As filed with the Securities and Exchange Commission on March 31, 2000
Registration No. _____________
_________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________________
TELULAR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3885440
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
______________________________
647 NORTH LAKEVIEW PARKWAY
VERNON HILLS, ILLINOIS 60061
(Address, including zip code, and telephone
number, including area code of
Registrant's principal executive offices)
______________________________
JEFFREY L. HERRMANN
CHIEF FINANCIAL OFFICER
TELULAR CORPORATION
647 NORTH LAKEVIEW PARKWAY
VERNON HILLS, ILLINOIS 60061
(847) 247-9400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
MICHAEL E. CUTLER, ESQ.
COVINGTON & BURLING
1201 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004
(202) 662-6000
______________________________
Approximate date of commencement of proposed
sale to public: From time to time after this
Registration Statement becomes effective.
______________________________
If the only securities being registered on this Form are to be
offered pursuant to dividend or interest reinvestment plans, please check
the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.
[X]
<PAGE>
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offer. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number on the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of Amount to Proposed Proposed Amount of
Each Class be Maximum Maximum Registration
of Registered Offering Price Aggregate Fee
Securities (1) Per Share (2) Offering Price
To be (2)
Registered
Common 851,634 $15.13 $12,885,222 $3,400
Stock, par
value $.01
per share
(1) In accordance with Rule 416 under the Securities Act of 1933, this
Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon
exercise of warrants and an option for shares of Common Stock to
prevent dilution resulting from stock splits, stock dividends or
similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the high and low
sale prices of the shares of Common Stock as reported on the Nasdaq
National Market on March 29, 2000.
__________________________________________
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this prospectus is not complete and may be
changed. The selling shareholders may not sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted.
Preliminary Prospectus Dated March 31, 2000
Subject To Completion
TELULAR CORPORATION
851,634 SHARES
COMMON STOCK
The shareholders identified in the "Selling Shareholders" section of
this prospectus are offering up to 851,634 shares of our common stock.
The shares they are offering (i) have been issued by us to them pursuant
to a private placement of common stock on March 3, 2000, (ii) will be
issued to them upon exercise of certain fixed-price warrants and a
fixed-price contractual option granted to them on March 3, 2000, or (iii)
will be issued upon exercise of a fixed-price warrant granted on
January 7, 2000.
The selling shareholders may sell the common stock at the prevailing
market price or at negotiated prices. We will not receive any proceeds
from sales of common stock by the selling shareholders.
Our common stock is traded on the Nasdaq National Market under the
symbol "WRLS". On March __, 2000, the last sale price for the common
stock was $_______ per share.
____________________
Investing in our common stock involves a high degree of risk. See
"Risk Factors" on page 4.
____________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
____________________
The date of this prospectus is _________, 2000
You should rely only on the information provided in, or incorporated
by reference in, this prospectus. We have not authorized anyone else to
provide you with any information that is not in, or incorporated by
reference in, the prospectus. This prospectus is not an offer to sell
the common stock in any state where the offer is not permitted.
<PAGE>
TABLE OF CONTENTS
Page
Where You Can Find More Information About Us.......... 2
Incorporation of Information by Reference............. 2
A Warning About Forward Looking Statements............ 3
About Telular......................................... 3
Risk Factors.......................................... 4
Our Dividend Policy................................... 17
Use of Proceeds....................................... 18
Selling Shareholders.................................. 18
Plan of Distribution.................................. 19
Legal Matters......................................... 21
Experts............................................... 21
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
This prospectus is part of a registration statement we have filed
with the SEC relating to the common stock being offered by the selling
shareholders. The registration statement contains exhibits and other
information about us and the offering that are not included in this
prospectus. We also file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy
these documents, as well as the registration statement, at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
at which our SEC filings may be found. The address of that site is
http://www.sec.gov. You can also obtain information about us at our
website, the address of which is http://www.telular.com.
INCORPORATION OF INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to
you by referring to those documents. The information incorporated by
reference is considered to be a part of this prospectus and information
we file with the SEC at a later date automatically will update and
supersede this information. We incorporate by reference the documents
listed below and any future filings that we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until the offering is completed:
o our Annual Report on Form 10-K for the year ended September 30,
1999;
o our Quarterly Report on Form 10-Q for the quarter ended
December 31, 1999;
o our Current Reports on Form 8-K filed on October 21, 1999, and
March 6, 2000; and
o the description of our common stock contained in the
registration statement on Form 8-A that we filed with the SEC
on January 13, 1994.
<PAGE>
We will send you at no cost a copy of any filing that is
incorporated by reference in the prospectus. You may request a copy of
any of these filings by writing or calling Jeffrey Herrmann, Executive
Vice President, Telular Corporation, 647 North Lakeview Parkway, Vernon
Hills, Illinois 60061, (847) 247-9400
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this
prospectus contain forward-looking statements about our financial
condition, results of operations and business. You can find many of
these statements by looking for words such as "may," "estimate,"
"project," "believe," "anticipate," "intend," "expect," "plan" and
similar expressions, although some forward-looking statements are
expressed differently. These statements reflect our current views about
future events based on information currently available and assumptions we
make. These statements are not guarantees of future performance and are
subject to risks and uncertainties that are difficult to predict. We
caution you that our actual performance and results could differ
significantly from those contemplated in the forward-looking statements
due to many factors, including those discussed in the "Risk Factors"
section. You also should be aware that we have no obligation to, and do
not intend to, update any forward-looking statements to reflect events or
circumstances occurring after the date of this prospectus that may cause
our actual results or performance to differ form those expressed in the
forward-looking statements.
ABOUT TELULAR
Telular Corporation is a Delaware corporation engaged in the fixed
wireless telecommunications industry. We design, manufacture and sell
products that allow traditional wireline communications devices, such as
telephones, fax machines, modems and alarm systems, to communicate over
wireless (cellular) telecommunications networks. These products are
based on our patented "intelligent interface" technology. When wireline
equipment (which is commonly called customer premises equipment or "CPE")
is connected to a cellular transceiver using our technology, the
intelligent interface provides a standard dial tone and other detection
signals and generates a send signal to the cellular transceiver when the
caller has finished entering the phone number.
Our technology has several different applications, such as:
o providing primary telephone service when wireline systems are
unavailable, unreliable or uneconomical;
o providing emergency backup and disaster recovery service for
wireline telephone systems; and
o wireless alarm signaling.
Our principal product lines are PHONECELL, a line of fixed wireless
terminals to which different types of CPE can be connected, and TELGUARD,
a line of wireless alarm signaling products. We also license our
technology to other telecommunications equipment manufacturers.
Our common stock is traded on the Nasdaq National Market under the
symbol "WRLS." Our mailing address is 647 North Lakeview Parkway, Vernon
Hills, Illinois 60061, and our telephone number (847) 247-9400.
<PAGE>
RISK FACTORS
You should carefully consider the following risks before you decide
to buy our common stock. If any one of these risks or uncertainties were
to occur, our business, financial condition, results and performance
could be seriously harmed and/or the price of our common stock might
significantly decrease.
We expect to continue to have losses and we may never achieve
profitability.
We started operations in 1986. Although we had a profit in the
fourth quarter of our 1996 fiscal year and the first quarter of our 1997
fiscal year, we have never had an annual profit. In order to develop our
business we already have spent significant amounts to defend our patents,
research and develop the technology we use in our products, develop new
products, and market those products. We believe that to be profitable
ultimately, we must continue to make significant investment in these
areas. However, we do not expect to generate revenues from product sales
or licensing that exceed our expenses in the near term, which would
result in continued losses during this period.
In order for us to achieve and sustain profitability, we must
generate significant and consistent revenues from operations through
increased sales of our products and/or licensing revenues. We cannot
assure you that we will be able to do this, so we may never achieve, or
be able to sustain, profitability.
We may not be able to obtain the funding we need to operate our business.
Our ability to continue operations depends on having adequate funds to
cover our expenses. Our current operating plan provides for significant
expenditures for research and development of new products, development of
new markets for our products, and marketing programs for our products.
At March 17, 2000, we had $23.6 million in cash and cash equivalents and
a working capital surplus of $30.9 million. This includes the proceeds
of $2.1 million under a $5 million credit facility with Wells Fargo Bank
("Wells") entered into on January 7, 2000, and the proceeds of a $10
million private placement of 444,444 shares of Common Stock, together
with warrants for additional shares, on March 3, 2000. Based on our
current operating plan, we believe that our existing capital resources,
including the Wells credit facility, revenues from sales and royalty
income from licensees, will allow us to maintain our current and planned
operations.
However, we caution you that our cash requirements may vary and are
difficult to predict. There are many uncertainties involved in
technological research. We also target markets in developing countries
for product sales, and the nature of these markets makes it difficult to
predict costs and revenues. Events that we cannot anticipate, such as
litigation, may also increase our capital needs. We also may change our
operating plan in ways that would increase our costs. Thus, our actual
cash requirements may be greater than we currently anticipate. Also, it
is difficult to predict the amount of sales revenue we will generate or
the amount of royalty income we will receive from our licensees.
Accordingly, we may not have adequate funds to cover our expenses.
If this is the case, we would need to find other financing sources to
provide the necessary funds, such as public or private sales of our
<PAGE>
equity or debt securities. We cannot assure you that if we needed
additional funds we would be able to obtain them or obtain them on terms
we find acceptable. If we could not obtain the necessary financing we
would be forced to cut back operations, which might include the scaling
back or elimination of research and development programs.
Unfavorable economic events in our target markets could lead to lower
sales of our products.
Sales of our products depend on the growth of the fixed wireless
telecommunications industry in general and increased demand for fixed
wireless products worldwide, particularly in developing countries. Based
on observed trends, we believe that the market for fixed wireless
terminals, such as our PHONECELL products, will experience substantial
growth over the next five years. We believe that nearer term prospects
should enable our sales to grow, but at more modest rates. We anticipate
that significant opportunities for product sales will develop in the near
future in Africa, Brazil, the Dominican Republic, Mexico, Malaysia,
Turkey, the USA and Venezuela. However, we cannot assure you that we will
have significant sales in any of these markets or that any sales will be
made in the near term. Each of these markets will develop at a different
pace, and some or all of them may not develop to the point that will
enable us to achieve significant revenues.
In addition, unfavorable general economic conditions in any market
will have a negative affect on sales in that market. Because economic
conditions in one region often affect conditions globally, unfavorable
general economic conditions in one market or region might result in
damage to industry growth and demand in other markets as well. For
instance, the recent economic turmoil experienced by Russia and many
Asian nations has and will continue to negatively affect our growth
prospects in the near term. If the unfavorable economic conditions in
these regions continue, or if conditions in other countries decline, our
product sales and financial condition could be seriously harmed.
Our competitive position will be seriously damaged if we cannot protect
intellectual property rights in our technology.
We believe that our success depends, in part, on our ability to
obtain and enforce intellectual property protection for our technology.
We believe that the U.S. patent for our intelligent interface technology
is valid. However, it is possible that this patent, any of our other
existing patents, or any patents that we may obtain in the future, will
be challenged, invalidated or circumvented. If we lose or cannot enforce
patent protection in the U.S. for our technology and products, our
competitive position will be significantly harmed because it would be
much easier for competitors to sell products similar to ours.
It also is possible that a competitor may independently develop
and/or patent technologies that are substantially equivalent to or
superior to our technology. If this happens, our patents will not
provide protection and our competitive position will be significantly
harmed.
We believe that our intelligent interface technology can be adapted
for use with new wireless services, such as telemetry. However, we
cannot be sure that any new services will fall within the boundaries of
the patent we hold. If we expand our product line or develop new uses
for our products, these uses may be outside the protection provided by
<PAGE>
our current patents and other intellectual property rights. In addition,
if we develop new products or enhancements to existing products we cannot
assure you that we will be able to obtain patents to protect them. Even
if we do get patents for new products, these patents may not provide
meaningful protection.
In some countries outside of the U.S., such as Brazil and many
African nations, patent protection is not available. Moreover, some
countries that do allow registration of patents do not provide meaningful
redress for violations of patents. As a result, protecting intellectual
property in these countries is difficult. In addition, neither we nor
any of our competitors in the past obtained patent protection for our
core intelligent interface technology in many countries, including the
principal countries of Western Europe, and we and our competitors are now
legally barred from obtaining patents in these countries.
In countries where we do not have patent protection or where patents
provide little, if any, protection, we have to rely on other factors to
differentiate our products from our competitors' products. These factors
include:
o the features and functions of our products;
o our reputation and experience in the industry;
o the quality of our products; and
o the desirability of products that meet the same specifications
as those in the U.S. and in other countries where we do have
patent protection.
Although we believe our products are superior to those of competitors, it
is easier for competitors to sell products similar to ours in countries
where we do not have meaningful patent protection. This could result in
a loss of potential sales.
The intense competition in the fixed wireless industry could prevent us
from achieving or sustaining profitability.
The market for fixed wireless products is extremely competitive, and
we may not be able to successfully compete with other companies already
in the market and new companies that enter the market. The major
national and international companies in this market are:
o Motorola;
o Ericsson; and
o Nokia.
Many of these competitors have greater resources than us in many areas
critical to succeeding in the industry, including:
o financial resources;
o manufacturing capabilities;
o name recognition;
<PAGE>
o research and development capabilities;
o technical expertise;
o sales and marketing staffs; and
o distribution channels.
Because of these advantages our competitors may succeed in developing
products that are more effective, desirable and/or cheaper than ours or
that render our products and technology obsolete. They also may have
better and more efficient marketing and distribution structures than we
do.
In addition, we have granted non-exclusive, royalty bearing licenses
to Motorola, Ericsson and Nokia, which permits these companies to produce
and sell products using our technology that compete with ours. Because
these companies have greater resources than us, they may be able to sell
similar products more effectively and cheaper than we can.
Our success depends on the growth and availability of wireless
telecommunications services in the markets we target.
Currently, some of our largest potential markets are developing
countries where the demand for basic telephone service has started to
grow significantly only in recent years, such as Brazil, Mexico, Turkey,
the Dominican Republic, the USA and Venezuela. In these countries, the
relatively low cost of developing and constructing wireless communications
infrastructure as compared to traditional wireline infrastructure may
make wireless an attractive alternative to wireline. Our success depends
to a large extent on the continued growth and increased availability of
cellular and other wireless telecommunications services in these
countries and the availability of such services at competitive prices.
However, these countries may decline to construct wireless systems,
or construction may be delayed, for a variety of reasons, including
government regulation, general economic factors, the availability of
funding and other competitive factors. These factors may also limit or
delay purchases of equipment used to provide telephone services, such as
our products. If system construction and equipment purchases in these
countries are not made or are delayed, the demand for our products in
these countries will be limited or delayed. Similarly, if the cost of
using wireless telecommunications services in these countries is not cost
effective, the demand for our products may be limited.
While wireless telecommunication systems in the U.S. are more
developed than in many other markets that we target, continued expansion
of wireless infrastructure and demand for fixed wireless products in the
U.S. is also important for the growth of our business. As is the case
with conditions in other target markets, there is no guarantee that
wireless telecommunications systems will continue to develop.
Delaware law and our charter documents may inhibit a potential takeover
bid that would be beneficial to common stockholders.
Delaware law and our certificate of incorporation may inhibit
potential acquisition bids for Telular common stock at a price greater
than the market price of the common stock. We are subject to the
antitakeover provisions of the Delaware General Corporation Law, which
<PAGE>
could delay, deter or prevent a change of control of Telular or make this
type of transaction more difficult. In addition, our board of directors
does not need the approval of common stockholders to issue shares of
preferred stock having rights that could significantly weaken the voting
power of the common stockholders and, as a result, make a change of
control more difficult.
An agreement among our principal stockholders and Motorola may inhibit a
potential takeover bid that would be beneficial to common stockholders.
We and our principal stockholders, including Motorola, have entered
into an agreement under which we and these stockholders are required to
notify Motorola before:
o we or the other stockholders solicit any purchase offers for
all or substantially all of our assets or a majority of the
outstanding common stock; or
o we or the other stockholders accept any unsolicited offer for
all or substantially all of our assets or a majority of the
outstanding common stock.
After Motorola has been notified, it has the right to submit a bid for
the proposed sale and we and the other stockholders cannot make any sale
at a valuation lower than Motorola's bid, if any. Motorola's contractual
right may inhibit other companies from making takeover bids at a price
that would benefit the common stockholders.
Our operating results may fluctuate greatly from quarter to quarter,
which may cause the price of our common stock to be volatile.
Our quarterly operating results may fluctuate greatly due to
numerous factors, including:
o our reliance on large volume orders from only a few customers
for most of our product sales, so we may experience volatility
when those orders are filled if we do not then have other
orders;
o variations in our distribution channels;
o the mix of products we sell;
o general economic conditions in our target markets;
o the timing of final product approvals from any major
distributor or end user;
o the timing of orders from and shipments to major customers;
o the timing of new product introductions by us or our
competitors;
o changes in the pricing policies of our suppliers;
o the availability and cost to us of the key components for our
products;
<PAGE>
o the timing of personnel hirings; and
o market acceptance of our new products or enhanced versions of
our existing products.
These quarterly fluctuations may cause volatility in the price of our
common stock, as described in the following paragraph.
Our common stock price has been extremely volatile, and extreme price
fluctuations could negatively affect your investment.
The market price of our common stock has been extremely volatile.
Since January 1, 1999, the price of our common stock (calculated on the
basis of the reverse stock split implemented in January 1999) has ranged
from a high of $32.00 to a low of $1.00 per share.
Publicized events and announcements may have a significant impact on
the market price of our common stock. For example, the occurrence of any
of the following events could have the effect of temporarily or
permanently driving down the price of our common stock:
o shortfalls in our revenue or net income;
o the results of trials or the introduction of new products by us
or our competitors;
o market conditions in the telecommunications, technology and
emerging growth sectors; and
o rumors related to us or our competitors.
In addition, the stock market from time to time experiences extreme price
and volume fluctuations which particularly affect the market prices for
emerging growth and technology companies, like Telular, and which often
are unrelated to the operating performance of the affected companies.
These broad fluctuations may negatively affect your ability to sell your
shares at a price equal to or greater than the price you paid for them.
In addition, a decrease in the price of our common stock could cause it
to be delisted from the Nasdaq National Market.
Sales of common stock issuable on the exercise of outstanding and
contemplated options and warrants may depress the price of the common
stock.
As of March 17, 2000, there were options granted to employees and
directors to purchase approximately 929,500 shares of the Company's
common stock. However, options to purchase only 214,635 of these shares
were exercisable at that time. The exercise prices for the exercisable
options ranges from $1.44 to $39.00 per share, with a weighted average
exercise price of $10.77. Options to purchase the remaining 714,865
shares will become exercisable over the next five years. The exercise
prices for the options that are not yet exercisable have a weighted
average exercise price of $5.83.
In connection with the proposed credit facility with Wells, we
issued to Wells warrants to purchase 50,000 shares of common stock at an
exercise price of $16.29 per share. In connection with the private
placement of 444,444 shares of common stock, we issued warrants to
purchase 100,000 additional shares at an exercise price of $29.25 per
<PAGE>
share, an option to purchase 177,746 additional shares at an exercise
price of $28.13 per share, and the right to receive additional warrants
to purchase 50,000 additional shares at an exercise price of $31.50 per
share. In the future we may issue additional shares of common stock,
convertible securities, options and warrants.
Under the terms of the purchase agreement for the common stock, we
have agreed to issue up to 285,714 additional warrants in the event that,
on prior to April 7, 2000, the average sale price of our shares for three
consecutive trading days falls below $13.50. The exercise price for
these warrants will be the lowest of the daily average sale prices on
those three days.
The issuance of shares common stock issuable upon the exercise of
options or warrants could cause substantial dilution to holders of
common stock. It also could negatively affect the terms on which we
could obtain equity financing.
Technology changes rapidly in our industry and our future success will
depend on our ability to keep pace with these changes and meet the needs
of our customers.
The telecommunications equipment industry is characterized by rapid
technological advances, evolving industry standards, changing customer
needs and frequent new product introductions and enhancements. The
wireless telecommunications industry also is experiencing significant
technological change, such as the transformation of cellular systems from
analog to digital. The introduction of products embodying new
technologies and the emergence of new industry standards could render our
existing products and technology obsolete and unmarketable.
To succeed, we must timely develop and market new products and
enhancements to existing products that keep pace with advancing
technological developments and industry standards and that address the
needs of customers. We may not be successful in developing and marketing
new products and enhancements or we may experience difficulties that
prevent development of products and enhancements in a timely manner. In
addition, our products may fail to meet the needs of the marketplace or
achieve market acceptance. Any of these circumstances would seriously
harm our results and financial condition.
We must devote substantial resources to research and development to
remain competitive and we may not have the resources to do so.
For us to be competitive, we must continue to dedicate substantial
resources to research and development of new products and enhancements of
current and future products as described in the preceding paragraph. We
cannot assure you that we will have sufficient resources to fund the
necessary research and development or that our research and development
efforts will be successful.
<PAGE>
We may face litigation that could significantly damage our business and
financial condition.
In the telecommunications equipment and other high technology
industries, litigation increasingly has been used as a competitive tactic
by both established companies seeking to protect their position in the
market and by emerging companies attempting to gain access to the market.
In this type of litigation, complaints may be filed on various grounds,
such as:
o antitrust;
o breach of contract;
o trade secret;
o copyright or patent infringement;
o patent or copyright invalidity; and
o unfair business practices.
If we have to defend ourselves against one or more of these claims,
whether or not they have any merit, we are likely to incur substantial
expense and management's attention will be diverted from operations.
This type of litigation also may cause confusion in the market and make
our licensees and distributors reluctant to commit resources to our
products. Any of these effects could have a significant negative impact
on our business and financial condition.
In the event that any of our patents or other intellectual property
rights were deemed invalid or were determined not to prohibit competing
technologies as a result of litigation, our competitive position would be
significantly harmed. See "Our competitive position will be seriously
damaged if we cannot protect intellectual property rights in our
technology._
In order to succeed we must develop markets for our products and we may
be unable to do so.
Our ability to achieve profitability depends on our ability to
develop both domestic and international markets for our products and on
the acceptance of our products by these markets. We cannot assure you
that we will be able to develop adequate markets or generate enough sales
to achieve and sustain profitability.
Certain former holders of our 5% Series A Convertible Preferred Stock
believe that we did not issue them enough common stock on conversion of
their preferred stock.
Under the terms of our 5% Series A Convertible Preferred Stock, on
October 18, 1999, all of the 11,350 outstanding shares of preferred stock
automatically were converted into approximately 2.1 million shares of
common stock at the minimum conversion price of $8.00 per common share
specified in the terms. However, we received notice from two holders of
preferred stock, NP Partners and Olympus Securities, Ltd., that they
believe that they were entitled to additional shares of common stock
because the minimum conversion price did not apply to the automatic
conversion. We do not agree with this interpretation and we have
<PAGE>
notified these holders of our position. NP Partners and Olympus
Securities have not indicated the number of additional shares to which
they believe they are entitled. However, we have determined that if the
minimum conversion price did not apply, all former holders of preferred
stock would have been entitled to a total of approximately 4.2 million
additional shares. If we were required to issue these shares it would
cause substantial dilution to our stockholders.
We rely on third parties to manufacture components for our products.
We manufacture some of our products and product components in-house.
We also use subcontractors to manufacture certain product components,
such as cellular transceivers and radio modules, and to assemble some of
our products, such as fixed wireless terminals. In the past, we
experienced delays in receiving subcontracted components and assembled
products which resulted in delays in our ability to deliver products. We
may experience similar delays in the future.
Our inability to obtain sufficient quantities of raw materials and
key components when required, or to develop alternative sources of supply
if required in the future, could result in delays or reductions in
product shipments and increased costs for affected parts. In addition,
production capacity restraints at our subcontractors or in our own
manufacturing facilities could prevent us from meeting production
obligations.
Delays in product deliveries for any reason or our failure to
deliver products could significantly harm customer relationships and
result in the loss of potential sales. Delivery delays or failures also
could subject to litigation. See "Risk Factors --We may face litigation
that could significantly damage our business and financial condition."
We depend on Motorola to supply the transceivers for our products.
We currently obtain some of the cellular transceivers we use in our
products from Motorola, which is one of our major stockholders and
competitors. Motorola has agreed to make transceivers available to us
based on any transmission technology that Motorola's Cellular Subscriber
Group offers, when, as and if these products are offered to the public.
Motorola has a right of first refusal to supply all of our transceiver
needs on the same terms as we could get from a competitor of Motorola,
provided that Motorola manufactures a product comparable to the
competitor's and our customer does not specifically request another
manufacturer's transceiver. If we are unable to get sufficient
quantities of Motorola transceivers, we might have to redesign our
products. This could increase our costs and cause shipments delays.
Quality control problems could harm our sales.
We believe that our products currently meet high standards of
quality. We have instituted quality monitoring procedures and we are
ISO-9001 compliant. All of our major subcontractors also have quality
control procedures in place and are ISO-9001 compliant. However, we
and/or our subcontractors may experience quality control problems in the
future. If this occurs, the quality of our products could suffer, which
could significantly harm product sales.
<PAGE>
We operate in developing markets which may subject us to volatile
conditions not present in the U.S.
Developing countries are some of our largest potential markets. As
we expand our operations in these countries, our business and performance
could be negatively affected by a variety of factors and conditions that
businesses operating in the U.S. generally do not have to contend with,
such as:
o foreign currency exchange fluctuations and instability of
foreign currencies;
o political or economic instability and volatility in particular
countries or regions;
o limited protection for intellectual property;
o difficulties in staffing and managing international operations;
and
o difficulties in collecting accounts receivable.
To date, our sales have not been negatively affected by currency
fluctuations. We currently require either letters of credit or
qualification for export credit insurance underwritten by the U.S.
Export-Import Bank or other third party insurers on a substantial portion
of our international orders. We also try to conduct all of our
international transactions in U.S. dollars to minimize the effects of
currency fluctuations. However, as our international operations grow,
foreign exchange fluctuations and foreign currency inflation may pose
greater risks for us and we may be required to develop and implement
additional strategies to mange these risks. If we are not successful in
managing these risks our business and financial condition could be
seriously harmed.
Some of our directors may have conflicts of interest that may adversely
affect our business.
Our board of directors currently includes, and we expect that it
will continue to include, persons designated by companies that we have
business relationships with. It is possible that the companies that
designate these directors, such as Motorola, may be in direct or indirect
competition with us or among themselves for business activities or
transactions. Although the affected directors may abstain from voting on
matters in which Telular's interests and the interests of another company
are in conflict, the presence of potential or actual conflicts could
affect the process or outcome of board deliberations in ways that would
harm our business and financial condition.
A small number of our existing stockholders exercise significant control
over our affairs.
As of March 17, 2000, our officers and directors, together with
entities affiliated with our directors, beneficially owned 24.14% of our
common stock (this is assuming that they had actually exercised all stock
options that were exercisable at that time). If these stockholders act
together, they have a significant impact on director elections and
matters that require stockholder approval, such as a change of control of
Telular. Thus, these stockholders may have the ability to direct our
<PAGE>
affairs in a manner that is beneficial for themselves but harmful to
other shareholders.
Under a shareholders agreement, Motorola has the right to nominate a
number of directors that is proportionate to its holding of common stock.
As of March 17, 2000, Motorola held 9.44% of our common stock, which
entitled it to nominate at least one director. Certain other
shareholders have agreed to vote in favor of each Motorola nominee.
OUR DIVIDEND POLICY
To date, we have paid no cash dividends on our common stock. We
currently intend to retain all future earnings, if any, to fund the
development and growth of our business. Thus, we do not anticipate that
we will pay any cash dividends in the foreseeable future.
Under the Company's credit facility with Wells, it has covenanted
not to pay dividends on its stock.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock
by the selling shareholders.
SELLING SHAREHOLDERS
The table below sets forth information concerning:
o the identity of each selling shareholder;
o the number and percentage of shares of common stock
beneficially owned (as defined under Exchange Act Rule 13d-3)
on March 17, 2000;
o the number of shares of common stock being offered; and
o the number of shares of common stock beneficially owned after
the offering.
The number of shares shown as beneficially owned is the number of shares
common stock issuable on conversion of all warrants and options held by
the selling shareholder.
<PAGE>
Unless otherwise indicated below, to our knowledge all of the
persons listed below have sole voting and investment power with respect
to their shares of common stock. None of the selling shareholders has
had any position, office or other material relationship with us in the
past three years.
Shares of Common Beneficial
Stock Beneficially Shares of Ownership
Owned Prior to this Common of Common
Name Offering Stock Stock
Being After
Offered Offering
Number Percent
Halifax Fund, L.P. 577,752(1) 4.51% 577,752 0
Elliott Associates, 72,219(1) 0.56 77,219 0
L.P.
Westgate 72,219(1) 0.56 77,219 0
International, L.P.
Cardinal 79,444(1) 0.62 79,444 0
Securities, L.L.C.
Wells Fargo 50,000(2) 0.39 50,000 0
Business Credit,
Inc.
________________
(1) Includes shares issuable upon exercise of contractual options and
warrants at fixed prices ranging from $28.13 to $31.50 per share.
(2) Shares issuable upon exercise of a warrant at an exercise price of
$16.29 per share.
PLAN OF DISTRIBUTION
The purpose of this prospectus is to permit the selling shareholders
to sell some or all of their shares of common stock at times, in the
manner, and at prices they choose. The selling shareholders may offer
the common stock through underwriters or agents or directly to
purchasers. They may make sales in market transactions or private
transactions. They may sell at the prevailing market price, at a price
related to the market price, or at a negotiated price.
Methods of Sale
The selling shareholders may sell all or a portion of the common
stock in one or more of, or through a combination of, the following
types of transactions:
o a block trade;
o purchases by a broker-dealer as principal and the resale of the
shares by the broker-dealer under this prospectus for its
account;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o other market transactions;
<PAGE>
o private transactions; and
o any other legal method of disposition.
If it is required, we will amend or supplement this prospectus to
describe a specific plan of distribution that will be used by a selling
shareholder.
Short Sales
Without limiting anything else they may do, the selling shareholders
may enter into hedging transactions with broker-dealers or other financial
institutions. These broker-dealers and institutions may engage in short
sales of the common stock in the course of hedging the positions they
assume with the selling shareholders. The selling shareholders may sell
common stock short and redeliver shares to close out their short positions.
Options and Pledges
Without limiting anything else they may do, the selling shareholders
may enter into option or other transactions with broker-dealers or other
financial institutions which require the delivery to the broker-dealer
or institution of the shares offered in this prospectus, which the
broker-dealer or institution may then resell under this prospectus.
The selling shareholders also may pledge the shares to a broker-dealer
or other financial institution and, upon a default, the broker-dealer or
institution may sell the pledged shares under this prospectus.
Compensation to Brokers and Dealers
If the selling shareholders sell common stock through brokers,
dealers or agents, the selling shareholders may pay compensation in the
form of commissions, discounts or concessions. These brokers or dealers
and any other brokers or dealers who participate in a sale may, under
some circumstances, be deemed to be "underwriters" within the meaning of
the Securities Act. Any commission, discount or concession they receive
may be deemed to be underwriting discounts and commissions under the
Securities Act.
Costs of Registration
We will pay the costs associated with the registration of the common
stock. The selling shareholders will be responsible for all commissions,
discounts and transfers taxes, if any, associated with sales of common
stock. We will supply each selling shareholder with a reasonable number
of copies of this prospectus on its request. The selling shareholders
are responsible for complying with the prospectus delivery requirements
of the Securities Act in connection with offers and sales of the common
stock.
Indemnification
The selling shareholders have agreed to indemnify us, and may agree
to indemnify any underwriter, against certain liabilities related to the
offering of the common stock, including liabilities under the Securities
Act. We have agreed to indemnify the selling shareholders and any
underwriter against certain liabilities related to the offering of the
common stock, including liabilities under the Securities Act.
<PAGE>
LEGAL MATTERS
Covington & Burling of Washington, D.C. has issued an opinion
regarding the legality of the common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our
consolidated financial statements and schedules included in our Annual
Report on Form 10-K for the year ended September 30, 1999, as set forth
in their report, which is incorporated by reference in this prospectus
and elsewhere in the registration statement. Our financial statements
and schedules are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and
auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered hereby
(other than underwriting discounts and commissions) are set forth below*:
Securities and Exchange Commission Registration Fee $3,400
Nasdaq Listing Fee 0
Accounting Fees and Expenses 1,000
Legal Fees and Expenses 50,000
Miscellaneous Expenses 2,000
Total 56,400
______________________
* Except for the Securities and Exchange Commission registration fee
and the Nasdaq listing fee, all expenses are estimated.
Item 15. Indemnification of Officers and Directors
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides that a corporation may indemnify any person,
including any officer or director, who was or is a party or who is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise ("such Person"), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonable
incurred by such Person, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 also
provides that in any threatened, pending or completed action by or in the
right of the corporation, a corporation also may indemnify any such
Person for expenses (including Attorneys' fees) actually and reasonably
incurred by him in connection with that action's defense or settlement,
if he acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation; however, no
indemnification shall be made with respect to any claim, issue or matter
as to which such Person shall have been adjudged to be liable to the
corporation, unless and only to the extent that a court shall determine
that such indemnity is proper. Where a director, officer, employee or
agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation is required under the DGCL to
indemnify him against the expenses (including attorneys' fees) that such
officer or director actually and reasonably incurred in connection
therewith.
The Registrant's Bylaws provide that the Registrant will indemnify
such Persons against all liability and expense arising out of such
Person's connection with the business of the Registrant, provided that
<PAGE>
the Board of Directors determines that such Person acted in good faith
and reasonably believed that his actions were not opposed to the best
interests of the Registrant; and with respect to any criminal action or
proceeding, that such Person had no reasonable cause to believe his
conduct was unlawful. In the case of any action, suit or proceeding by
or in the right of the Registrant in which such Person is adjudged liable
to the Registrant, the Registrant will indemnify such Person for expenses
only to the extent that the court in which such action is brought
determines, upon application, that such Person is entitled to indemnity
for reasonable expenses, and in no case shall such indemnification extend
to liability. Advances against reasonable expenses may be made by the
Registrant on terms fixed by the Board of Directors subject to an
obligation to repay if indemnification proves unwarranted.
The Registrant's Certificate of Incorporation provides that, to the
fullest extent permitted by Delaware law, its directors shall not be
liable for monetary damages for breach of the directors' fiduciary duty
to the Registrant and its stockholders. This provision in the
Certificate of Incorporation does not eliminate the duty of care. In
appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law.
In addition, each director will continue to be subject to liability for
breach of the director's duty of loyalty to the Registrant or its
stockholders, for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, for actions leading
to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a
director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
Directors and officers of the Registrant are covered by a directors'
and officers' liability insurance policy of the Registrant.
Item 16. Exhibits
Exhibit
Number Description Reference
4.1 Certificate of Incorporated by reference
Incorporation to Exhibit 3.1 to the
Registration Statement of
Telular Corporation on
Form S-1, No. 33-72096, as
amended ("Form S-1")
4.2 Amendment No. 1 to Incorporated by reference
Certificate of to Exhibit 3.2 to Form S-1
Incorporation
4.3 Amendment No. 2 to Incorporated by reference
Certificate of to Exhibit 3.3 to Form S-1
Incorporation
<PAGE>
Exhibit
Number Description Reference
4.4 Amendment No. 3 to Incorporated by reference
Certificate of to Exhibit 3.4 to Form 10-
Incorporation Q for the quarter ended
December 31, 1998
4.5 Amendment No. 4 to Incorporated by reference
Certificate of to Exhibit 3.5 to Form 10-
Incorporation Q for the quarter ended
December 31, 1998
4.6 Bylaws Incorporated by reference
to Exhibit 3.4 to Form S-1
4.7 Certificate of Incorporated by reference
Designations, Rights to Exhibit 99.2 to Form 8-
and Preferences of K filed on April 25, 1997
Series A Convertible
Preferred Stock
4.8 Common Stock Investment Filed herewith
Agreement dated
March 3, 2000
4.9 Registration Rights Filed herewith
Agreement dated
March 3, 2000
5.1 Opinion of Covington & Filed herewith
Burling
23.1 Consent of Covington & Included in Exhibit 5.1
Burling
23.2 Consent of Ernst & Filed herewith
Young LLP
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to the Registration
Statement:
(1) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(i) To reflect in the prospectus any facts or events
arising after the effective date of the
Registration Statement (or the most recent post-
effective amendment thereof) which, individually
or in the aggregate, represent a fundamental
change in the information set forth in the
Registration Statement;
<PAGE>
(ii) To include any material information with respect
to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the Registration Statement
is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-
effective amendment by those paragraphs is contained
in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities registered
which remain unsold at the termination of the
offering.
(b) The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to
be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the
Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Vernon Hills, State
of Illinois, on the 31st day of March, 2000.
TELULAR CORPORATION
(Registrant)
By: /s/Kenneth E. Millard
Kenneth E. Millard
President,
Chief Executive Officer
Each person whose signature appears below constitutes and appoints
Kenneth E. Millard and Jeffrey L. Herrmann, and each of them, his true
and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, and in any
and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, state securities law administrators, other governmental
authorities, the Nasdaq Stock Market, and stock exchanges, granting unto
said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully and to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitute or substitutes,
may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/Kenneth E. Millard President, Chief March 31, 2000
Executive Officer and
Kenneth E. Millard Director
(principal executive
officer)
/s/ Jeffrey L. Chief Operating March 31, 2000
Herrmann Officer, Secretary and
Jeffrey L. Herrmann Executive Vice
President
(principal financial
officer)
/s/ Robert L. Zirk Controller and Chief March 31, 2000
Robert L. Zirk Accounting Officer
<PAGE>
/s/ Daniel D. Giacopelli Executive Vice March 31, 2000
President,
Daniel D. Giacopelli Chief Technology Officer
and Director
/s/ William L. De Nicolo Chairman of the Board March 31, 2000
William L. De Nicolo
/s/ Mark R. Warner Director March 31, 2000
Mark R. Warner
/s/ John E. Berndt Director March 31, 2000
John E. Berndt
/s/ Larry J. Ford Director March 31, 2000
Larry J. Ford
/s/ Richard D. Haning Director March 31, 2000
Richard D. Haning
<PAGE>
Exhibit Index
Exhibit
Number Description Reference
4.1 Certificate of Incorporated by reference
Incorporation to Exhibit 3.1 to the
Registration Statement of
Telular Corporation on
Form S-1, No. 33-72096, as
amended ("Form S-1")
4.2 Amendment No. 1 to Incorporated by reference
Certificate of to Exhibit 3.2 to Form S-1
Incorporation
4.3 Amendment No. 2 to Incorporated by reference
Certificate of to Exhibit 3.3 to Form S-1
Incorporation
4.4 Amendment No. 3 to Incorporated by reference
Certificate of to Exhibit 3.4 to Form 10-
Incorporation Q for the quarter ended
December 31, 1998
4.5 Amendment No. 4 to Incorporated by reference
Certificate of to Exhibit 3.5 to Form 10-
Incorporation Q for the quarter ended
December 31, 1998
4.6 Bylaws Incorporated by reference
to Exhibit 3.4 to Form S-1
4.7 Certificate of Incorporated by reference
Designations, Rights to Exhibit 99.2 to Form 8-
and Preferences of K filed on April 25, 1997
Series A Convertible
Preferred Stock
4.8 Common Stock Investment Filed herewith
Agreement dated
March 3, 2000
4.9 Registration Rights Filed herewith
Agreement dated
March 3, 2000
5.1 Opinion of Covington & Filed herewith
Burling
23.1 Consent of Covington & Included in Exhibit 5.1
Burling
23.2 Consent of Ernst & Filed herewith
Young LLP
<PAGE>
Exhibit 5.1
March 31, 2000
Telular Corporation
647 North Lakeview Parkway
Vernon Hills, Illinois 60061
Gentlemen:
This opinion is being furnished to you in connection with the public
resale by certain investors (collectively, the "Investors"), of up to
851,634 shares of Telular Corporation's (the "Company") Common Stock, par
value $.01 per share (the "Shares"), pursuant to a registration statement
on Form S-3 to be filed by the Company with the Securities and Exchange
Commission (the "Commission") on the date hereof (the "Registration
Statement"). The Shares were issued to the Investors pursuant to that
certain Stock Purchase Agreement dated as of March 3, 2000 (the _Stock
Purchase Agreement_) or a warrant issued on January 7, 2000, or will be
issued to the Investors by the Company upon exercise of certain warrants
and options granted by the Company to the Investors in the Stock Purchase
Agreement. The Shares may be sold from time to time by the Investors to
or through brokers, dealers or other agents or directly to other
purchasers in one or more market transactions, in one or more private
transactions, or in a combination of such methods of sale, at prices then
prevailing, at prices related to such prices, or at negotiated prices.
We have acted as counsel for the Company in connection with the
issue and sale of the Shares to the Investors. We have examined copies
of the Registration Statement and all exhibits thereto. We also have
examined and relied upon certain resolutions adopted by the Board of
Directors of the Company and a copy of the Bylaws of the Company, each
certified by the Secretary of the Company, and a copy of the Certificate
of Incorporation of the Company certified by the Secretary of the State
of the State of Delaware. We also have examined such other documents and
made such other investigations as we have deemed necessary to form a
basis for the opinion hereinafter expressed.
In examining the foregoing documents we have assumed the
authenticity of documents submitted to us as originals, the genuineness
of all signatures, the conformity to original documents of documents
submitted as copies, and the accuracy of the representations and
statements included therein.
Based upon the foregoing, it is our opinion that the Shares are duly
authorized and issued or, in the case of Shares to be issued pursuant to
warrants and options, will be validly issued, fully paid and non-
assessable when and if issued in accordance with the terms of such
warrants and options.
We hereby consent to the filing of this opinion as part of the
Registration Statement, and to the use of our name therein and in the
related Prospectus under the caption "Legal Matters".
<PAGE>
It is understood that this opinion is to be used only in connection
with the offer and sale of the Shares while the Registration Statement is
in effect.
Very truly yours,
/s/ Covington & Burling
COVINGTON & BURLING
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in the Registration Statement (Form S-3) and related Prospectus of
Telular Corporation for the registration of 851,634 shares of its common
stock and to the incorporation by reference therein of our report dated
October 22, 1999, with respect to the consolidated financial statements
and schedule of Telular Corporation included in its Annual Report (Form
10-K) for the year ended September 30, 1999, filed with the Securities
and Exchange Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
March 31, 2000
COMMON STOCK INVESTMENT AGREEMENT
COMMON STOCK INVESTMENT AGREEMENT ("Agreement") dated as of
March 3, 2000 among TELULAR CORPORATION, a Delaware corporation (the
"Company"), HALIFAX FUND, L.P., a Cayman Island limited partnership
("Halifax"), ELLIOTT ASSOCIATES, L.P., a Delaware limited partnership
with an office at 512 Fifth Avenue, New York, New York 10019
("Elliott"), and WESTGATE INTERNATIONAL, L.P., a Cayman Islands limited
partnership with an office c/o Stonington Management Corporation, 712
Fifth Avenue, New York, New York 10019 ("Westgate").and together with
Halifax and Elliott, the "Investors").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the
Investors, and the Investors wish to purchase from the Company, an
aggregate of 444,444 shares of the Company's Common Stock, $.01 par value
("Common Stock") (all of such shares of Common Stock being the "Initial
Shares"), and five year warrants, in the form attached hereto as Annex A,
to purchase 100,000 shares of Common Stock at an exercise price of $29.25
per share (the "Initial Warrants"), on the terms and conditions described
below; and
WHEREAS, the Investors may receive, for no additional
consideration, five year warrants in the form attached hereto as Annex B,
exercisable for up to 285,714 additional shares of Common Stock, in the
event of certain market conditions described below ("Fill-up Warrants");
WHEREAS, the Investors may elect, in their sole discretion, to
purchase additional shares of Common Stock ("Additional Shares") on the
terms and conditions described below, in which event the Investors will
also receive five year warrants, in the form attached hereto as Exhibit
C, to purchase 50,000 shares of Common Stock at an exercise price of
$31.50 per share (the "Additional Warrants") (the Initial Warrants, the
Fill-Up Warrants and the Additional Warrants being, collectively, the
"Warrants"); and
WHEREAS, the Initial Shares, the shares of Common Stock
underlying the Warrants (the "Warrant Shares") and the Additional Shares
(the Initial Shares, the Warrant Shares and the Additional Shares being,
collectively, the "Registrable Shares") will carry registration rights,
pursuant to the terms of that certain Registration Rights Agreement to be
entered into between the Company and the Investors substantially in the
form annexed hereto (the "Registration Rights Agreement").
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
Article I
Purchase and Sale of Shares and Warrants
Section 1.1 Issuance of Initial Shares and Initial Warrants. Upon
the following terms and conditions, the Company shall issue and sell to
the Investors, and the Investors shall purchase from the Company, the
number of Initial Shares and Initial Warrants indicated next to the
<PAGE>
Investors' names on Schedule I attached hereto.
(a) Purchase Price. The aggregate purchase price for the
Initial Shares and Initial Warrants to be acquired by each Investor (the
"Aggregate Purchase Price") shall be the Aggregate Purchase Price set
forth next to each such Investor's name on Schedule I. The Initial
Shares shall be delivered against receipt of the Aggregate Purchase
Price. The purchase price per Initial Share (the "Share Purchase Price")
shall be $22.50.
(b) The Closing.
(i) The closing of the purchase and sale of
the Initial Shares and Initial Warrants (the "Closing")
shall take place at the offices of Kleinberg, Kaplan,
Wolff & Cohen, P.C. ("KKWC"), on the date hereof
(the "Closing Date").
(ii) On the Closing Date, the Company shall
deliver to the Investors stock certificates (with the
number of and denomination of such certificates
requested by each Investor) representing the Initial
Shares and Initial Warrants purchased hereunder
registered in the name of each such Investor or its
nominee. The delivery of payment by wire transfer to
an account designated by the Company by each Investor
of the Aggregate Purchase Price applicable to it as
set forth in Section 1.1 and Schedule I shall
constitute a payment delivered to the Company in
satisfaction of the Investor's obligation to pay the
Aggregate Purchase Price hereunder. In addition,
each party shall deliver all documents, instruments
and writings required to be delivered by such party
pursuant to this Agreement at or prior to the
Closing.
Section 1.2 Fill-Up.
(a) For purposes of this Agreement, "Weighted Average Price"
shall mean the quotient of (i) the per share price of each trade made on
the Principal Market during a trading day multiplied by the number of
shares of Common Stock included in such trade, divided by (ii) the total
volume of all shares of Common Stock traded on the Principal Market on
such trading day, calculated using the _Volume at Price_ function
provided by Bloomberg. If, at any time prior to or including the 25th
trading day (the "Fill-up Date") after but not including the Closing Date
(the "Fill-up Period"), the lowest average of any three consecutive
Weighted Average Prices is equal to or less than $13.50 (a "Fill-up
Event"), then the Company must provide to the Investor, at the Company's
option, either (i) the full cash Aggregate Purchase Price received from
the Investors, in exchange for which the Investors' right to any
Additional Shares and Additional Warrants will terminate and the
Investors shall deliver to the Company for cancellation the Initial
Shares (but NOT the Initial Warrants), or (ii) Fill-up Warrants
<PAGE>
exercisable for the maximum number of Warrant Shares (not to exceed
285,714) issuable pursuant to the following table:
% Decline in lowest average of
3 Consecutive Weighted Average # of Warrant Shares for
Prices below Share Purchase which Fill-up Warrants may be
Price during the Fill-up Period exercised
> 40% 166,667
> 50% 200,000
> 60% 250,000
> 65% 285,714
(b) The number of Warrant Shares underlying the Fill-up
Warrants shall be increased in proportion to the decline in the lowest
average of any three consecutive Weighted Average Prices below $13.50
during the Fill-up Period.
(c) If a Fill-up Event occurs during the Fill-up Period, the
Company shall irrevocably notify the Investors in writing, no later than
1 hour before the opening of the Principal Market on the trading day next
following the Fill-up Event, whether the Company will pay the Investors
entirely in cash or entirely in Fill-up Warrants as provided above. If
the Company fails to deliver such written notice within the time provided
by this Section 1.2(b), the Company shall be deemed to have irrevocably
elected to pay the Investors entirely in Fill-up Warrants.
(c) Subject to anti-dilution adjustments, the total number of
Warrant Shares for which the Warrants may be exercised shall not exceed
435,714 (100,000 for Initial Warrants, 50,000 for Additional Warrants and
up to 285,714 for Fill-up Warrants).
(d) The exercise price of the Fill-up Warrants will equal the
lowest average of any three consecutive Weighted Average Prices during
the Fill-up Period.
(e) The closing at which the Company shall deliver to the
Investors pursuant to this Section 1.2 either cash equal to the Aggregate
Purchase Price or the appropriate number of Fill-up Warrants (the "Fill-
up Closing") shall take place at the offices of KKWC either on the Fill-
up Closing Date.
(f) The number of Warrant Shares for which the Fill-up Warrants
calculated in accordance with the above formula can be exercised shall be
appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event so that the Investors receive the same
economically equivalent value of Warrant Shares underlying the Fill-up
Warrants as they would in the absence of such event.
(g) The Warrant Shares for which the Fill-up Warrants may be
exercised shall upon exercise be fully-paid, nonassessable, registered
(to the extent provided in the Registration Rights Agreement) shares of
Common Stock, free and clear of all liens and encumbrances and duly
eligible for trading on the Nasdaq National Market System or, if the
Common Stock is not quoted thereon, on any other Approved Market (as
hereinafter defined) upon which the Common Stock is principally traded or
quoted (in either case, the "Principal Market").
Section 1.3 Additional Investments.
(a) Except as provided in Section 1.2(a), (i) Halifax and (ii)
Elliott and Westgate (collectively), shall each respectively have the
pro-rata right but not the obligation to purchase in whole or in part on
any one day until and including the day 365 days after the Closing Date
(and if such day is not a business day, the next succeeding business day)
up to 177,746 Additional Shares at a price of $28.13 per share. Upon
such purchase of Additional Shares, the purchasing Investor will also
receive Additional Warrants exercisable for the same proportion of the
50,000 underlying Warrant Shares that the aggregate price paid for such
Investor's Additional Shares bears to $5,000,000. The exercise price of
the Additional Warrants shall be $31.50.
(b) The number of Warrant Shares into which the Additional
Warrants can be exercised shall be appropriately adjusted to reflect any
stock split, stock dividend, recapitalization or similar event so that
the Investors receive the same economically equivalent value of Warrant
Shares underlying such Additional Shares as they would in the absence of
such event.
(c) Upon delivery of a notice by (i) Halifax or (ii) Elliott
and Westgate, respectively, exercising its respective options to purchase
Additional Shares hereunder (an "Additional Investment Notice"), the
Company shall be obligated to sell and deliver to the applicable
Investors, and the applicable Investors shall be obligated to purchase,
the Additional Shares specified in the Additional Investment Notice.
Closings of such purchase and sale (each an "Additional Investment
Closing") shall take place at the office of KKWC within three (3) trading
days after the delivery of the Additional Investment Notice. At each
Additional Closing, the Company shall deliver certificates evidencing the
Additional Shares being purchased, free and clear of all liens and
encumbrances, against the payment of the purchase price therefor, as well
as the Additional Warrants. The Additional Shares delivered and the
Warrant Shares deliverable upon the exercise of the Additional Warrants
shall be fully-paid, nonassessable shares of Common Stock which shall be
required to be registered as provided in the Registration Rights
Agreement.
Article II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Investors as of the date hereof, on the Closing Date and on the date of
any Additional Investment Closing:
(a) Organization and Qualification; Material Adverse Effect.
The Company is a corporation duly incorporated and existing in good
standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as now
being conducted. The Company does not have any subsidiaries other than
the subsidiaries listed on Schedule 2.1(a) attached hereto
("Subsidiaries"). Except where specifically indicated to the contrary,
all references in this Agreement to Subsidiaries shall be deemed to refer
to all direct and indirect subsidiaries of the Company. The Company 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 or property owned by it makes such qualification necessary
other than those in which the failure so to qualify would not have a
Material Adverse Effect. "Material Adverse Effect" means any (i) adverse
effect(s) on the business, operations, properties, prospects or financial
condition of the Company and its Subsidiaries, if any, and which is
material to the Company and its Subsidiaries, if any, taken as a whole,
and (ii) any prohibition of, delay in or other adverse effect on the
transactions contemplated under this Agreement, the Registration Rights
Agreement or any other agreement or document contemplated hereby or
thereby.
(b) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Warrants and the Registration Rights Agreement
("Transaction Documents") and to issue the Initial Shares, Additional
Shares, Warrants and Warrant Shares (collectively, the "Securities") in
accordance with the terms hereof, (ii) the execution and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized
by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any committee
or subcommittee thereof) or stockholders is required, (iii) the
Transaction Documents have been duly executed and delivered by the
Company, (iv) the Transaction Documents constitute valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of creditors' rights and remedies or by other equitable
principles of general application, and (v) the Securities have been duly
authorized and, upon issuance thereof and payment therefor in accordance
with the terms of this Agreement, will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and
encumbrances.
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 75,000,000 shares of Common
Stock, of which as of the date hereof, other than as contemplated by the
Transaction Documents, 12,091,431 shares are issued and outstanding,
1,159,580 shares are issuable and reserved for issuance pursuant to the
Company's stock option and purchase plans and 50,000 shares are issuable
and reserved for issuance pursuant to securities exercisable or
exchangeable for, or convertible into, shares of Common Stock, and (ii)
9,979,000 shares of preferred stock, of which as of the date hereof, no
shares were issued and outstanding. All of such outstanding shares have
been, or upon issuance will be, validly issued, fully paid and
nonassessable. As of the date hereof, except as contemplated by this
Agreement or as disclosed in Schedule 2.1(c) or in the SEC Documents (as
defined in Section 2.1(f)), (i) no shares of the Company's capital stock
are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company, (ii) there are no
outstanding debt securities, (iii) 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, (iv) 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 Securities Act of
1933, as amended ("Securities Act" or "1933 Act"), (v) there are no
outstanding securities of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any
of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of Common Stock as required by this Agreement
and (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement.
The Company has furnished to the Investors 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 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) No Conflicts and No Consents. Except as disclosed in
Schedule 2.1(d), the execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby will not (i) result
in a violation of the Certificate of Incorporation or the By-laws; (ii)
conflict with, or constitute a default (or an event which with notice or
lapse of time or both reasonably could be expected to become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or
decree (including United States federal and state securities laws and
regulations and the rules and regulations of the Principal Market)
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 2.1(d) or in the SEC
Documents, neither the Company nor its Subsidiaries is in violation of
any term of, or in default under, (x) its Certificate of Incorporation or
By-laws or their organizational charter or by-laws, respectively, (y) any
material contract, agreement, mortgage, indebtedness, indenture,
instrument, or (z) any judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, the non-
compliance with which (in the case of (z) only), would have a Material
Adverse Effect. 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, governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any
of its obligations under, or contemplated by, the Transaction Documents
in accordance with the terms hereof or thereof. Except as disclosed in
Schedule 2.1(d) or in the SEC Documents, 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 is in compliance with the listing
requirements of the Principal Market, and no notice of any non-compliance
or violation thereof has been received in the previous 12 months.
(e) Principal Market. The Principal Market for the Common
Stock is the Nasdaq National Market System.
(f) SEC Documents; Financial Statements. Since December 31,
1997, the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing filed at
least five (5) days prior to the date hereof or the date of the
Additional Investment Closing, as applicable, 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"). All SEC Documents were filed electronically via EDGAR.
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).
Neither the Company nor any of its Subsidiaries or any of their officers,
directors, employees or agents have provided the Investor with any
material, nonpublic information which was not publicly disclosed prior to
the date provided.
(g) Absence of Certain Changes. Except as disclosed in
Schedule 2.1(g) or the SEC Documents, since September 30, 1999, no event,
liability, development or circumstances has occurred and there has been
no adverse change or adverse development in the business, properties,
assets, operations, financial condition, liabilities or results of
operations of the Company or its Subsidiaries which either has had or, to
the knowledge of the Company or its Subsidiaries, is reasonably likely to
have a Material Adverse Effect or which would be required to be disclosed
in an SEC registration statement for the Common Stock. 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 or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such which
individually and in the aggregate, respectively, would be reasonably
likely to result in liability to the Company in excess of $100,000 and
$300,000, respectively, except as set forth in Schedule 2.1(h) or the SEC
documents.
(i) Acknowledgment Regarding Investors' Purchase of Shares.
The Company acknowledges and agrees that the Investors are acting solely
in the capacity of arm's length purchasers with respect to the
Transaction Documents and the transactions contemplated hereby and
thereby. The Company further acknowledges that the Investors are not
acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and that the
Company's decision to enter into the Transaction Documents has been based
solely on the independent evaluation by the Company and its
representatives.
(j) 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
cause any offering of Securities to the Investors to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any
applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of the Principal Market, nor
will the Company or any of its Subsidiaries take any action or steps in
the future that would cause any offering of the Securities to be
integrated with other offerings.
(k) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened.
Neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement.
(l) 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 in all
material respects. Except as set forth on Schedule 2.1(l) or in the SEC
Documents, 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 within two (2) years
from the date of this Agreement. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries
of trademark, trade name 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. Except as set forth on Schedule 2.1(l) or in the
SEC Documents, 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 trademarks, trade name rights,
patents, patent rights, inventions, copyrights, licenses, service names,
service marks, service mark registrations, trade secrets or other
infringement. The Company and its Subsidiaries have taken security
measures that they in good faith deem reasonable to protect the secrecy,
confidentiality and value of all of their intellectual properties.
(m) Environmental Laws. To the Company's knowledge after
reasonable inquiry, the Company and its Subsidiaries (i) are in
compliance with 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 permits, licenses
or approvals.
(n) Title. The Company and its Subsidiaries own no real
property. The Company and its Subsidiaries have 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 material liens and encumbrances (except those of secured lenders)
and all material defects. Any material real property and facilities held
under lease by the Company or any of 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 by the Company and its Subsidiaries of such property and
buildings, or the personal property in them.
(o) 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
reasonably 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 been refused any insurance coverage sought or
applied for and 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.
(p) 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.
(q) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient
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.
(r) Foreign Corrupt Practices Act. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf
of the Company or any Subsidiary has, in the course of acting for, or on
behalf of, the Company, directly or indirectly used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; directly or indirectly made any
direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of
any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or any similar treaties of the United States; or directly or
indirectly made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government or party
official or employee.
(s) Tax Status. The Company and each of its Subsidiaries has
made or filed all United States 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 provisions 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 Company is not aware of any basis for any such claim.
(t) Certain Transactions. Except as set forth on Schedule
2.1(t) and in the SEC Documents filed on EDGAR at least five (5) trading
days prior to the date hereof, and other than the grant of stock options
and other employee compensation approved by the Compensation Committee of
the Board of Directors of the Company, none of the officers or directors
of the Company is presently a party to any transaction with the Company
or any of its Subsidiaries (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.
(u) Dilutive Effect. The Company understands and acknowledges
that the number of Shares of Common Stock issuable pursuant to this
Agreement will increase in certain circumstances. The Company further
acknowledges that, subject to such limitations and conditions as are
expressly set forth in the Transaction Documents, its obligation to issue
Fill-up Warrants, Warrant Shares and Additional Shares pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect
that any such issuance may have on the ownership interests of other
shareholders of the Company.
(v) Application of Takeover Protections. The completion of the
transactions contemplated by the Transaction Documents will not, in the
absence of any other acquisitions of Common Stock by the Investors,
trigger any anti-takeover provision contained in the Company's
Certificate of Incorporation or By-Laws or Delaware law.
(w) Rights Plan. Neither the Company nor any of its
Subsidiaries has adopted a shareholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a
change in control of the Company.
(x) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) for secondary
offerings on Form S-3 (as in effect on the date of this Agreement) under
the 1933 Act and rules promulgated thereunder.
(y) Brokers. Except for retaining Cardinal Capital Management,
Inc. ("Cardinal"), the Company and its Subsidiaries have taken no action
which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by the Company, its
Subsidiaries or the Investor relating to this Agreement or the
transactions contemplated hereby. The payment of any fees, expenses or
other amounts to Cardinal shall be the exclusive responsibility of the
Company.
Section 2.2 Representations and Warranties of the Investors.
Each Investor hereby makes the following representations and warranties to
the Company as of the date hereof as to itself, on the Closing Date and
on the date of any Additional Closing required by such Investor:
(a) Accredited Investor Status; Sophisticated Investor. The
Investor is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D under the 1933 Act. The Investor has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of investment in the Common
Stock.
(b) Information. The Investor and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company which have been requested and materials
relating to the offer and sale of the Initial Shares and Warrants (and
the other shares of Common Stock issuable hereunder) which have been
requested by the Investor. The Investor and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by
the Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in Section 2.1 above. The
Investor understands that its investment in the Common Stock and the
Warrants involves a high degree of risk. The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make
an informed investment decision with respect to its acquisition thereof.
(c) No Governmental Review. The Investor 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 Common Stock or the fairness or suitability of the
investment in Common Stock nor have such authorities passed upon or
endorsed the merits of the offering of the Common Stock or Warrants
hereunder.
(d) Authorization; Enforcement. This Agreement, the Warrants
and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of the Investor and each is
a valid and binding agreement of the Investor enforceable against the
Investor 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. The Investor has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement and each other agreement entered into
by the parties hereto in connection with the transactions contemplated by
this Agreement.
(e) Residency. The Investor is a resident of the jurisdiction
indicated on Schedule 1.
(f) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Investor and
the consummation by the Investor of the transactions contemplated hereby
and thereby will not result in a violation of the partnership agreement
or other documents of organization of the Investor.
(g) Regulatory Status. The Investor is not itself a broker-
dealer.
(h) Investment Representation. The Investor is purchasing the
Initial Shares and Initial Warrants for its own account and not with a
view to distribution other than pursuant to the 1933 Act or an exemption
therefrom. The Investor has been advised and understands that none of the
Initial Shares or the Initial Warrants or other Securities have been
registered under the 1933 Act or under the "blue sky" laws of any
jurisdiction and may be resold only if registered pursuant to the
provisions of the 1933 Act or if an exemption from registration is
available, except under circumstances where neither such registration nor
such an exemption is required by law. The Investor has been advised and
understands that the Company is issuing the Initial Shares, Initial
Warrants and, to the extent issued, other Securities in reliance upon,
among other things, the representations and warranties of the Investor
contained in this Section 2.2 in concluding that such issuance is a
"private offering" and is exempt from the registration provisions of the
1933 Act.
(i) Brokers. The Investor has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees
or similar payments by the Company or the Investor relating to this
Agreement or the transactions contemplated hereby.
Article III
Covenants
Section 3.1 Registration and Listing; Effective Registration.
Until the earlier of (i) three (3) months after the date on which all the
Initial Shares, Additional Shares and Warrant Shares are freely saleable
by the Investors without limitations pursuant to Rule 144, or (ii) a merger
in which the Company is not the surviving corporation or the consolidation
or sale of all or substantially all of the assets of the Company (the
"Termination Date"), the Company will cause the Common Stock to continue
at all times to be registered under Sections 12(b) or (g) of the Exchange
Act, will comply in all material respects with its reporting and filing
obligations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and will not take any action or file any document
(whether or not permitted by the Exchange Act or the rules thereunder) to
terminate or suspend such reporting and filing obligations. Until the
Termination Date, the Company shall use its best efforts to continue the
listing or trading of the Common Stock on the Nasdaq National Market,
Nasdaq SmallCap Market, New York Stock Exchange or American Stock
Exchange (each, an "Approved Market") and shall comply in all material
respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Approved Market on which the Common Stock is
listed.
Section 3.2 Replacement Certificates. The certificate(s)
representing the Securities held by any Investor (or then holder) may be
exchanged by the Investor (or such holder) at any time and from time to
time for certificates with different denominations representing an equal
aggregate number of Securities as requested by the Investor (or such
holder) upon surrendering the same. Lost certificates will be replaced
upon the delivery to the Company of an affidavit of loss. The Company
will deliver such substitute certificates within three trading days. No
service charge will be made for such registration of transfer or
exchange.
Section 3.3 Securities Compliance. The Company shall notify the
SEC and the Principal Market, in accordance with their requirements, of
the transactions contemplated by this Agreement, the Warrants and the
Registration Rights Agreement, and shall take all other necessary action
and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities and
the Warrants.
Section 3.4 Use of Proceeds. The Company agrees that the net
proceeds received by the Company from the sale of the Securities hereunder
shall be used for legally permitted purposes.
Section 3.5 Reservation of Additional Shares.
(a) The Company shall reserve all authorized but unissued
Securities for issuance to the Investors pursuant to the terms of this
Agreement.
(b) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the exercise of the Warrants and the sale of
Additional Shares, such number of its shares of Common Stock as shall
from time to time be sufficient to effect any such exercises, and if at
any time the number of authorized but unissued shares of Common Stock
shall not be sufficient, the Company will take such corporate action
without delay as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose, including
without limitation engaging in best efforts to promptly obtain the
requisite shareholder approval. If at any time the number of authorized
but unissued Warrant Shares or Additional Shares is not sufficient to
effect such exercises and sales in full, the Investors shall be entitled
to, inter alia, the redemption rights provided in the Registration Rights
Agreement.
Section 3.6 Form D; Blue Sky Laws. The Company agrees to file a
Form D with respect to the Securities and Warrants, as required under
Regulation D and to provide a copy thereof to the Investors and their
counsel promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall have reasonably
determined is necessary to qualify the Securities for sale to the Investors
under applicable securities or "blue sky" laws of the states of the United
States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Investors and their
counsel on or prior to the Closing Date.
Section 3.7 Publicity. Immediately following the contemplation of
the Closing, the Fill-up Closing or the Additional Investment Closing, as
applicable, the Company shall issue a press release with respect to this
Agreement and/or such transaction in a form which has been reviewed by
and is reasonably acceptable to the Investors.
Section 3.8 No Inside Information. The Company shall not provide,
and shall cause its agents not to provide, any Investor with any material
non-public information. Any such information received by an Investor may
be publicly disclosed by such Investor without liability.
Section 3.9 Transactions With Affiliates. The Company agrees that
any transaction or arrangement between it or any of its Subsidiaries and
any affiliate or employee of the Company shall be effected on an arms'
length basis in accordance with customary commercial practice and, except
with respect to grants of options and stock to service providers, including
employees, shall be approved by a majority of the Company's outside
directors. All such transactions or arrangements in existence on the
date of this Agreement have been disclosed in Schedule 3.09, and all
future arrangements shall, consistent with Section 3.8, be disclosed
promptly to the Investors.
Section 3.10 Right of First Offer. From the date hereof until the
first anniversary of the Closing Date, the Company shall not issue or sell,
or agree to issue or sell any equity or debt securities of the Company or
any of its Subsidiaries (or any security convertible into or exercisable
or exchangeable, directly or indirectly, for equity securities of the
Company or any of its subsidiaries) ("Future Securities") other than in a
registered public offering of securities ("Future Offering") unless the
Company shall have first delivered to each Investor, at least ten (10)
business days prior to the closing of such Future Offering, written
notice describing in detail the proposed Future Offering, including the
terms and conditions thereof, and providing each Investor and its
affiliates an exclusive option during the ten (10) business day period
following delivery of such notice to purchase up to the full amount of
the Future Securities being offered in the Future Offering on the same
terms as contemplated by such Future Offering (the limitations referred
to in this sentence are collectively referred to as the "Capital Raising
Limitations"); provided that if oversubscribed, the Future Offering will
be allocated to the Investors pro rata in proportion to the amount of the
Investors' purchase of Initial Shares hereunder. The Capital Raising
Limitations shall not apply to issuances of Future Securities (i) in
connection with a strategic alliance, (ii) in connection with a financing
with a commercial bank, or (iii) to officers, directors, employees or
bona fide consultants or agents of the Company in exchange for services
provided to the Company and not as a component of a financing. The
Company shall prohibit any Common Stock or other security issued by the
Company subject to the Capital Raising Limitation but not purchased by
any Investor from being converted, exercised or resold until the day
following the first anniversary of the date of the Closing and shall take
all actions necessary (including, without limitation, the issuance of a
stop transfer order) to effect such prohibition.
Section 3.11 Certain Sales. Each Investor agrees it shall not engage
in any short sales of the Common Stock with the intention of reducing the
price of the Common Stock on the Principal Market. Notwithstanding the
foregoing, the Company acknowledges that there is no presumption, nor
will there be deemed to be a presumption, that any sales by an Investor
(including short sales) are made with the intent of reducing the price of
the Common Stock on the Principal Market, even if the price of the Common
Stock on the Principal Market falls during the period in which such sales
are occurring.
Article IV
[Intentionally Left Blank]
Article V
Conditions to Closings
Section 5.1 Conditions Precedent to the Obligation of the Company to
Sell. The obligation hereunder of the Company to issue and/or sell the
Initial Shares and Initial Warrants to the Investors at the Closing and
to issue and/or sell Additional Shares and Additional Warrants elected to
be purchased by the Investors is subject to the satisfaction, at or
before the applicable closing, as the case may be, of each of the
applicable conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Investors' Representations and Warranties.
The representations and warranties of the Investors will be true and
correct in all material respects as of the date when made and as of the
Closing Date and as of any Additional Closing.
(b) Performance by the Investors. The Investors shall have
performed all agreements and satisfied all conditions required to be
performed or satisfied by the Investors at or prior to the Closing or any
Additional Closing, as the case may be, including payment of the
applicable purchase price.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.
Section 5.2 Conditions Precedent to the Obligation of the Investors
to Purchase. The obligation hereunder of the Investors to acquire and pay
for the Initial Shares and the Initial Warrants at the Closing, and the
election of the Investors to purchase Additional Shares and receive
Additional Warrants at any Additional Closing, if any, is subject to the
satisfaction, at or before the applicable closing, of each of the
applicable conditions set forth below. These conditions are for the
Investors' benefit and may be waived by the Investors at any time in
their sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the
applicable closing date as though made at that time (except for
representations and warranties expressly as of an earlier date, which
shall be true and correct in all material respects as of such date).
(b) Performance by the Company. The Company shall have
performed all agreements and satisfied all conditions required to be
performed or satisfied by the Company at or prior to the applicable
closing, including, without limitation, delivery of certificates
representing the Securities and the Warrants, as applicable.
(c) Nasdaq Trading. Trading in the Company's Common Stock
shall not have been suspended by the SEC and trading in securities
generally as reported by the Principal Market (or other Approved Market)
shall not have been suspended or limited, and the Common Stock shall be
listed on an Approved Market.
(d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by Transaction Documents. The NASD shall not
have objected or indicated that it may object to the consummation of any
of the transactions contemplated by this Agreement.
(e) Opinion of Counsel. The Investors shall have received an
opinion of counsel to the Company in the applicable form attached hereto
as Exhibit 5.2(e) and such other opinions, certificates and documents as
the Investors or their counsel shall reasonably require incident to the
closing.
(f) Registration Rights Agreement. The Company and the
Investors shall have executed and delivered the Registration Rights
Agreement in the form and substance of Exhibit 5.2(f) attached hereto.
(g) Officer's Certificate. The Company shall have delivered to
the Investors a certificate or certificates in form and substance
satisfactory to the Investors and the Investors' counsel, executed by an
officer of the Company, certifying as to satisfaction of applicable
closing conditions, incumbency of signing officers, and the true, correct
and complete nature of the Certificate of Incorporation, By-laws, good
standing and authorizing resolutions of the Company.
(h) Due Diligence. The Investors shall have completed their
business, financial and legal due diligence to their sole satisfaction.
(i) Miscellaneous. The Company shall have delivered to the
Investors such other documents relating to the transactions contemplated
by this Agreement as the Investors or their counsel may reasonable
request.
Section 5.3 Closing Date Deliveries.
(a) On the Closing Date, the Company shall deliver to the
Investor:
(i) Certificates representing the Initial Shares;
(ii) Initial Warrants in the form attached as Annex A;
(iii) The certificate referred to in Section 5.2(g) above;
(iv) The evidence of blue sky filing required by
Section 3.6;
(v) The executed Registration Rights Agreement; and
(vi) The opinion of counsel referred to in Section 5.2(e).
(b) On the Closing Date, the Investors shall deliver to the
Company:
(i) The Aggregate Purchase Price set forth on
Schedule I hereto; and
(ii) The executed Registration Rights Agreement.
Section 5.4 Company Deliveries at Fill-up and Additional Closings.
On the date of each Fill-up Closing or Additional Closing, the Company shall
deliver to the Investor:
(i) Certificates representing any applicable
Common Stock issuable to the Investors;
(ii) The certificate referred to in Section
5.2(g) above;
(iii) All applicable Warrants;
(iv) Evidence of any necessary blue sky
filings required by Section 3.6; and
(v) The opinion of counsel referred to in
Section 5.2(e) above.
Article VI
Legend and Stock
Each certificate representing the Common Stock issued hereunder
shall be stamped or otherwise imprinted with a legend substantially in
the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY
NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue within 3 trading days
certificates for Common Stock without the legend set forth above at such
time as such Common Stock is sold to a purchaser or purchasers who (in
the opinion of counsel to the seller or such purchaser(s), in form and
substance reasonably satisfactory to the Company and its counsel) are
able to dispose of such shares publicly without registration under the
Act.
Any Common Stock issued pursuant to exercise of Warrants shall
bear a legend in the same form as the legend indicated above; provided
that such legend shall be removed from the Common Stock and the Company
shall issue new certificates without such legend if such Common Stock is
registered for resale under the 1933 Act, or (iii) such Common Stock is
sold to a purchaser or purchasers who (in the opinion of counsel to the
seller or such purchaser(s), in form and substance reasonably
satisfactory to the Company and it counsel) are able to dispose of such
shares publicly without registration under the 1933 Act. Upon the
applicable trade date of each such sale, the Company agrees to issue
within 3 trading days new certificates representing such Common Stock
without such legend. The Investor agrees to sell the Common Stock
represented by the new certificates in accordance with the applicable
prospectus delivery requirements (if copies of a current prospectus are
provided to the Investors by the Company) or in accordance with an
exemption from the registration requirements of the 1933 Act.
Nothing herein shall limit the right of any holder to pledge
these securities pursuant to a bona fide margin account or lending
arrangement entered into in compliance with law, including applicable
securities laws.
Article VII
Indemnification
In consideration of the Investors' execution and delivery of
this Agreement, the Warrants and the Registration Rights Agreement and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless
the Investors and all of their partners, officers, directors, employees,
members and direct or indirect investors and any of the foregoing
persons' agents or other representatives (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) any misrepresentation or breach of any representation or warranty
made by the Company in the Transaction Documents or any other certificate
or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate or document contemplated
hereby or thereby, (c) any cause of action, suit or claim brought or made
against such Indemnitee by a third party and arising out of or resulting
from (i) the execution, delivery, performance, breach by the Company or
enforcement of the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii)
the status of the Investor or holder of the Securities or Warrants as
investors in the Company, and (d) the enforcement of this Section.
Notwithstanding the foregoing, Indemnified Liabilities shall not include
any liability of any Indemnitee to the extent arising out of such
Indemnitee's willful misconduct or fraudulent action(s). 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. Except as otherwise set forth herein,
the mechanics and procedures with respect to the rights and obligations
under this Article VIII shall be the same as those set forth in Section 6
(other than Section 6(b)) of the Registration Rights Agreement,
including, without limitation, those procedures with respect to the
settlement of claims and Company's right to assume the defense of claims.
Article VIII
9.99% Limitation.
Section 8.1 Limitation
(a) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by the
Investors as Additional Shares or upon exercise of any Warrants shall not
exceed a number that, when added to the total number of shares of Common
Stock deemed beneficially owned by the Investors (other than by virtue of
the ownership of securities that have limitations on the Investors' right
to convert, exercise or purchase similar to the limitation set forth
herein), together with all shares of Common Stock deemed beneficially
owned by the Investors' "affiliates" (as defined in Rule 144 of the 1933
Act) (the "Aggregation Parties") that would be aggregated for purposes of
determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists, would exceed 9.99% of the total
issued and outstanding shares of the Company's Common Stock (the
"Restricted Ownership Percentage"); provided that (w) each Investor shall
have the right at any time and from time to time to reduce its Restricted
Ownership Percentage immediately upon notice to the Company and (x) each
Investor shall have the right at any time and from time to time, to
increase its Restricted Ownership Percentage immediately in the event of:
(i) any consolidation or merger of the Company with or into any other
corporation or other entity or person (whether or not the Company is the
surviving corporation), or any other corporate reorganization or
transaction or series of related transactions in which in excess of 50%
of the Company's voting power is transferred through a merger,
consolidation, tender offer or similar transaction, (ii) any person (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), together with its affiliates and
associates (as such terms are defined in Rule 405 under the 1933 Act),
beneficially owns or is deemed to beneficially own (as described in Rule
13d-3 under the Exchange Act without regard to the 60-day exercise
period) in excess of 50% of the Company's voting power, (iii) there is a
replacement of more than one-half of the members of the Company's Board
of Directors which is not approved by those individuals who are members
of the Company's Board of Directors on the date thereof, in one or a
series of related transactions or (iv) a sale or transfer of all or
substantially all of the assets of the Company, determined on a
consolidated basis (each, a "Major Transaction").
The Company's obligation to issue additional shares of Common
Stock which would exceed such limit or the limit referred to in
subparagraph (b) below shall be suspended to the extent necessary until
such time, if any, as shares of Common Stock (or portions thereof, from
time to time) may be issued in compliance with such restrictions;
provided, however, that such obligation shall terminate and be of no
further force or effect after the third (3rd) anniversary of the Closing
Date with respect to any Initial Shares that have not become issuable
prior to that date solely by reason of this Section 8.1.
(b) Each time (a "Covenant Time") an Investor makes a
Triggering Acquisition (as defined below) of shares of Common Stock
pursuant to the Transaction Documents (the "Triggering Shares"), the
Investors will be deemed to covenant that they will not, during the
balance of the day on which such Triggering Acquisition occurs, and
during the 61-day period beginning immediately after that day, acquire
additional shares of Common Stock pursuant to rights-to-acquire existing
at that Covenant Time, if the aggregate amount of such additional shares
so acquired (without reducing that amount by any dispositions) would
exceed (x) 9.99% of the number of shares of Common Stock outstanding at
that Covenant Time (including the Triggering Shares) minus (y) the number
of shares of Common Stock actually owned by the Investors at that
Covenant Time (regardless of how or when acquired, and including the
Triggering Shares). "Triggering Acquisition" means with respect to any
Investor or Aggregation Party (i) the issuance of the Initial Shares;
(ii) giving of an Additional Investment Notice; (iii) an exercise of the
Warrants; or (iv) the issuance of Warrant Shares or Additional Shares or
(v) any other acquisition of Common Stock; provided, however, that with
respect to each event described in the preceding clauses (ii) or (iii),
if the associated issuance of shares of Common Stock does not occur, such
event shall cease to be a Triggering Acquisition and the related covenant
under this paragraph shall terminate. At each Covenant Time, the
Investors shall be deemed to waive any right they would otherwise have to
acquire shares of Common Stock to the extent that such acquisition would
violate any covenant given by the Investors under this paragraph.
Notwithstanding anything to the contrary in the Agreement, in the event
of a conflict between any covenant given under this paragraph and any
obligation of the Investors to buy shares pursuant to this Agreement, the
former shall supersede the latter, and the latter shall be reduced
accordingly. The Investors shall endeavor in good faith to avoid such a
conflict. For the avoidance of doubt:
(i) The covenant to be given pursuant to this
paragraph will be given at every Covenant Time and
shall be calculated based on the circumstances then
in effect. The making of a covenant at one Covenant
Time shall not terminate or modify any prior
covenants.
(ii) The Investors may therefore from time to
time be subject to multiple such covenants, each one
having been made at a different Covenant Time, and
some possibly being more restrictive than others.
The Investors must comply with all such covenants
then in effect.
Article IX
Governing Law; Miscellaneous.
Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS TO BE EXECUTED AND PERFORMED EXCLUSIVELY IN NEW
YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW
YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH
SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED
IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH
PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER THIS AGREEMENT AND
AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF
PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO
LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY
LAW. 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.
Section 9.2 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; provided that a
facsimile signature shall be considered due execution and shall be binding
upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.
Section 9.3 Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
Section 9.4 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.
Section 9.5 Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or written
agreements between the Investors, 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
(including the other Transaction Documents) 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 the Investors make any representation, warranty,
covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing
signed by the Company and the Investor, and no provision hereof may be
waived other than by an instrument in writing signed by the party against
whom enforcement is sought.
(b) The Investors may at any time elect, by notice to the
Company, to waive (whether permanently or temporarily, and subject to
such conditions, if any, as the Investors may specify in such notice) any
of their respective rights (but not obligations) under any of the
Transaction Documents to acquire shares of Common Stock from the Company,
in which event such waiver shall be binding against the Investors in
accordance with its terms.
Section 9.6 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or
hand delivery or (ii) facsimile, and will be deemed to have been
delivered upon receipt. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Telular Corporation
647 North Lakeview Parkway
Vernon Hills, IL 60061
Telephone: (847) 247-9400
Facsimile: (847) 247-0021
Attention: Chief Financial Officer
With a copy to:
Covington & Burling
1201 Pennsylvania Ave., N.W.
Washington, D.C. 20004
Telephone: (202) 662-5258
Facsimile: (202) 662-6291
Attention: Michael E. Cutler, Esq.
If to the Investors:
Halifax Fund, L.P.
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, New Jersey 07040
Telephone: (973) 313-6400
Facsimile: (973) 313-6493
Attention: Mr. Steven Weiner
AND
Elliott Associates, L.P.
712 Fifth Avenue
New York, New York 10019
Telephone: (212) 974-6000
Facsimile: (212) 974-2092
Attention: Mr. Brett Cohen
AND
Westgate International, L.P.
c/o Stonington Management Corporation
712 Fifth Avenue
New York, New York 10019
Telephone: (212) 586-2999
Facsimile: (212) 586-9467
Attention: Mr. Brett Cohen
With a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
Telephone: 212-986-6000
Facsimile: 212-986-8866
Attention: Christopher P. Davis, Esq.
Each party shall provide five (5) days prior written notice to
the other parties of any change in address, telephone number or facsimile
number. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
Section 9.7 Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns, including any
Permitted Assignee (as defined below). The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the Investor, including by merger or consolidation.
The Investors may assign some or all of their rights hereunder to the
other Investor, to an affiliate of either Investor or to an entity or
fund which has the same principal investment adviser as either Investor,
without the consent of the Company, and to others, with the written
consent of the Company (in each case, a "Permitted Assignee"); provided,
however, that any such assignment shall not release the Investors from
their obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented to such assignment and assumption.
Notwithstanding anything to the contrary contained in the Transaction
Documents, the Investor shall be entitled to pledge the Securities or
Warrants in connection with a bona fide margin account.
Section 9.8 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.
Section 9.9 Survival. The representations, warranties and agreements
of the Company and the Investors contained in the Agreement shall survive
each of the Closing and to the extent applicable, each Fill-up Closing
and each Additional Closing, in each case for a period which expires on
the second anniversary of the Closing Date.
Section 9.10 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.
Section 9.11 Remedies. Each Investor and each Permitted Assignee
shall have all rights and remedies set forth in this Agreement, the
Warrants and the Registration Rights Agreement and all rights and remedies
which such holders have been granted at any time under any other agreement
or contract and all of the rights which such holders have under any law.
Any person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond
or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by
law. Each Investor and each Permitted Assignee without prejudice may
withdraw, revoke or suspend its pursuit of any remedy at any time prior
to its complete recovery as a result of such remedy.
Section 9.12 Days. Unless the context refers to "business days" or
"trading days", all references herein to "days" shall mean calendar days.
Section 9.13 Rescission and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, wherever the Investors exercise
a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods
therein provided, then the Investors may rescind or withdraw, in their
sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice
to its future actions and rights.
Section 9.14 Obligations Absolute. Each of the Company and the
Investors agree that, its obligations under the Transaction Documents are
(subject to any contrary applicable legal or equitable principles to the
extent they may render this paragraph unenforceable and subject to other
express provisions of the Transaction Documents) unconditional and absolute
and not subject to any right of set off, counterclaim, delay or reduction.
Section 9.15 Specific Performance. The parties agree that a breach
of this Agreement would cause irreparable damage, and accordingly it is
agreed that the parties shall be entitled to an injunction or injunctions
to prevent or cure breaches of this Agreement and to enforce specifically
the terms and provisions hereof without the necessity of posting a bond
or surety.
* * * * *
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Common
Stock Investment Agreement to be duly executed as of the date and year
first above written.
COMPANY: INVESTORS:
TELULAR CORPORATION HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By:
Name: By: PALLADIN CAPITAL MANAGEMENT, LLC
Title: General Partner
By:
Name:
Title:
ELLIOTT ASSOCIATES, L.P.
<PAGE>
By:
Elliot Greenberg
Title:
By: WESTGATE INTERNATIONAL, L.P.
By: MARTLEY INTERNATIONAL, INC.
As Attorney-in-Fact
By:
Elliot Greenberg
Vice President
<PAGE>
List of Schedules
Schedule 1 Investments
Schedule 2.1(a) Organization and Qualification
Schedule 2.1(c) Capitalization
Schedule 2.1(d) No Conflicts
Schedule 2.1(g) Absence of Certain Changes
Schedule 2.1(h) Absence of Litigation
Schedule 2.1(l) Intellectual Property Rights
Schedule 2.1(t) Certain Transactions
Schedule 3.09 Transactions with Affiliates
List of Exhibits
Exhibit 5.2(e) Opinion of Counsel
Exhibit 5.2(f) Registration Rights Agreement
Exhibit 5.2(g) Officers' Certificate
<PAGE>
SCHEDULE 1
Number of Number of Aggregate
Investor Residence Initial Initial Purchase
Shares Warrants Price
Halifax Fund, L.P. New Jersey 355,556 80,000 $ 8,000,000
Elliott Associates, L.P. New York 44,444 10,000 $ 1,000,000
Westgate International Cayman Islands 44,444 10,000 $ 1,000,000
L.P.
<PAGE>
SCHEDULE 2.1(a)
ORGANIZATION AND QUALIFICATION
Telular International, Inc.
(an Illinois Corporation)
Telular Adcor-Security Products, Inc.
(a Georgia Corporation)
Telular-WD Corporation
(a New York corporation)
<PAGE>
SCHEDULE 2.1(c)
CAPITALIZATION
None
<PAGE>
SCHEDULE 2.1(d)
NO CONFLICTS
None
<PAGE>
SCHEDULE 2.1(g)
ABSENCE OF CERTAIN CHANGES
None
<PAGE>
SCHEDULE 2.1 (h)
ABSENCE OF LITIGATION
None
<PAGE>
SCHEDULE 2.1 (l)
INTELLECTUAL PROPERTY RIGHTS
None
<PAGE>
SCHEDULE 2.1 (t)
CERTAIN TRANSACTIONS
None
<PAGE>
SCHEDULE 3.09
TRANSACTIONS WITH AFFILIATES
None
<PAGE>
ANNEX A
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
OTHERWISE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED
UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
No. 2000-W[ ]
To Purchase Shares of $.01 Par Value Common Stock of
TELULAR CORPORATION
THIS CERTIFIES that, for value received, [NAME OF INVESTOR] (the
"Investor") is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or
prior to 5:00 p.m. New York City Time on March 2, 2005 (the "Termination
Date"), but not thereafter, to subscribe for and purchase from TELULAR
CORPORATION, a Delaware corporation (the "Company"), 100,000 shares of
Common Stock of the Company (the "Warrant Shares"). The "Exercise Price"
is $29.25 The Exercise Price and the number of shares for which the
Warrant is exercisable shall be subject to adjustment as provided herein.
This Warrant is being issued in connection with the Common Stock
Investment Agreement dated March 3, 2000 (the "Agreement") entered into
between the Company and the Investor.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in respect of the right to
purchase any part of the 100,000 Warrant Shares, at the office or
agency of the Company by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with
(a) the Assignment Form annexed hereto properly endorsed, and (b)
any other documentation reasonably necessary to satisfy the Company
that such transfer is in compliance with all applicable securities
laws.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights
represented by this Warrant and payment of the Exercise Price as set
forth herein will be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect
of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue or otherwise specified
herein).
<PAGE>
3. Exercise of Warrant.
(a) Exercise of the purchase rights represented by this Warrant may be
made at any time or times, in whole or in part but for not fewer
than 10,000 Warrant Shares (unless fewer than 10,000 Warrant Shares
underlie this Warrant), before the close of business on the
Termination Date, or such earlier date on which this Warrant may
terminate as provided in paragraph 11 below, by the surrender on any
business day of this Warrant and the Notice of Exercise annexed
hereto duly completed and executed, at the principal office of the
Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at
the address of such holder appearing on the books of the Company),
together with delivery to the Company by such holder of all
certifications or documentation reasonably necessary to establish,
to the satisfaction of the Company, that any such exercise has been
undertaken in compliance with all applicable federal and state
securities laws, and upon payment of the full Exercise Price of the
shares thereby purchased; whereupon the holder of this Warrant shall
be entitled to receive a certificate for the number of shares of
Common Stock so purchased. Certificates for shares purchased
hereunder shall be delivered to the holder hereof within three (3)
Trading Days after the date on which this Warrant shall have been
exercised as aforesaid. Payment of the Exercise Price of the shares
shall be by certified check or cashier's check or by wire transfer
(of same day funds) to an account designated by the Company in an
amount equal to the Exercise Price multiplied by the number of
shares being purchased.
(b) Alternatively, the Warrant holder may exercise this Warrant, in
whole or in respect of the right to surrender up to 100,000
Surrendered Shares (but for not fewer than 10,000 Deliverable
Shares, unless fewer than 10,000 Deliverable Shares underlie this
Warrant), in a "cashless" or "net-issue" exercise by delivering to
the offices of the Company or any transfer agent for the Common
Stock this Warrant, together with a Notice of Exercise specifying
the number of Warrant Shares to be delivered to such Warrant holder
("Deliverable Shares") and the number of Warrant Shares with respect
to which this Warrant is being surrendered in payment of the
aggregate Exercise Price for the Deliverable Shares ("Surrendered
Shares").
The number of Deliverable Shares shall be calculated as follows:
# of Deliverable Shares = # of Surrendered Shares x Fair Market
Value of Common Stock less Exercise Price/Fair Market Value of
Common Stock
"Fair Market Value" shall have the meaning specified in Section
12(c)
In the event that the Warrant is not exercised in full, the number
of Warrant Shares shall be reduced by the number of such Warrant
Shares for which this Warrant is exercised and/or surrendered, and
the Company, at its expense, shall within three (3) Trading Days
issue and deliver to or upon the order of the Warrant holder a new
Warrant of like tenor in the name of Warrant holder or as Warrant
holder (upon payment by Warrant holder of any applicable transfer
<PAGE>
taxes) may request, reflecting such adjusted Warrant Shares.
All exercises will be deemed to occur as of the date of the Notice
of Exercise, and certificates for shares of Common Stock purchased
hereunder shall be delivered to the holder hereof within three (3)
Trading Days after the date on which this Warrant shall have been
exercised as aforesaid. The Warrant holder may withdraw its Notice
of Exercise under Section 3(a) or 3(b) at any time thereafter if the
Company fails to timely deliver the relevant certificates to the
Warrant holder as provided in this Agreement.
(c) In lieu of delivering physical certificates representing the Common
Stock issuable upon exercise, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of the
Warrant Holder, the Company shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable
upon exercise to the Warrant Holder by crediting the account of
Warrant Holder's prime broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for
delivery described in the immediately preceding paragraph shall
apply to the electronic transmittals described herein.
The term "Trading Day" means (x) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, a day on
which there is trading on such stock exchange, or (y) if the Common
Stock is not listed on either of such stock exchanges but sale
prices of the Common Stock are reported on an automated quotation
system, a day on which trading is reported on the principal
automated quotation system on which sales of the Common Stock are
reported, or (z) if the foregoing provisions are inapplicable, a day
on which quotations are reported by National Quotation Bureau
Incorporated.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate,
all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this
Warrant or in such name or names as may be directed by the holder of
this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the
name of the holder of this Warrant, this Warrant when surrendered
for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the holder hereof; and provided further,
that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issuance
of any Warrant certificates or any certificates for the Warrant
Shares other than the issuance of a Warrant Certificate to the
Investor in connection with the Investor's surrender of a Warrant
Certificate upon the exercise of less than all of the Warrants
evidenced thereby, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons
<PAGE>
requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
6. Closing of Books. The Company will at no time close its shareholder
books or records in any manner which interferes with the timely
exercise of this Warrant.
7. No Rights as Shareholder until Exercise. Subject to Section 12 of
this Warrant and the provisions of any other written agreement
between the Company and the Investor, the Investor shall not be
entitled to vote or receive dividends or be deemed the holder of
Warrant Shares or any other securities of the Company that may at
any time be issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the
Investor, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock,
change of par value, or change of stock to no par value,
consolidation, merger, conveyance or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised as provided
herein. However, at the time of the exercise of this Warrant
pursuant to Section 3 hereof, the Warrant Shares so purchased
hereunder shall be deemed to be issued to such holder as the record
owner of such shares as of the close of business on the date on
which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned in
whole or in part (but not in respect of fewer than 10,000 Warrant
Shares unless fewer than 10,000 Warrant Shares underlie this
Warrant) by the surrender of this Warrant and the Assignment Form
annexed hereto duly executed at the office of the Company (or such
other office or agency of the Company as it may designate by notice
in writing to the registered holder hereof at the address of such
holder appearing on the books of the Company); provided, however,
that this Warrant may not be resold or otherwise transferred except
(i) in a transaction registered under the Securities Act of 1933, as
amended (the "Act"), or (ii) in a transaction pursuant to an
exemption, if available, from registration under the Act and
whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to the Company is obtained by the holder of
this Warrant to the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of any Warrant or stock certificate
representing the Warrant Shares, and in case of loss, theft or
destruction, of indemnity reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental
thereto. Upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new
Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
<PAGE>
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next
succeeding day not a legal holiday.
11. Effect of Certain Events. If at any time while this Warrant or any
portion thereof is outstanding and unexpired there shall be (i) a
sale or conveyance of all or substantially all of the Company's
assets or (ii) a transaction (by merger or otherwise) in which more
than 50% of the voting power of the Company is disposed of
(collectively, a "Sale or Merger Transaction"), in which the
consideration to be received by the Company or its shareholders
consists solely of cash, and in case the Company shall at any time
effect a Sale or Merger Transaction in which the consideration to be
received by the Company or its shareholders consists in part of
consideration other than cash, the holder of this Warrant shall have
the right thereafter to purchase, by exercise of this Warrant and
payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities
and property which it would have owned or have been entitled to
receive after the happening of such transaction had this Warrant
been exercised immediately prior thereto, subject to further
adjustment as provided in Section 12. Notwithstanding the above, a
Sale or Merger Transaction shall not be deemed to occur in the event
the Company is the acquiring entity in connection with an
acquisition by the Company.
12. Adjustments of Exercise Price and Number of Warrant Shares.
The number of and kind of securities purchasable upon exercise of
this Warrant and the Exercise Price shall be subject to adjustment
from time to time as follows:
(a) Subdivisions, Combinations and other Issuances. If the Company
shall at any time after the date hereof but prior to the expiration
of this Warrant subdivide its outstanding securities as to which
purchase rights under this Warrant exist, by split-up, spin-off, or
otherwise, or combine its outstanding securities as to which
purchase rights under this Warrant exist, the number of Warrant
Shares as to which this Warrant is exercisable as of the date of
such subdivision, split-up, spin-off or combination shall forthwith
be proportionately increased in the case of a subdivision, or
proportionately decreased in the case of a combination. Appropriate
proportional adjustments (decrease in the case of subdivision,
increase in the case of combination) shall also be made to the
Exercise Price payable per share, so that the aggregate Exercise
Price payable for the total number of Warrant Shares purchasable
under this Warrant as of such date shall remain the same as it would
have been before such subdivision or combination.
<PAGE>
(b) Stock Dividend. If at any time after the date hereof the Company
declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into Common
Stock ("Common Stock Equivalents") without payment of any
consideration by holders of Common Stock for the additional shares
of Common Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon exercise or
conversion thereof), then the number of shares of Common Stock for
which this Warrant may be exercised shall be increased as of the
record date (or the date of such dividend distribution if no record
date is set) for determining which holders of Common Stock shall be
entitled to receive such dividends, in proportion to the increase in
the number of outstanding shares (and shares of Common Stock
issuable upon conversion of all such securities convertible into
Common Stock) of Common Stock as a result of such dividend, and the
Exercise Price shall be proportionately reduced so that the
aggregate Exercise Price for all the Warrant Shares issuable
hereunder immediately after the record date (or on the date of such
distribution, if applicable), for such dividend shall equal the
aggregate Exercise Price so payable immediately before such record
date (or on the date of such distribution, if applicable).
(c) Other Distributions. If at any time after the date hereof the
Company distributes to holders of its Common Stock, other than as
part of its dissolution, liquidation or the winding up of its
affairs, any shares of its capital stock, any evidence of
indebtedness or any of its assets (other than Common Stock or cash
dividends per share of Common Stock not in excess of 3% per annum),
then the number of Warrant Shares for which this Warrant is
exercisable shall be increased to equal: (i) the number of Warrant
Shares for which this Warrant is exercisable immediately prior to
such event, (ii) multiplied by a fraction, (A) the numerator of
which shall be the Fair Market Value (as defined below) per share of
Common Stock on the record date for the dividend or distribution,
and (B) the denominator of which shall be the Fair Market Value
price per share of Common Stock on the record date for the dividend
or distribution minus the amount allocable to one share of Common
Stock of the value (as jointly determined in good faith by the Board
of Directors of the Company and the Warrant holder) of any and all
such evidences of indebtedness, shares of capital stock, other
securities or property, so distributed. For purposes of this
Warrant, "Fair Market Value" shall equal the 10 Trading Day average
closing trading price of the Common Stock on the Principal Market
for the 10 Trading Days preceding the date of determination or, if
the Common Stock is not listed or admitted to trading on any
Principal Market, the average of the closing bid and asked prices on
the over-the-counter market as furnished by any New York Stock
Exchange member firm reasonably selected from time to time by the
Company for that purpose and reasonably acceptable to the Holder,
or, if the Common Stock is not listed or admitted to trading on the
Principal Market or traded over-the-counter and the average price
cannot be determined as contemplated above, the Fair Market Value of
the Common Stock shall be as reasonably determined in good faith by
the Company's Board of Directors with the concurrence of the Holder.
The Exercise Price shall be reduced to equal: (i) the Exercise Price
in effect immediately before the occurrence of any event (ii)
multiplied by a fraction, (A) the numerator of which is the number
of Warrant Shares for which this Warrant is exercisable immediately
before the adjustment, and (B) the denominator of which is the
<PAGE>
number of Warrant Shares for which this Warrant is exercisable
immediately after the adjustment.
(d) Merger, etc. If at any time after the date hereof there shall be a
merger or consolidation of the Company with or into or a transfer of
all or substantially all of the assets of the Company to another
entity, then the Warrant Holder shall be entitled to receive upon or
after such transfer, merger or consolidation becoming effective, and
upon payment of the Exercise Price then in effect, the number of
shares or other securities or property of the Company or of the
successor corporation resulting from such merger or consolidation,
which would have been received by Warrant Holder for the shares of
stock subject to this Warrant had this Warrant been exercised just
prior to such transfer, merger or consolidation becoming effective
or to the applicable record date thereof, as the case may be. The
Company will not merge or consolidate with or into any other
corporation, or sell or otherwise transfer its property, assets and
business substantially as an entirety to another corporation, unless
the corporation resulting from such merger or consolidation (if not
the Company), or such transferee corporation, as the case may be,
shall expressly assume in writing the due and punctual performance
and observance of each and every covenant and condition of this
Warrant to be performed and observed by the Company.
(e) Reclassification, etc. If at any time after the date hereof there
shall be a reorganization or reclassification of the securities as
to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, then
the Warrant Holder shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of
shares or other securities or property resulting from such
reorganization or reclassification, which would have been received
by the Warrant Holder for the shares of stock subject to this
Warrant had this Warrant at such time been exercised.
13. Voluntary Adjustment by the Company. The Company may at its option,
at any time during the term of this Warrant, reduce but not increase
the then current Exercise Price to any amount and for any period of
time deemed appropriate by the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, the
Company shall promptly mail to the holder of this Warrant a notice
setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding and exercisable, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares
to provide for the issuance of the Warrant Shares upon the exercise
of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates
<PAGE>
for the Warrant Shares upon the exercise of the purchase rights
under this Warrant. The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the American Stock Exchange or
any domestic securities exchange upon which the Common Stock may be
listed.
16. 9.99% Limitation.
(1) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by the
Investor upon exercise pursuant to the terms hereof shall not exceed
a number that, when added to the total number of shares of Common
Stock deemed beneficially owned by such holder (other than by virtue
of the ownership of securities or rights to acquire securities that
have limitations on the Investor's right to convert, exercise or
purchase similar to the limitation set forth herein), together with
all shares of Common Stock deemed beneficially owned by the holder's
"affiliates" (as defined Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under Section
13(d) of the Securities Exchange Act of 1934, as amended, exists,
would exceed 9.99% of the total issued and outstanding shares of the
Company's Common Stock (the "Restricted Ownership Percentage");
provided that (w) each Holder shall have the right at any time and
from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company and (x) each Holder shall
have the right at any time and from time to time, to increase its
Restricted Ownership Percentage immediately in the event of a Major
Transaction (as such term is defined in the Agreement).
(2) Each time (a "Covenant Time") the Investor makes a
Triggering Acquisition (as defined below) of shares of Common Stock
(the "Triggering Shares") pursuant to the Transaction Documents (as
defined in the Agreement), the Investor will be deemed to covenant
that it will not, during the balance of the day on which such
Triggering Acquisition occurs, and during the 61-day period
beginning immediately after that day, acquire additional shares of
Common Stock pursuant to rights-to-acquire existing at that Covenant
Time, if the aggregate amount of such additional shares so acquired
(without reducing that amount by any dispositions) would exceed (x)
9.99% of the number of shares of Common Stock outstanding at that
Covenant Time (including the Triggering Shares) minus (y) the number
of shares of Common Stock actually owned by the Investor at that
Covenant Time (regardless of how or when acquired, and including the
Triggering Shares). "Triggering Acquisition" means (i) the giving
of a Purchase Notice (as defined in the Agreement), (ii) a Closing
(as defined in the Agreement), (iii) an exercise of the Warrant by
the Investor, or (iv) the issuance of Warrant Shares to the Investor
under the Warrant; provided, however, that with respect to each
event described in the preceding clauses "i" and "iii", if the
associated issuance of shares of Common Stock does not occur, such
event shall cease to be a Triggering Acquisition and the related
covenant under this paragraph shall terminate. At each Covenant
Time, the Investor shall be deemed to waive any right it would
otherwise have to acquire shares of Common Stock to the extent that
such acquisition would violate any covenant given by the Investor
under this paragraph. Notwithstanding anything to the contrary in
the Transaction Documents, in the event of a conflict between any
<PAGE>
covenant given under this paragraph and any obligation of the
Investor to buy shares pursuant to the Transaction Documents, the
former shall supersede the latter, and the latter shall be reduced
accordingly. The Investor shall endeavor in good faith to avoid
such a conflict. For the avoidance of doubt:
(i) The covenant to be given pursuant to this paragraph
will be given at every Covenant Time and shall be calculated based
on the circumstances then in effect. The making of a covenant at
one Covenant Time shall not terminate or modify any prior covenants.
(ii) The Investor may therefore from time to time be
subject to multiple such covenants, each one having been made at a
different Covenant Time, and some possibly being more restrictive
than others. The Investor must comply with all such covenants then
in effect.
17. Compliance with Securities Laws. (a) The holder hereof acknowledges
that the Warrant Shares acquired upon the exercise of this Warrant,
if not registered (or if no exemption from registration exists),
will have restrictions upon resale imposed by state and federal
securities laws. Each certificate representing the Warrant Shares
issued to the Holder upon exercise (if not registered or if no
exemption from registration exists) will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED,
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
(b) Without limiting the Investor's right to transfer, assign or
otherwise convey the Warrant or Warrant Shares in compliance with
all applicable securities laws, the Investor of this Warrant, by
acceptance hereof, acknowledges that this Warrant and the Warrant
Shares to be issued upon exercise hereof are being acquired solely
for the Investor's own account and not as a nominee for any other
party, and that the Investor will not offer, sell or otherwise
dispose of this Warrant or any Warrant Shares to be issued upon
exercise hereof except under circumstances that will not result in a
violation of applicable federal and state securities laws. Upon
exercise of this Warrant, the Investor shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company,
that the Warrant Shares of Common Stock so purchased are being
acquired solely for the Investor's own account and not as a nominee
for any other party, for investment, and not with a view toward
distribution or resale.
(c) Neither this Warrant nor any Share of Common Stock issued upon
exercise of this Warrant may be offered for sale or sold, or
otherwise transferred or sold in any transaction which would
<PAGE>
constitute a sale thereof within the meaning of the Act, unless (i)
such security has been registered for sale under the Act and
registered or qualified under applicable state securities laws
relating to the offer an sale of securities, or (ii) exemptions from
the registration requirements of the Act and the registration or
qualification requirements of all such state securities laws are
available and the Company shall have received an opinion of counsel
that the proposed sale or other disposition of such securities may
be effected without registration under the Act, such counsel and
such opinion to be satisfactory to the Company.
(d) Investor recognizes that investing in the Warrant and the Warrant
Shares involves a high degree of risk, and Investor is in a
financial position to hold the Warrant and the Warrant Shares
indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Warrant and the Warrant
Shares. The Investor is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company. The
Investor has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management, has
been given full and complete access to information concerning the
Company, and has utilized such access to its satisfaction for the
purpose of obtaining information or verifying information and have
had the opportunity to inspect the Company's operation. Investor
has had the opportunity to ask questions of, and receive answers
from, the management of the Company (and any person acting on its
behalf) concerning the Warrant and the Warrant Shares and the
agreements and transactions contemplated hereby, and to obtain any
additional information as Investor may have requested in making its
investment decision. The initial Investor in this Warrant is an
"accredited investor", as defined by Regulation D promulgated under
the Act.
18. Miscellaneous.
(A) Issue Date; Choice Of Law; Venue; Jurisdiction. THE PROVISIONS OF
THIS WARRANT SHALL BE CONSTRUED AND SHALL BE GIVEN EFFECT IN ALL
RESPECTS AS IF IT HAD BEEN ISSUED AND DELIVERED BY THE COMPANY ON
THE DATE HEREOF. THIS WARRANT SHALL BE BINDING UPON ANY SUCCESSORS
OR ASSIGNS OF THE COMPANY. THIS WARRANT WILL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK, EXCEPT FOR MATTERS ARISING UNDER THE ACT, WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES
CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE U.S. DISTRICT COURT
SITTING IN THE STATE OF CITY OF NEW YORK IN THE STATE OF NEW YORK IN
CONNECTION WITH ANY DISPUTE ARISING UNDER THIS WARRANT AND HEREBY
WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION,
INCLUDING ANY OBJECTION BASED ON FORUM NON CONVENIENS, TO THE
BRINGING OF ANY SUCH PROCEEDING IN SUCH JURISDICTION. EACH PARTY
HEREBY AGREES THAT IF THE OTHER PARTY TO THIS WARRANT OBTAINS A
JUDGMENT AGAINST IT IN SUCH A PROCEEDING, THE PARTY WHICH OBTAINED
SUCH JUDGMENT MAY ENFORCE SAME BY SUMMARY JUDGMENT IN THE COURTS OF
ANY COUNTRY HAVING JURISDICTION OVER THE PARTY AGAINST WHOM SUCH
JUDGMENT WAS OBTAINED, AND EACH PARTY HEREBY WAIVES ANY DEFENSES
AVAILABLE TO IT UNDER LOCAL LAW AND AGREES TO THE ENFORCEMENT OF
SUCH A JUDGMENT. EACH PARTY TO THIS WARRANT IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
SUCH PARTY AT ITS ADDRESS IN ACCORDANCE WITH SECTION 18(C). NOTHING
<PAGE>
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW. EACH PARTY WAIVES ITS RIGHT TO A
TRIAL BY JURY.
(b) Modification and Waiver. This Warrant and any provisions hereof may
be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the same
is sought. Any amendment effected in accordance with this paragraph
shall be binding upon the Investor, each future holder of this
Warrant and the Company. No waivers of, or exceptions to, any term,
condition or provision of this Warrant, in any one or more
instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
(c) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Investor or future holders
hereof or the Company shall be personally delivered or shall be sent
by certified or registered mail, postage prepaid, to the Investor or
each such holder at its address as shown on the books of the Company
or to the Company at the address set forth in the Agreement. All
notices under this Warrant shall be deemed to have been given when
received.
A party may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice in accordance
with the provisions of this Section 18(c).
(d) Severability. Whenever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant is held
to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Warrant in
such jurisdiction or affect the validity, legality or enforceability
of any provision in any other jurisdiction, but this Warrant shall
be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained
herein.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Warrant Holder
against impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any
Warrant Shares above the amount payable therefor on such exercise,
and (b) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares on the exercise of this
Warrant.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: March 3, 2000
TELULAR CORPORATION
By: ______________________________
Name:
Title:
Agreed and Accepted
this 3rd day of March, 2000
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: PALLADIN CAPITAL MANAGEMENT, LLC
General Partner
By:___________________
Name:_________________
Title:________________
<PAGE>
NOTICE OF EXERCISE
To: TELULAR CORPORATION
(1) The undersigned hereby elects:
(A) to purchase ________ shares of Common Stock of TELULAR
CORPORATION pursuant to the terms of the attached Warrant, and tenders
herewith payment of the Exercise Price in full, together with all
applicable transfer taxes, if any.
(B) in a "cashless" or "net-issue exercise" for, and to purchase
thereunder, ______ shares of Common Stock, and herewith makes payment
therefor with _______ Surrendered Shares.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as
is specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
(3) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as
is specified below:
Other Name: ____________________
___________________________________
(Name)
____________________ ___________________________________
(Date) (Signature)
___________________________________
(Address)
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________,
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the
name as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or
trust company. Officers of corporations and those acting in an fiduciary
or other representative capacity should file proper evidence of authority
to assign the foregoing Warrant.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of
March 3, 2000, between TELULAR CORPORATION, a Delaware corporation with
offices at 647 North Lakeview Parkway, Vernon Hills, IL 60061 (the
"Company"), HALIFAX FUND, L.P. a Cayman Islands limited partnership with
offices c/o The Palladin Group, 195 Maplewood Avenue, Maplewood, New
Jersey 07040 ("Halifax"), ELLIOTT ASSOCIATES, L.P., a Delaware limited
partnership with an office at 512 Fifth Avenue, New York, New York 10019
("Elliott"), and WESTGATE INTERNATIONAL, L.P., a Cayman Islands limited
partnership with an office c/o Stonington Management Corporation, 712
Fifth Avenue, New York, New York 10019 ("Westgate"). Each of Halifax,
Elliott and Westgate are referred to hereinafter individually as an
"Investor" and collectively as the "Investors".
W I T N E S S E T H:
WHEREAS, pursuant to that certain Common Stock Investment Agreement,
dated the date hereof, among the Company and the Investors (the "Purchase
Agreement"), the Company has agreed to sell and issue to the Investors,
and the Investors have agreed to purchase from the Company, inter alia,
an aggregate of 444,445 shares (the "Initial Shares") of the Company's
common stock, $.01 par value ("Common Stock"), and certain warrants, all
as more fully specified and subject to the terms and conditions set forth
in the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Purchase Agreement and this Agreement, the Company and the Investors
agree as follows:
1. Certain Definitions. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to
such terms in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"Holder" and "Holders" shall include the Investors and any
transferee or transferees of the Purchased Shares or Registrable
Securities which have not been sold to the public to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement and the Purchase Agreement.
The terms "register," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement
in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
"Purchased Shares" means the Initial Shares, Warrant Shares and
Additional Shares actually acquired by Holders.
<PAGE>
"Registrable Securities" shall mean: (i) the Initial Shares;
(ii) the Warrant Shares; (iii) the Additional Shares; (iv) securities
issued or issuable upon any stock split, stock dividend, recapitalization
or similar event with respect to the foregoing; and (v) any other
security issued as a dividend or other distribution with respect to, in
exchange for or in replacement of the securities referred to in the
preceding clauses; provided such securities will cease to be Registrable
Securities for purposes of this Agreement if and to the extent they
become freely saleable by the Holders pursuant to Rule 144.
"Registration Expenses" shall mean all expenses to be incurred by
the Company in connection with each Holder's registration rights under
this Agreement, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, reasonable fees and disbursements of
counsel to Holders (using a single counsel selected by a majority in
interest of the Holders) for a "due diligence" examination of the Company
and review of the Registration Statement and related documents, and the
expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Registration Statement" shall have the meaning set forth in Section
2(a)(i) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to
the Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees
and disbursements of counsel for Holders not included within
"Registration Expenses._
2. Registration Requirements. The Company shall use its best
efforts to effect the registration of the Registrable Securities
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable
blue sky or other state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act) as would permit
or facilitate the sale or distribution of all the Registrable Securities
in the manner (including manner of sale) and in all states reasonably
requested by any Holder. Such best efforts by the Company shall include,
without limitation, the following:
(a) The Company shall, as expeditiously as possible after
the Closing Date:
(i) But in any event within thirty (30) calendar days
after the Closing, prepare and file a registration statement
with the Commission pursuant to Rule 415 under the Securities
Act on Form S-3 under the Securities Act (or in the event that
the Company is ineligible to use such form, such other form as
the Company is eligible to use under the Securities Act)
covering resales by the Holders of the Registrable Securities
("Registration Statement"). If the Company issues Fill-up
Warrants (as defined in the Purchase Agreement), the Warrant
<PAGE>
Shares underlying such Fill-up Warrants shall be included in
such Registration Statement. Thereafter the Company shall use
its best efforts to cause such Registration Statement and other
filings to be declared effective as soon as possible, and in
any event prior to 90 days following the Closing Date. Without
limiting the foregoing, the Company will promptly respond to
all SEC comments, inquiries and requests, and shall request
acceleration of effectiveness at the earliest possible date.
The Company shall provide the Holders and their counsel
reasonable opportunity to review any such Registration
Statement or amendment or supplement thereto prior to filing.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be
necessary to comply with the provisions of the Act with respect
to the disposition of all securities covered by such
Registration Statement and promptly notify the Holders of the
filing and effectiveness of such Registration Statement and any
amendments or supplements.
(iii) Furnish to each Holder such numbers of copies of
a current prospectus conforming with the requirements of the
Act, copies of the Registration Statement, any amendment or
supplement thereto and any documents incorporated by reference
therein and such other documents as such Holder may reasonably
require in order to facilitate the disposition of Registrable
Securities owned by such Holder.
(iv) Register and qualify the securities covered by
such Registration Statement under the securities or "Blue Sky"
laws of all domestic jurisdictions.
(v) Notify each Holder immediately of the happening of
any event (but not the substance or details of any such events
unless specifically requested by a Holder) as a result of which
the prospectus (including any supplements thereto or thereof)
included in such Registration Statement, as then in effect,
includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to
promptly update and/or correct such prospectus.
(vi) Notify each Holder immediately of the issuance by
the Commission or any state securities commission or agency of
any stop order suspending the effectiveness of the Registration
Statement or the threat or initiation of any proceedings for
that purpose. The Company shall use its best efforts to
prevent the issuance of any stop order and, if any stop order
is issued, to obtain the lifting thereof at the earliest
possible time.
<PAGE>
(vii) Permit counsel to the Holders to review the
Registration Statement and all amendments and supplements
thereto within a reasonable period of time (but not less than
four (4) full trading days) prior to each filing, and shall not
file any document in a form to which such counsel reasonably
objects and will not request acceleration of the Registration
Statement without prior notice to such counsel.
(viii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or
markets on which the Common Stock is then listed and prepare
and file any required filings with the Nasdaq National Market
System or any exchange or market where the Common Shares are
traded.
(ix) Take all steps necessary to enable Holders to
avail themselves of the prospectus delivery mechanism set forth
in Rule 153 (or successor thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events
that may arise that the parties consider will interfere with the full
enjoyment by the Investors of their rights under this Agreement and the
Purchase Agreement (the "Interfering Events"), and (II) certain remedies
applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b) describe
the Interfering Events, provide a remedy to the Investors if an
Interfering Event occurs and provide that the Investors may require that
the Company repurchase outstanding Purchased Shares at a specified price
if certain Interfering Events are not timely cured.
Paragraph (v) provides, inter alia, that if default
adjustments required as the remedy in the case of certain of the
Interfering Events are not provided when due, the Company may be required
by the Investors to redeem outstanding Purchased Shares at a specified
price.
Paragraph (vi) provides, inter alia, that the Investors
have the right to specific performance.
The preceding paragraphs in this Section 2(b) are meant to
serve only as an introduction to this Section 2(b), are for convenience
only, and are not to be considered in applying, construing or
interpreting this Section 2(b).
(i) Delay in Effectiveness of Registration Statement.
(A) In the event that such Registration Statement has
not been declared effective within 90 days from the
Closing Date, then the Company shall pay each Holder a
Monthly Delay Payment (as defined below) for each 30 day
period (or portion thereof) that effectiveness of the
Registration Statement is delayed. In addition to the
foregoing, if the Registration Statement has not been
declared effective within 120 days after the Closing Date,
then each Holder shall have the right but not the
obligation to sell to the Company, and the Company shall
have the obligation to purchase for immediately available
funds, at any time after the 120th day after the Closing
<PAGE>
Date, any or all of its Purchased Shares for a per share
consideration (the "Mandatory Repurchase Price") equal to
120% of the original purchase price of each Purchased
Share being sold to the Company.
(B) As used in this Agreement, a "Monthly Delay
Payment" shall be a five year Warrant in substantially the
form of Annex A to the Purchase Agreement, but having an
economic value to the Holders at issuance equal to 1% of
the Purchase Price of the Purchased Shares held by a
Holder for the initial 30 day period (or portion thereof)
that the specified condition in this Section 2(b) has not
been fulfilled or the specified deficiency has not been
remedied, and 1 1/2% of the Purchase Price of the Purchased
Shares held by a Holder for each subsequent such 30 day
period (or portion thereof). Payment of the Monthly Delay
Payments and Mandatory Repurchase Price shall be due and
payable from the Company to such Holder within five (5)
business days of demand therefor. Without limiting the
foregoing, if cash payment of the Mandatory Repurchase
Price is not made within such 5 business day period, the
Holder may revoke and withdraw in whole or in part its
election to cause the Company to make such mandatory
purchase at any time prior to its receipt of such cash,
without prejudice to its ability to elect to receive the
Mandatory Repurchase Price in the future.
(ii) No Listing; Premium Price Redemption for Delisting
of Class of Shares.
(A) In the event that the Company fails, refuses or
for any other reason is unable to cause the Registrable
Securities covered by the Registration Statement to be
listed with Nasdaq National Market System or another
Approved Market at all times during the period ("Listing
Period") from the 90th day following the Closing Date
until the fifth (5th) anniversary of the Closing Date,
then each Holder shall have the right from time to time to
sell to the Company, and the Company shall have the
obligation to purchase for immediately available funds,
any or all of its Purchased Shares at the Mandatory
Repurchase Price. In the event that the Company is
statutorily prohibited from purchasing all Purchased
Shares submitted for repurchase, the Company shall only
be required (as long as such prohibition remains) to
purchase a pro rata amount from each Holder based on the
number of Purchased Shares submitted for repurchase by all
Holders. In any case where the Company fails to
repurchase any Purchased Shares as required, in addition
to any other remedies available to the Holders, the
Company shall provide to each Holder a Monthly Delay
Payment in respect of each Purchased Share not so
repurchased, for each 30-day period or portion thereof
during which such listing is not in effect. The
provisions of Section 2(b)(i)(B) shall apply to this
Section 2(b)(ii)(A).
<PAGE>
(B) In the event that shares of Common Stock of the
Company are not listed on any of the Approved Markets at
all times following the Closing Date, or are otherwise
suspended from trading and remain unlisted or suspended
for three (3) consecutive days, or if the Registrable
Securities are not listed for three (3) consecutive days
following the Closing, then at the option of each Holder
and to the extent such Holder so elects, each Holder shall
have the right to sell to the Company the Purchased Shares
held by such Holder, in whole or in part, for the
Mandatory Repurchase Price on the terms set forth in
Section 2(b)(i)(B) above.
(iii) Blackout Periods. In the event any Holder's
ability to sell Registrable Securities under the Registration
Statement is suspended for more than an aggregate of thirty
(30) days in any twelve month period ("Suspension Grace
Period"), including without limitation by reason of any
suspension or stop order with respect to the Registration
Statement or the fact that an event has occurred as a result of
which the prospectus (including any supplements thereto)
included in such Registration Statement then in effect includes
an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing (a "Blackout"), then the Company
shall provide to each Holder a Monthly Delay Payment for each
30 day period or portion thereof from and after the expiration
of the Suspension Grace Period, on the terms set forth in
Section 2(b)(i)(B) above. In addition, at any time following
the expiration of the Suspension Grace Period if the Blackout
continues for more than ten (10) additional consecutive days, a
Holder shall have the right to sell to the Company its
Purchased Shares in whole or in part for the Mandatory
Repurchase Price on the terms set forth in Section 2(b)(i)(B)
above.
(iv) Redemption for Exercise Deficiency. In the event
that the Company does not have a sufficient number of shares of
Common Stock available to satisfy the Company's obligations to
any Holder upon receipt of a notice of exercise of a Warrant or
Additional Investment Notice from an Investor, or is otherwise
unable or unwilling for any reason to issue Common Stock as
required by the Warrants or the Purchase Agreement (each, an
"Exercise Deficiency"), then:
(A) The Company shall provide to each Holder a
Monthly Delay Payment for each 30 day period or portion
thereof following the Exercise Deficiency, on the terms
set forth in Section 2(b)(i)(B) above.
<PAGE>
(B) At any time five (5) days after the commencement
of the running of the first 30-day period described above
in clause (A) of this paragraph (iv), at the request of
any Holder, the Company promptly shall purchase from such
Holder, and on the terms set forth in Section 2(b)(i)(B)
above, the outstanding Warrants to the extent required to
be issued but not issuable, in each case as a result of
the Exercise Deficiency at a price equal to the excess of
the Mandatory Repurchase Price as applied to the
applicable Warrant Shares over the applicable aggregate
Warrant exercise price.
(v) Mandatory Repurchase Price for Defaults.
(A) The Company acknowledges that any failure,
refusal or inability by the Company to perform the
obligations described in the foregoing paragraphs (i)
through (iv) will cause the Holders to suffer damages in
an amount that will be difficult to ascertain, including
without limitation damages resulting from the loss of
liquidity in the Registrable Securities and the additional
investment risk in holding the Registrable Securities.
Accordingly, the parties agree, after consulting with
counsel, that it is appropriate to include in this
Agreement the foregoing provisions for Monthly Delay
Payments and mandatory redemptions in order to compensate
the Holders for such damages. The parties acknowledge and
agree that the Monthly Delay Payments and mandatory
redemptions set forth above represent the parties' good
faith effort to quantify such damages and, as such, agree
that the form and amount of such payments and mandatory
redemptions are reasonable and will not constitute a
penalty.
(B) In the event that the Company fails to pay any
Monthly Delay Payment within 5 business days of demand
therefor, each Holder shall have the right to sell to the
Company any or all of its Purchased Shares at the
Mandatory Repurchase Price on the terms set forth in
Section 2(b)(i)(B) above.
(vi) Cumulative Remedies. The Monthly Delay Payments
and mandatory redemptions provided for above are in addition to
and not in lieu or limitation of any other rights the Holders
may have at law, in equity or under the terms of the Purchase
Agreement, the Warrants and this Agreement, including without
limitation the right to monetary contract damages and specific
performance. Each Holder shall be entitled to specific
performance of any and all obligations of the Company in
connection with the registration rights of the Holders
hereunder without the necessity of posting a bond or surety.
(c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by nationally or
regionally recognized investment bankers reasonably satisfactory to the
Company.
<PAGE>
(d) The Company shall enter into such customary agreements
for secondary offerings (including a customary underwriting agreement
with the underwriter or underwriters, if any) and take all such other
reasonable actions reasonably requested by the Holders in connection
therewith in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the Registrable
Securities are to be sold in an underwritten offering:
(i) make such representations and warranties to the
Holders and the underwriter or underwriters, if any, in form,
substance and scope as are customarily made by issuers to
underwriters in secondary offerings;
(ii) cause to be delivered to the sellers of
Registrable Securities and the underwriter or underwriters, if
any, opinions of independent counsel to the Company, on and
dated as of the effective day (or in the case of an
underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the
Registration Statement, and within ninety (90) days following
the end of each fiscal year thereafter, which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the Holders and the underwriter(s), if any, and
their counsel and covering, without limitation, such matters as
the due authorization and issuance of the securities being
registered and compliance with securities laws by the Company
in connection with the authorization, issuance and registration
thereof and other matters that are customarily given to
underwriters in underwritten offerings, addressed to the
Holders and each underwriter, if any;
(iii) cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case
of an underwritten offering, at the time of delivery of any
Registrable Securities sold pursuant thereto), and at the
beginning of each fiscal year following a year during which the
Company's independent certified public accountants shall have
reviewed any of the Company's books or records, a "comfort"
letter from the Company's independent certified public
accountants addressed to the Holders and each underwriter, if
any, stating that such accountants are independent public
accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder, and
otherwise in customary form and covering such financial and
accounting matters as are customarily covered by letters of the
independent certified public accountants delivered in
connection with secondary offerings; such accountants shall
have undertaken in each such letter to update the same during
each such fiscal year in which such books or records are being
reviewed so that each such letter shall remain current, correct
and complete throughout such fiscal year; and each such letter
and update thereof, if any, shall be reasonably satisfactory to
the Holders;
(iv) if an underwriting agreement is entered into, the
same shall include customary indemnification and contribution
provisions to and from the underwriters and procedures for
secondary underwritten offerings; and
<PAGE>
(v) deliver such documents and certificates as may be
reasonably requested by the Holders of the Registrable
Securities being sold or by the managing underwriter or
underwriters, if any, to evidence compliance with clause (i)
above and with any customary conditions contained in the
underwriting agreement, if any.
(e) The Company shall make available for inspection by the
Holders, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement,
and any attorney or accountant retained by any Holder or underwriter, all
financial and other records customary for purposes of the Holders' due
diligence examination of the Company and review of any Registration
Statement, all SEC Documents (as defined in the Purchase Agreement) filed
subsequent to the Closing, pertinent corporate documents and properties
of the Company, and cause the Company's officers, directors and employees
to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with
such Registration Statement, provided that such parties agree to keep
such information confidential.
(f) Subject to Section 2(b) above, the Company may suspend
the use of any prospectus used in connection with the Registration
Statement only in the event, and for such period of time as, such a
suspension is required by the rules and regulations of the Commission.
The Company will use its best efforts to cause such suspension to
terminate at the earliest possible date.
(g) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved Registrable Securities
within five (5) business days of any stockholders or directors meeting
formally authorizing same and shall use its best efforts to cause such
Registration Statement to become effective within thirty (30) days of
such stockholders meeting. If the Holders receive any Registrable
Securities that were not already included in a Registration Statement,
subsequent to the date such Registration Statement is declared effective,
and the Company is unable under the securities laws to add such
securities to the then effective Registration Statement, the Company
shall promptly file, in accordance with the procedures set forth herein,
an additional Registration Statement with respect to such newly
Registrable Securities. The Company shall use its best efforts to (i)
cause any such additional Registration Statement, when filed, to become
effective under the Securities Act, and (ii) keep such additional
Registration Statement effective during the period described in Section 5
below and cause such Registration Statement to become effective within 30
days of that date that the need to file the Registration Statement arose.
All of the registration rights and remedies under this Agreement shall
apply to the registration of such newly reserved shares and such new
Registrable Securities, including without limitation the provisions
providing for default payments and mandatory redemptions contained
herein.
3. Expenses of Registration. All Registration Expenses in
connection with any registration, qualification or compliance with
registration pursuant to this Agreement shall be borne by the Company,
and all Selling Expenses of a Holder shall be borne by such Holder.
<PAGE>
4. Registration on Form S-3. The Company shall use its best
efforts to remain qualified for registration on Form S-3 or any
comparable or successor form or forms, or in the event that the Company
is ineligible to use such form, such form as the Company is eligible to
use under the Securities Act.
5. Registration Period. In the case of the registration
effected by the Company pursuant to this Agreement, the Company will use
its best efforts to keep such registration effective until the earlier of
the fifth (5th) anniversary of the Closing Date or the date upon which
such Registrable Securities may be sold freely and without limitation by
the Holders under Rule 144(k) (provided that the Company's transfer agent
has accepted an irrevocable instruction from the Company to such effect,
a copy of which shall have been given and be reasonably acceptable to the
Holders and their counsel). As long as any Registrable Securities are
outstanding, the Company shall do all things necessary to make Rule 144
available to the Holders.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each
Holder, each of its officers, directors, agents and partners, and each
person controlling each of the foregoing, within the meaning of Section
15 of the Securities Act and the rules and regulations thereunder with
respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages, expenses (including the costs of
enforcing this provision) and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances under which they were made, or any violation by the
Company of the Securities Act or any state securities law or in either
case, any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse
each Holder, each of its officers, directors, agents and partners, and
each person controlling each of the foregoing, each such underwriter and
each person who controls any such underwriter, for any legal and any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided
that the Company will not be liable in any such case to a Holder to the
extent that any such claim, loss, damage, liability or expense arises out
of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or the underwriter
(if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent will not be unreasonably withheld).
<PAGE>
(b) Holder Indemnity. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the
securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors, officers,
agents and partners, and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15
of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and
partners, and each person controlling such other Holder(s) against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statement therein not
misleading in light of the circumstances under which they were made, and
will reimburse the Company and such other Holder(s) and their directors,
officers and partners, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating
and defending any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made
in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for
use therein, and provided that the maximum amount for which such Holder
shall be liable under this indemnity shall not exceed the net proceeds
received by such Holder from the sale of the Registrable Securities
pursuant to the registration statement in question. The indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid
in settlement of any such claims, losses, damages or liabilities if such
settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification
under this Section 6 (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of any such claim in any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting therefrom,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 except to the
extent that the Indemnifying Party is materially and adversely affected
by such failure to provide notice. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such non-privileged information regarding
itself or the claim in question as an Indemnifying Party may reasonably
request in writing and as shall be reasonably required in connection with
the defense of such claim and litigation resulting therefrom.
<PAGE>
7. Contribution. If the indemnification provided for in
Section 6 herein is unavailable to the Indemnified Parties in respect of
any losses, claims, damages or liabilities referred to herein (other than
by reason of the exceptions provided therein), then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages or liabilities as between the
Company on the one hand and any Holder on the other, in such proportion
as is appropriate to reflect the relative fault of the Company and of
such Holder in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on
the one hand and of any Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or by such
Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Holders or the underwriters were treated
as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraphs. The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraphs shall be
deemed to include, subject to the limitations set forth above, any legal
or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter
shall be required to contribute any amount in excess of the amount by
which (i) in the case of any Holder, the net proceeds received by such
Holder from the sale of Registrable Securities pursuant to the
registration statement in question or (ii) in the case of an underwriter,
the total price at which the Registrable Securities purchased by it and
distributed to the public were offered to the public exceeds, in any such
case, the amount of any damages that such Holder or underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements
contained in Sections 6 and 7 and the representations and warranties of
the Company referred to in Section 2(d)(i) shall remain operative and in
full force and effect regardless of (i) any termination of this Agreement
or the Purchase Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on
behalf of the Company, and (iii) the consummation of the sale or
successive resales of the Registrable Securities.
<PAGE>
9. Information by Holders. Each Holder shall furnish to the
Company such information regarding such Holder and the distribution
and/or sale proposed by such Holder as the Company may reasonably request
in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
The intended method or methods of disposition and/or sale (Plan of
Distribution) of such securities as so provided by such Investor shall be
included without alteration in the Registration Statement covering the
Registrable Securities and shall not be changed without written consent
of such Holder.
10. Replacement Certificates. The certificate(s) representing
the shares Common Stock held by any Investor (or then Holder) may be
exchanged by such Investor (or such Holder) at any time and from time to
time for certificates with different denominations representing an equal
aggregate number of shares or Common Stock, as reasonably requested by
such Investor (or such Holder) upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
11. Transfer or Assignment. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. Without limiting
the foregoing, if the Company merges with and into another corporation in
a transaction in which the Common Stock holders of the Company receives
shares of another publicly traded company, the publicly traded company
issuing such shares will assume the Company's obligations under this
Agreement as a condition of such merger. The rights granted to the
Investors by the Company under this Agreement to cause the Company to
register Registrable Securities may be transferred or assigned (in whole
or in part) to a permitted transferee or assignee of Registrable
Securities or Warrants, and all other rights granted to the Investors by
the Company hereunder may be transferred or assigned to any such
transferee or assignee; provided in each case that the Company must be
given written notice by the such Investor at the time of or within a
reasonable time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned; and provided further that the transferee or assignee of such
rights agrees in writing to be bound by the registration provisions of
this Agreement.
12. Miscellaneous.
(a) Remedies. The Company and the Investors acknowledge
and agree that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions
to prevent or cure breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof without the
necessity of posting a bond or surety, this being in addition to any
other remedy to which any of them may be entitled by law or equity.
<PAGE>
(b) Jurisdiction. EACH OF THE COMPANY AND EACH OF THE
INVESTORS (I) HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT, THE NEW YORK STATE COURTS AND OTHER
COURTS OF THE UNITED STATES SITTING IN NEW YORK COUNTY, NEW YORK FOR THE
PURPOSES OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE
SUIT, ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND THE INVESTORS
CONSENT TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN
THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW.
(c) Notices. Any notice or other communication required
or permitted to be given hereunder shall be in writing by facsimile, mail
or personal delivery and shall be effective upon actual receipt of such
notice. The addresses for such communications shall be:
to the Company:
Telular Corporation
647 North Lakeview Parkway
Vernon Hills, IL 60061
Telephone: (847) 247-9400
Facsimile: (847) 247-0021
Attention: Chief Financial Officer
with copies to:
Covington & Burling
1201 Pennsylvania Ave., N.W.
Washington, D.C. 20004
Telephone: (202) 662-5258
Facsimile: (202) 662-6291
Attention: Michael E. Cutler, Esq.
to the Investors:
Halifax Fund, L.P.
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, New Jersey 07040
Telephone: (973) 313-6400
Facsimile: (973) 313-6493
Attention: Mr. Steven Weiner
AND
<PAGE>
Elliott Associates, L.P.
712 Fifth Avenue
New York, New York 10019
Telephone: (212) 974-6000
Facsimile: (212) 974-2092
Attention: Mr. Brett Cohen
AND
Westgate International, L.P.
c/o Stonington Management Corporation
712 Fifth Avenue
New York, New York 10019
Telephone: (212) 586-2999
Facsimile: (212) 586-9467
Attention: Mr. Brett Cohen
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Facsimile: (212) 986-8866
Attention: Christopher P. Davis, Esq.
Any party hereto may from time to time change its address for notices by
giving at least five days' written notice of such changed address to the
other parties hereto.
(d) Indemnity. Each party shall indemnify each other
party against any loss, cost or damages (including reasonable attorney's
fees) incurred as a result of such parties' breach of any representation,
warranty, covenant or agreement in this Agreement.
(e) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay
or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. The
representations and warranties and the agreements and covenants of the
Company and each Investor contained herein shall survive the Closing.
(f) Execution in Counterpart. This Agreement may be
executed in two or more counterparts, all of which shall be considered
one and the same agreement, it being understood that all parties need not
sign the same counterpart.
(g) Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of
the Investors without their consent, unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of
such requirement. The Company agrees to submit for reasonable review and
comment a copy of any public announcement regarding the matters covered
by this Agreement or any agreement or document executed herewith to the
Investors and any public announcement including the name of the Investors
to the Investors, prior to the publication of such announcements.
<PAGE>
(h) Entire Agreement; Amendment. This Agreement, together
with the Purchase Agreement, the Warrants and the agreements and
documents contemplated hereby and thereby, contains the entire
understanding and agreement of the parties, and may not be amended,
modified or terminated except by a written agreement signed by the
Company plus the Holders of two-thirds (2/3) of the Registrable
Securities (as if all are Warrants were exercised).
(i) Governing Law. THIS AGREEMENT AND THE VALIDITY AND
PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT TO THE
EXTENT THAT THE LAW OF THE STATE OF DELAWARE REGULATES THE COMPANY'S
ISSUANCE OF SECURITIES.
(j) Titles. The titles used in this Agreement are used
for convenience only and are not to be considered in construing or
interpreting this Agreement.
(k) Unconditional Obligation. The obligations of the
Company hereunder are unconditional and no alleged claim against the
Investors shall excuse the Company from its obligations hereunder
(without prejudice to the Company's right to commence an action against
the Investors to assert any such claims).
<PAGE>
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
TELULAR CORPORATION
By:
Name:
Title:
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: PALLADIN CAPITAL MANAGEMENT, LLC
General Partner
By:
Name:
Title:
ELLIOTT ASSOCIATES, L.P.
By:
Elliot Greenberg
Title:
By: WESTGATE INTERNATIONAL, L.P.
By: MARTLEY INTERNATIONAL, INC.
As Attorney-in-Fact
By:
Elliot Greenberg
Vice President
