investor (as that term is defined in the Registration
Rights Agreement) during the Registration Period: (i) within five (5) days
after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
any registration statements or amendments filed pursuant to the 1933 Act; (ii)
within one (1) day after release thereof, copies of all press releases issued
by the Company or any of its subsidiaries and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than 150% of the number of shares of Common Stock needed
to provide for the issuance of the Conversion Shares based on the trading price
of the Common Stock at such time.
g. Listing. The Company shall promptly secure the
listing of the Conversion Shares upon each national securities exchange and
automated quotation system (including the Nasdaq National Market System), if
any, upon which shares of Common Stock are then listed
-11-
<PAGE> 12
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable under the terms of this Agreement and the
Registration Rights Agreement. The Company shall maintain the Common Stock's
authorization for quotation on the Nasdaq National Market, The New York Stock
Exchange, Inc. or The American Stock Exchange, Inc. ("AMEX"). The Company
shall promptly provide to each Buyer copies of any notices it receives from the
Nasdaq National Market System regarding the continued eligibility of the Common
Stock for listing on the Nasdaq National Market System. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(g).
h. Expenses. Each of the Company and the Buyers shall
each pay its respective costs and expenses incurred by such party in connection
with the negotiation, investigation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement; provided,
that, subject to Section 9(l) below, following the Closing, the Company shall
reimburse the Buyers for Buyers' attorneys' fees and expenses in connection
with this Agreement and the Registration Rights Agreement up to an aggregate of
$25,000.
i. No Short Sales of the Common Stock. So long as (i)
a Buyer or any of its affiliates beneficially owns any Series A Preferred
Shares, (ii) the Company has not issued any publicly traded convertible
securities and (iii) the Company is not in default under the Certificate of
Designations for failing to effect any requested Redemption (as defined in the
Certificate of Designations) or conversion of any Series A Preferred Shares
pursuant to the Certificate of Designations, such Buyer shall not (A) directly
or through or with any other person, engage in any transaction in or relating
to securities of the Company in violation of Section 9 of the 1933 Act, or (B)
engage in any short sales of the Common Stock ("SHORT SALES"); provided,
however, that Short Sales made no earlier than three days prior to the Date of
Conversion of any Series A Preferred Shares with respect to a number of shares
of Common Stock that does not exceed the number of Conversion Shares to be
obtained pursuant to such conversion shall not be prohibited by this Section
4(i)(B). Each Buyer agrees not to engage in any Short Sales during the ten
(10) days prior to the Closing.
j. Additional Issuances of Series A Preferred Stock.
So long as a Buyer or any of its affiliates beneficially owns Series A
Preferred Shares, the Company shall not issue or agree to issue any shares of
Series A Preferred Stock unless (i) the Company receives prior written consent
from each Buyer, which consent shall not be unreasonably withheld, (ii) the
purchaser of the shares of Series A Preferred Stock enters into a securities
purchase agreement and registration rights agreement in substantially the form
of, and with terms no more favorable to the purchasers of shares of Series A
Preferred Stock than those set forth in, this Agreement and the Registration
Rights Agreement, respectively, and (iii) the issuance of such additional
shares of Series A Preferred Stock is consummated by April 30, 1997.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent to issue certificates, registered in the name of each Buyer or
its respective nominee(s), for the Conversion Shares in such amounts as
specified from time to time by each Buyer to the
-12-
<PAGE> 13
Company upon conversion of the Series A Preferred Shares (the "IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the Conversion Shares
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act) will be given by the Company to its
transfer agent and that the Series A Preferred Shares and the Conversion Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 5 shall affect in any way each Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Series A Preferred Shares or Conversion Shares. If a Buyer
provides the Company with an opinion of counsel, reasonably satisfactory in
form, and substance to the Company, that registration of a resale by such Buyer
of any of the Series A Preferred Shares or the Conversion Shares is not
required under the 1933 Act, the Company shall permit the transfer, and, in the
case of the Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates in such name and in such denominations as specified by
such Buyer. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 5, that the Buyers
shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Series A Preferred Shares to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
a. Such Buyer shall have executed this Agreement and
the Registration Rights Agreement and delivered the same to the Company.
b. The Certificate of Designations shall have been
filed with the Secretary of State of the State of Delaware.
c. Such Buyer shall have delivered to the Company the
Purchase Price for the Series A Preferred Shares being purchased by such Buyer
at the Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.
d. The representations and warranties of such Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
-13-
<PAGE> 14
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Series
A Preferred Shares at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:
a. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to such Buyer.
b. The Certificate of Designations, shall have been
filed with the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to such Buyer.
c. The Common Stock shall be authorized for quotation
on the Nasdaq National Market System, The New York Stock Exchange, Inc. or
AMEX, trading in the Common Stock issuable upon conversion of the Series A
Preferred Shares to be traded on the Nasdaq National Market System, The New
York Stock Exchange, Inc. or AMEX shall not have been suspended by the SEC, The
Nasdaq Stock Market, Inc., The New York Stock Exchange, Inc. or AMEX and all of
the Conversion Shares issuable upon conversion of the Series A Preferred Shares
to be sold at the Closing shall be listed upon the Nasdaq National Market
System, The New York Stock Exchange, Inc. or AMEX.
d. The representations and warranties of the Company
shall be true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer including, without limitation, an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
e. Such Buyer shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of Exhibit
C attached hereto.
f. The Company shall have executed and delivered to
such Buyer the Stock Certificates (in such denominations as such Buyer shall
request) for the Series A Preferred Shares being purchased by such Buyer at the
Closing.
-14-
<PAGE> 15
g. The Board of Directors of the Company shall have
adopted the resolutions in substantially the form of Exhibit D attached hereto.
h. As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Series A Preferred Shares, at least
150% of the number of shares of Common Stock necessary to provide for the
issuance of the Conversion Shares based on the trading price of the Common
Stock as of the Closing Date.
i. The Irrevocable Transfer Agent Instructions, in the
form of Exhibit E attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION. In consideration of each Buyer's execution
and delivery of this Agreement and acquiring the Series A Preferred Shares and
Conversion Shares hereunder and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify
and hold harmless each Buyer and each other holder of Series A Preferred Shares
and Conversion Shares and all of their officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) subject to
Section 9(i), any misrepresentation or breach of any representation or warranty
made by the Company in this Agreement, the Certificate of Designations or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, the Certificate of
Designations or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out
of or resulting from the execution, delivery, performance or enforcement of
this Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Indemnitees, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Series A Preferred Shares or the status of such Buyer or holder of the
Series A Preferred Shares or the Conversion Shares as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Illinois without
regard to the principles of conflict of laws.
-15-
<PAGE> 16
b. Counterparts. This Agreement may be executed in two
or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. In the event any signature page
is delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the Buyers, the
Company, their affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of this Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
f. Notices. Any notices consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Telular Corporation
920 Deerfield Parkway
Buffalo Grove, Illinois 60089
Telephone: (847) 465-4500
Facsimile: (847) 465-4501
Attention: President
-16-
<PAGE> 17
With a copy to:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20044-7566
Telephone: (202) 662-5258
Facsimile: (202) 662-6291
Attention: Michael Cutler, Esq.
If to the Transfer Agent:
Harris Trust and Savings Bank
311 W. Monroe Street, 11th Floor
Chicago, Illinois 60690
Telephone: (312) 461-2121
Facsimile: (312) 461-1530
Attention: Paulette Striegel
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Series A Preferred
Shares. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyers, except
pursuant to a Major Transaction (as defined in Section 3(c) of the Certificate
of Designations) with respect to which the Company is in compliance with
Section 3 of the Certificate of Designations. A Buyer may assign some or all
of its rights hereunder without the consent of the Company, provided, however,
that (i) any such assignment shall not release such Buyer from its obligations
hereunder unless such obligations are assumed by such assignee and the Company
has consented to such assignment and assumption and (ii) no Buyer may assign
its rights hereunder in a manner that would cause the offering of Series A
Preferred Shares hereunder to be required to be registered under the 1933 Act.
h. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the Buyers
contained in Sections 3 and 2, respectively, shall survive the Closing until
two years after the Closing Date. Unless this agreement is terminated under
Section 9(l), the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
-17-
<PAGE> 18
j. Publicity. The Company and each Buyer shall have
the right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations (although
each Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
k. Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
l. Termination. In the event that the Closing shall
not have occurred with respect to a Buyer on or before five (5) business days
from the date hereof due to the Company's or such Buyer's failure to satisfy
the conditions set forth in Sections 6 and 7 above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to such
breaching party at the close of business on such date without liability of any
party to any other party; provided, however, that if this Agreement is
terminated pursuant to this Section 9(l), the Company shall remain obligated to
reimburse the Buyers for the expenses described in Section 4(h) above.
m. Placement Agent. The Company acknowledges that it
has engaged a placement agent in connection with the sale of the Series A
Preferred Shares, which placement agent may have formally or informally engaged
other agents on its behalf. The Company shall be responsible for the payment
of any placement agent's fees or broker's commissions relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out of pocket expenses) arising in connection
with any such claim.
n. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
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<PAGE> 19
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
TELULAR CORPORATION NELSON PARTNERS
By: /s/ KENNETH E. MILLARD By: /s/ ANNE DUPUY
--------------------------------- ------------------------------
Name: Kenneth E. Millard Name: Anne Dupuy
Its: President and Chief Executive Its: Officer
Officer
OLYMPUS SECURITIES, LTD.
By: /s/ ANNE DUPUY
------------------------------
Name: Anne Dupuy
Its: Alternate Director
<PAGE> 20
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
NUMBER OF
SERIES A
INVESTOR ADDRESS PREFERRED INVESTOR'S ADVISORS AND LEGAL
INVESTOR NAME AND FACSIMILE NUMBER SHARES COUNSEL ADDRESS
- ----------------------- ------------------------------ ----------- --------------------------------
<S> <C>
Nelson Partners c/o Leeds Management Services 5,000 Citadel Investment Group, L.L.C.
129 Front Street, 5th Floor 225 West Washington Street
Hamilton HM12 Bermuda Chicago, Illinois 60606
Attn: Anne Dupuy Attention: Kenneth A. Simpler
Facsimile: (441) 292-2239 Kenneth C. Griffin
Facsimile: (312) 368-1348
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Matthew S. Brown, Esq.
Facsimile: (312) 902-1061
Olympus Securities, Ltd. c/o Leeds Management Services 5,000 Citadel Investment Group, L.L.C.
129 Front Street, 5th Floor 225 West Washington Street
Hamilton HM12 Bermuda Chicago, Illinois 60606
Attn: Anne Dupuy Attention: Kenneth A. Simpler
Facsimile: (441) 292-2239 Kenneth C. Griffin
Facsimile: (312) 368-1348
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Matthew S. Brown, Esq.
Facsimile: (312) 902-1061
</TABLE>
<PAGE> 21
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(a)
SUBSIDIARIES
<TABLE>
<S> <C>
1. Telular International, Inc. (inactive)
2. Telular-Adcor Security Products, Inc. (inactive)
3. Wireless Domain, Inc. (43% ownership position)
</TABLE>
<PAGE> 22
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(c)
CAPITALIZATION
The Company has issued stock option and stock under, and is or may become
obligated to issue stock in the future, under the following agreements and
arrangements:
<TABLE>
<S> <C>
1. Telular Corporation Second Amended and Restated Stock
Incentive Plan.
2. Various stock options agreements with individual
employees and former employees.
3. Stock option agreements with members of the Board of
Directors.
4. Services agreement with law firm of Hamman & Benn,
pursuant to which stock is issued in exchange for
services.
5. Consulting Agreement with William DeNicolo.
6. Bonus Plan agreements with Kenneth Millard and Robert
Montgomery.
7. Stock Purchase Agreement with TelePath Corporation
(a/k/a Wireless Domain, Inc.)
</TABLE>
The Company has granted registration rights under the following agreements
and arrangements:
<TABLE>
<S> <C>
1. Various stock option and incentive agreements with
current and former employees.
2. Stock Purchase Agreement with TelePath Corporation
(a/k/a/ Wireless Domain, Inc.)
3. Second Registration Rights Agreement, as amended,
between Telular Corporation and certain of the original
shareholders.
</TABLE>
<PAGE> 23
Detail listing - Plan post IPO
<TABLE>
<CAPTION>
POST-IPO Dte end q4,96
today, or date for calculation
Shares Strike Active Active
Name Issued Rev. Strike (Act Emp) (Term Emp)
<S> <C> <C> <C> <C>
Canty, Michael 390 $ 5.5625 - 260
Geary, Kevin 2,400 $ 5.5625 - 1,600
Geary, Kevin 7,600 $ 5.5625 - 2,533
Gomez, Rafael 900 $ 5.5625 - 600
Walsh, Tim 6,000 $ 5.5625 - 4,000
Walsh, Tim 4,000 $ 5.5625 - 4,000
Mallison, Sylvia 1,410 $ 5.5625 - 940
Adams, Phyllis 480 $ 5.5625 - 320
Glover, Cheryl 150 $ 5.5625 - 100
Holsey, Mary 510 $ 5.5625 - 340
Love, Keisha 150 $ 5.5625 - 100
Birnum, Gunnar 10,000 $ 5.5625 - -
O'Shea, Daniel 210 $ 5.5625 - 140
O'Conell, Patrick 225 $ 5.5625 - 150
Hermann, Jeff tbd - -
ten Brink, Frank 25,000 $ 5.0000 25,000 -
ten Brink, Frank 25,000 $ 4.5000 25,000 -
ten Brink, Frank 50,000 $ 4.5000 50,000 -
Adams, Michele 180 $ 5.5625 180 -
Adams, William 750 $ 5.5625 750 -
Altermer, Mehmet 210 $ 5.5625 210 -
Anter, Nuri 7,500 $ 5.5625 7,500 -
Anter, Nuri 2,500 $ 5.5625 2,500 -
Beneditz, Neil 450 $ 5.5625 450 -
Berg, Joe 1,290 $ 5.5625 1,290 -
Blevens, Gladys 180 $ 5.5625 180 -
Buckley, William 420 $ 5.5625 420 -
Buckley, William 4,580 $ 5.5625 4,580 -
Burns, Clem 210 $ 5.5625 210 -
Butler, Corey 180 $ 5.5625 180 -
Claudio, George 15,000 $ 5.5625 15,000 -
Claudio, George 15,000 $ 5.5625 15,000 -
Claudio, George 18,209 $ 5.5625 18,209 -
Comstock, James 420 $ 5.5625 420 -
Ejoh, Charles 900 $ 5.5625 900 -
Eklund, Laura 180 $ 5.5625 180 -
Fagan, Eric 165 $ 5.5625 165 -
Gaspar, Zoltan 3,600 $ 5.5625 3,600 -
Heitschel, Carl 1,500 $ 5.5625 1,500 -
Holtzrichter, R. 1,500 $ 5.1875 1,500 -
James, Gail 270 $ 5.5625 270 -
Jarnagin, Laura 210 $ 5.5625 210 -
Jenkins, Gordon 25,000 $ 5.5625 25,000 -
Jenkins, Gordon 6,000 $ 5.5625 6,000 -
Jenkins, Gordon 6,000 $ 5.5625 6,000 -
Kowalski, Gary 1,500 $ 5.3125 1,500 -
Kushner, Matt 25,000 $ 5.5625 25,000 -
Landress, Tony 390 $ 5.5625 390 -
Page 1
</TABLE>
<PAGE> 24
Detail listing - Plan post IPO
<TABLE>
<CAPTION>
POST-IPO Dte end q4,96
today, or date for calculation
Shares Strike Active Active
Name Issued Rev. Strike (Act Emp) (Term Emp)
<S> <C> <C> <C> <C>
Landress, Tony 6,610 $ 5.5625 6,610 -
Mackely, David 1,200 $ 5.5625 1,200 -
Maennena, Risto 2,400 $ 5.5625 2,400 -
Martinez, Teresa 1,200 $ 5.5625 1,200 -
Mason, Tom 20,000 $ 5.5625 20,000 -
Mason, Tom 20,000 $ 5.5625 20,000 -
Mason, Tom 20,000 $ 5.5625 20,000 -
McDonald, Raul 510 $ 5.5625 510 -
Millard, Ken 50,000 $ 5.0000 50,000 -
Millard, Ken 150,000 $ 4.5000 150,000 -
Millard, Ken 300,000 $ 4.5000 300,000 -
Millard, Ken 150,000 $ 4.7800 150,000 -
Mitchell, John 10,000 $ 5.5625 10,000 -
Mitchell, John 10,000 $ 5.5625 10,000 -
Montgomery, Robert 25,000 $ 5.0000 25,000 -
Montgomery, Robert 62,000 $ 4.5000 62,000 -
Montgomery, Robert 123,000 $ 4.5000 123,000 -
Montgomery, Robert 18,000 $ 4.5000 18,000 -
Montgomery, Robert 18,000 $ 4.5000 18,000 -
Moore, S perfomance 25,000 $ 5.5625 25,000 -
Moore, S perfomance 25,000 $ 5.5625 25,000 -
Moore, Sandy 12,500 $ 5.5625 12,500 -
Moore, Sandy 12,500 $ 5.5625 12,500 -
Moore, Sandy 25,000 $ 5.5625 25,000 -
Mosley, Anthony 210 $ 5.5625 210 -
Nicholas, Joseph 1,140 $ 5.5625 1,140 -
Odessky, B 2,000 $ 5.3750 2,000 -
Paulraj, David 150 $ 5.5625 150 -
Paulraj, David 300 $ 5.5625 300 -
Poirier, Louis 900 $ 5.5625 900 -
Pullega, Theresa 450 $ 5.5625 450 -
Pullega, Theresa 450 $ 5.5625 450 -
Radke, Fred 13,750 $ 5.5625 13,750 -
Radke, Fred 13,750 $ 5.5625 13,750 -
Radke, Fred 27,500 $ 5.5625 27,500 -
Rock, Ronald 420 $ 5.5625 420 -
Russell, Roy 1,500 $ 5.3125 1,500 -
Sanchez, Edward 390 $ 5.5625 390 -
Saxon, Michael 240 $ 5.5625 240 -
Schormack, Louis 3,900 $ 5.5625 3,900 -
Schormack, Louis 6,100 $ 5.5625 6,100 -
Sellin, Steven 15,000 $ 5.5625 15,000 -
Sellin, Steven 15,000 $ 5.5625 15,000 -
Sellin, Steven 25,000 $ 5.5625 25,000 -
Sendele, Steve 3,000 $ 5.5625 3,000 -
Simpson, Jane 180 $ 5.5625 180 -
Skomer, Caryn 210 $ 5.5625 210 -
Stec, Eddie 1,800 $ 5.5625 1,800 -
</TABLE>
Page 2
<PAGE> 25
<TABLE>
<CAPTION>
POST-IPO Dte end q4,96
today, or date for calculation
Shares Strike Active Active
Name Issued Rev. Strike (Act Emp) (Term Emp)
<S> <C> <C> <C> <C>
Stec, Eddie 8,200 $ 5.5625 8,200 -
Wallace, Robert 360 $ 5.5625 360 -
Wilkerson, Pam 510 $ 5.5625 510 -
Wojcik, Paul 390 $ 5.5625 390 -
Yearwood, Sharon 720 $ 5.5625 720 -
Yerou, John 10,000 $ 5.5625 10,000 -
Zamecnik, Tom 2,000 $ 6.1250 2,000 -
</TABLE>
Page 3
<PAGE> 26
Options Board
<TABLE>
<CAPTION>
BOARD MEMBER'S OPTIONS
Shares
Name Issued Strike Active
<S> <C> <C> <C>
Blanchard, Gus 25,000 $8.2500 25,000
Ford, Larry 25,000 $8.2500 25,000
Blanchard, Gus 7,623 $5.5625 7,623
Ford, Larry 10,000 $5.5625 10,000
Berndt, John 5,000 $5.0625 5,000
Ford, Larry 10,000 10,000
Berndt, John 10,000 10,000
Ford, Larry 10,000 10,000
Berndt, John 10,000 10,000
========================================================
TOTAL 112,623
</TABLE>
1
<PAGE> 27
Special
<TABLE>
<CAPTION>
SPECIAL OPTIONS
Shares Active Active
Name Issued Price (Act Emp) (Term Emp)
- ---- ------ ----- --------- ----------
<S> <C> <C> <C> <C>
Puleo, Rod 20,023 $ 8.7900 13,349
Quinlan, Michael 37,107 $ 8.7900 12,369
Vodak, James 4,455 $ 8.7900 1,485
Wagster, Dan 6,824 $ 8.7900 4,550
Wilkins, John 6,354 $ 8.7900 4,236
Elliott, Loretta 2,248 $ 8.7900 1,498
Gerstner, Dick 59,201 59,201
Puleo, Rod 20,555 $ 9.7500 13,703
Quinlan, Michael 17,308 $ 9.7500 11,539
Vodak, James 4,615 $ 9.7500 1,538
Wagster, Dan 1,369 $ 9.7500 913
Wagster, Dan 2,734 $ 9.7500 1,823
Wilkins, John 5,680 $ 9.7500 3,787
Elliott, Loretta 2,012 $ 9.7500 1,341
Gerstner, Dick 69,744 69,744
Puleo, Rod 20,000 $ 9.7500 13,333
Quinlan, Michael 25,000 $13.0000 12,500
Vodak, James 5,000 $ 8.5000 5,000
Rose, Eric 10,000 $ 5.5625 10,000
Wagster, Dan 37,220 $ 8.2500
Wilkins, John 20,000 $13.0000 10,000
Wilkins, John 30,575 $ 8.2500
Wilkins, John 10,000 $ 8.2500
Elliott, Loretta 10,000 $ 8.2500
428,024 -- 251,909
</TABLE>
Page 1
<PAGE> 28
<TABLE>
<CAPTION>
PRE-IPO
Act/Term Start Term Grant Grant Shares Exercise
Name 1/0 Date Date Date # Issued Price Date
- ----- -------- --------- -------- -------- -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Herget, Phillip 0 11/01/93 06/30/94 08/01/93 28,000 $3.710
08/01/93 14,000 $3.710
08/01/93 14,000 $3.710
$3.710 08/16/95
$3.710 08/17/95
$3.710 08/18/95
Gerstner, Richard 0 11/01/93 11/15/95 11/01/93 36,078 $6.930
11/01/93 36,078 $6.930
11/01/93 36,092 $6.930
08/31/94 $9.750
$6.930 06/04/96
Shafer, Ed 0 01/01/86 05/03/96 12/01/92 017 128,800 $0.930 08/08/94
08/09/94
08/10/94
12/02/94
12/05/94
02/15/95
05/15/95
05/18/95
05/24/95
06/09/95
05/02/96
Brletich, Frank 0 12/16/92 01/27/95 12/01/92 028 64,106 $0.930 02/15/95
03/16/95
03/20/95
04/20/95
05/09/95
05/10/95
05/15/95
05/24/95
06/09/95
06/22/95
07/10/95
12/01/92 029 64,106 $0.930 07/10/95
01/02/96
01/03/96
01/04/96
01/05/96
04/02/96
05/02/96
06/03/96
06/04/96
06/04/96
Claudio, George 1 12/17/86 12/01/92 001 96,376 $0.930
<CAPTION>
PRE-IPO
Open after Active Active Cancelled
Name Expiry Exercised exercise (Act. Emp) (Term Emp) Shares
- ----- -------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Herget, Phillip 28,000
42,000
56,000
1,000 55,000
8,000 47,000
11,000 36,000 36,000
Gerstner, Richard 11/01/99 36,078
11/01/00 72,156
11/01/01 108,248
08/31/04 108,248
10,000 98,248 98,248
Shafer, Ed 12/01/97 20,000 108,800
20,000 88,800
5,000 83,800
3,000 80,800
10,000 70,800
10,000 60,800
10,000 50,800
10,000 40,800
10,000 30,800
5,000 25,800
22,800 3,000 3,000
Brletich, Frank 12/01/98 10,000 54,106
5,000 49,106
5,000 44,106
10,000 34,106
500 33,606
5,500 28,106
4,000 24,106
10,000 14,106
10,000 4,106
1,000 3,106
3,106 - -
12/01/99 3,894 60,212
1,000 59,212
1,300 57,912
800 57,112
500 56,612
8,000 48,612
5,000 43,612
5,000 38,612
30,000 8,612
6,000 2,612 2,612
Claudio, George 12/01/97 96,376 96,376
</TABLE>
Page 1
<PAGE> 29
<TABLE>
<CAPTION>
PRE-IPO
Act/Term Start Term Grant Grant Shares Exercise
Name 1/0 Date Date Date # Issued Price Date
- ----- -------- --------- -------- -------- -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eshkenazi, Sheryl 0 06/05/87 07/31/96 12/01/92 004 64,106 $0.940
Jenkins, Gordon 1 05/13/74 09/30/93 274 24,850 $1.440 02/23/94
Jenkins, Gordon 1 05/13/74 09/30/93 275 24,850 $18.000
Montgomery, Robert 1 11/16/83 09/30/93 272 61,950 $18.000
Montgomery, Robert 1 11/16/83 09/30/93 273 61,950 $1.440 02/23/94
Murtha, Pat 0 03/15/91 07/01/96 12/01/92 010 96,376 $0.930 08/10/95
08/21/95
09/11/95
09/12/95
09/13/95
09/14/95
09/15/95
06/07/96
06/10/96
06/10/96
Walsh, Tim 1 04/12/93 04/01/93 020 35,084 $2.140
TOTAL
<CAPTION>
PRE-IPO
Open after Active Active Cancelled
Name Expiry Exercised exercise (Act. Emp) (Term Emp) Shares
- ----- -------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eshkenazi, Sheryl 12/01/97 64,106 64,106
Jenkins, Gordon 24,850 -
Jenkins, Gordon 24,850 24,850
Montgomery, Robert 61,950
Montgomery, Robert 61,950 - -
Murtha, Pat 12/01/97 2,500 93,876
2,500 91,376
10,000 81,376
5,000 76,376
15,000 61,376
20,000 41,376
1,000 40,376
10,000 30,376
10,000 20,376
20,376 -
Walsh, Tim 4/99/00 - 35,084 35,084
TOTAL 121,226 239,050 61,950
</TABLE>
Page 2
<PAGE> 30
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(e)
CONFLICTS
None
<PAGE> 31
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(g)
MATERIAL CHANGES
<TABLE>
<S> <C>
1. In connection with its consolidation and restructuring, the
Company is transferring manufacturing and certain other
business activities from Atlanta to Illinois
2. R&D contracts:
- - Mentor Graphics: Agreement dated December 10, 1996 for
development of RJ-11 ASIC software and/or design.
- - Wireless Domain: Various development and project management
projects to develop integrated radio designs for AMPS,
ETACS, GSM, DCS 1800 standards. Create interface between
new radio designs and RJ-11 ASIC.
- - Qualcomm Contract dated April 11, 1997, to enter into Supply
Agreement for services and supplies associated with the
Qualcomm daughter card.
- - TTP license agreements dated January 21, 1997 for GSM
license and support including a maintenance contract.
Agreements cover GSM protocol stack, GSM data services and
GSM application background layer.
3. The Company is party to ongoing litigation, described on
Schedule 3(h).
4. The Company's existing loan agreement with LaSalle National
Bank is scheduled to terminate on April 30, 1997. A
replacement facility is under negotiation, but has not been
completed.
</TABLE>
<PAGE> 32
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(h)
LITIGATION
<TABLE>
<S> <C>
1. The Company is party to the litigation described on pages
10-11 of the Company's Form 10-K for the year ended
September 30, 1996.
2. The Company is engaged in a contractual dispute with Global
Tel*Link, Inc., regarding an agreement pursuant to which the
Company had agreed to purchase payphones to be manufactured
by Global Tel*Link. The Company terminated the agreement
asserting late delivery. Global Tel*Link has asserted a
claim for $1.2 million in damages, but has not instituted an
arbitration demand in accordance with the agreement.
3. Two ex-employees of the Company have asserted claims for
unpaid commissions. One of these employees has also
asserted a claim alleging sex discrimination. On March 5,
1997, this same ex-employee filed a law suit against the
Company.
</TABLE>
<PAGE> 33
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(n)
INTELLECTUAL PROPERTY
<TABLE>
<S> <C>
1. The Company is party to the litigation described on pages
10-11 of the Company's Form 10-K for the period ending
September 30, 1996.
2. Information regarding the Company's patents, licenses and
other intellectual property is set forth on pages 8-10 of
the Company's Form 10-K for the year ended September 30,
1996, and incorporated herein.
</TABLE>
<PAGE> 34
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(p)
LIENS
<TABLE>
<S> <C>
1 Liens in favor of LaSalle National Bank Loan pursuant to
loan agreement
2. Hewlett Packard Machinery lease
</TABLE>
<PAGE> 35
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(u)
TAX STATUS
None
<PAGE> 36
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 3(v)
CERTAIN TRANSACTIONS
None
<PAGE> 37
Schedules to Securities Purchase Agreement of April 1997.
SCHEDULE 4(d)
USE OF PROCEEDS
<TABLE>
<S> <C>
1. General business purposes
2. Research and development
3. Working capital requirements
</TABLE>
<PAGE> 38
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF THE SERIES A PREFERRED SHARES
Attached hereto [as Exhibit 99.2].
<PAGE> 39
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
Attached hereto [as Exhibit 99.3].
<PAGE> 40
EXHIBIT C
Form of Company Counsel Opinion
Attached hereto.
<PAGE> 41
[COVINGTON & BURLING LETTERHEAD]
April 16, 1997
Nelson Partners
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton HM12 Bermuda
Attn: Anne Dupuy
Olympus Securities, Ltd.
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton HM12 Bermuda
Attn: Anne Dupuy
Ladies and Gentlemen:
We have acted as counsel to Telular Corporation, a Delaware
corporation (the "Company"), in connection with the issuance and sale of 10,000
shares of Series A Convertible Preferred Shares (the "Preferred Shares")
pursuant to the Securities Purchase Agreement dated April 16, 1997, between the
Company and each of you (the "Securities Purchase Agreement").
In connection with rendering the opinions set forth hereto,
we have examined a copy of the Securities Purchase Agreement, the Certificate
of Designations, the Registration Rights Agreement and the Irrevocable Transfer
Agent Instructions (the "Transaction Documents"), the Company's Certificate of
Incorporation, as amended to date, its Bylaws, as amended to date, the
proceedings of the Company's Board of Directors taken in connection with the
sale and issuance of the Preferred Shares, and such other documents and
instruments as we have deemed necessary. As to certain matters of fact, we
have relied upon a certificate of officers of the Company.
In conducting our examination, we have assumed the following:
(i) the genuineness of all signatures, the legal capacity of natural persons,
the authenticity and accuracy of all documents submitted to us as originals,
and accuracy of all documents submitted to us as originals, and the conformity
to originals of all documents submitted to as copies, (ii) that the Securities
Purchase Agreement has been duly and validly authorized, executed, and
delivered by the party or
<PAGE> 42
Nelson Partners
Olympus Securities, Ltd.
April 16, 1997
Page 2
parties thereto other than the Company, and (iii) that the Securities Purchase
Agreement constitutes the valid and binding agreement of the party or parties
thereto other than the Company, enforceable against such party or parties in
accordance with the terms of the Securities Purchase Agreement.
In rendering the opinion set forth in paragraph 5 below, we
have relied upon your representations and warranties as set forth in the
Securities Purchase Agreement.
With respect to matters stated herein to be to our actual
knowledge, we have advised you only as to the actual knowledge without
independent investigation of those lawyers in our firm who have devoted
substantive attention to this transaction on behalf of the Company.
Capitalized terms used and not defined herein shall have the
meaning set forth in the Securities Purchase Agreement.
Based on the foregoing, and subject to the assumptions and
qualifications set forth below, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has the requisite corporate power to conduct its business
and to own, lease and operate its properties, as described in the Company's
Annual Report on Form 10-K for the year ended September 30, 1996 (the "1996
10-K"). The Company is qualified as a foreign corporation to do business and
is in good standing in the State of Illinois.
2. The Company has the requisite corporate power and authority
to execute, deliver and perform its obligations under the Securities Purchase
Agreement, the Certificate of Designations, the Registration Rights Agreement
and the Irrevocable Transfer Agent Instructions (collectively, the "Transaction
Documents"), including issuance of the Preferred Shares and the Conversion
Shares in accordance with the terms thereof. The filing of the Certificate of
Designations and the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated therein
have been duly authorized by the Company's Board of Directors and no further
consent or authorization of the Company, its Board of Directors or its
stockholders is required therefor. The Transaction Documents have been duly
executed and delivered by the Company and the Certificate of Designations has
been duly executed and properly filed by the Company with the Secretary of
State of the State of Delaware in accordance with the Delaware General
Corporate Law (the "Delaware Corporate Law") and has become effective under the
Delaware Corporate Law. The Transaction Documents, other than the Certificate
of Designations, constitute the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
<PAGE> 43
Nelson Partners
Olympus Securities, Ltd.
April 16, 1997
Page 3
3. The issuance and sale of the Preferred Shares, have been duly
authorized. When issued in accordance with the terms of the Securities
Purchase Agreement, the Preferred Shares will be validly issued, fully paid and
non-assessable and free of all taxes, liens, charges and preemptive rights with
respect to the issue thereof. The Conversion Shares have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares in accordance
with the Securities Purchase Agreement and the Certificate of Designations and
when issued in accordance with the Securities Purchase Agreement and the
Certificate of Designations, the Conversion Shares will be validly issued,
fully paid and nonassessable and free of all taxes, liens charges and
preemptive rights with respect to the issue thereof.
4. As of the date hereof, the authorized capital stock of the
Company consists of (i) 75,000,000 shares of Common Stock, par value $.01 per
share, and (ii) 10,000,000 shares of Preferred Stock, par value $.01 per share.
None of such Common Stock or such Preferred Stock is subject to preemptive
rights or other rights of the stockholders of the Company pursuant to the
Certificate of Incorporation or the Bylaws or under the Delaware Corporate Law.
The rights, preferences and privileges of the Series A Preferred Shares are as
stated in the Certificate of Designations. The Board of Directors of the
Company has reserved for issuance shares of Common Stock sufficient to provide
for the issuance of the Conversion Shares.
5. The Preferred Shares and the Conversion Shares may be issued
to you pursuant to the Transaction Documents without registration under the
1933 Act or the securities laws of any state.
6. No authorization, approval, consent, filing or other order of
any federal or state governmental body, regulatory agency, self-regulatory
organization or stock exchange or market, or the stockholders of the Company,
or any court, or, to our knowledge, any third party, is required to be obtained
by the Company to enter into and perform its obligations under the Transaction
Documents or for the issuance and sale of the Preferred Shares and the
Conversion Shares as contemplated by the Transaction Documents, with the
exception of (i) the listing of the Conversion Shares with NASDAQ, (ii) the
filing of a Form D with the Securities and Exchange Commission, and (iii) such
registrations, filings and approvals with and by the Securities and Exchange
Commission and applicable state securities regulators as may be necessary to
effect the registration of the Conversion Shares for resale.
7. Except as disclosed in the Securities Purchase Agreement, we
do not have actual knowledge of any action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or any governmental
agency or self-regulatory organization pending or threatened against the
Company or any of its subsidiaries or any of the Properties of the Company or
any of its subsidiaries.
8. The execution, delivery and performance by the Company of the
Transaction Documents, the consummation by the Company of the transactions
contemplated thereby and
<PAGE> 44
Nelson Partners
Olympus Securities, Ltd.
April 16, 1997
Page 4
the compliance by the Company with the terms thereof does not violate, conflict
with or constitute a default (or an event which, with the giving of notice or
lapse of time or both, constitutes or would constitute a default) under (i) the
Certificate of Incorporation or the Bylaws, (ii) to the best of our knowledge,
any agreement, note, lease, mortgage, deed or other instrument to which the
Company is a party or by which the Company is bound and which the Company has
filed as an exhibit to the 1996 10-K, or which, to our actual knowledge, the
Company is otherwise required to file with the Securities and Exchange
Commission, or (iii) any statute, law, rule or regulation applicable to the
Company or, to our actual knowledge, any order, writ, injunction or decree, if
such violation would have a material adverse effect on the business,
operations, financial conditions or results of operations of the Company.
9. The Company is not an "investment company" or any entity
controlled by an "investment company," as such term is defined in the
Investment Company Act of 1940, as amended.
In the process of our review of the 1996 10-K and all other reports
filed by the Company pursuant to Section 13 of the Securities Exchange Act of
1934, as amended, since the date of the filing of the 1996 10-K, although we
have not engaged in any independent investigation and do not assume any
responsibility for the accuracy or completeness of the information contained
therein, nothing has come to our attention that has led us to believe that any
of such reports contain any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, as of its filing date with the SEC.
This opinion is rendered only with regard to the matters set
out above. No other opinions are intended nor should they be inferred. We are
attorneys licensed to practice in the District of Columbia and the federal
courts and agencies of the United States, and we express no opinion herein as
to the laws of any other jurisdiction other than the General Corporation Law of
the State of Delaware.
The opinions expressed herein are given to you solely for
your use in connection with the Securities Purchase Agreement and may not be
relied upon by any other person or entity or for any other purpose without our
prior written consent. This opinion is given solely as of the date hereof, and
we assume no obligation or duty to update any of the opinions expressed herein.
Very truly yours,
/s/ COVINGTON & BURLING
Covington & Burling
<PAGE> 45
EXHIBIT D
FORM OF RESOLUTIONS ADOPTED BY THE COMPANY'S BOARD OF DIRECTORS
Attached hereto.
<PAGE> 46
Telular Corporation
Special Meeting of Board of Directors
April 14, 1997
Resolution to approve and execute up to $21,000,000 in Series A
Convertible Preferred Stock through a private placement, using
Lehman Brothers as the Investment Banker
WHEREAS, Telular Corporation has determined that it is in the best interest of
the Company to secure up to $21,000,000 in proceeds from a Private Placement
upon the terms and conditions listed on the attached Exhibit A; and
RESOLVED, that 21,000 shares of the Company's Preferred Stock be designated as
the Series A Convertible Preferred Stock, with the preferences and rights set
forth on Exhibit B hereto; and
RESOLVED, that a Certificate of Designations, Preferences and Rights of Series
A Convertible Preferred Stock of Telular Corporation, in the form of Exhibit B
hereto, be filed with the Secretary of State of Delaware; and
RESOLVED, that the Corporation be, and it hereby is, authorized to issue 21,000
shares of Series A Convertible Preferred Stock in accordance with and for the
consideration specified in Exhibit A hereto to the purchasers specified in
Exhibit A hereto, or to such other or additional purchasers as the officers of
the Corporation may approve; and
RESOLVED, that the Corporation be, and it hereby is, authorized to issue upon
conversion of the Series A Convertible Preferred Stock such shares of Common
Stock, par value $.01 per share, of the Corporation, up to the total amount
authorized under the Certificate of Incorporation and not theretofore issued or
reserved for issuance for any other purpose, as may be required in accordance
with the terms of the Series A Convertible Preferred Stock; and
<PAGE> 47
RESOLVED, that the Corporation hereby reserves for issuance upon conversion of
the Series A Convertible Preferred Stock 12 million shares of Common Stock, par
value $.01 per share, of the Corporation; and
RESOLVED, that the Corporation be, and it hereby is, authorized to effect the
registration of such Common Stock of the Corporation on Securities Exchange
Commission Form S-3 or such other form as may be appropriate, and in connection
therewith to execute and deliver such registration statements and other
documents, instruments, agreements and certificates, pay such sums, and take
such other actions as the officers of the Corporation may deem necessary or
desirable in connection therewith; and
RESOLVED, that the Corporation be, and it hereby is, authorized to issue to
Lehman Brothers up to 95,000 shares of Common Stock, par value $.01 per share,
of the Corporation, in consideration for its services heretofore provided in
connection with the sale of the Series A Convertible Preferred Stock.
RESOLVED, that the Corporation be, and it hereby is, authorized to issue in
accordance with the terms of the Private Placement, that number of shares of
Common Stock of the Corporation, par value $.01 per share, as is specified in
the Private Placement; and
RESOLVED, that the appropriate officers of the Company be and each is
authorized to do and perform or cause to be done and performed in the name and
on behalf of the Company, any and all such acts and things and execute or
deliver, under corporate seal or otherwise, any and all such documents,
agreements, instruments, certificates and notices as shall be necessary or
appropriate to carry out the intent of the foregoing resolution.
<PAGE> 48
EXHIBIT E
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
Attached hereto.
<PAGE> 49
TRANSFER AGENT INSTRUCTIONS
TELULAR CORPORATION
April 16, 1997
Harris Trust and Savings Bank
311 W. Monroe Street
Chicago, Illinois 60690
Attn: Paulette Striegel
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement, of
even date herewith, by and among Telular Corporation, a Delaware corporation
(the "Company"), and each of Nelson Partners and Olympus Securities, Ltd.
(collectively, the "Holders") pursuant to which the Company is issuing to the
Holders an aggregate of 10,000 shares of Series A Preferred Stock, $.01 par
value, of the Company (the "Preferred Shares"). This letter shall serve as our
irrevocable authorization and direction to you (provided that you are the
transfer agent of the Company at such time) to issue shares (the "Conversion
Shares") of Common Stock, $.01 par value (the "Common Stock"), of the Company
to or upon the order of a Holder from time to time upon (i) surrender to you of
a properly completed and duly executed Conversion Notice, in the form attached
hereto as Exhibit I and (ii) certificates representing Preferred Shares being
converted (or an indemnification undertaking with respect to such shares in the
case of their loss, theft or destruction). Certificates representing the
Convertible Shares shall not bear any legend restricting transfer of the
Conversion Shares thereby and should not be subject to any stop-transfer
restriction: provided, however, that if the Conversion Shares are not
registered for resale under the Securities Act of 1933, as amended, then the
certificates for the Conversion Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT."
and, provided, further that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
in the event a registration statement covering the Conversion Shares is subject
to amendment for events then current.
<PAGE> 50
Please be advised that the Holders are relying upon this
letter as an inducement to enter into the Securities Purchase Agreement and,
accordingly, each Holder is a third party beneficiary to these instructions.
Should you have any questions concerning this matter, please
contact me at (847) 465-4500.
Very truly yours,
TELULAR CORPORATION
By:
---------------------------
Name: Kenneth Millard
Its: President and Chief
Executive Officer
ACKNOWLEDGED AND AGREED:
HARRIS TRUST AND SAVINGS BANK
By:
-----------------------------
Name:
---------------------------
Title:
---------------------------
Date:
---------------------------
Enclosure
cc: Nelson Partners
Olympus Securities, Ltd.
Robert J. Brantman, Esq.
2
<PAGE> 51
EXHIBIT I
TELULAR CORPORATION
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
Telular Corporation (the "CERTIFICATE OF DESIGNATIONS"). In accordance with and
pursuant to the Certificate of Designations, the undersigned hereby elects to
convert the number of shares of Series A Convertible Preferred Stock, $.01 par
value per share (the "SERIES A PREFERRED SHARES"), of Telular Corporation, a
Delaware corporation (the "COMPANY"), indicated below into shares of Common
Stock, $.01 par value per share (the "COMMON STOCK"), of the Company by
tendering the stock certificate(s) representing the share(s) of Series A
Preferred Shares specified below as of the date specified below. The
undersigned represents and warrants that as of the date of this notice the
undersigned is in compliance with Section 4(i) of the Securities Purchase
Agreement among the Company and the Buyers named therein.
Date of Conversion:
------------------------------
Number of Series A
Preferred Shares to be converted:
------------------------------
Stock certificate no(s). of Series A
Preferred Shares to be converted:
------------------------------
Please confirm the following information:
Conversion Price:
------------------------------
Number of shares of Common Stock
to be issued:
------------------------------
Additional Amount:
------------------------------
Please issue the Common Stock and, if applicable, any check drawn on an account
of the Company into which the Series A Preferred Shares are being converted in
the following name and to the following address:
Issue to:
------------------------------
------------------------------
------------------------------
------------------------------
Facsimile number:
------------------------------
Authorization:
------------------------------
By:
---------------------------
Title:
------------------------
Dated:
------------------------------
<PAGE> 1
EXHIBIT 99.2
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK
OF
TELULAR CORPORATION
Telular Corporation (the "COMPANY"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the Board of
Directors of the Company by the Certificate of Incorporation, as amended, of
the Company, and pursuant to Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors of the Company at a meeting duly
held, adopted resolutions (i) authorizing a series of the Company's previously
authorized preferred stock, $.01 par value per share, and (ii) providing for
the designations, preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof, of
twenty-one thousand (21,000) shares of Series A Convertible Preferred Stock of
the Company, as follows:
RESOLVED, that the Company is authorized to issue 21,000
shares of Series A Convertible Preferred Stock (the "SERIES A
PREFERRED SHARES"), $.01 par value per share, which shall have the
following powers, designations, preferences and other special rights:
(1) Dividends. The Series A Preferred Shares shall not
bear any dividends.
(2) Holder's Conversion of Series A Preferred Shares. A
holder of Series A Preferred Shares shall have the right, at such
holder's option, to convert the Series A Preferred Shares into shares
of the Company's common stock, $.01 par value per share (the "COMMON
STOCK"), on the following terms and conditions:
(a) Conversion Right. Subject to the
provisions of Sections 2(g), 2(h) and 2(i) below, at any time or times
on or after the earlier of (i) the date the Registration Statement (as
defined below) is declared effective by the United States Securities
and Exchange Commission (the "SEC") and (ii) 120 days after the
initial date of issuance of the Series A Preferred Shares (the
"SCHEDULED EFFECTIVE DATE"), any holder of Series A Preferred Shares
shall be entitled to convert any whole number of Series A Preferred
Shares into fully paid and nonassessable shares (rounded to the
nearest whole share in
<PAGE> 2
accordance with Section 2(k) below) of Common Stock, at the Conversion
Rate (as defined below); provided, however, that in no event shall any
holder be entitled to convert Series A Preferred Shares in excess of
that number of Series A Preferred Shares which, upon giving effect to
such conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates to exceed
4.9% of the outstanding shares of the Common Stock following such
conversion. For purposes of the foregoing proviso, the aggregate
number of shares of Common Stock beneficially owned by the holder and
its affiliates shall include the number of shares of Common Stock
issuable upon conversion of the Series A Preferred Shares with respect
to which the determination of such proviso is being made, but shall
exclude the number of shares of Common Stock which would be issuable
upon (i) conversion of the remaining, nonconverted Series A Preferred
Shares beneficially owned by the holder and its affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of
any other securities of the Company (including, without limitation,
any warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the
holder and its affiliates. Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended.
(b) Conversion Rate. The number of shares of
Common Stock issuable upon conversion of each of the Series A
Preferred Shares pursuant to Sections (2)(a), 2(g) and 2(h) shall be
determined according to the following formula (the "CONVERSION RATE"):
<TABLE>
<S> <C>
(.05)(N/365)(1,000) 1,000
------------------- + -----
Average Market Price Conversion Price
for the 30 trading days
preceding conversion
</TABLE>
For purposes of this Certificate of Designations, the following terms
shall have the following meanings:
(i) "CONVERSION PRICE" means, subject
to the provisions of Section 2(j), as of any Conversion Date (as defined below)
or other date of determination, the lower of the Fixed Conversion Price and the
Floating Conversion Price, each in effect as of such date and subject to
adjustment as provided herein;
(ii) "FIXED CONVERSION PRICE" means 110%
of the Average Market Price for the thirty (30) consecutive trading days ending
one trading day prior to the initial date of issuance of the Series A Preferred
Shares, subject to adjustment as provided herein;
(iii) "FLOATING CONVERSION PRICE" means,
as of any date of determination, the amount obtained by multiplying the
Conversion Percentage in effect as of such date by the Average Market Price for
the Common Stock for the thirty (30) consecutive trading days immediately
preceding such date;
-2-
<PAGE> 3
(iv) "CONVERSION PERCENTAGE" means (A)
eighty-five percent (85%), if the Conversion Date is before October 15, 1999 or
(B) one-hundred percent (100%), if the Conversion Date is on October 15, 1999,
subject in each case to adjustment as provided herein;
(v) "AVERAGE MARKET PRICE" means, with
respect to any security for any period, that price which shall be computed as
the weighted average of the Closing Bid Prices (as defined below) for such
security for each trading day in such period;
(vi) "CLOSING BID PRICE" means, for any
security as of any date, the last closing bid price on the Nasdaq National
Market System (the "NASDAQ-NM") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the Nasdaq-NM is not the principal trading market for
such security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing
bid price is reported for such security by Bloomberg, or, if no last closing
trade price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc., the last closing trade price of such
security as reported by Bloomberg. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as mutually determined by the Company and the holders of Series A Preferred
Shares. If the Company and the holders of Series A Preferred Shares are unable
to agree upon the fair market value of the Common Stock, then such dispute
shall be resolved pursuant to Section 2(f)(iii) below with the term "Closing
Bid Price" being substituted for the term "Average Market Price." (All such
determinations to be appropriately adjusted for any stock dividend, stock,
split or other similar transaction during such period).
(vii) "N" means the number of days from,
but excluding, the Issuance Date through and including the Conversion Date for
the Series A Preferred Shares for which conversion is being elected; and
(viii) "ISSUANCE DATE" means the initial
date of issuance of the Series A Preferred Shares.
(c) Effect of Failure to Obtain and Maintain
Effectiveness of Registration Statement. (i) If the registration statement
(the "REGISTRATION STATEMENT") covering the resale of the shares of Common
Stock issuable upon conversion of the Series A Preferred Shares and required to
be filed by the Company pursuant to the Registration Rights Agreement between
the Company and the initial holders of the Series A Preferred Shares (the
"REGISTRATION RIGHTS AGREEMENT") is not declared effective by the SEC on or
before the Scheduled Effective Date, then each holder of Series A Preferred
Shares shall be entitled to the following payments until such time as the
Registration Statement is declared effective by the
-3-
<PAGE> 4
SEC (all such payments to be made upon the earlier of the end of the relevant
thirty (30) day period and the Registration Statement being declared effective
by the SEC):
(A) during the thirty (30) day period
beginning immediately following the Scheduled Effective Date
and ending 30 days following the Scheduled Effective Date,
that number of shares of Common Stock per Series A Preferred
Share each day that equals the product of (I) the quotient of
(w) (.01) divided by (x) 30, multiplied by (II) the quotient
of (y) 1,000 divided by (z) the Conversion Price.
(B) during the thirty (30) day period
beginning 31 days following the Scheduled Effective Date and
ending 60 days following the Scheduled Effective Date, an
amount in cash per Series A Preferred Share each day that
equal to the product of (I) the quotient of (w) (.02) divided
by (x) 30, multiplied by (II) 1,000.
(C) at the end of each entire consecutive
thirty (30) day period beginning 61 days following the
Scheduled Effective Date, at the option of the Company,
either (I) that number of shares of Common Stock per Series A
Preferred Share that equals the quotient of 30 divided by the
Conversion Price or (II) an amount in cash per Series A
Preferred Share equal to $30.
(ii) Subject to Section 2(c)(iii) below, if
after the Registration Statement has been declared effective by the SEC, sales
cannot be made pursuant to the Registration Statement (whether because of a
failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, to register sufficient shares of Common Stock or otherwise), then,
as partial relief for the damages to any holder by reason of any such delay in
or reduction of its ability to sell the underlying shares of Common Stock
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Conversion Percentage and the Fixed Conversion Price shall be
adjusted as follows:
(A) Conversion Percentage. The
Conversion Percentage in effect at such time shall be reduced by a
number of percentage points equal to the product of (I) 2.5 and (II)
the number of months (prorated for partial months) that sales cannot
be made pursuant to the Registration Statement after the Registration
Statement has been declared effective; provided, however, that the
maximum aggregate reduction in the Conversion Percentage due to this
Section 2(c)(ii)(A) shall be fifteen (15) percentage points. (For
example, if after the Registration Statement becomes effective, sales
could not be made pursuant to the Registration Statement for a period
of one and one-half (1 1/2) months, the Conversion Percentage would be
eighty-one and one-fourth percent (81.25%) until any subsequent
adjustment; if thereafter sales could not be made pursuant to the
Registration Statement for a period of two (2) additional months, the
Conversion Percentage would then be seventy-six and one-fourth percent
(76.25%)); and
-4-
<PAGE> 5
(B) Fixed Conversion Price. The
Fixed Conversion Price in effect at such time shall be reduced by an
amount equal to the product of (I) the Fixed Conversion Price
multiplied by (II) 2.5 multiplied by (III) the number of months
(prorated for partial months) that sales cannot be made pursuant to
the Registration Statement after the Registration Statement has been
declared effective; provided, however, that the maximum aggregate
reduction in the Fixed Conversion Price pursuant to this section
2(c)(ii)(B) shall be an amount equal to 15% of the Fixed Conversion
Price in effect at such time. (For example, assuming the Fixed
Conversion Price is $3.6125, if after the Registration Statement
becomes effective, sales could not be made pursuant to the
Registration Statement for a period of one and one-half (1 1/2)
months, the Fixed Conversion Price would be $3.4771 until any
subsequent adjustment; if thereafter sales could not be made pursuant
to the Registration Statement for a period of two (2) additional
months, the Fixed Conversion Price would then be $3.2965).
(iii) The adjustments to the Conversion
Percentage and the Fixed Conversion Price set forth in Sections 2(c)(ii)(A) and
2(c)(ii)(B) above shall not apply in the following situations:
(A) With respect to a holder of
Series A Preferred Shares, during any period of time when such holder
may sell the Conversion Shares issuable upon conversion of such
holder's Series A Preferred Shares without restriction pursuant to
Rule 144(k) under the 1933 Act.
(B) For a period of time (a
"GRACE PERIOD") during which the Company believes that an amendment or
supplement to the Registration Statement is necessary to correct an
untrue statement of a material fact or omission to state a material
fact during such time, provided that: (I) the filing of such amendment
or supplement would require the Company to disclose material
non-public information concerning the Company, the disclosure of which
at the time, in the good faith opinion of the Board of Directors of
the Company, is not in the best interest of the Company and, in the
opinion of counsel to the Company, is not otherwise required; (II) the
Company shall promptly notify the holders of Series A Preferred Shares
in writing of the existence of material non-public information giving
rise to a Grace Period and the date on which the Grace Period will
begin; (III) the Company shall promptly notify the holders of Series A
Preferred Shares in writing of the date on which the Grace Period
ends; and (IV) the Grace Period shall not exceed 30 consecutive days
and during each consecutive 12 month period following the Scheduled
Effective Date, 45 days in the aggregate. For purposes of determining
the length of a Grace Period in clause (IV) above, the Grace Period
begin on and include the date the holders receive the notice referred
to in clause (II) and shall end on and include the date the holders
receive the notice referred to in clause (III).
(d) Adjustment to Conversion Price Floors and
Conversion Price -- Dilution and Other Events. In order to prevent dilution of
the rights granted under this Certificate of Designations, the Conversion Price
Floors (as defined in Section 2(j)) and the
-5-
<PAGE> 6
Conversion Price will be subject to adjustment from time to time as provided in
this Section 2(d).
(i) Adjustment upon Issuance of Common
Stock. If and whenever on or after the date of issuance of the Series A
Preferred Shares, the Company issues or sells shares of Common Stock for a
consideration per share (the "NEW COMMON STOCK ISSUANCE PRICE") less than
either of the Conversion Price Floors in effect immediately prior to such time,
then, notwithstanding the provisions of Section 2(j), from and after the time
of such issue or sale, the Year 1 Conversion Price Floor and the Year 2
Conversion Price Floor shall be reduced, if necessary, so that they shall not
exceed the New Common Stock Issuance Price.
(ii) Adjustment upon Issuance of
Options. If and whenever on or after the date of issuance of the Series A
Preferred Shares, the Company in any manner grants any rights or options to
subscribe for or to purchase Common Stock (other than pursuant to an Approved
Stock Plan or upon conversion of the Series A Preferred Shares) or any stock or
other securities convertible into or exchangeable for Common Stock (such rights
or options being herein called "OPTIONS" and such convertible or exchangeable
stock or securities being herein called "CONVERTIBLE SECURITIES") and the price
per share for which Common Stock is issuable upon the exercise of such Options
or upon conversion or exchange of such Convertible Securities (the "NEW OPTION
ISSUANCE PRICE") is less than either of the Conversion Price Floors in effect
immediately prior to such time, then, notwithstanding the provisions of Section
2(j), from and after the time of such issue or sale, the Year 1 Conversion
Price Floor and the Year 2 Conversion Price Floor shall be reduced, if
necessary, so that they shall not exceed the New Option Issuance Price. For
purposes of this Section 2(d)(ii), the New Option Issuance Price shall be
determined by dividing (I) the total amount, if any, received or receivable by
the Company as consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (II) the
total maximum number of shares of Common Stock issuable upon exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. No further adjustment of the
Conversion Price Floors shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the exercise of such Options or
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) Adjustment upon Issuance of
Convertible Securities. If and whenever on or after the date of issuance of
the Series A Preferred Shares, the Company in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon the conversion or exchange of such Convertible Securities (the
"NEW CONVERTIBLE SECURITY ISSUANCE PRICE") is less than either of the
Conversion Price Floors in effect immediately prior to such time, then,
notwithstanding the provisions of Section 2(j), from and after the time of such
issue or sale, the Year 1 Conversion Price Floor and the Year 2 Conversion
Price Floor shall be reduced, if necessary, so that they shall not exceed the
New Convertible Security Issuance Price. For the purposes of this Section
2(d)(iii), the "New
-6-
<PAGE> 7
Convertible Security Issuance Price" shall be determined by dividing (I) the
total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (II) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities.
No additional adjustment of the Conversion Price Floors shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Fixed Conversion Price had been or are to be made pursuant to other provisions
of this Section 2(d), no further adjustment of the Conversion Price Floors
shall be made by reason of such issue or sale.
(iv) Adjustment upon Issuance of
Convertible Securities with Conversion Price Floors. If and whenever on or
after the date of issuance of the Series A Preferred Shares, the Company in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon the conversion or exchange of such
Convertible Securities is subject to a minimum price (the "NEW CONVERTIBLE
SECURITIES FLOORS") which is less than either of the Conversion Price Floors in
effect immediately prior to such time, then, notwithstanding the provisions of
Section 2(j), from and after the time of such issue or sale, the Year 1
Conversion Price Floor and the Year 2 Conversion Price Floor shall be reduced,
if necessary, so that they shall not exceed the New Convertible Securities
Floors.
(v) Change in Option Price or Rate of
Conversion. If the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock change at any time, the
Conversion Price Floors in effect at the time of such change shall be
readjusted, effective on and after the date of such change, to the Conversion
Price Floors which would have been in effect on the date of such change had
such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold; provided that
no adjustment shall be made if such adjustment would result in an increase of
the Conversion Price Floors then in effect.
(vi) Certain Definitions. For purposes
of determining the adjustments under this Section 2(d), the following "APPROVED
STOCK PLAN" shall mean any contract, plan or agreement which has been approved
by the Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer, director, consultant or
other service provider of the Company, Wireless Domain, Inc., or any majority-
owned subsidiary of the Company.
(vii) Notwithstanding anything to the
contrary in this Section 2(d), no adjustments to the Conversion Price Floors
shall be made pursuant to this Section 2(d) as a result of any issuance by the
Company of securities to Wireless Domain, Inc. pursuant to the Stock Purchase
Agreement, dated June 28, 1996, by and among the Company and TelePath
-7-
<PAGE> 8
Corporation (a/k/a Wireless Domain, Inc.), or in connection with any Approved
Stock Plan for the benefit of Wireless Domain, Inc.
(viii) Adjustment of Fixed Conversion Price
and Conversion Price Floors upon Subdivision or Combination of Common Stock.
If the Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Fixed Conversion Price and
the Conversion Price Floors in effect immediately prior to such subdivision
will be proportionately reduced. If the Company at any time combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Fixed
Conversion Price and the Conversion Price Floors in effect immediately prior to
such combination will be proportionately increased.
(ix) Reorganization, Reclassification,
Consolidation, Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
the Company's assets to another Person (as defined below) or other transaction
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock, other than cash
dividends paid out of retained earnings of the Company generated after April 1,
1997, is referred to herein as "ORGANIC CHANGE." Prior to the consummation of
any Organic Change, the Company will make appropriate provision (in form and
substance satisfactory to the holders of a majority of the Series A Preferred
Shares then outstanding) to insure that each of the holders of the Series A
Preferred Shares will thereafter have the right to acquire and receive in lieu
of or addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Series A Preferred Shares, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon the
conversion of such holder's Series A Preferred Shares had such Organic Change
not taken place. In any such case, the Company will make appropriate provision
(in form and substance satisfactory to the holders of a majority of the Series
A Preferred Shares then outstanding) with respect to such holders' rights and
interests to insure that the provisions of this Section 2(d) and Section 2(e)
below will thereafter be applicable to the Series A Preferred Shares
(including, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is other than the Company, an immediate
adjustment of the Fixed Conversion Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, if the value so
reflected is less than the Fixed Conversion Price in effect immediately prior
to such consolidation, merger or sale). The Company will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to the holders of a majority of the Series A
Preferred Shares then outstanding), the obligation to deliver to each holder of
Series A Preferred Shares such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire. "PERSON" shall mean an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
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<PAGE> 9
(X) Certain Events. If any event
occurs of the type contemplated by the provisions of this Section 2(d) but not
expressly provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company's Board of Directors will make an
appropriate adjustment in the Conversion Price and the Conversion Price Floors
so as to protect the rights of the holders of the Series A Preferred Shares;
provided that no such adjustment will increase the Conversion Price and the
Conversion Price Floors as otherwise determined pursuant to this Section 2(d).
(vi) Notices.
(A) Immediately upon any
adjustment of the Conversion Price Floors or the Conversion Price, the
Company will give written notice thereof to each holder of Series A
Preferred Shares, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(B) The Company will give written
notice to each holder of Series A Preferred Shares at least twenty
(20) days prior to the date on which the Company closes its books or
takes a record (I) with respect to any dividend or distribution upon
the Common Stock, (II) with respect to any pro rata subscription offer
to holders of Common Stock or (III) for determining rights to vote
with respect to any Organic Change, dissolution or liquidation;
provided that in no event shall such notice be provided to such holder
prior to such information being made known to the public.
(C) The Company will also give
written notice to each holder of Series A Preferred Shares at least
twenty (20) days prior to the date on which any Organic Change,
dissolution or liquidation will take place.
(e) Intentionally omitted.
(f) Mechanics of Conversion. Subject to the
Company's inability to fully satisfy its obligations under a Conversion Notice
(as defined below) as provided for in Section 5 below:
(i) Holder's Delivery Requirements. To
convert Series A Preferred Shares into full shares of Common Stock on
any date (the "CONVERSION DATE"), the holder thereof shall (A) deliver
or transmit by facsimile, for receipt on or prior to 11:59 p.m.,
Central Time on such date, a copy of a fully executed notice of
conversion in the form attached hereto as Exhibit I (the "CONVERSION
NOTICE"), to the Company or its designated transfer agent (the
"TRANSFER AGENT"), and (B) surrender to a common carrier for delivery
to the Company or the Transfer Agent as soon as practicable following
such date, the original certificates representing the Series A
Preferred Shares being converted (or an indemnification undertaking
with respect to such shares in the case of their loss, theft or
destruction) (the "PREFERRED STOCK CERTIFICATES") and the originally
executed Conversion Notice.
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<PAGE> 10
(ii) Company's Response. Upon receipt
by the Company of a facsimile copy of a Conversion Notice, the Company
shall immediately send, via facsimile, a confirmation of receipt of
such Conversion Notice to such holder. Upon receipt by the Company or
the Transfer Agent of the Preferred Stock Certificates to be converted
pursuant to a Conversion Notice, together with the originally executed
Conversion Notice, the Company or the Transfer Agent (as applicable)
shall, on the next business day following the date of receipt (or the
second business day following the date of receipt if received after
11:00 a.m. local time of the Company or Transfer Agent, as
applicable), (I) issue and surrender to a common carrier for overnight
delivery to the address as specified in the Conversion Notice, a
certificate, registered in the name of the holder or its designee, for
the number of shares of Common Stock to which the holder shall be
entitled, including the number of shares of Common Stock constituting
the Additional Amount if the Company elects to pay the Additional
Amount in Common Stock or (II) credit such aggregate number of shares
of Common Stock to which the holder shall be entitled to the holder's
or its designee's balance account with The Depository Trust Company.
(iii) Dispute Resolution. In the case of
a dispute as to the determination of the Average Market Price or the
arithmetic calculation of the Conversion Rate, the Company shall
promptly issue to the holder the number of shares of Common Stock that
is not disputed and shall submit the disputed determinations or
arithmetic calculations to the holder via facsimile within one (1)
business day of receipt of such holder's Conversion Notice. If such
holder and the Company are unable to agree upon the determination of
the Average Market Price or arithmetic calculation of the Conversion
Rate within one (1) business day of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company
shall within one (1) business day submit via facsimile (A) the
disputed determination of the Average Market Price to an independent,
reputable investment bank or (B) the disputed arithmetic calculation
of the Conversion Rate to its independent, outside accountant. The
Company shall cause the investment bank or the accountant, as the case
may be, to perform the determinations or calculations and notify the
Company and the holder of the results no later than fortyeight (48)
hours from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties
absent manifest error.
(iv) Record Holder. The person or
persons entitled to receive the shares of Common Stock issuable upon a
conversion of Series A Preferred Shares shall be treated for all
purposes as the record holder or holders of such shares of Common
Stock on the Conversion Date.
(v) Company's Failure to Timely
Convert. If the Company shall fail (other than as a result of the
situations described in Section 5(a) with respect to which the holder
has elected, and the Company has satisfied its obligations under, one
of the options set forth in subparagraphs (i) through (iv) of Section
5(a)) to issue to a holder on a timely basis as described in this
Section 2(f), a certificate for the number of shares of Common Stock
to which such holder is entitled upon such holder's conversion
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<PAGE> 11
of Series A Preferred Shares, the Company shall pay damages to such
holder equal to the greater of (A) actual damages incurred by such
holder as a result of such holder's needing to "buy in" shares of
Common Stock to satisfy its securities delivery requirements ("BUY IN
ACTUAL DAMAGES") and (B) if the Company fails to deliver such
certificates within four days after the last possible date which the
Company could have issued such Common Stock to such holder without
violating this Section 2(f), on each date such conversion is not
timely effected in an amount equal to 0.5% of the product of (A) the
number of shares of Common Stock not issued to the holder on a timely
basis and to which such holder is entitled and (B) the Closing Bid
Price of the Common Stock on the last possible date which the Company
could have issued such Common Stock to such holder without violating
this Section 2(f).
(g) Mandatory Conversion. Subject to the
Company's right to redeem Series A Preferred Shares pursuant to
Section 4, if any Series A Preferred Shares remain outstanding on the
Mandatory Conversion Date (as defined below), then all such Series A
Preferred Shares shall be converted as of such date in accordance with
this Section 2 as if the holders of such Series A Preferred Shares had
given the Conversion Notice on the Mandatory Conversion Date, and the
Conversion Date had been fixed as of the Mandatory Conversion Date,
for all purposes of this Section 2, and all holders of Series A
Preferred Shares shall thereupon and with two (2) business days
thereafter surrender all Preferred Stock Certificates, duly endorsed
for cancellation, to the Company or the Transfer Agent. No person
shall thereafter have any rights in respect of Series A Preferred
Shares, except the right to receive shares of Common Stock on
conversion thereof as provided in this Section 2. "MANDATORY
CONVERSION DATE" means (i) April 15, 1999, if the Conversion Price is
greater than $2.00 on April 15, 1999 or (ii) October 15, 1999, if the
Conversion Price is less than or equal to $2.00 on April 15, 1999.
(h) Conversion at the Option of the Company. At
any time or times (x) on or after the earlier of (i) one (1) year
after the Issuance Date and (ii) six (6) months after the date the
Registration Statement is declared effective by the SEC, but (y)
before April 15, 1999, the Company shall have the right, in its sole
discretion, to require that any or all of the outstanding Series A
Preferred Shares be converted ("CONVERSION AT COMPANY'S ELECTION") at
the Conversion Rate; provided that (A) the Company shall first provide
each holder of Series A Preferred Shares written notice ("NOTICE OF
CONVERSION AT COMPANY'S ELECTION") at least fifteen (15) days prior to
the date selected by the Company for conversion ("COMPANY'S ELECTION
CONVERSION DATE") and (B) if Conversion at Company's Election occurs
on or prior to April 15, 1999, the Average Market Price for the Common
Stock for the thirty (30) consecutive trading days immediately
preceding Company's Election Conversion Date must be at least $10. If
the Company elects to require conversion of some, but not all, of the
Series A Preferred Shares, the Company shall redeem an amount from
each holder of Series A Preferred Shares equal to such holder's
pro-rata amount (based on the number of Series A Preferred Shares held
by such holder relative to the number of Series A Preferred Shares
outstanding on Company's Election Conversion Date) of all Series A
Preferred Shares the Company is requiring to be converted. The Notice
of Conversion at Company's Election shall indicate (x) the number of
Series A Preferred Shares the Company has
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<PAGE> 12
selected for conversion, (y) the Company's Election Conversion Date,
which date shall be not less than fifteen (15) or more than thirty
(30) days after each holder's receipt of such notice, and (z) each
holder's pro-rata share of outstanding Series A Preferred Shares. All
Series A Preferred Shares selected for conversion in accordance with
the provision of this Section 2(h) shall be converted as of the
Company's Election Conversion Date in accordance with this Section 2
as if the holders of such Series A Preferred Shares had given the
Conversion Notice on the Company's Election Conversion Date, and the
Conversion Date had been fixed as of the Company's Election Conversion
Date, for all purposes of this Section 2, and all holders of Series A
Preferred Shares shall thereupon and within two (2) business days the
Company's Election Conversion Date surrender all Preferred Stock
Certificates selected for conversion, duly endorsed for cancellation,
to the Company or the Transfer Agent. Notwithstanding the above, any
holder of Series A Preferred Shares may convert such shares (including
Series A Preferred Shares selected for conversion) into Common Stock
pursuant to Section 2(a) (and without regard to the conversion
limitations set forth in Section 2(i)) on or prior to the date
immediately preceding the Company's Election Conversion Date.
(i) Conversion Restriction. Other than a
conversion pursuant to Section 2(g) or 2(h), the right of a holder of
Series A Preferred Shares to convert Series A Preferred Shares
pursuant to this Section 2 more than thirty (30) days prior to the
Mandatory Conversion Date shall be limited as set forth below.
Without the prior consent of the Company, a holder of Series A
Preferred Shares shall not be entitled to convert any of such holder's
Series A Preferred Shares pursuant to Section 2(a) if during the
preceding ninety (90) days such holder has delivered four (4)
Conversion Notices with respect to which the Company has made a timely
delivery of Conversion Shares (each a "CONVERSION EVENT"). The
Company shall not consent to a holder's exceeding the foregoing
limitation on Conversion Events, unless it concurrently delivers
notice to all other holders of Series A Preferred Shares similarly
consenting to such other holders exceeding such limitation. In
addition, a holder of Series A Preferred Shares shall not be entitled
to convert Series A Preferred Shares at any one time pursuant to a
single Conversion Notice into Conversion Shares in excess of that
number of shares equal to the average weekly trading volume (as
reported by Bloomberg) for the four (4) consecutive weeks ending on
the date immediately preceding the Conversion Date. For purposes of
the restriction on the number of Conversion Events set forth above,
the Conversion Events of holders which are Affiliates (as defined
below) shall be aggregated; provided that if holders which are
Affiliates deliver Conversion Notices on the same day, then such
Conversion Events shall constitute only one Conversion Event. For
purposes of this Section 2(i), "AFFILIATE" means, with respect to a
holder, a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such holder. "CONTROL" or "CONTROLS" for purposes
hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or
entity.
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<PAGE> 13
(j) Conversion Price Restrictions.
Notwithstanding the determination of the Conversion Price set forth in
Section 2(b), the Conversion Price shall be subject to the following
restrictions:
(i) Prior to the 365th day following
the Issuance Date, the Conversion Price shall not be less
than $5.00, provided, however, that if the Average Market
Price for the Common Stock for the 80 consecutive trading
days ending the date immediately preceding the Conversion
Date is less than $5.00, then the Conversion Price shall not
be less than the greater of (A) $3.00 and (B) the product of
the Conversion Percentage in effect as of such date
multiplied by the Average Market Price for the 80 consecutive
trading days ending the date immediately preceding the
Conversion Date (the "YEAR 1 CONVERSION PRICE FLOOR").
(ii) During the period beginning on the
366th day following the Issuance Date and ending on the
Mandatory Conversion Date, the Conversion Price shall not be
less than $4.00, provided, however, that if the Average
Market Price for the Common Stock for the 80 consecutive
trading days ending the date immediately preceding the
Conversion Date is less than $4.00, then the Conversion Price
shall not be less than the greater of (A) $2.00 and (B) the
product of the Conversion Percentage in effect as of such
date multiplied by the Average Market Price for the 80
consecutive trading days ending the date immediately
preceding the Conversion Date (the "YEAR 2 CONVERSION PRICE
FLOOR" and, collectively with the Year 1 Conversion Price
Floor, the "CONVERSION PRICE FLOORS").
(k) Fractional Shares. The Company shall not
issue any fraction of a share of Common Stock upon any conversion.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one Series A Preferred Share by a holder
thereof (including shares of Common Stock issuable in connection with
the payment of an Additional Amount, if the Company elects to pay such
Additional Amount in Common Stock) shall be aggregated for purposes of
determining whether the conversion would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned
aggregation, the issuance would result in the issuance of a fraction
of a share of Common Stock, the Company shall round such fraction of a
share of Common Stock up or down to the nearest whole share.
(l) Taxes. The Company shall pay any and all
taxes which may be imposed upon it with respect to the issuance and
delivery of Common Stock upon the conversion of the Series A Preferred
Shares.
(3) Redemption at Option of Holders.
(a) Redemption Option Upon Major Transaction.
In addition to all other rights of the holders of Series A Preferred
Shares contained herein, after a Major Transaction (as defined below),
each holder of Series A Preferred Shares shall have the
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<PAGE> 14
right in accordance with Section 3(e), at such holder's option, to
require the Company to redeem all or a portion of such holder's Series
A Preferred Shares at a price per Series A Preferred Share equal to
greater of (i) $1,250 and (ii) the product of (A) the Conversion Rate
at such time and (B) the Closing Bid Price on the date of the public
announcement of such Major Transaction or the next date on which the
exchange or market on which the Common Stock is traded is open if such
public announcement is made (X) after 12:00 p.m., Central Time, time
on such date or (Y) on a date on which the exchange or market on which
the Common Stock is traded is closed ("Major Transaction Redemption
Price").
(b) Redemption Option Upon Triggering Event. In
addition to all other rights of the holders of Series A Preferred
Shares contained herein, after a Triggering Event (as defined below),
each holder of Series A Preferred Shares shall have the right in
accordance with Section 3(f), at such holder's option, to require the
Company to redeem all or a portion of such holder's Series A Preferred
Shares at a price per Series A Preferred Share equal to the greater of
(i) $1,250 and (ii) the product of (A) the Conversion Rate at such
time and (B) the Closing Bid Price calculated as of the date
immediately preceding such Triggering Event on which the exchange or
market on which the Common Stock is traded is open ("Triggering Event
Redemption Price" and, collectively with "Major Transaction Redemption
Price," the "Redemption Price").
(c) "Major Transaction". A "Major Transaction"
shall be deemed to have occurred at such time as any of the following
events:
(i) the consolidation or merger of the
Company with or into another Person (other than pursuant to a
migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company or pursuant to a merger
after which the holders of the Company's outstanding capital stock
immediately prior to the merger own a number of shares of the
resulting company's outstanding capital stock sufficient to elect a
majority of the resulting company's board of directors);
(ii) the sale or transfer of
substantially all of the Company's assets; or
(iii) a purchase, tender or exchange
offer for more than 50% of the outstanding shares of Common Stock is
made and accepted by the holders thereof.
(d) "Triggering Event". A "Triggering Event"
shall be deemed to have occurred at such time as any of the following
events:
(i) notice from the Company that Common
Stock issued or issuable upon conversion of the Shares A Preferred
Shares cannot be sold under the Registration Statement, for any period
of 45 consecutive days that is (A) after the date the Registration
Statement has been declared effective by the SEC and (B) prior to the
time that the Conversion Shares may be sold without limitation in
accordance with Rule 144(k) under the 1933 Act;
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<PAGE> 15
(i) the failure of the Common Stock to
be listed on the Nasdaq National Market System, The New York Stock
Exchange, Inc. or AMEX for a period of 15 consecutive days (provided
that such failure shall not constitute a Triggering Event if caused by
holders of Series A Preferred Shares pursuant to Section 3(g) below);
or
(ii) the Company's notice to any holder
of Series A Preferred Shares, including by way of public announcement,
at any time, of its intention not to comply with proper requests for
conversion of any Series A Preferred Shares into shares of Common
Stock, including due to any of the reasons set forth in Section 5(a)
below, except in any case in which the basis for such intention by the
Company is a bona fide dispute as to the right of such holder to such
conversion.
(e) Mechanics of Redemption at Option of Buyer
Upon Major Transaction. No sooner than fifteen (15) days nor later
than ten (10) days prior to the consummation of a Major Transaction,
but not prior to the public announcement of such Major Transaction,
the Company shall deliver written notice thereof via facsimile and
overnight courier ("Notice of Major Transaction") to each holder of
Series A Preferred Shares. The holders of at least two-thirds (2/3)
of the Series A Preferred Shares then outstanding may require the
Company to redeem all of the holder's Series A Preferred Shares then
outstanding by delivering written notice thereof via facsimile within
seven days after receipt of a Notice of Major Transaction, and
followed the next day by overnight courier, ("Notice of Redemption at
Option of Buyer Upon Major Transaction") to the Company, which Notice
of Redemption at Option of Buyer Upon Major Transaction shall indicate
(i) the number of Series A Preferred Shares that such holders are
voting in favor of redemption and (ii) the applicable Redemption
Consideration, as calculated pursuant to Section 3(a) above.
(f) Mechanics of Redemption at Option of Buyer
Upon Triggering Event. Within one (1) day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via
facsimile and overnight courier ("Notice of Triggering Event") to each
holder of Series A Preferred Shares. At any time after receipt of a
Notice of Triggering Event, but only for as long as the facts giving
rise to the Triggering Event continue to exist, the holders of at
least two-thirds (2/3) of the Series A Preferred Shares then
outstanding may require the Company to redeem all of the Series A
Preferred Shares by delivering written notice thereof via facsimile
and overnight courier ("Notice of Redemption at Option of Buyer Upon
Triggering Event") to the Company, which Notice of Redemption at
Option of Buyer Upon Triggering Event shall indicate (i) the number of
Series A Preferred Shares that such holders are voting in favor of
redemption and (ii) the applicable Optional Redemption Price, as
calculated pursuant to Section 3(b) above.
(g) Payment of Redemption Price. Upon the
Company's receipt of a Notice(s) of Redemption at Option of Buyer Upon
Major Transaction or a Notice(s) of Redemption at Option of Buyer Upon
Triggering Event, as the case may be, from the holders of at least
two-thirds (2/3) of the Series A Preferred Shares then outstanding,
the Company shall immediately notify each holder by facsimile of the
Company's receipt of
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<PAGE> 16
such requisite notices necessary to affect a redemption and each
holder of Series A Preferred Shares shall thereafter promptly send
such holder's Preferred Stock Certificates to be redeemed to the
Company or its Transfer Agent. The Company shall deliver the
applicable Redemption Consideration or Optional Redemption Price, as
the case may be, to such holder within thirty (30) days after the
Company's receipt of the requisite notices required to affect a
redemption; provided that a holder's Preferred Stock Certificates
shall have been so delivered to the Company or its Transfer Agent;
provided further that if the Company is unable to redeem all of the
Series A Preferred Shares, the Company shall redeem an amount from
each holder of Series A Preferred Shares equal to such holder's
pro-rata amount (based on the number of Series A Preferred Shares held
by such holder relative to the number of Series A Preferred Shares
outstanding) of all Series A Preferred Shares being redeemed. If the
Company shall fail to redeem all of the Series A Preferred Shares
submitted for redemption (other than pursuant to a dispute as to the
arithmetic calculation of the Redemption Price), in addition to any
remedy such holder of Series A Preferred Shares may have under this
Certificate of Designations and the Securities Purchase Agreement
between the Company and the initial holders of the Series A Preferred
Shares (the "SECURITIES PURCHASE AGREEMENT"), the applicable
Redemption Consideration or Optional Redemption Price payable in
respect of such unredeemed Series A Preferred Shares shall bear
interest at the rate of 1.0% per month (prorated for partial months)
for the first 60 days and thereafter 2.5% per month (prorated for
partial months) until paid in full. Until the Company pays such
unpaid applicable Redemption Consideration or Optional Redemption
Price in full to each holder, holders of at least two-thirds (2/3) of
the Series A Preferred Shares then outstanding, including shares of
Series A Preferred Shares submitted for redemption pursuant to this
Section 3 and for which the applicable Redemption Consideration or
Optional Redemption Price has not been paid, shall have the option
(the "Void Optional Redemption Option") to, in lieu of redemption,
require the Company to promptly return to each holder all of the
Series A Preferred Shares that were submitted for redemption by such
holder under this Section 3 and for which the applicable Redemption
Consideration or Optional Redemption Price has not been paid, by
sending written notice thereof to the Company via facsimile (the "Void
Optional Redemption Notice"). Upon the Company's receipt of such Void
Optional Redemption Notice(s) and prior to payment of the full
applicable Redemption Consideration or Optional Redemption Price to
each holder, (i) the Notice(s) of Redemption at Option of Buyer Upon
Triggering Event or the Notice(s) of Redemption at Option of Buyer
Upon Major Transaction, as the case may be, shall be null and void
with respect to those Series A Preferred Shares submitted for
redemption and for which the applicable Redemption Consideration or
Optional Redemption Price has not been paid, (ii) the Company shall
immediately return any Series A Preferred Shares submitted to the
Company by each holder for redemption under this Section 3(i) and for
which the applicable Redemption Consideration or Optional Redemption
Price has not been paid, (iii) the Fixed Conversion Price of such
returned Series A Preferred Shares shall be adjusted to the lesser of
(A) the Fixed Conversion Price as in effect on the date on which the
Void Optional Redemption Notice(s) is delivered to the Company and (B)
the lowest Closing Bid Price during the period beginning on the date
on which the Notice(s) of Redemption of Option of Buyer Upon Major
Transaction or the Notice(s) of Redemption at Option of Buyer Upon
Triggering event, as the case may be, is delivered to the
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<PAGE> 17
Company and ending on the date on which the Void Optional Redemption
Notice(s) is delivered to the Company; provided that no adjustment
shall be made if such adjustment would result in an increase of the
Fixed Conversion Price then in effect, and (iv) the Conversion
Percentage in effect at such time shall be reduced by a number of
percentage points equal to the product of (A) two and one-half (2.5)
and (B) the number of months (prorated for partial months) in the
period beginning on the date on which the Notice(s) of Redemption at
Option of Buyer Upon Major Transaction or the Notice(s) of Redemption
at Option of Buyer Upon Triggering Event, as the case may be, is
delivered to the Company and ending on the date on which the Void
Optional Redemption Notice(s) is delivered to the Company.
Notwithstanding the foregoing, in the event of a dispute as to the
determination of the Closing Bid Price or the arithmetic calculation
of the Redemption Price, such dispute shall be resolved pursuant to
Section 2(f)(iii) above with the term "Closing Bid Price" being
substituted for the term "Average Market Price" and the term
"Redemption Price" being substituted for the term "Conversion Rate".
Payments provided for in this Section 3 shall have priority to
payments to other stockholders in connection with a Major Transaction.
(4) Company's Right to Redeem at Its Election.
Notwithstanding Section 2(g) or anything herein to the contrary but
subject to Section 4(d) below, if, on April 15, 1999 the Conversion
Price is less than or equal to $2.00, the Company shall have the
right, in its sole discretion, to redeem ("REDEMPTION AT THE COMPANY'S
ELECTION"), from time to time, any or all of the Series A Preferred
Shares at the Redemption Price at the Company's Election (as defined
below). If the Company elects to redeem some, but not all, of the
Series A Preferred Shares, the Company shall redeem an amount from
each holder of Series A Preferred Shares equal to such holder's
pro-rata amount (based on the number of Series A Preferred Shares held
by such holder relative to the number of Series A Preferred Shares
outstanding) of all Series A Preferred Shares being redeemed.
(a) Redemption Price at the Company's Election.
The "REDEMPTION PRICE AT THE COMPANY'S ELECTION" shall be an amount
per Series A Preferred Share equal to the product of (i) 1.2
multiplied by (ii) the sum of (A) (.05)(P/365)(1,000) plus (B) 1,000;
where "P" means the number of days from, but excluding, the Issuance
Date through and including the Date of Redemption at the Company's
Election (as defined in Section 4(b)).
(b) Mechanics of Redemption at the Company's
Election. The Company shall effect each such redemption no sooner
than thirty (30) days after delivering written notice of its
Redemption at the Company's Election via facsimile and overnight
courier ("NOTICE OF REDEMPTION AT THE COMPANY'S ELECTION") to (i) each
holder of the Series A Preferred Shares and (ii) the Transfer Agent.
Such Notice of Redemption at the Company's Election shall indicate (A)
the number of shares of Series A Preferred Shares that have been
selected for redemption, (B) the date that such redemption is to
become effective (the "DATE OF REDEMPTION AT THE COMPANY'S ELECTION")
and (C) the applicable Redemption Price at the Company's Election.
Notwithstanding the above, any holder may convert into Common Stock
pursuant to Section (2)(a) above, on or prior to the date immediately
preceding the Date of
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<PAGE> 18
Redemption at the Company's Election, any Series A Preferred Shares
that such holder is otherwise entitled to convert (and, after such
holder's receipt of the Notice of Redemption at the Company's
Election, without regard to the conversion limitations set forth in
Section 2(i)), including Series A Preferred Shares that have been
selected for Redemption at the Company's Election pursuant to this
Section 4.
(c) Payment of Redemption Price. Each holder
submitting Series A Preferred Shares being redeemed under this Section
4 shall send such holder's Preferred Stock Certificates so redeemed to
the Company or its Transfer Agent within five (5) business days after
the Date of Redemption at the Company's Election, and the Company
shall pay the applicable Redemption Price at the Company's Election to
that holder in cash within three (3) business days after such holder's
Preferred Stock Certificates are delivered to the Company or its
Transfer Agent. If the Company shall fail to pay the applicable
Redemption Price at the Company's Election to such holder on a timely
basis as described in this Section 4(c), in addition to any remedy
such holder of Series A Preferred Shares may have under this
Certificate of Designations and the Securities Purchase Agreement,
such unpaid amount shall bear interest at the rate of 1.0% per month
(prorated for partial months) for the first 60 days and thereafter
2.5% per month (prorated for partial months) until paid in full.
Notwithstanding the foregoing, if the Company fails to pay the
applicable Redemption Price at the Company's Election to a holder
within the time period described in this Section 4 due to a dispute as
to the arithmetic calculation of the Redemption Price at the Company's
Election, such dispute shall be resolved pursuant to Section 2(f)(iii)
above with the term "Redemption Price at the Company's Election" being
substituted for the term "Conversion Rate."
(d) Company Must Have Immediately Available
Funds or Credit Facilities. The Company shall not be entitled to send
any Notice of Redemption at the Company's Election pursuant to Section
4(b) above and begin the redemption procedure under this Section 4,
unless it has:
(i) the full amount of the Redemption Price
at the Company's Election in cash, available in a demand or other
immediately available account in a bank or similar financial
institution;
(ii) credit facilities, with a bank or
similar financial institutions that are immediately available and
unrestricted for use in redeeming the Series A Preferred Shares, in
the full amount of the Redemption Price at the Company's Election;
(iii)a written agreement with a standby
underwriter or qualified buyer ready, willing and able to purchase
from the Company a sufficient number of shares of stock to provide
proceeds necessary to redeem any stock that is not converted prior to
a Redemption at the Company's Election; or
(iv) a combination of the items set forth
in the preceding clauses (i), (ii) and (iii), aggregating the full
amount of the Redemption Price at the Company's Election.
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<PAGE> 19
(5) Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully
Convert. If, upon the Company's receipt of a Conversion Notice, the
Company can not issue shares of Common Stock registered for resale
under the Registration Statement for any reason, including, without
limitation, because the Company (x) does not have a sufficient number
of shares of Common Stock authorized and available, (y) is otherwise
prohibited by applicable law or by the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its Securities,
including without limitation the Nasdaq Cap (as defined in Section
12), from issuing all of the Common Stock which is to be issued to a
holder of Series A Preferred Shares pursuant to a Conversion Notice or
(z) fails to have a sufficient number of shares of Common Stock
registered for resale under the Registration Statement, then the
Company shall issue as many shares of Common Stock as it is able to
issue in accordance with such holder's Conversion Notice and pursuant
to Section 2(f) above and, with respect to the unconverted Series A
Preferred Shares, the holder, solely at such holder's option, can
elect to (unless the Company issues and delivers the Conversion Shares
underlying the unconverted Series A Preferred Shares prior to the
holder's election hereunder, in which case such holder shall only be
entitled to receive Buy In Actual Damages under Section 2(f)(v)):
(i) require the Company to redeem from such
holder those Series A Preferred Shares for which the Company is unable
to issue Common Stock in accordance with such holder's Conversion
Notice ("MANDATORY REDEMPTION") at a price per Series A Preferred
Share (the "MANDATORY REDEMPTION PRICE") equal to the Triggering Event
Redemption Price as of such Conversion Date;
(ii) if the Company's inability to fully
convert Series A Preferred Shares is pursuant to Section 5(a)(z)
above, require the Company to issue restricted shares of Common Stock
in accordance with such holder's Conversion Notice and pursuant to
Section 2(f) above;
(iii)void its Conversion Notice and retain
or have returned, as the case may be, the nonconverted Series A
Preferred Shares that were to be converted pursuant to such holder's
Conversion Notice; or
(iv) if the Company's inability to fully
convert Series A Preferred Shares is pursuant to the Nasdaq Cap
described in Section 5(a)(y) above, require the Company to issue
shares of Common Stock in accordance with such holder's Conversion
Notice and pursuant to Section 2(f) above at a Conversion Price equal
to the Average Market Price of the Common Stock for the five (5)
consecutive trading days preceding such holder's Notice in Response to
Inability to Convert (as defined below).
(b) Mechanics of Fulfilling Holder's Election.
The Company shall immediately send via facsimile to a holder of Series
A Preferred Shares, upon receipt of a facsimile copy of a Conversion
Notice from such holder which cannot be fully satisfied
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<PAGE> 20
as described in Section 5(a) above, a notice of the Company's
inability to fully satisfy such holder's Conversion Notice (the
"INABILITY TO FULLY CONVERT NOTICE"). Such Inability to Fully Convert
Notice shall indicate (i) the reason why the Company is unable to
fully satisfy such holder's Conversion Notice, (ii) the number of
Series A Preferred Shares which cannot be converted and (iii) the
applicable Mandatory Redemption Price. Such holder must within five
(5) business days of receipt of such Inability to Fully Convert Notice
deliver written notice via facsimile to the Company ("NOTICE IN
RESPONSE TO INABILITY TO CONVERT") of its election pursuant to Section
5(a) above.
(c) Payment of Redemption Price. If such
holder shall elect to have its shares redeemed pursuant to Section
5(a)(i) above, the Company shall pay the Mandatory Redemption Price in
cash to such holder within thirty (30) days of the Company's receipt
of the holder's Notice in Response to Inability to Convert. If the
Company shall fail to pay the applicable Mandatory Redemption Price to
such holder on a timely basis as described in this Section 5(c) (other
than pursuant to a dispute as to the determination of the arithmetic
calculation of the Redemption Price), in addition to any remedy such
holder of Series A Preferred Shares may have under this Certificate of
Designations and the Securities Purchase Agreement, such unpaid amount
shall bear interest at the rate of 1.0% per month (prorated for
partial months) for the first 60 days and thereafter 2.5% per month
(prorated for partial months) until paid in full. Until the full
Mandatory Redemption Price is paid in full to such holder, such holder
may void the Mandatory Redemption with respect to those Series A
Preferred Shares for which the full Mandatory Redemption Price has not
been paid and receive back such Series A Preferred Shares.
Notwithstanding the foregoing, if the Company fails to pay the
applicable Mandatory Redemption Price within such thirty (30) days
time period due to a dispute as to the determination of the arithmetic
calculation of the Redemption Rate, such dispute shall be resolved
pursuant to Section 2(f)(iii) above with the term "Redemption Price"
being substituted for the term "Conversion Rate".
(d) Pro-rata Conversion and Redemption. In the
event the Company receives a Conversion Notice from more than one
holder of Series A Preferred Shares on the same day and the Company
can convert and redeem some, but not all, of the Series A Preferred
Shares pursuant to this Section 5, the Company shall convert and
redeem from each holder of Series A Preferred Shares electing to have
Series A Preferred Shares converted and redeemed at such time an
amount equal to such holder's pro-rata amount (based on the number of
Series A Preferred Shares held by such holder relative to the number
of Series A Preferred Shares outstanding) of all Series A Preferred
Shares being converted and redeemed at such time.
(6) Reissuance of Certificates. In the event of a
conversion or redemption pursuant to this Certificate of Designations
of less than all of the Series A Preferred Shares represented by a
particular Preferred Stock Certificate, the Company shall promptly
cause to be issued and delivered to the holder of such Series A
Preferred Shares a preferred stock certificate representing the
remaining Series A Preferred Shares which have not been so converted
or redeemed.
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<PAGE> 21
(7) Reservation of Shares. The Company shall, so long
as any of the Series A Preferred Shares are outstanding, reserve and
keep available out of its authorized and unissued Common Stock, solely
for the purpose of effecting the conversion of the Series A Preferred
Shares, such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all of the Series A
Preferred Shares then outstanding; provided that the number of shares
of Common Stock so reserved shall at no time be less than 150% of the
number of shares of Common Stock for which the Series A Preferred
Shares are at any time convertible; provided further that such shares
of Common Stock so reserved shall be allocated for issuance upon
conversion of Series A Preferred Shares pro rata among the holders of
Series A Preferred Shares based on the number of Series A Preferred
Shares held by such holder relative to the total number of authorized
Series A Preferred Shares.
(8) Voting Rights. Holders of Series A Preferred Shares
shall have no voting rights, except as required by law, including but
not limited to the General Corporation Law of the State of Delaware,
and as expressly provided in this Certificate of Designations.
(9) Liquidation, Dissolution, Winding-Up. In the event
of any voluntary or involuntary liquidation, dissolution or winding up
of the Company, the holders of the Series A Preferred Shares shall be
entitled to receive in cash out of the assets of the Company, whether
from capital or from earnings available for distribution to its
stockholders (the "PREFERRED FUNDS"), before any amount shall be paid
to the holders of any of the capital stock of the Company of any class
junior in rank to the Series A Preferred Shares in respect of the
preferences as to the distributions and payments on the liquidation,
dissolution and winding up of the Company, an amount per Series A
Preferred Share equal to the sum of (i) $1,000 and (ii) an amount
equal to the product of (.05) (N/365) ($1,000) (such sum being
referred to as the "LIQUIDATION VALUE"); provided that, if the
Preferred Funds are insufficient to pay the full amount due to the
holders of Series A Preferred Shares and holders of shares of other
classes or series of preferred stock of the Company that are of equal
rank with the Series A Preferred Shares as to payments of Preferred
Funds (the "PARI PASSU SHARES"), then each holder of Series A
Preferred Shares and Pari Passu Shares shall receive a percentage of
the Preferred Funds equal to the full amount of Preferred Funds
payable to such holder as a liquidation preference, in accordance with
their respective Certificate of Designations, Preferences and Rights,
as a percentage of the full amount of Preferred Funds payable to all
holders of Series A Preferred Shares and Pari Passu Shares. The
purchase or redemption by the Company of stock of any class, in any
manner permitted by law, shall not, for the purposes hereof, be
regarded as a liquidation, dissolution or winding up of the Company.
Neither the consolidation or merger of the Company with or into any
other Person, nor the sale or transfer by the Company of less than
substantially all of its assets, shall, for the purposes hereof, be
deemed to be a liquidation, dissolution or winding up of the Company.
No holder of Series A Preferred Shares shall be entitled to receive
any amounts with respect thereto upon any liquidation, dissolution or
winding up of the Company other than the amounts provided for herein.
-21-
<PAGE> 22
(10) Preferred Rank. All shares of Common Stock shall be
of junior rank to all Series A Preferred Shares in respect to the
preferences as to distributions and payments upon the liquidation,
dissolution and winding up of the Company. The rights of the shares
of Common Stock shall be subject to the preferences and relative
rights of the Series A Preferred Shares. As long as at least
one-third (1/3) of the Series A Preferred Shares initially issued
remain outstanding, then without the prior express written consent of
the holders of not less than two-thirds (2/3) of the then outstanding
Series A Preferred Shares, the Company shall not hereafter authorize
or issue additional or other capital stock that is of senior rank to
the Series A Preferred Shares in respect of the preferences as to
distributions and payments upon the liquidation, dissolution and
winding up of the Company, other than in connection with vendor
financing or financing associated with sales of the Company's
products). Without the prior express written consent of the holders
of not less than two-thirds (2/3) of the then outstanding Series A
Preferred Shares, the Company shall not hereafter authorize or make
any amendment to the Company's Certificate of Incorporation or bylaws,
or file any resolution of the board of directors of the Company with
the Delaware Secretary of State containing any provisions, which would
adversely affect or otherwise impair the rights or relative priority
of the holders of the Series A Preferred Shares relative to the
holders of the Common Stock or the holders of any other class of
capital stock. In the event of the merger or consolidation of the
Company with or into another corporation, the Series A Preferred
Shares shall maintain their relative powers, designations and
preferences provided for herein and no merger shall result
inconsistent therewith.
(11) Restriction on Redemption and Cash Dividends with
respect to Other Capital Stock. Until all of the Series A Preferred
Shares have been converted or redeemed as provided herein, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash
dividend (other than cash dividends paid out of retained earnings of
the Company generated after April 1, 1997) or distribution on, its
Common Stock without the prior express written consent of the holders
of not less than two-thirds (2/3) of the then outstanding Series A
Preferred Shares.
(12) Limitation on Number of Conversion Shares. The
Company shall not be obligated to issue, in the aggregate, more than
6,310,700 shares of Common Stock (such amount to be proportionately
and equitably adjusted from time to time in the event of stock splits,
stock dividends, combinations, reverse stock splits, reclassification,
capital reorganizations and similar events relating to the Common
Stock) (the "NASDAQ CAP") upon conversion of the Series A Preferred
Shares, if issuance of a larger number of shares of Common Stock would
constitute a breach of the Company's obligations under the rules or
regulations of The Nasdaq Stock Market, Inc. or any other principal
securities exchange or market upon which the Common Stock becomes
traded. The Nasdaq Cap shall be allocated among the Series A
Preferred Shares pro rata based on the total number of authorized
Series A Preferred Shares.
(13) Vote to Change the Terms of Series A Preferred
Shares. The affirmative vote at a meeting duly called for such
purpose or the written consent without a meeting, of the holders of
not less than two-thirds (2/3) of the then outstanding Series A
Preferred
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<PAGE> 23
Shares, shall be required for any change to this Certificate of
Designations or the Company's Certificate of Incorporation which would
amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Series A Preferred Shares.
(14) Lost or Stolen Certificates. Upon receipt by the
Company of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Preferred Stock Certificates
representing the Series A Preferred Shares, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the holder
to the Company and, in the case of mutilation, upon surrender and
cancellation of the Preferred Stock Certificate(s), the Company shall
execute and deliver new preferred stock certificate(s) of like tenor
and date; provided, however, the Company shall not be obligated to
re-issue preferred stock certificates if the holder contemporaneously
requests the Company to convert such Series A Preferred Shares into
Common Stock.
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<PAGE> 24
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by Kenneth E. Millard, its President and Chief
Executive Officer, as of the 16th day of April 1997.
TELULAR CORPORATION
By: /s/ KENNETH E. MILLARD
------------------------------
Name: Kenneth E. Millard
Its: President and Chief Executive
Officer
<PAGE> 25
EXHIBIT I
TELULAR CORPORATION
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
Telular Corporation (the "CERTIFICATE OF DESIGNATIONS"). In accordance with
and pursuant to the Certificate of Designations, the undersigned hereby elects
to convert the number of shares of Series A Convertible Preferred Stock, $.01
par value per share (the "SERIES A PREFERRED SHARES"), of Telular Corporation,
a Delaware corporation (the "COMPANY"), indicated below into shares of Common
Stock, $.01 par value per share (the "COMMON STOCK"), of the Company, by
tendering the stock certificate(s) representing the share(s) of Series A
Preferred Shares specified below as of the date specified below. The
undersigned represents and warrants that as of the date of this notice the
undersigned is in compliance with Section 4(i) of the Securities Purchase
Agreement among the Company and the Buyers named therein.
Date of Conversion:
------------------------------
Number of Series A
Preferred Shares to be converted:
------------------------------
Stock certificate no(s). of Series A
Preferred Shares to be converted:
------------------------------
Please confirm the following information:
Conversion Price:
------------------------------
Number of shares of Common Stock
to be issued:
------------------------------
Additional Amount:
------------------------------
Please issue the Common Stock and, if applicable, any check drawn on an account
of the Company into which the Series A Preferred Shares are being converted in
the following name and to the following address:
Issue to:
------------------------------
------------------------------
------------------------------
------------------------------
Facsimile number:
------------------------------
Authorization:
------------------------------
By:
---------------------------
Title:
------------------------
Dated:
------------------------------
<PAGE> 1
EXHIBIT 99.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of April
16, 1997, by and among Telular Corporation, a Delaware corporation, with
headquarters located at 920 Deerfield Parkway, Buffalo Grove, Illinois 60089
(the "COMPANY"), and the undersigned buyers (each, a "BUYER" and collectively,
the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers shares of the
Company's Series A Convertible Preferred Stock (the "SERIES A PREFERRED
SHARES"), which will be convertible into shares of the Company's common stock,
$.01 par value per share (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES") in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of the Series A Convertible Preferred
Stock (the "CERTIFICATE OF DESIGNATIONS"); and
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer and any transferee or
assignee thereof to whom a Buyer assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9.
b. "PERSON" means a corporation, a limited liability
company, an association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a governmental
agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
<PAGE> 2
d. "REGISTRABLE SECURITIES" means the Conversion Shares
issued or issuable upon conversion of the Series A Preferred Shares and any
shares of capital stock issued or issuable with respect to the Conversion
Shares or the Series A Preferred Shares as a result of any stock split, stock
dividend, recapitalization, exchange or similar event.
e. "REGISTRATION STATEMENT" means a registration
statement of the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare,
and, on or prior to thirty (30) days after the date of issuance of the relevant
Series A Preferred Shares, file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for
such a registration, subject to the consent of each Buyer and the provisions of
Section 2(c), which consent will not be unreasonably withheld), covering the
resale of all of the Registrable Securities, which Registration Statement(s)
shall state that, in accordance with Rule 416 promulgated under the 1933 Act,
such Registration Statement(s) also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of the
Series A Preferred Shares (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions and (ii) by reason of changes in the
Conversion Price or Conversion Rate of the Series A Preferred Shares in
accordance with the terms thereof. Such Registration Statement shall initially
register for resale at least that number of shares of Common Stock equal to the
product of (x) 1.5 and (y) the number of Registrable Securities (as defined
below) as of the date immediately preceding the date the Registration Statement
is initially filed with the SEC, subject to adjustment as provided in Section
3(b). Such registered shares of Common Stock shall be allocated among the
Investors pro rata based on the total number of Registrable Securities issued
or issuable as of each date that a Registration Statement, as amended, relating
to the resale of the Registrable Securities is declared effective by the SEC.
The Company shall use its best efforts to have the Registration Statement
declared effective by the SEC within one hundred twenty (120) days after the
issuance of the relevant Series A Preferred Shares.
b. Counsel and Investment Bankers. Subject to Section
5 hereof, in connection with any offering pursuant to Section 2, the Buyers
shall have the right to select one legal counsel and an investment banker or
bankers and manager or managers to administer their interest in the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. The Company shall reasonably cooperate with any
such counsel and investment bankers.
c. Eligibility for Form S-3. The Company represents,
warrants and covenants that it will meet the requirements for the use of Form
S-3 for registration of the sale by the Buyers and any other Investor of the
Registrable Securities on and after the thirtieth (30th) day following that
date of issuance of any Series A Preferred Shares and the Company has filed and
shall file all reports required to be filed by the Company with the SEC in a
timely manner so
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<PAGE> 3
as to obtain and maintain such eligibility for the use of Form S-3. In the
event that Form S-3 is not available for sale by the investors of the
Registrable Securities, then the Company (i) with the consent of each Investor
pursuant to Section 2(a), shall register the sale of the Registrable Securities
on another appropriate form and (ii) the Company shall undertake to register
the Registrable Securities on Form S-3 as soon as such form is available,
provided that the Company shall maintain the effectiveness of the Registration
Statement then in effect until such time as a Registration Statement on Form
S-3 covering the Registrable Securities has been declared effective by the SEC.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:
a. The Company shall promptly prepare and file with the
SEC a Registration Statement with respect to the Registrable Securities (on or
prior to the thirtieth (30th) day after the date of issuance of any Series A
Preferred Shares for the registration of Registrable Securities pursuant to
Section 2(a)) and use its best efforts to cause such Registration Statement(s)
relating to Registrable Securities to become effective as soon as possible
after such filing (within one hundred twenty (120) days after the issuance of
any Series A Preferred Shares for the registration of Registrable Securities
pursuant to Section 2(a)), and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto)
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Series A Preferred Shares is outstanding (the
"REGISTRATION PERIOD"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall 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 light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s), which prospectus(es) are to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act
with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement(s) until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth
in the Registration Statement(s). In the event the number of shares available
under a Registration Statement filed pursuant to this Agreement is insufficient
to cover all of the Registrable Securities, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within fifteen (15) days after the necessity therefor
-3-
<PAGE> 4
arises (based on the market price of the Common Stock and other relevant
factors on which the Company reasonably elects to rely). The Company shall use
it best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of Registrable Securities
issued or issuable upon conversion of the Series A Preferred Shares is greater
than the quotient determined by dividing (i) the number of shares of Common
Stock available for resale under such Registration Statement by (ii) 1.50. For
purposes of the calculation set forth in the foregoing sentence, any
restrictions on the convertibility of the Series A Preferred Shares shall be
disregarded and such calculation shall assume that the Series A Preferred
Shares are then convertible into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Company's Certificate of Designations).
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement(s) and its
legal counsel without charge (i) promptly after the same is prepared and filed
with the SEC at least one copy of the Registration Statement and any amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus(es) included
in such Registration Statement(s) (including each preliminary prospectus) and,
with regards to the Registration Statement, any correspondence by or on behalf
of the Company to the SEC or the staff of the SEC and any correspondence from
the SEC or the staff of the SEC to the Company or its representatives, (ii)
upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including any preliminary
prospectus, as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as any Investor reasonably requests, (ii)
prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
-4-
<PAGE> 5
e. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select underwriters for
the offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor in writing of the happening
of any event, of which the Company has knowledge, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission 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, and
promptly prepare a supplement or amendment to the Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to each Investor (or such other number of copies as
such Investor may reasonably request). The Company shall also promptly notify
each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Investor by facsimile on the same day
of such effectiveness and by overnight mail), (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
g. The Company shall use its best efforts to prevent
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
h. The Company shall permit each Investor and a single
firm of counsel, initially Katten Muchin & Zavis or such other counsel as
thereafter designated as selling stockholders' counsel by the Investors who
hold a majority of the Registrable Securities being sold, to review and comment
upon the Registration Statement(s) and all amendments and supplements thereto
at least seven (7) days prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement(s) or any amendment or supplement thereto without the prior approval
of such counsel, which consent shall not be unreasonably withheld.
i. At the request of the Investors who hold a majority
of the Registrable Securities being sold, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with the Registration Statement (i) if required by an
underwriter, a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public
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<PAGE> 6
accountants to underwriters in an underwritten public offering, addressed to
the underwriters, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by
(i) any Investor, (ii) any underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one firm of attorneys and one firm
of accountants or other agents retained by the Investors, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "INSPECTORS")
all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "RECORDS"), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in strict confidence and shall not make any
disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. Each
Investor agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company,
at its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make
any disclosure of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal
or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt written notice to such Investor and allow such Investor, at the
Investor's expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, such information.
l. The Company shall use its best efforts either to (i)
cause all the Registrable Securities covered by a Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i)
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<PAGE> 7
or (ii), to secure the inclusion for quotation on the Nasdaq SmallCap Market
for such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who
hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any,
or the Investors may request. Not later than the date on which any
Registration Statement registering the resale of Registrable Securities is
declared effective, the Company shall deliver to its transfer agent
instructions, accompanied by any reasonably required opinion of counsel, that
permit sales of unlegended securities in a timely fashion that complies with
then mandated securities settlement procedures for regular way market
transactions.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
o. The Company shall provide a transfer agent and
registrar of all such Registrable Securities not later than the effective date
of such Registration Statement.
p. If requested by the managing underwriters or an
Investor, the Company shall immediately incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriters and
the Investors agree should be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and with respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and supplement or
make amendments to any Registration Statement if requested by a shareholder or
any underwriter of such Registrable Securities.
q. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
r. The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
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<PAGE> 8
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as
shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement.
c. In the event any Investor elects to participate in
an underwritten public offering pursuant to Section 2, each such Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement(s) covering such Registrable Securities until such Investor's receipt
of the copies of the supplemented or amended prospectus contemplated by Section
3(g) or the first sentence of 3(f) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or
destroy all copies in such Investor's possession, of the prospectus covering
such Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share
of all underwriting discounts and commissions.
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<PAGE> 9
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts
and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees,
and fees and disbursements of counsel for the Company and fees and
disbursements of one counsel for the Investors, shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company
will, and hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents and each Person, if any, who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934 ACT"), and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and officers of, and each Person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, attorneys' fees,
amounts paid in settlement or expenses, joint or several, (collectively,
"CLAIMS") incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of
them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which Registrable
Securities are offered ("BLUE SKY FILING"), or the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with
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<PAGE> 10
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter
for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c); (ii) with respect to any preliminary prospectus,
shall not inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(c), and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a violation and such
Indemnified Person, notwithstanding such advice, used it; (iii) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company; and (iv) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees to severally and
not jointly indemnify, hold harmless and defend, to the same extent and in the
same manner as is set forth in Section 6(a), the Company, each of its
directors, each of its officers who signs the Registration Statement, each
Person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(d), such Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as
does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the
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<PAGE> 11
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in
writing expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates. The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party
in connection with any negotiation or defense of any such action or claim by
the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or Indemnified Person
which relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
or Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action.
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<PAGE> 12
e. The indemnification required by this Section 6 shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
f. The indemnity agreements contained herein shall be
in addition to (i) any cause of action or similar right of the Indemnified
Party or Indemnified Person against the indemnifying party or others, and (ii)
any liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however,
that: (i) no contribution shall be made under circumstances where the maker
would not have been liable for indemnification under the fault standards set
forth in Section 6; (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 4(c) of
the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the investors to sell such securities pursuant to Rule 144 without
registration.
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<PAGE> 13
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a)
the name and address of such transferee or assignee, and (b) the securities
with respect to which such registration rights are being transferred or
assigned; (iii) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted
under the 1933 Act and applicable state securities laws; (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of
this sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein; (v) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement; (vi) such transferee shall be an "accredited investor" as
that term is defined in Rule#501 of Regulation D promulgated under the 1933
Act; and (vii) in the event the assignment occurs subsequent to the date of
effectiveness of the Registration Statement required to be filed pursuant to
Section 2(a), the transferee agrees to pay all reasonable expenses of amending
or supplementing such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of
the Company and Investors who hold two-thirds (2/3) of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
b. Any notices consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested; or (iv) one (1)
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<PAGE> 14
day after deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
if to the Company:
Telular Corporation
920 Deerfield Parkway
Buffalo Grove, Illinois 60089
Telephone: (847) 465-4500
Facsimile: (847) 465-4501
Attention: President
with a copy to:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20044-7566
Telephone: (202) 662-5258
Facsimile: (202) 662-6291
Attention: Michael Cutler, Esq.
if to a Buyer, to its address and facsimile number on the
Schedule of Buyers attached hereto, with copies to such
Buyer's counsel as set forth on the Schedule of Buyers.
Each party shall provide five (5) days prior notice to the other party
of any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Illinois without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
and therein. This Agreement and the Securities Purchase Agreement supersede
all prior agreements and understandings among the parties hereto with respect
to the subject matter hereof and thereof.
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<PAGE> 15
f. Subject to the requirements of Section 9, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
i. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
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<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
TELULAR CORPORATION NELSON PARTNERS
By: /s/ KENNETH E. MILLARD By: /s/ ANNE DUPUY
--------------------------------- ------------------------------
Name: Kenneth E. Millard Name: Anne Dupuy
Its: President and Chief Executive Its: Officer
Officer
OLYMPUS SECURITIES, LTD.
By: /s/ ANNE DUPUY
------------------------------
Name: Anne Dupuy
Its: Alternate Director
<PAGE> 17
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
INVESTOR ADDRESS INVESTOR'S LEGAL COUNSEL
INVESTOR NAME AND FACSIMILE NUMBER AND COUNSEL'S ADDRESS
- --------------------------------- -------------------------------------- ------------------------------------
<S> <C> <C>
Nelson Partners c/o Leeds Management Services Citadel Investment Group, L.L.C.
129 Front Street, 5th Floor 225 West Washington Street
Hamilton HM12 Bermuda Chicago, Illinois 60606
Attn: Anne Dupuy Attention: Kenneth A. Simpler
Facsimile: (441) 292-2239 Kenneth C. Griffin
Facsimile: (312) 368-1348
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
Attention: Robert J. Brantman, Esq.
Matthew S. Brown, Esq.
Facsimile: (312) 902-1061
Olympus Securities, Ltd. c/o Leeds Management Services Citadel Investment Group, L.L.C.
129 Front Street, 5th Floor 225 West Washington Street
Hamilton HM12 Bermuda Chicago, Illinois 60606
Attn: Anne Dupuy Attention: Kenneth A. Simpler
Facsimile: (441) 292-2239 Kenneth C. Griffin
Facsimile: (312) 368-1348
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
Attention: Robert J. Brantman, Esq.
Matthew S. Brown, Esq.
Facsimile: (312) 902-1061
</TABLE>
<PAGE> 1
EXHIBIT 99.4
[TELULAR LOGO] MEDIA INFORMATION
- --------------------------------------------------------------------------------
AT THE COMPANY: AT LEHMAN BROTHERS
Thomas M. Mason Jack Skydel
Chief Financial Officer New York, N.Y.
847-465-4500 212-526-3114
For Immediate Release
TELULAR CORPORATION ISSUES $10 MILLION IN 5%
CONVERTIBLE PREFERRED STOCK
BUFFALO GROVE, ILL., MONDAY, APRIL 21, 1997 - TELULAR CORPORATION (NASDAQ:
WRLS) announced that is has issued 10,000 shares of Series A Convertible
Preferred Stock in exchange for approximately $10 million under Regulation "D"
provisions of the 1933 Securities Act in a transaction arranged by Lehman
Brothers. The Preferred Stock reflects the equivalent of a 5% annual stock
dividend. The Preferred Stock automatically converts to Telular common stock
on April 16, 1999, or October 16, 1999, depending upon the conversion price.
Prior to maturity, the Preferred Stock is convertible by the holders or the
Company under specific terms and conditions. In both cases, the conversion
formula is based upon the NASDAQ closing bid prices for the Company's common
stock. The Company also has the right to redeem the Preferred Stock for cash
at defined terms.
"The capital infusion will be used primarily to fund the
development of new products for the worldwide Fixed Wireless Terminal business"
commented Tom Mason, Senior Vice President and Chief Financial Officer. "We
believe the market for Wireless Local Loop is experiencing substantial growth
and Telular will devote the resources to meet the customer requirements in both
analog and digital standards" adds Ken Millard, President and Chief Executive
Officer.
Founded in 1986, Telular has developed telecommunications
interface technology that switches a standard phone system, fax, computer modem
or monitored alarm system to available wireless service for either primary or
back-up communications. The line of fixed wireless products developed and
marketed by Telular includes the PhoneCell(TM) line of products.
920 Deerfield Parkway
Buffalo Grove, Illinois
60089 USA
Phone 847 465 4500
Fax 847 465 4501
