UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
NOVATEL WIRELESS, INC.
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
US66987M1099
(CUSIP NUMBER)
----------------------
Alvin G. Segel
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
(310) 277-1010
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS)
MARCH 12, 2003
(DATE OF EVENT WHICH REQUIRES
FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. US66987M1099
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Bay Investments Limited
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
Hong Kong
Number of Shares 7. Sole Voting Power: 142,857 Shares
Beneficially ------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting ------------------------------------------------------------
Person With 9. Sole Dispositive Power: 142,857 Shares
------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares (See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of March
5, 2002, as disclosed by the Issuer (as defined below) pursuant to the
Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
OO
CUSIP No. US66987M1099
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Mutual Trust Management (Bermuda) Limited as trustee of Sofaer
Funds/Global Hedge Fund
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
Cayman Islands
Number of Shares 7. Sole Voting Power: 193,857 Shares
Beneficially ------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting ------------------------------------------------------------
Person With 9. Sole Dispositive Power: 193,857 Shares
------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares
(See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of
March 5, 2002, as disclosed by the Issuer (as defined below) pursuant to
the Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
IV
CUSIP No. US66987M1099
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
RIT Capital Partners plc
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
United Kingdom
Number of Shares 7. Sole Voting Power: 55,100 Shares
Beneficially ------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting ------------------------------------------------------------
Person With 9. Sole Dispositive Power: 55,100 Shares
------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares
(See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of
March 5, 2002, as disclosed by the Issuer (as defined below) pursuant to
the Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
IV
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Sofaer Capital Inc.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
British Virgin Islands
Number of Shares 7. Sole Voting Power: 90,000 Shares
Beneficially -------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting -------------------------------------------------------------
Person With 9. Sole Dispositive Power: 90,000 Shares
-------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares
(See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of
March 5, 2002, as disclosed by the Issuer (as defined below) pursuant to
the Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
CO
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Michael Sofaer
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
United Kingdom
Number of Shares 7. Sole Voting Power: 0 Shares
Beneficially ------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting ------------------------------------------------------------
Person With 9. Sole Dispositive Power: 0 Shares
------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares
(See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of
March 5, 2002, as disclosed by the Issuer (as defined below) pursuant to
the Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
IN
CUSIP No. US66987M1099
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Seon Yong Lee
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
Korea
Number of Shares 7. Sole Voting Power: 35,714 Shares
Beneficially ------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting ------------------------------------------------------------
Person With 9. Sole Dispositive Power: 35,714 Shares
------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares
(See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of March
5, 2002, as disclosed by the Issuer (as defined below) pursuant to the
Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
IN
CUSIP No. US66987M1099
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Cornerstone Equity Investors, LLC
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
Delaware
Number of Shares 7. Sole Voting Power: 0 Shares
Beneficially ------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting ------------------------------------------------------------
Person With 9. Sole Dispositive Power: 0 Shares
------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares
(See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of March
5, 2002, as disclosed by the Issuer (as defined below) pursuant to the
Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
OO
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Cornerstone Equity Investors IV, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
Hong Kong
Number of Shares 7. Sole Voting Power: 766,905 Shares
Beneficially ------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting ------------------------------------------------------------
Person With 9. Sole Dispositive Power: 766,905 Shares
------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares
(See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of March
5, 2002, as disclosed by the Issuer (as defined below) pursuant to the
Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
PN
CUSIP No. US66987M1099
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
PS Capital LLC
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See Instructions)
PF (See Item 3)
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
Delaware
Number of Shares 7. Sole Voting Power: 468,388 Shares
Beneficially ------------------------------------------------------------
Owned by Each 8. Shared Voting Power: 3,065,300 Shares (See Item 5)
Reporting ------------------------------------------------------------
Person With 9. Sole Dispositive Power: 468,388 Shares
------------------------------------------------------------
10. Shared Dispositive Power: 1,752,821 Shares
(See Item 5)
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,065,300 Shares (See Item 5)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
[ ]
13. Percent of Class Represented by Amount in Row (11)
39.2%, based on 6,984,823 shares of Common Stock outstanding as of March
5, 2002, as disclosed by the Issuer (as defined below) pursuant to the
Securities Purchase Agreement (as defined below).
14. Type of Reporting Person
OO
SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
(a) Name of Issuer:
Novatel Wireless, Inc., a Delaware corporation (the "ISSUER").
(b) Address of Principal Executive Offices of the Issuer:
9360 Towne Centre Drive, Suite 110 San Diego, CA 92121
(c) Title of Class of Equity Securities:
Common stock, par value $0.001 per share ("COMMON STOCK").
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is being filed jointly by Bay Investments Limited
("BAY INVESTMENTS"), Mutual Trust Management (Bermuda) Limited as
trustee of Sofaer Funds/Global Hedge Fund ("MUTUAL TRUST MANAGEMENT"),
RIT Capital Partners plc ("RIT"), Sofaer Capital Inc. ("SOFAER
CAPITAL"), Michael Sofaer ("MR. SOFAER"), Seon Yong Lee ("MR. LEE"),
Cornerstone Equity Investors, LLC ("CORNERSTONE LLC"), Cornerstone
Equity Investors IV, L.P. ("CORNERSTONE") and PS Capital LLC ("PS
CAPITAL" and, together with the foregoing, "REPORTING PERSONS").
(a) Bay Investments:
Bay Investments is a limited liability entity formed under the laws of
Hong Kong. Its principal business is to seek out opportunities to
invest in the securities of companies and to acquire, hold, manage and
dispose of such securities. The principal place of business of Bay
Investments is Suite 1806, Central Plaza, 18 Harbour Road, WanChai, Hong
Kong.
With respect to each manager of Bay Investments, such person's name,
citizenship, business address, present principal occupation or
employment are set forth on Schedule I hereto and are incorporated by
reference herein.
(b) Mutual Trust Management:
Mutual Trust Management is an exempted Investment Unit Trust formed
under the laws of the Cayman Islands. Its principal business is to seek
out opportunities in the securities of companies and to acquire,
hold and manage such securities. Its principal place of business of
Mutual Management is Hemisphere House, 9 Church Street, P.O. Box HM 951,
Hamilton HM DX, Bermuda.
With respect to each manager of Mutual Trust Management, such person's
name, citizenship, business address, present principal occupation or
employment are set forth on Schedule I hereto and are incorporated by
reference herein.
(c) RIT:
RIT is an investment company formed under the laws of the United
Kingdom, whose principal place of business is Spencer House, 27 St.
James's Place London SW1A 1NR, in the United Kingdom. Its principal
business is to seek out opportunities to invest in the securities of
companies and to acquire, hold, manage and dispose of such securities.
With respect to each manager of RIT, such person's name, citizenship,
business address, present principal occupation or employment are set
forth on Schedule I hereto and are incorporated by reference herein.
(d) Sofaer Capital
Sofaer Capital is a British Virgin Islands corporation that acts as the
authorized investment advisor for Mutual Trust Management and RIT. Its
principal place of business of Sofaer Capital is PO Box 71, Craigmuir
Chambers, Road Town, Tortola, British Virgin Islands.
With respect to each director and executive officer of Sofaer Capital,
such person's name, citizenship, business address, present principal
occupation or employment are set forth on Schedule I hereto and are
incorporated by reference herein.
(e) Mr. Sofaer
Mr. Sofaer is principally employed as the director of Sofaer Capital. He
is a citizen of the United Kingdom, and his business address is Spencer
House, 27 St. James's Place, London, SW1A 1NR.
(f) Mr. Lee:
Mr. Lee is a citizen of Korea, whose address is #25-8 Sangdo 2-Dong,
Dongjak-Gu, Seoul, Korea. He is principally employed by Asianstar, Inc.
(g) Cornerstone LLC and Cornerstone IV:
Cornerstone IV is a limited partnership formed under the laws of
Delaware whose principal place of business is 717 Fifth Avenue, Suite
1100, New York, New York 10021. Its principal business, and that of
Cornerstone LLC, its parent, is to make private equity investments in
growth companies. Cornerstone LLC, a Delaware limited liability company,
is the general partner of Cornerstone IV. Mr. Robert Getz and Mr. Mark
Rossi are managers of Cornerstone LLC.
With respect to each manager of Cornerstone LLC, such person's name,
citizenship, business address, present principal occupation or
employment are set forth on Schedule I hereto and are incorporated by
reference herein.
(h) PS Capital:
PS Capital is a limited liability company formed under the laws of
Delaware whose principal place of business is 11 Hedgerow Lane,
Greenwich, Connecticut 06831. Its principal business is to seek out
opportunities to invest in the securities of companies and to acquire,
hold, manage and dispose of such securities.
With respect to each manager and member of PS Capital, such person's
name, citizenship, business address, present principal occupation or
employment are set forth on Schedule I hereto and are incorporated by
reference herein.
During the last five years, no Reporting Person has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
The Reporting Persons may be deemed to be members of a "group" within
the meaning of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"). Nothing herein shall be construed to affirm or
imply that any such group exists. To the extent that such a group exists, this
Schedule 13D shall constitute a single joint filing by the Reporting Persons, as
members of such group, pursuant to Rule 13d-1(k)(2) of the Exchange Act.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Pursuant to a Securities Purchase Agreement dated as of March 12, 2003,
among the Issuer, on the one hand, and Bay Investments, Mutual Trust Management,
RIT, Mr. Lee, Pan Invest, Mr. Peter Leparulo, Cornerstone LLC, and PS Capital
(collectively, the "INVESTORS") on the other (the "SECURITIES PURCHASE
AGREEMENT"), the Investors initially acquired for cash from the Issuer (i)
Warrants, dated March 12, 2003, to purchase 853,572 shares of Common Stock (the
"TRANCHE I WARRANTS") and (ii) Secured Convertible Subordinated Notes, dated
March 12, 2003, in the aggregate principal amount of $1.2 Million that may be
convertible, into either (a) 1,190 shares of a to be designated Series B
Convertible Preferred Stock (which in turn will be convertible into 1,700,058
shares of common stock), upon approval by the Issuer's stockholders and the
occurrence of certain other events set forth in the Securities Purchase
Agreement or (b) 535,341 shares of Common Stock not including interest payments
or penalties accruing thereon (the "TRANCHE I NOTES").
Each of the Reporting Persons used personal funds to purchase the
Tranche I Notes and the Tranche I Warrants. The Reporting Persons do not plan on
borrowing funds to consummate the remaining transactions pursuant to the
Securities Purchase Agreement.
ITEM 4. PURPOSE OF TRANSACTION.
Each of the Reporting Persons entered into the Securities Purchase
Agreement for the purpose of acquiring securities in the Issuer and causing the
approval of the transactions described in Item 5 by the Issuer's stockholders.
Because the shares of Common Stock issuable upon conversion or exercise of all
of the securities issuable to the Reporting Persons pursuant to the Securities
Purchase Agreement would represent a controlling interest in the Issuer, the
Reporting Persons may be deemed to have formed a group (under Rule 13d-5) to
acquire control of the Issuer, provided that nothing herein shall be construed
to affirm or imply that any such group exists. Pursuant to the Securities
Purchase Agreement, certain decisions and actions on behalf of the Reporting
Persons in connection with the Securities Purchase Agreement may be made by
Reporting Persons owning the majority of the shares issuable pursuant to the
Securities Purchase Agreement. Except as set forth in the preceding sentence, no
Reporting Person is legally bound to follow another Reporting Person's
instructions or actions with respect to securities of the Issuer. However, the
Reporting Persons intend to confer with respect to any actions taken with
respect to the Issuer, but are not legally bound to do so.
Each Reporting Person is considering a number of alternatives to enhance
stockholder value, including seeking to cause changes in the board of directors
of the Issuer.
Each Reporting Person retains the right, depending on market conditions
and/or other factors, to change their intent, to acquire from time to time
additional shares of Common Stock (or debt or other equity securities of the
Issuer), to exercise all or a portion of the Tranche I Warrants and/or to sell
or otherwise dispose of from time to time, in open market transactions, private
transactions, transactions with affiliates of the Issuer or otherwise, all or
part of the Tranche I Warrants or the Common Stock issuable upon exercise
thereof, the Tranche I Notes or the Common Stock issuable upon conversion
thereof, the Common Stock or any other securities in the Issuer beneficially
owned by them in any manner permitted by
law. In the event of a material change in the present plans or intentions of the
Reporting Persons, the Reporting Persons will amend this Schedule 13D to reflect
such change.
In addition to the Tranche I Notes and Tranche I Warrants, the Reporting
Persons acquired the right, subject to the fulfillment of certain conditions
under the Securities Purchase Agreement, to acquire (i) additional warrants to
purchase 1,884,733 shares of Common Stock (the "TRANCHE III WARRANTS"), (ii)
notes (the "SANMINA NOTES") repayable in the Series B Convertible Preferred
Stock convertible into 4,756,786 shares of Common Stock, not including interest
payments or penalties accruing thereon (the "SERIES B CONVERTIBLE PREFERRED"),
and (iii) an additional 1,947 shares of Series B Convertible Preferred
convertible into 2,782,142 shares of Common Stock, not including dividends
accruing thereon (the "TRANCHE III SHARES"). Beneficial ownership of these
equity securities will be acquired for investment purposes, and any resulting
change of control of the Issuer is incidental to that investment.
Pursuant to a Common Stock Voting Agreement, dated March 12, 2003 (the
"COMMON STOCK VOTING AGREEMENT"), certain holders of the Issuer's Common Stock
agreed to vote (or cause to be voted) the shares of Common Stock owned by such
holders (totaling 1,312,479 shares of Common Stock) in favor of approving and
consummating the transactions contemplated under the Securities Purchase
Agreement, including the adoption of the Certificate of Designation for the
Series B Convertible Preferred. The Reporting Persons have no pecuniary interest
in the shares of Common Stock subject to the Common Stock Voting Agreement and
disclaim beneficial ownership of such shares.
Pursuant to a Series A Preferred Stock Voting Agreement, dated as of
March 12, 2003, (the "PREFERRED STOCK VOTING AGREEMENT"), certain holders of the
Issuer's Series A Preferred Stock agreed to vote (or cause to be voted) the
shares of Series A Preferred Stock (totaling 2,100 shares, or more than
50% of the issued and outstanding Series A Preferred Stock of the Issuer) in
favor of approving and consummating the amendment and restatement of the
Certificate of Designation of the Issuer's Series A Preferred Stock contemplated
by the Securities Purchase Agreement. The Reporting Persons have no pecuniary
interest in the shares of Series A Preferred Stock subject to the Preferred
Stock Voting Agreement and disclaim beneficial ownership of such shares.
Pursuant to the Securities Purchase Agreement, the Issuer agreed to
permit one designee of the representative of the Reporting Persons to attend,
but not to vote on any proposals at, all meetings of the Issuer's Board of
Directors (the "BOARD") and its committees. The Issuer also agreed to cause its
Board (subject to its fiduciary duties) to take steps to nominate for election
to the Board up to four individuals (subject to proportionate increase if the
size of the Board is increased beyond seven members) designated by the
Investors' representative.
Except for the foregoing, the Reporting Persons have no plans or
proposals which relate to or would result in any of the actions enumerated in
clauses (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As noted in Item 4 above, the Reporting Persons may be deemed to have formed
a group (under Rule 13d-5) provided that nothing herein shall be construed to
affirm or imply that any such group exists. Accordingly, each Reporting Person
is reporting that it has shared voting power with respect to 3,065,300 shares,
representing (i) the 1,752,821 shares beneficially owned in the aggregate by the
Reporting Persons (including the 835,714 shares purchased pursuant to the
Securities Purchase Agreement), and (ii) the shares owned by other stockholders
of the Issuer which are subject to the Common Stock Voting Agreement. The
Reporting Persons have no pecuniary interest in the shares referred to in clause
(ii) and disclaim beneficial ownership of such shares. In addition, the
Reporting Persons have reported that they have shared dispositive power with
respect the 835,714 shares beneficially owned in the aggregate by the Reporting
Persons pursuant to the Securities Purchase Agreement. Except for shares set
forth in clause (b) below with respect to such Reporting Person, each Reporting
Person disclaims beneficial ownership of all shares as to which shared voting
control and shared dispositive control is reported pursuant to this Schedule
13D.
(b) See clause (a) above with respect to shared voting and dispositive power. In
addition:
(i) Bay Investments may be deemed to have sole dispositive and voting
power with respect to 142,857 shares of Common Stock, all of which is issuable
pursuant to warrants acquired by Bay Investments pursuant to the Securities
Purchase Agreement.
(ii) Mutual Trust Management may be deemed to have sole dispositive and
voting power with respect to 193,857 shares of Common Stock, of which 142,857
shares are issuable pursuant to warrants acquired by Mutual Trust Management
pursuant to the Securities Purchase Agreement.
(iii) RIT may be deemed to have sole dispositive and voting power with
respect to 51,000 shares of Common Stock, of which no shares are issuable
pursuant to warrants acquired by RIT pursuant to the Securities Purchase
Agreement.
(iv) Sofaer Capital may be deemed to have sole dispositive and voting
power with respect to 90,000 shares of Common Stock, of which no shares are
issuable pursuant to warrants acquired by Sofaer Capital pursuant to the
Securities Purchase Agreement and shared voting and dispositive power with
respect to 248,957 shares of common stock.
(v) Mr. Sofaer may be deemed to have shared dispositive and voting power
with respect to 248,957 shares of Common Stock.
(vi) Mr. Lee may be deemed to have sole dispositive and voting power with
respect to 35,714 shares of Common Stock, all of which is issuable pursuant to
warrants acquired pursuant to the Securities Purchase Agreement.
(vii) PS Capital may be deemed to have sole dispositive and voting power
with respect to 468,388 shares of Common Stock, of which 442,857 shares are
issuable pursuant to warrants acquired by PS Capital pursuant to the Securities
Purchase Agreement.
(viii) Cornerstone LLC may be deemed to have shared dispositive and voting
power with respect to 766,905 shares of Common Stock.
(ix) Cornerstone IV may be deemed to have sole dispositive and voting
power with respect to 766,905 shares of Common Stock, of which 71,429 shares are
issuable pursuant to warrants acquired by Cornerstone IV pursuant to the
Securities Purchase Agreement.
(c) Except as described in Items 3 and 4 above, none of the Reporting
Persons has effected any transactions in the Common Stock during the
past sixty days, with the exception of the following:
Nature of
Date on Number Transaction
and Market and Title Price (purchase, sale,
Name of in which of Shares Per option, gift, Parties to
Reporting Person Effected Involved Share inheritance, etc.) Transaction
- ------------------ -------------- -------------- ------------ --------------------- ------------------
RIT 01/07/2003 5000 1.217 Purchase Fahnestock
- ------------------ -------------- -------------- ------------ --------------------- ------------------
RIT 01/08/2003 5000 1.1 Purchase Fahnestock
- ------------------ -------------- -------------- ------------ --------------------- ------------------
RIT 01/10/2003 20000 1.0693 Purchase Sungard
- ------------------ -------------- -------------- ------------ --------------------- ------------------
RIT 02/05/2003 100 0.68 Purchase Sungard
- ------------------ -------------- -------------- ------------ --------------------- ------------------
RIT 02/20/2003 14200 0.87 Purchase Sungard
- ------------------ -------------- -------------- ------------ --------------------- ------------------
RIT 02/21/2003 3500 0.8257 Purchase Sungard
- ------------------ -------------- -------------- ------------ --------------------- ------------------
RIT 02/25/2003 7300 0.7487 Purchase Sungard
- ------------------ -------------- -------------- ------------ --------------------- ------------------
Sofaer 03/17/2003 30000 0.8935 Purchase Sungard
Capital
- ------------------ -------------- -------------- ------------ --------------------- ------------------
Sofaer 03/21/2003 60000 1.1337 Purchase Sungard
Capital
- ------------------ -------------- -------------- ------------ --------------------- ------------------
Mutual Trust 01/13/2003 21500 1.0517 Purchase Sungard
Management
- ------------------ -------------- -------------- ------------ --------------------- ------------------
Mutual Trust 01/14/2003 29500 1.1829 Purchase Sungard
Management
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The Reporting Persons acquired the right, subject to the fulfillment of certain
conditions under the Securities Purchase Agreement, to acquire (i) the Tranche
III Warrants, (ii) the Sanmina Notes, and (iii) the Tranche III Shares. If,
following the closing of the purchase of the Tranche III Shares and Tranche III
Warrants, the Issuer issues any capital securities (including Common Stock), the
Securities Purchase Agreement entitles the Investors to purchase an amount of
the new issuance such that each Reporting Person will hold the same
percentage of the Issuer's outstanding capital securities both before and after
the new issuance.
The Series B Convertible Preferred will be a new series of the Issuer's
preferred stock that will initially be held solely by the Investors. Pursuant to
the Securities Purchase Agreement, the Issuer agreed not to issue any shares of
Series B Convertible Preferred in excess of the number of shares issued pursuant
to the Securities Purchase Agreement without the prior written consent of
Investors holding a majority of the shares of Common Stock issuable upon
exercise or conversion of the Series B Convertible Preferred.
Pursuant to a Registration Rights Agreement dated as of March 12, 2003
(the "REGISTRATION RIGHTS AGREEMENT"), between the Issuer and the Investors, the
Issuer granted the Investors certain demand, "incidental" and "shelf"
registration rights with respect to the shares of Common Stock that they
beneficially own.
Pursuant to the Common Stock Voting Agreement, certain holders of the
Issuer's Common Stock agreed to vote (or cause to be voted) the shares of Common
Stock owned by him/her in favor of approving and consummating the transactions
contemplated under the Securities Purchase Agreement, including the adoption of
the Certificate of Designation for the Series B Convertible Preferred.
Pursuant to a Series A Voting Agreement, certain holders of the Issuer's
Series A Preferred Stock agreed to vote (or cause to be voted) the shares of
Series A Preferred Stock owned by him/her in favor of approving the amendment
and restatement of the Certificate of Designation for the Series A Convertible
Preferred contemplated by the Purchase Agreement.
Pursuant to the Securities Purchase Agreement, the Issuer agreed to
permit one representative of the Investors to attend, but not to vote on any
proposals at, all meetings of the Board and its committees. The Issuer also
agreed to cause its Board (subject to its fiduciary duties) to take such steps
as are necessary to nominate for election to the Board up to four individuals
(subject to proportionate increase if the size of the Board is increased beyond
7 members).
The foregoing descriptions of the Securities Purchase Agreement, the
Tranche I Warrants, the Tranche I Notes, the Common Stock Voting Agreement, the
Series A Voting Agreement, and the Registration Rights Agreement are not, and do
not purport to be, complete and are qualified in their entirety by reference to
copies of the same filed as Exhibits 99.2 through 99.7 hereto, respectively, and
incorporated herein in their entirety by this reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit Description
- ------- -----------
99.1 Joint Reporting Agreement, dated March 24, 2003, among Bay Investments
Limited, Mutual Trust Management (Bermuda) Limited as trustee of Sofaer
Funds/Global Hedge Fund, RIT Capital Partners plc, Sofaer Capital Inc.,
Michael Sofaer, Seon Yong Lee, Cornerstone Equity Investors, LLC
Cornerstone Equity Investors IV, L.P., and PS Capital LLC.
99.2 Securities Purchase Agreement, dated March 12, 2003, among Novatel
Wireless, Inc. and Bay Investments Limited, Mutual Trust Management
(Bermuda) Limited as trustee of Sofaer Funds/Global Hedge Fund, RIT
Capital Partners plc, Mr. Seon Yong Lee, Pan Invest & Trade Inc., Mr.
Peter Leparulo, Cornerstone Equity Investors, LLC, and PS Capital LLC.
99.3 Form of Warrant to purchase Common Stock, dated March 12, 2003, issued
by Novatel Wireless, Inc. to Bay Investments Limited, Mutual Trust
Management (Bermuda) Limited as trustee of Sofaer Funds/Global Hedge
Fund, Mr. Seon Yong Lee, Pan Invest & Trade Inc., Mr. Peter Leparulo,
Cornerstone Equity Investors, LLC, and PS Capital LLC.
99.4 Form of Secured Convertible Subordinated Note, dated March 12, 2003,
issued by Novatel Wireless, Inc. to Bay Investments Limited, Mutual
Trust Management (Bermuda) Limited as trustee of Sofaer Funds/Global
Hedge Fund, Mr. Seon Yong Lee, Pan Invest & Trade Inc., Mr. Peter
Leparulo, Cornerstone Equity Investors, LLC, and PS Capital LLC.
99.5 Voting Agreement, dated March 12, 2003, between Henry Sweetbaum, as
Purchaser Representative, and certain stockholders of Novatel Wireless,
Inc.
99.6 Series A Preferred Stock Voting Agreement, dated March 12, 2003, between
Henry Sweetbaum, as Purchaser Representative, and certain holders of the
Series A Convertible Preferred Stock of Novatel Wireless, Inc.
99.7 Registration Rights Agreement, dated March 12, 2003, between Novatel
Wireless, Inc. and Bay Investments Limited, Mutual Trust Management
(Bermuda) Limited as trustee of Sofaer Funds/Global Hedge Fund, RIT
Capital Partners plc, Mr. Seon Yong Lee, Pan Invest & Trade Inc., Mr.
Peter Leparulo, Cornerstone Equity Investors, LLC, and PS Capital LLC.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that this statement is true, complete and correct.
March 24, 2003 Bay Investments Limited
By: /s/ H. J. Pudwill
--------------------------------------------
Name: Horst J. Pudwill
Title: Director
March 24, 2003 Mutual Trust Management (Bermuda) Limited as
trustee of Sofaer Funds/Global Hedge Fund
By: /s/ Michael Sofaer
--------------------------------------------
Name: Michael Sofaer
Title: Managing Director
March 24, 2003 RIT Capital Partners plc
By: /s/ Michael Sofaer
--------------------------------------------
Name: Michael Sofaer
Title: Managing Director
March 24, 2003 Seon Yong Lee
By: /s/ Seon Yong Lee
--------------------------------------------
Seon Yong Lee
March 24, 2003 Cornerstone Equity Investors, LLC
By: /s/ Robert H. Getz
--------------------------------------------
Name: Robert H. Getz
Title: Managing Director
March 24, 2003 Cornerstone Equity Investors IV, L.P.
By: Cornerstone Equity Investors, LLC
By: /s/ Robert H. Getz
----------------------------------------
Name: Robert H. Getz
Title: Managing Director
March 24, 2003 Michael Sofaer
By: /s/ Michael Sofaer
--------------------------------------------
Michael Sofaer
March 24, 2003 Sofaer Capital Inc.
By: /s/ Michael Sofaer
--------------------------------------------
Title: Managing Director
PS Capital LLC
March 24, 2003
By: /s/ Stanley M. Blau
--------------------------------------------
Name: Stanley M. Blau
Title: Managing Director
SCHEDULE I
a) Bay Investments:
The name, citizenship and present principal occupation or employment of,
and the number of shares of the Issuer owned by, each manager of Bay Investments
is set forth below. The business address of each of the persons listed below is
Suite 1806, Central Plaza, 18 Harbour Road, WanChai, Hong Kong.
Name Present Principal Occupation
- ---- ----------------------------
Horst J. Pudwill Managing Director, Bay Investments
Barbara A. Pudwill Managing Director, Bay Investments
Citizenship: Hong Kong
Number of shares owned: 178,481 (not including shares disclosed in this 13D)
b) Mutual Trust Management:
The name, citizenship and present principal occupation or employment of
each manager of Mutual Trust Management is set forth below.
Name Present Principal Occupation
- ---- ----------------------------
Sofaer Capital Manager & Investment Advisor, Mutual Trust
Management & RIT
Citizenship: British Virgin Islands
c) RIT:
The name, citizenship and present principal occupation or employment of
each manager of RIT is set forth below.
Name Present Principal Occupation
- ---- ----------------------------
Sofaer Capital Manager & Investment Advisor, Mutual Trust
Management & RIT
Citizenship: British Virgin Islands
d) Sofaer Capital
The name, citizenship and present principal occupation or employment of
each director of Sofaer Capital is set forth below.
Name Present Principal Occupation
- ---- ----------------------------
Michael Sofaer [Managing Director, Sofaer Capital]
Citizenship: United Kingdom
g) Cornerstone LLC & Cornerstone IV
Cornerstone LLC is the general partner of Cornerstone IV.
The name, citizenship and present principal occupation or employment of
each manager of Cornerstone LLC, the general partner of Cornerstone IV, is set
forth below. The business address of each of the persons listed below is 717
Fifth Avenue, Suite 1100, New York, New York 10021.
Name Present Principal Occupation
- ---- ----------------------------
Robert H. Getz Managing Director, Cornerstone LLC
Mark Rossi Managing Director, Cornerstone LLC
Citizenship: United States
h) PS CAPITAL
The name, citizenship and present principal occupation or employment of,
and the number of shares of the Issuer owned by, each manager and member of PS
Capital is set forth below. The business address of each of the persons listed
below is 11 Hedgerow Lane Greenwich, Connecticut 06831.
Members:
Name Present Principal Occupation Present Business Address
- ---- ---------------------------- ------------------------
Hass Corporation Investment in private companies 880 Fifth Ave., Suite 19A, New York,
NY 10021
CBK LLC Investment in private companies 11 Hedgerow Lane, Greenwich,
CT 06831
Blau Group LLC Investment in private companies 880 Fifth Ave., Suite 19A, New York,
NY 10021
Ronald Posner Chairman, PS Capital 880 Fifth Ave., Suite 19A, New York,
NY 10021
Managers:
Name of Manager Present Principal Occupation Present Business Address
- --------------- ---------------------------- ------------------------
Stanley M. Blau Managing Director, PS Capital 880 Fifth Avenue, New York,
NY 10021
Alan Kessman Managing Director, PS Capital 11 Hedgerow Lane, Greenwich,
CT 06831
Henry Sweetbaum Managing Director, PS Capital 880 Fifth Ave., Suite 19A, New York,
NY 10021
Ronald Posner Chairman, PS Capital 880 Fifth Ave., Suite 19A, New York,
NY 10021
Citizenship: With the exception of Mr. Sweetbaum, who is a citizen of the
United Kingdom, each of the members of PS Capital is a citizen of the United
States.
Number of shares owned: Mr. Kessman owns 500 shares of the Issuer's Common
Stock.
During the last five years, none of the individuals or entities set forth on
this Schedule I has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
-5-
Exhibit Index
Exhibit Description
- ------- -----------
99.1 Joint Reporting Agreement, dated March 24, 2003, among Bay Investments
Limited, Mutual Trust Management (Bermuda) Limited as trustee of Sofaer
Funds/Global Hedge Fund, RIT Capital Partners plc, Sofaer Capital, Inc.,
Michael Sofaer, Seon Yong Lee, Cornerstone Equity Investors, LLC,
Cornerstone Equity Investors IV, L.P. and PS Capital LLC.
99.2 Securities Purchase Agreement, dated March 12, 2003, among Novatel
Wireless, Inc. and Bay Investments Limited, Mutual Trust Management
(Bermuda) Limited as trustee of Sofaer Funds/Global Hedge Fund, RIT
Capital Partners plc, Mr. Seon Yong Lee, Pan Invest & Trade Inc., Mr.
Peter Leparulo, Cornerstone Equity Investors, LLC, and PS Capital LLC.
99.3 Form of Warrant to purchase Common Stock, dated March 12, 2003, issued
by Novatel Wireless, Inc. to Bay Investments Limited, Mutual Trust
Management (Bermuda) Limited as trustee of Sofaer Funds/Global Hedge
Fund, Mr. Seon Yong Lee, Pan Invest & Trade Inc., Mr. Peter Leparulo,
Cornerstone Equity Investors, LLC, and PS Capital LLC.
99.4 Form of Secured Convertible Subordinated Note, dated March 12, 2003,
issued by Novatel Wireless, Inc. to Bay Investments Limited, Mutual
Trust Management (Bermuda) Limited as trustee of Sofaer Funds/Global
Hedge Fund, Mr. Seon Yong Lee, Pan Invest & Trade Inc., Mr. Peter
Leparulo, Cornerstone Equity Investors, LLC, and PS Capital LLC.
99.5 Voting Agreement, dated March 12, 2003, between Henry Sweetbaum, as
Purchaser Representative, and certain stockholders of Novatel Wireless,
Inc.
99.6 Series A Preferred Stock Voting Agreement, dated March 12, 2003, between
Henry Sweetbaum, as Purchaser Representative, and certain holders of the
Series A Convertible Preferred Stock of Novatel Wireless, Inc.
99.7 Registration Rights Agreement, dated March 12, 2003, between Novatel
Wireless, Inc. and Bay Investments Limited, Mutual Trust Management
(Bermuda) Limited as trustee of Sofaer Funds/Global Hedge Fund, RIT
Capital Partners plc, Mr. Seon Yong Lee, Pan Invest & Trade Inc., Mr.
Peter Leparulo, Cornerstone Equity Investors, LLC, and PS Capital LLC.
Exhibit 99.1
JOINT REPORTING AGREEMENT REGARDING
STATEMENTS ON SCHEDULE 13D
This JOINT SCHEDULE 13D FILING AGREEMENT, made as of March 24, 2003 among
the undersigned.
In accordance with Rule 13d-1(k)(1) promulgated under the Securities
Exchange Act of 1934, as amended, the undersigned agree as follows:
1. Joint Filing. The undersigned agree to file from time to time joint
Schedules 13D with respect to the beneficial ownership of securities by the
parties hereto (or by such other parties as may be deemed beneficially owned by
any of such parties), and to file jointly any further amendments or schedules
that may be required with respect to such ownership.
2. Representations and Warranties. Each of the parties hereto represents
and warrants to the other that all information regarding such party provided for
use in preparing a Schedule 13D pursuant hereto and any amendments thereto shall
be accurate and complete.
3. Responsibility for Filing. Each party hereto retains responsibility, as
required by the Securities and Exchange Commission's regulations, for the timely
filing of any and all Schedules 13D and any amendments thereto and for the
completeness and accuracy of the information concerning such party. Each party
hereto is not responsible, however, for the completeness and accuracy of the
information concerning the other party hereto, unless such party knows or has
reason to believe that such information is inaccurate.
4. Disclaimer of Group Status. Each party disclaims the existence of a
"group" with any other party, and as between any and all entities which may
beneficially own directly the securities which may be reported in one or more
Schedules 13D pursuant hereto, except as otherwise expressly stated in such
Schedules.
March 24, 2003 Bay Investments Limited
By: /s/ H. J. Pudwill
-----------------
Title: Director
Mutual Trust Management (Bermuda)
Limited as trustee of Sofaer
Funds/Global Hedge Fund
By: /s/ Michael Sofaer
------------------
Title: Authorised signatory of
Sofaer Capital, Inc.
Authorised Investment Advisor
RIT Capital Partners plc
By: /s/ Michael Sofaer
------------------
Title: Authorised signatory of
Sofaer Capital, Inc.
Authorised Investment Advisor
Sofaer Capital Inc.
By: /s/ Michael Sofaer
-------------------
Title: Director
Michael Sofaer
By: /s/ Michael Sofaer
------------------
Soen Yong Lee
By: /s/ Soen Yong Lee
------------------
Cornerstone Equity Investors, LLC
By: /s/ Robert H. Getz
------------------
Title: Managing Director
Cornerstone Equity Investors IV, L.P.
By: Cornerstone Equity Investors, LLC
By: /s/ Robert H. Getz
-------------------------
Title: Managing Director
- 2 -
PS Capital LLC
By: /s/ Stanley M. Blau
-------------------
Title: Managing Director
- 3 -
Exhibit 99.2
SECURITIES PURCHASE AGREEMENT
BETWEEN
NOVATEL WIRELESS, INC.
AND
THE PURCHASERS LISTED ON THE SIGNATURE PAGES HERETO
MARCH 12, 2003
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made as of March
12, 2003, between NOVATEL WIRELESS, INC. (the "COMPANY"), a corporation
organized under the laws of the State of Delaware, and the purchasers listed on
the signature pages hereto ("PURCHASERS").
WHEREAS, the Company wishes to sell to Purchasers up to 6,755 shares of
the Company's Series B Convertible Preferred Stock, $0.001 par value (the
"SERIES B PREFERRED STOCK"), together with warrants to purchase shares of common
stock, on the terms and conditions hereinafter provided; and
WHEREAS, as an inducement to Purchasers to enter into this Agreement,
certain executive officers and directors of the Company (the "PRINCIPAL
STOCKHOLDERS") have entered into agreements with Purchasers (the "VOTING
AGREEMENTS") pursuant to which, among other things, each Principal Stockholder
has agreed to vote all of such Principal Stockholder's shares of the Company's
capital stock in favor of the transactions contemplated hereby and has granted
Horst Pudwill ("PUDWILL") an irrevocable proxy to so vote its shares; and
WHEREAS, as a further inducement to Purchasers to enter into this
Agreement, certain holders of the Company's Series A Preferred Stock have
entered into agreements with Purchasers (the "SERIES A VOTING AGREEMENTS")
pursuant to which, among other things, each such holder has agreed to vote all
of such holder's of Series A Preferred Stock in favor of certain amendments to
the Certificate of Designation of the Series A Preferred Stock and has granted
Pudwill an irrevocable proxy to so vote its shares;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained in this Agreement, the Company and Purchasers agree as follows:
1. Purchase and Sale of Securities. On the terms and subject to the
conditions set forth herein:
1.1. The Company agrees to issue and sell to the Purchasers,
and Purchasers agree (severally and not jointly) to purchase from the Company
(in accordance with the allocation set forth under the heading "Tranche I
Amount" on the signature page for each Purchaser) for an aggregate of $1.2
Million, at the First Closing (as defined below), (i) secured subordinated
convertible promissory notes in the aggregate principal amount of $1.2 Million
in substantially the form of Exhibit A hereto (the "TRANCHE I NOTES"), which
shall be convertible into an aggregate Twelve Hundred (1,200) shares of Series B
Preferred Stock on the terms and conditions set forth therein (the "TRANCHE I
CONVERSION SHARES") and (ii) warrants to purchase an aggregate of 857,143 shares
of the Company's common stock, $0.001 par value ("COMMON STOCK") at a price of
Seventy Cents ($0.70) per share, in substantially the form of Exhibit B hereto
(the "FIRST ISSUANCE WARRANTS"). One half of the First Issuance Warrants shall
be allocated proportionately to the Purchasers in accordance with their
percentage participation indicated on the signatures pages hereto. The remaining
half of the First Issuance Warrants shall be issued to PS Capital LLC.
-1-
1.2. The Company understands and acknowledges that, following
the Stockholders Meeting (as defined in Section 5.2), the Purchasers intend to
purchase, from Sanmina-SCI Corporation ("SANMINA") and Sanmina Canada ULC
("SANMINA ULC") certain of Sanmina's rights (including, without limitation, the
right to receive payments from the Company, but excluding Sanmina's and Sanmina
ULC's warrants to purchase Company stock) under the Settlement Agreement and
Mutual Release, dated January 12, 2002, by and the Company, Sanmina, and Sanmina
ULC (as amended, the "SETTLEMENT AGREEMENT"), together with the Security
Agreement, dated as of January 12, 2002, between the Company and Sanmina (the
"SANMINA SECURITY AGREEMENT"). Such purchase shall be referred to herein as the
"SANMINA PURCHASE." Each Purchaser hereby commits to the other Purchasers to
contribute its allocable share (in accordance with the allocation set forth
under the heading "Sanmina Tranche Percentage" on the signature page for each
Purchaser) toward the Sanmina Purchase. The Company hereby consents to the
Sanmina Purchase and acknowledges and agrees that, upon the consummation of the
Sanmina Purchase, the Company shall no longer have any right to receive any
product or inventory in exchange for such payments, and such payments shall be
due and payable (pursuant to the terms of the Sanmina Notes described below)
unconditionally without any obligation of Sanmina or the Purchasers or any
defense or right of set off. Accordingly, at the Sanmina Closing, the Company
shall (i) execute and deliver to Sanmina a mutual release of all claims; (ii)
execute and deliver to the Purchasers secured promissory notes in the form of
Exhibit C hereto in the aggregate principal amount equal to $3,505,000, with a
note payable to each Purchaser for the principal amount of such Purchaser's
percentage share of the Sanmina Purchase (as shown under the heading "Sanmina
Tranche Percentage" on the signature page for such Purchaser) times $3.505
Million (the "SANMINA NOTES"), together with a Security Agreement in the form of
Exhibit D hereto securing the obligations under the Sanmina Notes; and (iii)
execute and deliver to the Purchasers and Sanmina such other documents as may be
requested by the Purchasers to terminate (subject to Sanmina's concurrence and
execution of required documents, where necessary) all other obligations arising
out the Settlement Agreement other than the payments contemplated by the Sanmina
Notes. Shares of Series B Preferred Stock issued as repayment of any portion of
the Sanmina Notes are herein referred to as the "SANMINA CONVERSION SHARES." At
the Sanmina Closing, Purchaser shall pay to the Company (or, at its election,
cause Sanmina to repay to the Company at such time) cash in an amount equal to
(i) the sum of all payments made by the Company to Sanmina under the Settlement
Agreement between February 14, 2003 and the Sanmina Closing Date and (ii)
amounts paid by the Company under Section 1.9 of the Tranche I Notes to the
extent such amounts were used to pay Sanmina and applied toward or reduced the
Purchasers' aggregate purchase price paid to Sanmina. Each Purchaser
acknowledges and agrees that the Tranche I Notes and the Sanmina Notes shall be
pari passu in seniority (including seniority of liens) notwithstanding any
previous priority or seniority of Sanmina under the Settlement Agreement and
Sanmina Security Agreement. Notwithstanding the foregoing, at the request of the
Purchaser Representative, the Company and each Purchaser shall cooperate in
order to restructure the transactions at the Sanmina Closing, so long as such
restructuring does not cause the Company or any Purchaser to incur any
additional liability or obligation or reduce the benefits to the Company or such
Purchaser of the Sanmina Purchase. Without limiting the foregoing, such
restructuring may include the formation of a partnership or other legal entity
by the Purchasers (with ownership in accordance with the percentages indicated
on the signature pages hereto)
-2-
which would consummate the Sanmina Purchase and assume from Sanmina all
obligations of Sanmina under the Settlement Agreement, provided all obligations
and claims of the parties under the Settlement Agreement (other than as set
forth in the Sanmina Notes and the Sanmina Security Agreement) shall then be
immediately cancelled and waived by the parties at the Sanmina Closing.
1.3. The Company agrees to issue and sell to Purchasers, and
Purchasers agree (severally and not jointly) to purchase from the Company (in
accordance with the allocation set forth under the heading "Tranche III Amount"
on the signature page for each Purchaser) for an aggregate of $2.05 Million, at
the Third Closing (as defined below), (i) an additional 2,050 shares of Series B
Preferred Stock, at a purchase price of One Thousand Dollars ($1,000) per share
(the "THIRD ISSUANCE SHARES," and collectively with the Tranche I Conversion
Shares and the Sanmina Conversion Shares, the "SHARES"), and (ii) warrants to
purchase 1,983,929 shares of Common Stock at an exercise price of Seventy Cents
($0.70) per share, in substantially the form of Exhibit B hereto (the "THIRD
ISSUANCE WARRANTS"; and, together with the First Issuance Warrants, the
"WARRANTS"). The shares issuable upon exercise of the Warrants are herein
referred to as the "WARRANT SHARES." The Series B Preferred Stock shall have the
terms designated in the Certificate of Designation of Series B Convertible
Preferred Stock attached hereto as Exhibit E hereto (the "CERTIFICATE OF
DESIGNATION").
2. Closing; Deliveries.
2.1. First Closing. The closing of the purchase and sale of
the Tranche I Notes and First Issuance Warrants (the "FIRST CLOSING") shall
occur at the offices of Irell & Manella LLP ("I&M"), 1800 Avenue of the Stars,
Suite 900, Los Angeles, California 90067, as soon as practicable (but not more
than five (5) business days) after the satisfaction or waiver of all of the
conditions to the First Closing set forth herein, or at such other place and
time as the Company and Purchasers may agree. At the First Closing, the Company
shall deliver to Purchasers the executed Tranche I Notes, the First Issuance
Warrants and an executed Security Agreement in the form of Exhibit F hereto, and
Purchasers shall deliver to the Company $1.2 Million (less fees to be paid
pursuant to Section 11.2) in immediately available funds. At the First Closing,
the parties hereto will also duly execute and deliver the Registration Rights
Agreement in the form of Exhibit G hereto (the "REGISTRATION RIGHTS AGREEMENT")
and Purchasers shall receive (i) an opinion from Latham & Watkins LLP covering
matters described in Exhibit H; (ii) the Voting Agreements in the form of
Exhibit I hereto from certain officers and directors of the Company; (iii) the
Series A Voting Agreements in the form of Exhibit J hereto from holders of a
majority of the outstanding shares of Series A Preferred Stock and (iv)
resolutions of the Board of Directors of the Company authorizing the
transactions contemplated hereby, certified by the Company's secretary in form
reasonably satisfactory to Purchasers.The date on which the First Closing occurs
is hereinafter referred to as the "FIRST CLOSING DATE."
2.2. Sanmina Closing. The closing of the Sanmina Purchase (the
"SANMINA CLOSING") shall occur at the offices of I&M at a date and time to be
agreed upon between the Purchasers and Sanmina (the "SANMINA CLOSING DATE"), the
which is expected to be one day following the satisfaction or waiver of all of
the conditions to the Sanmina Closing set forth herein. If the Sanmina Closing
is not to occur on the first day
-3-
following approval of the Shareholder Proposals the Stockholders Meeting, the
Purchasers shall notify the Company at least two days prior to the anticipated
Sanmina Closing Date to allow the Company to effect delivery of executed
documents. At the Sanmina Closing, the Company shall execute and deliver to
Purchasers and Sanmina the documents described in Section 1.2 above.
2.3. Third Closing. The closing of the purchase and sale of
the Third Issuance Shares and Third Issuance Warrants (the "THIRD CLOSING")
shall occur at the offices of I&M as soon as practicable (but not more than two
(2) business days) after the satisfaction or waiver of all of the conditions to
the Third Closing set forth herein, or at such other place and time as the
Company and Purchasers may agree. At the Third Closing, the Company shall
deliver to Purchasers one or more stock certificates evidencing the Third
Issuance Shares and the executed Third Issuance Warrants, in each case
registered in the name of the applicable Purchaser, and each Purchaser shall pay
to the Company the purchase price for its Third Issuance Shares and Third
Issuance Warrants (less fees to be paid pursuant to Section 11.2) by check or
wire transfer. At the Third Closing, the parties will also duly execute and
deliver the Registration Rights Agreement and Purchasers shall receive (i) an
opinion from Latham & Watkins LLP covering matters described in Exhibit K and
(ii) a certificate from an officer of the Company (in form reasonably
satisfactory to Purchasers) certifying that the resolutions of the Board of
Directors of the Company authorizing the transactions contemplated hereby, as
delivered at the First Closing, have not been amended or modified since the
First Closing Date and that such resolutions are the only resolutions relating
to this Agreement and the transactions contemplated hereby. The date on which
the Third Closing occurs is hereinafter referred to as the "THIRD CLOSING DATE."
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchasers as follows (it being agreed that for
purposes of the representations and warranties set forth in this Section 3, the
term the "COMPANY" shall be deemed to refer to the Company and each of its
Subsidiaries on a consolidated basis, except where the context reasonably
indicates otherwise):
3.1. Organization and Qualification. Except as disclosed on
Schedule 3.1, the Company and each of its Subsidiaries (as defined in Section
3.3) is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation, has all requisite corporate power
and authority to conduct its business as currently conducted and (assuming
approval by the holders of the Common Stock of the Shareholder Proposals, as
defined in Section 5.2, below, and approval by the holders of the Series A
Preferred Stock of the Certificate Amendments, as defined in Section 5.7, below)
to enter into and to carry out and perform its obligations under the Transaction
Documents. For purposes of this Agreement, "TRANSACTION DOCUMENTS" shall
include: (a) this Agreement, (b) the Registration Rights Agreement, (c) the
Warrants, (d) the Tranche I Notes, (e) the Sanmina Notes, (f) the Security
Agreements delivered at the First Closing and Sanmina Closing, (g) the
Certificate of Designation, and (h) the Certificate Amendments, as defined in
Section 5.7. Except as set forth on Schedule 3.1, the Company and each of its
Subsidiaries is duly qualified as a foreign corporation and is in good standing
in each jurisdiction in which the failure to be so qualified or in good standing
could reasonably be expected to have a material adverse effect on the business,
properties, results of operations, financial condition
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or prospects of the Company and its Subsidiaries taken as a whole (a "MATERIAL
ADVERSE EFFECT").
3.2. Authorized Capital Stock. As of the date hereof, the
authorized capital stock of the Company consists of (a) Three Hundred Fifty
Million (350,000,000) shares of Common Stock, $0.001 par value per share; and
(b) Fifteen Million (15,000,000) shares of Preferred Stock, $0.001 par value per
share, Thirty Thousand (30,000) shares of which are designated as Series A
Preferred Stock. As of March 4, 2003, there were 6,984,823 shares of Common
Stock outstanding and 3,675 shares of Series A Preferred Stock outstanding, and
the Company has issued no shares of capital stock since that date other than as
may have been issued pursuant to the exercise of then outstanding warrants and
options and conversion of Series A Preferred Stock. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. The Company has reserved for issuance 1,400,000
shares of Common Stock upon exercise of options granted under its Amended and
Restated 2000 Stock Incentive Plan and Amended and Restated 1997 Stock Option
Plan (collectively, the "COMPANY OPTION PLANS"). As of March 4, 2003 and the
date hereof, there were not outstanding or existing any options, warrants,
rights (including conversion or preemptive rights, other than those described in
Section 3.6.1) or agreements for the purchase or acquisition from the Company or
any Subsidiary of any shares of its capital stock or any securities exercisable
for or convertible into shares of its capital stock, except for options
described above and warrants described on Schedule 3.2 hereto, which sets forth
for each warrant or group of identical warrants (x) the number of shares subject
to such warrants, (y) the exercise price thereof as of the date hereof without
giving effect to the transactions contemplated under this Agreement and (z) the
exercise price thereof after giving effect to the issuance of all Warrants and
Shares contemplated hereby (for which purpose it shall be assumed that the
Tranche I Notes and the Sanmina Notes are converted in full into Series B
Preferred Stock under the terms thereof). Upon consummation of the Third Closing
(assuming repayment of the Sanmina Notes entirely in Series B Preferred Stock),
Purchasers shall collectively own Series B Preferred Stock convertible into
54.94% of the Fully Diluted Common Shares of the Company. "FULLY DILUTED COMMON
SHARES" shall mean the sum of (i) all shares of Common Stock issued and
outstanding as of March 4, 2003, (ii) all shares of Common Stock issuable upon
conversion of outstanding Series A Preferred Stock (as of March 4, 2003) and
Series B Preferred Stock (making the aforementioned assumptions regarding the
conversion in full of the Tranche I Notes and Sanmina Notes into Series B
Preferred Stock under the terms thereof) and (iii) all shares of common stock
issuable upon exercise of options and warrants outstanding at March 4, 2003
which, after giving effect to all antidilution adjustments arising out of the
transactions contemplated hereby and the issuance of all Shares and Warrants
contemplated to be issued hereunder, will have an exercise price less than or
equal to $1.05 per share. There are no outstanding obligations of the Company or
any Subsidiary to purchase, redeem or otherwise acquire any equity interest
therein.
3.3. Subsidiaries. Except as set forth in Schedule 3.3, the
Company (a) owns no equity securities of any other corporation, limited
partnership or similar entity, directly or through any Subsidiary, beneficially
or of record and (b) is not, directly or through any Subsidiary, a participant
in any joint venture, partnership or similar arrangement. "SUBSIDIARY" means any
corporation, joint venture, limited liability company,
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partnership, association or other business entity of which more than 50% of the
total voting power of stock or other equity entitled to vote generally in the
election of directors or managers thereof is owned or controlled, directly or
indirectly, by the Company.
3.4. Due Execution, Delivery and Performance of the Agreement; No
Conflict.
3.4.1. Subject to (A) approval by the requisite holders of the
Common Stock and Series A Preferred Stock, voting together as a single class of
(i) the issuance and sale to Purchasers of the Third Issuance Shares; (ii) the
Certificate of Designation; (iii) the Certificate Amendments; and (iv) delivery
of Series B Preferred Shares upon conversion or payment of the Tranche I Notes
and Sanmina Notes and (B) approval by the requisite holders of Series A
Preferred Stock of the Certificate Amendments, the execution, delivery and
performance of the Transaction Documents have been duly authorized by all
necessary corporate action on the part of the Company. The Company's Board of
Directors (the "BOARD") has approved the Certificate of Designation and the
Certificate Amendments. This Agreement has been, and, when executed and
delivered at the First Closing, the Sanmina Closing or the Third Closing (as the
case may be), the other Transaction Documents will be, duly executed and
delivered by the Company and constitute, or when executed and delivered at the
First Closing, the Sanmina Closing or the Third Closing (as the case may be)
will constitute, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except as may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium and other similar laws
and equitable principles relating to or limiting creditors' rights generally and
(b) the effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or at law, concepts of materiality;
reasonableness, good faith and fair dealing, and the discretion of the court
before which any proceeding therefore may be brought. The Company has delivered
to Purchasers executed Voting Agreements from holders of 1,312,479 shares
(17.91%) of the Common Stock outstanding and a majority of the Series A
Preferred Stock outstanding.
3.4.2. The execution, delivery and, subject to obtaining the
consents and waivers set forth in Schedule 3.4, performance by the Company of
the Transaction Documents and the consummation of the transactions contemplated
thereby will not, (i) modify (except for modifications deemed to occur by virtue
of the waivers and consents given by third parties with respect to the
transactions contemplated hereby), breach or constitute grounds for the
occurrence or declaration of a default under or give rise to a right to
terminate, or accelerate or permit the acceleration of any performance required
by the terms of, any material agreement, license, indenture, undertaking or
other instrument to which the Company or any Subsidiary is a party or by which
they or any of their assets may be bound or affected, (ii) violate any provision
of law or any regulation or any order, judgment, or decree of any court or other
agency of government to which the Company or any Subsidiary is subject, (iii)
violate any provision of the Amended and Restated Certificate of Incorporation
(the "CERTIFICATE OF INCORPORATION") or Bylaws of the Company, or (iv) result in
the creation or imposition of (or the obligation to create or impose) any
material liens, mortgages, pledges, charges, claims or other encumbrances
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(collectively, "LIENS") on any of the Company's or any Subsidiary's properties,
other than as may be created as a consequence of the Security Agreement.
3.5. State Takeover Statutes. The Board has approved the terms of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby (including without limitation the
sale and issuance to Purchasers of the Shares, Tranche I Notes, the Sanmina
Notes and Warrants pursuant to this Agreement) and such approval constitutes
approval of such transactions by the Board under the provisions of Section 203
of the Delaware General Corporation Law (the "DGCL"), and constitutes all
actions necessary to ensure that the restrictions contained in Section 203 of
the DGCL will not apply to any Purchaser or its affiliates in connection with or
following such transactions. No other state takeover statute is applicable to
the transactions contemplated by this Agreement and the other Transaction
Documents.
3.6. Issuance, Sale and Delivery of the Shares and Warrants.
3.6.1. When issued in compliance with all the provisions of
this Agreement (including the delivery of payment therefor), the Shares
will be validly issued, fully paid and nonassessable, and will be free of
any Liens, other than restrictions on transfer under applicable state
and/or federal securities laws and any Liens created or imposed by the
Purchasers. The sale of the Shares and Warrants is not subject to any
preemptive rights or rights of first refusal that have not been properly
waived or complied with, except for participation rights granted to the
holders of Series A Preferred Stock in December 2001 and Common Stock
issued in September 2002 (which collectively entitle those holders to
purchase securities in an amount up to 6.3% of the total number of
securities offered hereby, after giving effect to any sales to such
holders pursuant to such participation rights). Upon the filing with the
Delaware Secretary of State and effectiveness of the Certificate of
Designation, the rights, privileges and preferences of the Series B
Preferred Stock set forth in the Certificate of Designation will
constitute the valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except as may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium and
other similar laws and equitable principles relating to or limiting
creditors' rights generally and (b) the effect of general principles of
equity, whether enforcement is considered in a proceeding in equity or at
law, concepts of materiality; reasonableness, good faith and fair dealing,
and the discretion of the court before which any proceeding therefore may
be brought.
3.6.2. The shares of Common Stock that are issuable upon
conversion of the Series B Preferred Stock or exercise of the Warrants,
when so issued and paid for, will be validly issued, fully paid and
nonassessable, and will be free of any Liens, other than restrictions on
transfer under state and/or federal securities laws and any Liens created
or imposed by the Purchasers. Issuance of such shares of Common Stock is
not subject to any preemptive rights or rights of first refusal that have
not been properly waived or complied with.
3.7. Governmental Consent. No consent, approval or authorization of, or
declaration or filing with, any federal, state, local, municipal, foreign or
other governmental body or authority ("GOVERNMENTAL AUTHORITY") on the part of
the Company or any Subsidiary is required for the execution and delivery of the
Transaction Documents or the
-7-
sale of the Shares to Purchasers pursuant to this Agreement, except for the
filing of the Certificate of Designation.
3.8. SEC Reports; Financial Statements.
3.8.1. The Company has filed all forms, reports and documents
required to be filed by it with the SEC since and including the filing
date of the Registration Statement with respect to the Company's initial
public offering (the "SEC REPORTS"). The SEC Reports (x) were prepared in
accordance with the requirements of the Securities Act of 1933, as amended
(the "SECURITIES ACT") and the Securities and Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed,
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading.
3.8.2. Except as set forth on Schedule 3.8.2 hereto, each of
(i) the financial statements (including, in each case, any notes thereto)
of the Company included in the SEC Reports, (ii) the unaudited
consolidated statement of operations for the Company and its Subsidiaries
for the year ended December 31, 2002 attached as Schedule 3.8.2(a) hereto
and (iii) the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 2002 attached as Schedule 3.8.2(b) hereto
(the "UNAUDITED BALANCE SHEET"; and items (i), (ii) and (iii) being
collectively referred to herein as the "FINANCIAL STATEMENTS"), was
prepared in accordance with GAAP (subject, in the case of unaudited
statements, to the absence of footnotes thereto and to normal and
recurring year-end adjustments which were not and are not expected to be
material in amount) and each fairly presented the financial position,
results of operations and cash flows of the Company as at the respective
dates thereof and for the respective periods indicated therein (except as
may be indicated in the notes thereto) in all material respects.
3.8.3. Except as set forth in Schedule 3.8.3 hereto, as of the
date hereof, the Company has no liability or obligation (whether accrued,
absolute, contingent or otherwise and whether or not required to be
reflected on the balance sheet under GAAP) other than (a) liabilities and
obligations reflected on the Unaudited Balance Sheet, and (b) liabilities
or obligations incurred since December 31, 2002 in the ordinary course of
business consistent with past practice, none of which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect.
3.8.4. The Company has previously furnished to the Purchaser
Representative true, correct and complete copies of all "management"
letters issued by the Company's independent auditors since January 1,
2000, and all letters from the Company's outside counsel to its auditors
delivered since January 1, 2000 in connection with any audits.
3.9. Proxy Statement. The Proxy Statement described in Section 5.3,
including any amendments or supplements thereto, shall not, at the time filed
with the SEC, as of the date mailed to the Company's stockholders or at the time
of the Stockholders Meeting (as defined in Section 5.2), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the
-8-
statements therein, in light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information provided by Purchasers specifically
for use in the Proxy Statement. The Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
3.10. Absence of Litigation. Except as set forth on Schedule 3.10 hereto,
there is no material claim, action, proceeding or investigation (or collection
of similar or related claims, actions, proceedings or investigations which in
the aggregate would be material) pending, and, to the knowledge of the Company
or its Subsidiaries, there is no material claim, action, proceeding or
investigation threatened, against the Company or any Subsidiary, or any director
or officer of the Company or any Subsidiary or any property or asset of the
Company or any Subsidiary, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign. Except as set
forth on Schedule 3.10 hereto, neither the Company or any Subsidiary, nor any of
their properties or assets, is subject to any order, writ, judgment, injunction,
decree, determination or award.
3.11. Absence of Certain Changes or Events. Except as disclosed in the
Company's Form 10-Q dated September 30, 2002 or in subsequent SEC Reports or in
Schedule 3.11, or as specifically contemplated by this Agreement, since
September 30, 2002, there has not been (i) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate
which has had or could reasonably be expected to have a Material Adverse Effect;
(ii) any damage, destruction or loss, whether or not covered by insurance; (iii)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of the
Company (for purposes of clarification, other than the accrual of dividends on
the Series A Preferred Stock); (iv) any increases by the Company or its
Subsidiaries in the wages, salaries, compensation, pension or other fringe
benefits or perquisites payable to any executive officer or director, grants by
the Company or any Subsidiary of any severance or termination pay, execution by
the Company or any Subsidiary of any contract to make or grant any severance or
termination pay, or payments by the Company or any Subsidiary of any bonus, in
each case with respect to any such executive officer or director, other than
pursuant to pre-existing agreements or arrangements; or (v) entry into any
commitment or transaction material to the Company or any Subsidiary (including,
without limitation, any material borrowing or sale of assets).
3.12. Compliance with Laws; Permits. The Company and each of its
Subsidiaries has at all times materially complied, and it is currently in
material compliance, with all material applicable statutes, rules, regulations
and orders of the United States, Canada and all states or provinces in which the
Company or any Subsidiary is engaged in business and has obtained all required
licenses, permits and other approvals of any Governmental Authority (as defined
in Section 3.7).
3.13. Material Contracts. Except as set forth on Schedule 3.13, each of the
contracts required to be filed as material contracts as exhibits to the SEC
Reports (the "MATERIAL CONTRACTS") (including all amendments, modifications and
waivers) (a) has been filed with the SEC, (b) to the knowledge of the Company,
has been duly authorized,
-9-
executed and delivered by the parties thereto, (c) remains in full force and
effect to the extent of its terms without any amendment, modification or waiver
not reflected in the Material Contracts, (d) to the knowledge of the Company, is
binding on the parties thereto in accordance with and to the extent of its terms
and applicable laws, and (e) is not subject to, and the Company has not received
any written notice threatening or declaring, termination as a result of any
alleged uncured breach or default. The Company and each Subsidiary has performed
all material obligations required to be performed by it to date under each
Material Contract, and neither the Company nor any Subsidiary is in material
breach or default under any Material Contract. To the Company's knowledge,
without a specific review having been conducted by the Company, no other party
to any Material Contract is in material breach or default thereunder or in
material violation thereof, and no condition exists that with notice or lapse of
time or both would constitute a material violation thereof or a material default
thereunder. Without limiting the foregoing, except as set forth on Schedule
3.13, any failure by the Company or any Subsidiary to receive an unqualified
opinion of its auditors in connection with its annual audit will not modify,
breach or constitute grounds for the occurrence or declaration of a default
under or give rise to a right to terminate, or accelerate or permit the
acceleration of any performance required by the terms of, any agreement,
license, indenture, undertaking or other instrument to which the Company or any
Subsidiary is a party or by which it or any of its assets may be bound or
affected.
3.14. Intellectual Property Rights.
3.14.1. The Company and its Subsidiaries own or have licenses
to use registered copyrights, copyright registration and copyright applications,
trademark registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names, Internet domain names and
other intellectual property rights (collectively, "INTELLECTUAL PROPERTY
RIGHTS") which are sufficient to carry on the business of the Company and its
Subsidiaries as presently conducted, except for Intellectual Property Rights the
failure of which to own or have licenses to use would not reasonably be expected
to result in a Material Adverse Effect.
3.14.2. The operation of the business of the Company and its
Subsidiaries does not, and except as identified on Schedule 3.14, neither the
Company nor any Subsidiary has received any notice from any person claiming that
the business of the Company or any Subsidiary does, infringe or misappropriate
the Intellectual Property Rights of any person, violate any export control law
or regulation, violate the rights of any person (including rights to privacy or
publicity), or constitute unfair competition or trade practices under any
applicable laws.
3.14.3. Except as set forth on Schedule 3.14, to the knowledge
of the Company, no person is infringing or misappropriating any Intellectual
Property Rights owned or licensed by the Company or any Subsidiary or engaging
in other conduct that may diminish or undermine such Intellectual Property
Rights, such as the disclosure of Company or Subsidiary confidential
information.
3.14.4. The Company and its Subsidiaries have taken all
reasonable steps to protect their rights in confidential information and trade
secrets of the Company and its Subsidiaries or provided by any other person to
the Company or a Subsidiary subject to a
-10-
duty of confidentiality. Without limiting the foregoing, the Company and its
Subsidiaries have, and enforce, a policy requiring each of its executive
officers and research and development personnel to execute proprietary
information, confidentiality and invention and copyright assignment agreements,
and all such individuals have executed such an agreement.
3.15. Certain Matters Regarding Employees. To the knowledge of the
Company, no officer or key employee of the Company or any Subsidiary is subject
to any contract, agreement, undertaking, commitment or instrument (including any
no hire or non-competition agreements) which would impair his or her ability to
perform the services on behalf of Company or any Subsidiary contemplated to be
performed by such officers or key employee.
3.16. Tax Matters.
3.16.1. The Company and its Subsidiaries (i) have timely filed
all material Tax Returns required to be filed by it as of the date hereof, and
(ii) have timely paid, or have made appropriate provision on their balance
sheets (in accordance with GAAP) for, all Taxes due or (to the Company's
knowledge) claimed to be due from it by any taxing authority with respect to any
liability for Taxes except where such failure, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Company. All Tax Returns described in clause (i) are complete and accurate in
all material respects. With respect to periods commencing on or after December
31, 2002, neither the Company nor any of its Subsidiaries has incurred any
liability for Taxes which could reasonably be expected to have a Material
Adverse Effect other than (i) as reflected on the audited balance sheet of the
Company as of December 31, 2001 contained in the Financial Statements (the
"AUDITED BALANCE SHEET") or the Unaudited Balance Sheet, or (ii) federal and
state income taxes payable on the Company's income after December 31, 2002.
There are no material Liens with respect to Taxes upon any of the Company's or
any Subsidiary's properties or assets, except for current Taxes not yet due.
3.16.2. To the Company's knowledge, none of the Tax Returns of
the Company or its Subsidiaries have been or are currently being audited or
examined by the Internal Revenue Service. Except to the extent reserved for in
the Audited Balance Sheet, no material issue of which the Company or any of its
Subsidiaries has received written notice has been raised by a taxing authority
in any audit or examination which reasonably could be expected to result in a
proposed deficiency, penalty or interest for any other period, which could
reasonably be expected to have a Material Adverse Effect on the Company.
3.16.3. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Returns
required to be filed by, or which include or are treated as including, the
Company or any of its Subsidiaries.
3.16.4. Neither Company nor any Subsidiary is involved in or
subject to any joint venture, partnership or other arrangement or contract which
is treated as a partnership for federal, state, local or foreign income tax
purposes.
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3.16.5. All material elections with respect to Taxes affecting
the Company or any of its Subsidiaries as of the date hereof are set forth in
Schedule 3.16. No consent to the application of section 341(f)(2) of the Code
(as defined below) has been filed with respect to any property or assets held,
acquired, or to be acquired by the Company or any of its Subsidiaries.
3.16.6. There are no tax sharing agreements or similar
arrangements with respect to or involving the Company or any of its
Subsidiaries.
3.16.7. Neither the Company nor any Subsidiary was included,
nor are any of them includible, in any consolidated or unitary Tax Return with
any corporation other than such a return of which the Company is the common
parent corporation.
3.16.8. Neither the Company nor any Subsidiary has agreed to,
and they are not required to, make any material adjustment under section 481(a)
of the Internal Revenue Code of 1986, as amended (the "CODE").
3.16.9. Neither the Company nor any of its Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
contract, agreement or arrangement covering any current or former employee or
consultant of the Company or its Subsidiaries that under certain circumstances
could require it to make or give rise to any payments that are not deductible as
a result of the provisions set forth in Section 280G of the Code or the treasury
regulations thereunder or would result in an excise tax to the recipient of any
such payment under Section 4999 of the Code, except as set forth on Schedule
3.16.9.
3.16.10. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
"TAX" or "TAXES", as the context may require, include: (i) any
income, alternative or add-on minimum tax, gross income, gross receipts,
franchise, profits, sales, use, ad valorem, business license, withholding,
payroll, employment, excise, stamp, transfer, recording, occupation, premium,
property, value added, custom duty, severance, windfall profit or license tax,
including estimated taxes relating to any of the foregoing, or other similar tax
or other like assessment or charge of similar kind whatsoever together with any
interest and any penalty, addition to tax or additional amount imposed by any
taxing authority responsible for the imposition of any such Tax; or (ii) any
liability of a person for the payment of any taxes, interest, penalty, addition
to tax or like additional amount resulting from the application of Treas. Reg.
Section 1.1502-6 or comparable provisions of any Governmental Authority (as
defined in Section 3.7) in respect of a consolidated or combined return.
"TAX RETURN" means any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any taxing authority in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any law
relating to any Tax.
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3.17. Title to Properties; Liens and Encumbrances. The Company has
good and marketable title to all of its material owned properties and assets and
such properties and assets are not subject to any Liens, except for (a) Liens
under the Loan and Security Agreement dated November 29, 2001, as amended, with
Silicon Valley Bank, Commercial Finance Division and Liens under the Security
Agreement dated January 12, 2002 with Sanmina, (b) immaterial Liens which arise
in the ordinary course of business (including without limitation Liens from
current taxes not yet due and payable), and (c) Liens which individually or in
the aggregate could not reasonably be expected to have a Material Adverse Effect
on the Company or its material properties. All material leases, subleases,
conditional sale contracts and other agreements pursuant to which the Company
leases or otherwise uses real or personal property (collectively, "LEASES") are
in good standing and are valid and effective in accordance with their respective
terms. The Company has performed its obligations in all material respects to
date under all such Leases.
3.18. Employee Benefit Plans. Except as listed in Schedule 3.18,
neither the Company nor any Subsidiary maintains, sponsors, or contributes to
any plan, program or arrangement (other than a "Foreign Plan" as defined below)
that is (a) an "employee welfare benefit plan," as that term is defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (b) any other plan, arrangement or policy of the Company (whether
written or oral) providing for insurance coverage (including self-insured
arrangements), disability benefits, supplemental unemployment benefits, or for
deferred compensation, bonuses, stock options, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or
benefits, or (c) a "pension plan" within the meaning of Section 3(2) of ERISA (a
"PLAN"). No member (other than the Company) of the same controlled group of
businesses as the Company within the meaning of Section 4001(a)(14) of ERISA now
or ever has maintained, sponsored or been obligated to contribute to any
"employee benefit plan" within the meaning of Section 3(3) of ERISA, other than
a Foreign Plan. Each Plan has been operated substantially in accordance with its
terms, ERISA, the Code and other applicable law. Each of the Plans which is
intended to be a qualified plan under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service. Neither the
Company nor any Subsidiary has any knowledge of any circumstances which
reasonably might result in any material liability, tax or penalty, including,
but not limited to, a penalty under Section 502 of ERISA, as a result of a
breach of any fiduciary duty under ERISA. None of the Plans provides or has
provided post-retirement medical or health benefits. None of the Plans is or was
a "welfare benefit fund," as defined in Section 419(e) of the Code, or an
organization described in Sections 501(c)(9) or 501(c)(20) of the Code. Neither
the Company nor any of its Subsidiaries is or ever has been a party to any
collective bargaining agreement. Except as disclosed on Schedule 3.18, neither
the Company nor any of its Subsidiaries has announced or otherwise made any
commitment to create or amend any Plan, and neither the Company nor any of its
Subsidiaries has announced or otherwise made any commitment to begin
contributing to any pension plan subject to Title IV of ERISA, or to any
"multiemployer plan" within the meaning of Section 3(37) of ERISA.. All
contributions required to be made to any Plan under the terms of such Plan or
under ERISA or the Code have been timely made. Each Plan which is required to
comply with the provisions of Sections 4980B and 4980C of the Code, or with the
requirements referred to in Section 4980D(a) of the Code, has complied in all
material respects. Each Plan intended to meet the requirements for tax-
- 13 -
favored treatment under Subchapter B of Chapter 1 of the Code meets such
requirements. Except as disclosed on Schedule 3.18, the execution and
performance of this Agreement will not (i) result in any obligation or liability
(with respect to accrued benefits or otherwise) of the Company to any Plan, or
any present or former employee of the Company, (ii) be a trigger event under any
Plan that will result in any payment (whether of severance pay or otherwise)
becoming due to any present or former employee, officer, director, stockholder,
contractor, or consultant, or any of their dependents, or (iii) except as
otherwise expressly contemplated by this Agreement, accelerate the time of
payment or vesting, or increase the amount, of compensation due to any present
or former employee, officer, director, stockholder, contractor, or consultant of
the Company. Other than routine claims for benefits under the Plans, there are
no pending, or, to the best knowledge of the Company, threatened,
investigations, proceedings, claims, lawsuits, disputes, actions, audits or
controversies involving the Plans, or the fiduciaries, administrators, or
trustees of any of the Plans or the Company or any subsidiary of any as the
employer or sponsor under any Plan, with any of the Internal Revenue Service,
the Department of Labor, the Pension Benefit Guaranty Company, any participant
in or beneficiary of any Plan. The Company knows of no reasonable basis for any
such claim, lawsuit, dispute, action or controversy. With respect to each
employee benefit plan, program, and other arrangement providing compensation or
benefits to any employee or former employee of the Company or any Subsidiary
thereof, which plan, program or arrangement is maintained outside of the United
States primarily for the benefit of persons substantially all of whom are
nonresident aliens (a "FOREIGN PLAN"): (A) the Foreign Plan has been maintained
in all material respects in accordance with applicable law, (B) if intended to
qualify for special tax treatment, the Foreign Plan satisfies the requirements
for such treatment, and (C) the Foreign Plan is funded and/or book reserved to
the extent required by applicable law.
3.19. Existing Indebtedness; Existing Liens; Investments; Etc.
(a) Schedule 3.19 sets forth a true, correct and complete list or
schedule, and describe, as of the date or dates indicated therein, as
applicable:
(i) all material indebtedness of the Company and its
Subsidiaries on a consolidated and consolidating basis (collectively,
"EXISTING INDEBTEDNESS") as of the date hereof;
(ii) all material Liens as of a recent practicable date in
respect of any assets of the Company or its Subsidiaries (collectively,
"EXISTING LIENS"), showing, as to each such Lien, the name of the grantor
and secured party, the indebtedness secured thereby, the name of the
debtor (if different from the grantor) and the assets or other property
covered by such Lien;
(iii) all material investments of the Company and its
Subsidiaries as of the date hereof; and
(iv) a payables aging schedule for the Company and its
Subsidiaries as of a recent practicable date.
- 14 -
(b) All principal, interest and other amounts owing under the
obligations secured by the liens described in the UCC-1 filings by Cupertino
National Bank, Venture Banking Group has been paid in full, and all such liens
have been cancelled.
3.20. Accounts Receivable. Schedule 3.20 sets forth a receivables
aging schedule for the Company and its Subsidiaries as of a recent practicable
date. All accounts receivable of the Company and its Subsidiaries (a) to the
Company's knowledge, are legal, valid and binding obligations of the persons
shown on the books of the Company or such Subsidiary as the respective account
debtors with respect thereto, except as may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally and (ii) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, concepts of materiality; reasonableness, good
faith and fair dealing, and the discretion of the court before which any
proceeding therefore may be brought, (b) arose out of bona fide sales actually
made or services actually performed on or prior to such date in the ordinary
course of business, (c) are not subject to any discount, rebate, offset, return
privilege or claim outside of the ordinary course of business (and are reflected
in the reserves established on the books of the Company or such Subsidiary, as
the case may be, in accordance with GAAP) and (d) to the best knowledge of the
Company, are valid and collectible in the ordinary course of business. Except as
set forth on Schedule 3.20, no customer has indicated an unwillingness or an
inability to pay any amount included in the accounts receivables of the Company
or any of its Subsidiaries.
3.21. Customers. Schedule 3.21 lists the names and addresses of the
six (6) most significant customers (by revenue) of the Company and its
Subsidiaries for the year ended December 31, 2002, and the amount and percentage
of total revenues accounted for by each such customer during each such period.
Except for the bankruptcy filing of Metricom, Inc., which is disclosed in the
Company's SEC Reports, neither the Company nor any Subsidiary has received any
notice or otherwise have knowledge that any of such six significant customers
has ceased, or will cease, to use the products or services of the Company or its
Subsidiaries, or has materially reduced, or will materially reduce, the use of
such products or services at any time.
3.22. Suppliers. Schedule 3.22 lists the three (3) largest suppliers
of any products or services to the Company and its Subsidiaries during the year
ended December 31, 2002, and the amount of purchases made by the Company or any
Subsidiary from each supplier during such period. Except for the arrangements
with Sanmina and Sanmina ULC pursuant to the Settlement Agreement and related
Sanmina Security Agreement, no material purchase order, commitment or other
obligation of the Company or any Subsidiary to take delivery is in excess of
normal requirements, nor are prices provided therein in excess of current market
prices for the products or services to be provided thereunder. Except in
connection with the Settlement Agreement and related Sanmina Security Agreement,
neither the Company nor any Subsidiary has any obligation to any supplier with
respect such supplier's work in process or inventory, and no such obligation
would arise as a result of any termination of any contract or purchase order.
3.23. Business Relationships. There is no threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship
- 15 -
between the Company or its Subsidiaries, on the one hand, and any customer or
group of customers whose purchases, individually or in the aggregate, are
material to the business of the Company or any Subsidiary, or with any material
suppliers, on the other hand, and to the Company's knowledge there exists no
present condition or state of facts or circumstances with respect to any such
business relationship which could materially and adversely affect the Company or
its Subsidiaries or prevent the Company or its Subsidiaries from conducting such
business after the consummation of the transactions contemplated by this
Agreement in substantially the same manner in which it has been heretofore been
conducted.
3.24. Business Plan. The Company has delivered to the Purchaser
Representative a true and correct copy of its business plan for the year 2003
(the "BUSINESS PLAN"). The information contained in the Business Plan (including
without limitation the projections) has been prepared by Company and its
representatives in good faith based upon assumptions believed by the management
of Company and its Subsidiaries to be reasonable at the time of such preparation
and as of the date hereof (excluding any analysis of the transactions
contemplated hereby, including Purchasers' acquisition of the obligations owed
to Sanmina), which constitute all assumptions reasonably necessary and prudent
in making such projections.
3.25. Employment Agreements. Schedule 3.25 sets forth a true,
correct and complete list of all material employment agreements and golden
parachute agreements to which the Company or any of its Subsidiaries is a party,
both with respect to current employees and officers and (to the extent any
obligations remain outstanding thereunder) former officers and employees. The
Company has previously delivered to the Purchaser Representative (or made
available to FTI Consulting) true, correct and complete copies of all such
agreements, including all amendments thereto. Each such agreement is in writing,
and to the Company's knowledge is a valid and binding agreement enforceable
against the respective parties thereto in accordance with its terms, except as
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium and
other similar laws and equitable principles relating to or limiting creditors'
rights generally and (ii) the effect of general principles of equity (whether
enforcement is considered in a proceeding in equity or at law), concepts of
materiality, reasonableness, good faith and fair dealing, and the discretion of
the court before which any proceeding therefore may be brought. To the knowledge
of the Company, no party to any such agreement is in breach of, or in default
with respect to, any of its obligations thereunder, nor is the Company or any of
its Subsidiaries aware of any facts or circumstances which might reasonably be
expected to result in any breach or default thereunder.
3.26. Transactions with Affiliated Persons.
3.26.1. Since December 31, 2001, except as set forth on
Schedule 3.26, neither the Company nor any of its Subsidiaries has at any time,
directly or indirectly, purchased, leased or otherwise acquired any material
property or obtained any material services from, or sold, leased or otherwise
disposed of any material property or furnished any material services to (except
in each case with respect to remuneration for services rendered as a director,
officer, consultant or employee of the Company or any of its Subsidiaries), in
the ordinary course of business or otherwise, any officer, director, employee,
stockholder, any family member of any officer, director, employee, stockholder
- 16 -
or any other person (other than the Company and its Subsidiaries) that, directly
or indirectly, alone or together with others, controls, is controlled by or is
under common control with the Company, any of its Subsidiaries or any officer,
director, employee, stockholder or any family member of any officer, director,
employee or stockholder (the preceding persons listed in this sentence being
referred to herein collectively as "AFFILIATED PERSONS" and individually as an
"AFFILIATED PERSON").
3.26.2. Except as set forth in Item 13 of the Company's Form
10-K/A for the year ended December 31, 2001, or in subsequent SEC Reports,
neither the Company nor any of its Subsidiaries is indebted, directly or
indirectly, to any Affiliated Person, in a material amount; and no Affiliated
Person is indebted in a material amount to the Company or any of its
Subsidiaries (except for advances for travel expenses to employees in the
ordinary course of business) or has any direct or indirect ownership interest in
any firm or corporation with which the Company or any of its Subsidiaries is
affiliated or with which the Company or any of its Subsidiaries has a business
relationship. To the Company's knowledge, no such Affiliated Person is, directly
or indirectly, interested in any material contract with the Company or any of
its Subsidiaries (other than bona fide employment agreements).
3.27. Listing of Common Stock. All shares of Common Stock issuable
upon conversion of the Shares or exercise of the Warrants will be listed for
trading on Nasdaq National Market or Nasdaq SmallCap Market, effective on and as
of the Third Closing Date. Except as disclosed in the SEC Reports, as of the
date hereof, the Company is, and as of each of the First Closing Date and the
Third Closing Date will be, in compliance with all applicable Nasdaq SmallCap
Market continued listing standards and requirements, other than the $1.00
minimum bid requirement.
3.28. Full Disclosure. There is no fact known to the Company
relating to the Company or its Subsidiaries (other than facts related to general
economic conditions) which the Company has not disclosed to the Purchasers
herein, in the SEC Reports, in the Schedules hereto or in the Financial
Statements which the Company in good faith believes either materially adversely
affects, or could reasonably be expected to materially adversely affect, the
properties, business, operations, affairs, earnings, assets, liabilities or
condition (financial or otherwise) of the Company or the ability of the Company
to perform its obligations under this Agreement or any document contemplated
hereby.
3.29. Finders' Fees. There is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of Company or any Affiliated Person who might be entitled to any fee or
commission upon consummation of the transactions contemplated by this Agreement
and each of the other Transaction Documents.
3.30. No General Solicitation or General Advertising. In the case of
each issuance of securities, including, without limitation, the Shares,
Warrants, Tranche I Notes and Sanmina Notes, pursuant to the terms of this
Agreement, no form of general solicitation or general advertising was used by
the Company or its representatives, including without limitation,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any
- 17 -
seminar or meeting whose attendees have been invited by any general solicitation
or general advertising.
4. Representations and Warranties of Purchasers. Each of the Purchasers,
individually and not jointly, represents and warrants that:
4.1. Authorization. Such Purchaser has full power and authority to
enter into and to perform its obligations under this Agreement and to carry out
the transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by such Purchaser and constitutes a valid and legally
binding obligation of such Purchaser.
4.2. Investment Representations. Such Purchaser is acquiring and
will acquire the securities pursuant to this Agreement for such Purchaser's own
account, for investment purposes and not with a view to, or for sale in
connection with, any distribution of such securities or any part thereof in
violation of federal or state securities laws.
4.3. Investment Experience: Access to Information. Such Purchaser is
an "accredited investor" as that term is defined in Rule 501(a) promulgated
under the Securities Act, is a sophisticated investor, is able to fend for
itself in the transactions contemplated by this Agreement, has such knowledge
and experience in financial, business and investment matters as to be capable of
evaluating the merits and risks of this investment, has the ability to bear the
economic risks of this investment, has been furnished with copies of and has
read the SEC Reports, was not organized or reorganized for the specific purpose
of acquiring the securities pursuant to this Agreement; and (b) has been
afforded the opportunity to ask questions of, and to receive answers from, the
Company and to obtain any additional information, to the extent the Company has
or could have acquired such information without unreasonable effort or expense,
all as necessary for such Purchaser to make an informed investment decision with
respect to purchasing the securities pursuant to this Agreement. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in this Agreement or the right of such Purchaser to rely thereon.
4.4. No General Solicitation or General Advertising. In the case of
each issuance of securities, including, without limitation, the Shares,
Warrants, the Tranche I Notes and the Sanmina Notes, pursuant to the terms of
this Agreement, no form of general solicitation or general advertising was used
by any Purchaser or its representatives, including without limitation,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
4.5. Absence of Registration. Such Purchaser understands that:
4.5.1. The securities to be sold and issued hereunder (and all
securities to be issued on conversion or exercise thereof) are unregistered and
may be required to be held indefinitely unless they are subsequently registered
under the Securities Act, or an exemption from such registration is available.
- 18 -
4.5.2. Except as provided in the Registration Rights
Agreement, the Company is under no obligation to file a registration statement
with the SEC with respect to the securities acquired pursuant to this Agreement
or the securities to be issued on conversion or exercise thereof.
4.6. Restrictions on Transfer. Such Purchaser agrees that (a) it
will not offer, sell, pledge, hypothecate, or otherwise dispose of the
securities to acquired pursuant to this Agreement other than to its "affiliates"
unless such offer, sale, pledge, hypothecation or other disposition is (i)
registered under the Securities Act, or (ii) to the extent that such offer,
sale, pledge, hypothecation or other disposition thereof does not violate the
Securities Act, and (b) the securities acquired pursuant to this Agreement (and
all securities acquired on the conversion or exercise thereof) shall bear a
legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES HAVE NOT BEEN ACQUIRED WITH
A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT AND ANY
APPLICABLE STATE LAWS OR TO THE EXTENT THAT REGISTRATION OR QUALIFICATION
IS NOT REQUIRED UNDER SUCH ACT OR UNDER APPLICABLE STATE LAWS OR (B)
PURSUANT TO AN EXEMPTION THEREFROM UNDER SAID ACT AND ALL APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS WITH RESPECT TO WHICH THE COMPANY MAY, UPON
REQUEST, REQUIRE A SATISFACTORY OPINION OF COUNSEL FOR THE PURCHASER THAT
SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE ACT.
4.7. Proxy Statement. All information included in the Proxy
Statement (as defined in Section 5.3) furnished by such Purchaser will not, at
the date of mailing of the Proxy Statement to the stockholders of the Company,
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which made, not misleading.
4.8. Registration Required. Such Purchaser hereby covenants with the
Company not to make any sale of the Shares, Common Stock and Warrant Shares
without complying with the provisions hereof, and without effectively causing
the prospectus delivery requirement under the Securities Act to be satisfied
(unless the Purchaser is selling such Shares, Common Stock or Warrant Shares in
a transaction not subject to the prospectus delivery requirement). Such
Purchaser acknowledges that as set forth in, and subject to the provisions of,
the Registration Rights Agreement, there may occasionally be times when the
Company, based on the advice of its counsel, determines that it must suspend the
use of the any prospectus forming a part of the registration statement required
to be filed pursuant to the terms of the Registration Rights Agreement until
such time as an amendment to the registration statement has been filed by the
Company and declared effective by the SEC or until the Company has amended or
supplemented such prospectus.
- 19 -
4.9. No Tax or Legal Advice. Such Purchaser understands that nothing
in the Agreement, or any other materials presented to the Purchaser in
connection with the purchase and sale of the Shares, Common Stock and Warrant
Shares constitutes legal, tax or investment advice. Such Purchaser has consulted
such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of Shares,
Common Stock and Warrant Shares.
4.10. International Actions. Such Purchaser acknowledges, represents
and agrees that no action has been or will be taken in any jurisdiction outside
the United States by the Company that would permit an offering of the Shares,
Common Stock and Warrant Shares, or possession or distribution of offering
materials in connection with the issuance of the Shares, Common Stock and
Warrant Shares, in any jurisdiction outside the United States. If such Purchaser
is located outside the United States, it has or will take all actions necessary
for any resale of the Shares, Common Stock and Warrant Shares by such Purchaser
to comply with all applicable laws and regulations in each foreign jurisdiction
in which it offers, sells or delivers Shares, Common Stock and Warrant Shares or
distributes any offering material, in all cases at its own expense.
4.11. Brokers or Finders. The Company has not and will not incur,
directly or indirectly, as a result of any action taken by any Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or the transactions contemplated
hereby.
5. Covenants of the Company. The Company hereby covenants and agrees with
Purchasers as follows:
5.1. Access; Reports. At all times through the Third Closing, the
Company will permit Purchaser Representative and its authorized representatives,
full access at reasonable times, during normal business hours, to all of the
books, records, personnel and properties of the Company and its Subsidiaries,
wherever located, for the purpose of conducting its due diligence review of the
Company. No investigation will affect or limit the scope of any of the
representations, warranties, covenants and indemnities of the other in this
Agreement or in any Transaction Document or limit liability for any breach of
any of the foregoing. The Company shall (i) at the request of Purchaser
Representative, at reasonable times, meet with and/or report to the Purchaser
Representative regarding material operational matters and financial matters
(including monthly unaudited financial information); (ii) promptly and regularly
notify the Purchaser Representative of any change in the normal course of
operation of its business or its properties and of any material development in
the business, properties, or operations of the Company (including without
limitation any Material Adverse Effect or any governmental or third party
claims, complaints, investigations or hearings, or communications indicating
that the same may be forthcoming or contemplated).
5.2. Stockholders Meeting. The Company shall cause a meeting of its
stockholders to be duly called and held as soon as reasonably practicable for
the purpose of voting on the approval of the issuance and sale to Purchasers of
the Third Issuance Shares and Third Issuance Warrants (and the conversion of the
Tranche I Notes in connection therewith and the repayment of the Sanmina Notes
with Series B Preferred Stock) and the
- 20 -
election of directors pursuant to this Agreement (the "STOCKHOLDERS MEETING").
The proxy materials relating to such meeting shall contain the recommendation of
the Board (which shall be a unanimous recommendation of the disinterested
directors) that the stockholders approve (x) the issuance and sale to Purchasers
of the Third Issuance Shares, Third Issuance Warrants and Purchasers'
acquisition of the Tranche I Conversion Shares and Sanmina Conversion Shares on
conversion of the Tranche I Notes and repayment of the Sanmina Notes
(collectively, the "PURCHASER ACQUISITIONS") and (y) the Certificate Amendments
(collectively, the "SHAREHOLDER PROPOSALS").
5.3. Proxy Statement. As promptly as practicable after the date of
this Agreement, the Company shall prepare and cause to be filed with the SEC a
Proxy Statement in connection with the transactions contemplated hereby (the
"PROXY STATEMENT"), and the Company shall respond promptly to any comments of
the SEC or its staff with respect thereto. The Company will afford Purchasers a
reasonable opportunity to review and comment on the proposed form of Proxy
Statement prior to its filing with the SEC. Purchasers shall promptly furnish to
the Company all information concerning Purchasers as may be required or
reasonably requested in connection with any action contemplated by this Section
5.3. The Company shall (a) notify the Purchaser Representative promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and (b) supply the Purchaser Representative with copies
of all correspondence with the SEC or its staff with respect to the Proxy
Statement. Whenever any event occurs that should be set forth in an amendment or
supplement to the Proxy Statement, Purchasers or the Company, as the case may
be, shall promptly inform the other of such occurrence and shall cooperate in
filing with the SEC or its staff, and, if appropriate, mailing to stockholders
of the Company, such amendment or supplement.
5.4. Conduct of Business. From the date hereof through the Third
Closing (or, if the Third Closing does not occur, until all principal and
interest under the Tranche I Notes and Sanmina Notes (if issued) are repaid in
full under their terms), the Company shall and shall cause each of its
Subsidiaries to, except as contemplated by this Agreement, or as consented to by
the Purchaser Representative in writing, operate its businesses in the ordinary
course of business and in accordance with past practice, consistent with the
Business Plan, and not take any action inconsistent with this Agreement. Without
limiting the generality of the foregoing, except as specifically contemplated by
this Agreement, the Business Plan, or as consented to by the Purchaser
Representative in writing, the Company shall not and shall cause each of its
Subsidiaries not to:
(a) change or amend the Certificate of Incorporation or Bylaws
of the Company;
(b) enter into, extend, materially modify, terminate or renew
any Material Contract, except in the ordinary course of business;
(c) sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any assets, or any interests therein,
except in the ordinary course of business;
- 21 -
(d) make new commitments for capital expenditures in excess of
either Fifty Thousand Dollars ($50,000) in any one quarter or One Hundred
Thousand Dollars ($100,000) during 2003;
(e) take any action with respect to the grant of any bonus,
severance or termination pay or with respect to any increase of benefits
payable (including the grant of stock options) under its severance or
termination pay policies or agreements in effect on the date hereof or
increase in any manner the compensation or benefits of any executive
officer except in the ordinary course of business consistent with past
practice or pay any benefit not required by any existing agreement with
any employee or former employee or employee or by any existing benefit
plan or policy;
(f) take any action with respect to the hiring of additional
executive officers or the termination or replacement existing executive
officers;
(g) subject to Section 5.5, acquire by merger or consolidation
with, or merge or consolidate with, or purchase substantially all of the
assets of, or otherwise acquire any material assets or business of any
corporation, partnership, association or other business organization or
division thereof;
(h) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock (for purposes of
clarification, other than the accrual of dividends on the Series A
Preferred Stock);
(i) take any action to effect any stock dividend, split-up,
recapitalization, combination, conversion, exchange of shares or other
similar change in the corporate or capital structure of the Company;
(j) fail to comply in all material respects with all legal
requirements applicable to it, its assets and its business;
(k) intentionally do any other act which would cause any
representation or warranty of the Company in this Agreement to be or
become untrue in any material respect;
(l) issue, repurchase or redeem or commit to issue, repurchase
or redeem, any shares of its capital stock, any options or other rights to
acquire such stock or any securities convertible into or exchangeable for
such stock, other than the following: (i) issuance of shares in connection
with the consummation of a Superior Proposal (as defined in Section
5.5.3), (ii) issuance of shares to employees, consultants and directors of
the Company pursuant to stock options existing as of the date hereof, and
(iii) repurchases of shares from employees or consultants as may be
required by existing agreements in connection with the termination of
their employment or consultancy with the Company;
(m) enter into any transaction or arrangement described in
Section 3.26;
- 22 -
(n) fail to use its commercially reasonable efforts to (i)
retain its key employees and (ii) maintain existing relationships with
material suppliers, customers and others having business dealings with it
and (iii) otherwise preserve the goodwill of its business so that such
relationships and goodwill will be preserved on and after the Third
Closing Date;
(o) other than as permitted by the current Loan Agreement with
Silicon Valley Bank, incur any indebtedness for borrowed money or modify
the terms of any existing indebtedness;
(p) Modify the Business Plan in any material respect;
(q) become a guarantor or surety of any indebtedness of any
other person; or
(r) enter into any agreement, or otherwise become obligated,
to do any action prohibited under this Section 5.4.
5.5. No Solicitation.
5.5.1. Subject to Section 5.5.3 and the fiduciary duties to
which the Board is subject under Delaware Law, prior to the Third Closing, the
Company shall not, and the Company shall cause its Affiliated Persons and the
respective officers, directors, employees, investment bankers, attorneys,
accountants and other representatives and agents (collectively,
"REPRESENTATIVES") of the Company and its Affiliated Persons not to, directly or
indirectly, initiate, solicit, encourage or participate in negotiations or
discussions relating to, or provide any information to any person concerning, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Transaction Proposal (as
defined below), or any inquiry with respect thereto, or agree to approve or
recommend any Transaction Proposal. The Company shall, and shall cause its
Affiliated Persons and the respective Representatives of the Company and its
Affiliated Persons to, immediately cease and cause to be terminated all existing
activities, discussions and negotiations, if any, with any parties conducted
heretofore with respect to any of the foregoing.
5.5.2. For purposes of this Agreement, "TRANSACTION PROPOSAL"
shall mean any proposal (other than any proposal by Purchasers or their
affiliates) regarding (i) any merger, consolidation, share exchange, business
combination or other similar transaction or series of related transactions
involving the Company or a Subsidiary of the Company; (ii) any sale, lease,
exchange, transfer or other disposition of more than twenty percent (20%) of the
assets of the Company or any Subsidiary of the Company; (iii) any acquisition of
a substantial equity interest in the Company or any equity interest in any of
its Subsidiaries (with "substantial equity interest" meaning (a) in the case of
an institutional investor acquiring such interest for investment purposes only,
equity interests representing at least 20% of the Company's outstanding capital
stock (by voting power or otherwise) prior to such investment and (b) in any
other case, at least 10% of the Company's outstanding capital stock (by voting
power or otherwise) prior to such investment); (iv) any offer to purchase
(whether from the Company or otherwise), tender offer, exchange offer or similar
- 23 -
transaction involving the capital stock of the Company or any Subsidiary of the
Company; and (v) a liquidation or dissolution of the Company.
5.5.3. Notwithstanding anything to the contrary contained in
this Section 5.5 or elsewhere in this Agreement, the Company may, in response to
an unsolicited bona fide Transaction Proposal from an unaffiliated third party,
participate in discussions or negotiations with or furnish information to the
third party making such Transaction Proposal, if all of the following events
have occurred: (a) such third party has made a written proposal to the Board of
the Company to consummate a Transaction Proposal, which proposal identifies a
price to be paid for the capital stock or assets of the Company that the Board
reasonably has determined, if such transaction is consummated, would be
financially more favorable to the stockholders of the Company than the
transactions contemplated under this Agreement (a "SUPERIOR PROPOSAL"); (b) the
Board reasonably has determined that such third party is financially capable of
consummating such Superior Proposal and that such Superior Proposal is at least
as likely to be consummated, and is not subject to materially greater
conditions, than the transactions contemplated by this Agreement; (c) the Board
shall have reasonably determined, after consultation with its outside legal
counsel, that the failure to participate in discussions or negotiations with or
furnish information to such third party would result in a substantial risk of
liability for a breach of the fiduciary duties of the members of such Board
under applicable Delaware law; and (d) the Purchaser Representative shall have
been notified in writing of such Transaction Proposal, including its principal
financial and other material terms and conditions, including the identity of the
person and its affiliates (if relevant) making such Transaction Proposal.
Notwithstanding the foregoing, the Company shall not provide any
non-public information to such third party unless (a) it has prior to the date
thereof provided such information to the Purchaser Representative, and (b) it
has provided such non-public information pursuant to a non-disclosure agreement
with terms which are at least as restrictive as the Nondisclosure Agreement
dated February 3, 2003, heretofore entered into between the Company and PS
Capital LLC. In addition to the foregoing, the Company shall not accept or enter
into any agreement concerning a Superior Proposal nor issue any securities or
agree to pay a termination or break-up fee in connection with a Superior
Proposal for a period of not less than 36 hours after Purchasers' receipt of the
notification in clause (d) of the preceding paragraph, and the Company will
afford Purchasers an opportunity to discuss with the Company what, if any,
response Purchasers may desire to make with to such Transaction Proposal. If the
Company intends to accept such Superior Proposal, the Company shall first offer
to the Purchasers in writing the right to enter into a transaction with the
Company on substantially equivalent terms and conditions, which offer shall
clearly set forth the terms thereof, and Purchasers shall then be entitled to 5
business days to determine whether to accept such offer. Upon the occurrence of
all of the events in the preceding paragraph and this paragraph, and if the
Purchasers have not elected within the required 5 day period to accept the offer
described in the preceding sentence, the Company shall be entitled to (1) change
its recommendations concerning the Purchaser Acquisitions, (2) accept such
Superior Proposal, and (3) enter into an agreement with such third party
concerning a Superior Proposal provided that the Company shall immediately make
payment in full of the expenses provided for in Section 11.2. Company will
promptly communicate to Purchasers the principal terms of any proposal or
inquiry, including the
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identity of the person and its affiliates making the same, that it may receive
in respect of any such Transaction Proposal, or of any such information
requested from it or of any such negotiations or discussions being sought to be
initiated with it regarding a Transaction Proposal.
5.6. Additional Issuances.
5.6.1. At any time after the Third Closing, in the event the
Company shall issue (an "ADDITIONAL ISSUANCE") any capital stock, including
securities of any type that are, or may become, convertible into or exercisable
or exchangeable for capital stock of the Company (the "ADDITIONAL SECURITIES"),
each Purchaser shall have the right to subscribe for and to purchase that number
of Additional Securities such that such Purchaser holds the same percentage of
the Company's outstanding capital stock immediately prior to and immediately
following the Additional Issuance (the "PRO RATA SHARE"); provided, however,
that this Section 5.6 shall not apply to shares issued:
(a) to employees, officers or directors of, or
consultants or advisors to the Company or any Subsidiary, pursuant to
stock purchase, Company Option Plans, other option plans or arrangements
approved by the Board;
(b) pursuant to any options, warrants, conversion rights
or other rights or agreements outstanding as of the date of this Agreement
or pursuant to the conversion of the shares of Series B Preferred Stock
contemplated to be issued pursuant to this Agreement;
(c) in connection with any stock split, stock dividend
or recapitalization by the Company;
(d) pursuant to a Superior Proposal if this Agreement is
terminated in connection therewith; or
(e) in any Additional Issuance that reduces the
Purchaser's equity percentage by less than 10% of its holdings, so long as
at the time of an Additional Issuance which either solely or considered
together with prior Additional Issuances that reduced the Purchaser's
equity percentage by less than 10% is an Additional Issuance of greater
than 10%, the Purchaser has the right to purchase common stock in order to
retain the percentage ownership it had at the time of the first Additional
Issuance which did not exceed 10%.
5.6.2. If the Company proposes an Additional Issuance, the
Company shall, at least fifteen (15) business days prior to the proposed closing
date of such issuance, give written notice to the Purchaser Representative and
offer to sell to each Purchaser its Pro Rata Share of the Additional Securities
at the lowest price per share, and otherwise on the same terms and conditions
(or, if the nature of the transaction involves an exchange of assets or
securities which cannot be delivered by each Purchaser, then for cash on the
same economic terms), offered to other investors. Such notice shall describe the
type of Additional Securities which the Company is offering to each Purchaser,
the price of the Additional Securities and the general terms upon which the
Company will issue same. Each
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Purchaser shall have five (5) business days from the date of mailing of any such
notice to agree to purchase its Pro Rata Share of such Additional Securities for
the price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of Additional Securities
to be purchased. Sale and issuance of the Additional Securities which Purchaser
has elected to purchase shall be effected concurrently with the closing of the
issuance of securities which gave rise to Purchaser's right to buy such
securities, but only after compliance with all governmental regulations.
5.7. Amendments of Charter Documents. The Company shall take all
necessary action to amend the Certificate of Incorporation so as to amend and
restate the certificate of designation of its Series A Preferred Stock in the
form set forth as Exhibit K (the "CERTIFICATE AMENDMENTS"). The Company shall
use reasonable efforts take all steps reasonably necessary to effect any other
amendment of the Certificate of Incorporation and Bylaws (subject, where
necessary, to obtaining stockholder consent) to implement the rights and
obligations of the parties contained herein to the extent necessary or
appropriate under Delaware law.
5.8. Issuance of Additional Shares of Series B Preferred Stock. The
Company shall not issue any shares of Series B Preferred Stock in excess of the
number of shares to be issued pursuant to this Agreement, including the shares
issuable pursuant to rights of participation disclosed in Section 3.6.1 hereof,
unless the Company obtains the prior written consent of Purchasers holding a
majority of the shares of Common Stock issuable upon exercise or conversion of
the securities. Without limitation of any other remedies, the Purchasers shall
be entitled to injunctive relief to prevent any issuance prohibited by this
Section.
6. Additional Covenants of the Parties.
6.1. Conditions to the First Closing, Sanmina Closing and Third
Closing. The Company and each Purchaser, severally and not jointly, agree to use
their respective commercially reasonable best efforts to ensure that the
conditions set forth in Sections 7, 8 and 9 are satisfied, insofar as such
matters are within their respective control. In that regard, each party hereto,
at the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things (including, but not
limited to, all action reasonably necessary to seek and obtain any and all
consents and approvals of any government or regulatory authority or person
required in connection with the transactions contemplated under this Agreement);
provided, however, that Purchasers shall not be obligated to consent to any
payment by the Company (or any modification of any contract) requested in
connection with the delivery of any consent, and no party shall be obligated to
make a payment of money as a condition to obtaining any such consent or
approval.
6.2. Nominees. The Company shall cause the Board of Directors of the
Company and any nominating committee thereof (subject to its fiduciary duties)
to take such steps as are necessary to nominate for election at the next two
annual meetings of the Company's shareholders individuals to be designated by
the Purchaser Representative (up to a maximum of 4 directors, subject to a
proportionate increase if the size of the Board is
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increased above 7 members), provided that such obligation shall expire in the
event this Agreement is terminated prior to the Third Closing.
6.3. Board Observation. In addition to, and without limiting the
generality of, Section 6.2 above, from the date hereof until the consummation of
the Third Closing (or the termination of this Agreement), the Company shall
permit one designee of Purchaser Representative to, attend, but not vote on any
proposals at, all meetings (including in person and telephonic meetings) of the
Company's Board and all committees thereof. The Company shall provide Purchaser
Representative and it's designee with copies of all notices of such meetings
sent to the Company's directors as well as copies of all materials distributed
to the Company's directors in connection with such meetings (which may be sent
via facsimile or e-mail) at the same time such notices and materials are
provided to members of the board.
6.4. Transaction Documents. At each Closing, each party shall, and
shall cause each of its affiliates to, execute and deliver to the other party
the Transaction Documents that are to be delivered at the such Closing.
6.5. Regulatory Approval. The Company and each Purchaser shall use
commercially reasonable efforts to file, as soon as practicable after the date
of this Agreement, all notices, reports and other documents required to be filed
with any Governmental Authority with respect to the transactions contemplated by
this Agreement, and to submit promptly any additional information requested by
any such Governmental Authority. Each of the Company and each Purchaser shall
(A) give the other parties hereto prompt notice of the commencement of any
action, suit, litigation, arbitration, preceding or investigation ("LEGAL
PROCEEDING") by or before any Governmental Authority with respect to the
transactions contemplated by this Agreement and (B) keep the other party
informed as to the status of any such Legal Proceeding.
6.6. Disclosure; Public Announcements. At all times at or before the
Third Closing, no party hereto will issue or make any reports, statements or
releases to the public with respect to this Agreement or the transactions
contemplated hereby without the consent of the other party hereto, which consent
shall not be unreasonably withheld. If either party hereto is unable to obtain,
after reasonable effort, the approval of its public report, statement or release
from the other party hereto and such report, statement or release is, in the
opinion of legal counsel to such party, required by law in order to discharge
such party's disclosure obligations, then such party may make or issue the
legally required report, statement or release and promptly furnish the other
parties with a copy thereof. Each party hereto will also obtain the prior
approval of the other party hereto of any press release to be issued announcing
the consummation of the transactions contemplated by this Agreement; provided,
however, no such press release shall be issued prior to consummation of the
First Closing.
6.7. No General Solicitation or General Advertising. In the case of
each issuance of securities, including, without limitation, the Shares,
Warrants, the Tranche I Notes and the Sanmina Notes, pursuant to the terms of
this Agreement, each Purchaser and the Company, including any of such
Purchaser's or Company's representatives, agree not to use any form of general
solicitation or general advertising, including without limitation,
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advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
6.8. Other Sales of Series B Preferred Stock. Except as contemplated
by Section 3.6.1 and within the limits set forth therein, the Company shall not
at any time in the future (whether before or after the Third Closing), issue,
offer to sell, sell or enter into any agreement to issue or sell any shares of
Series B Preferred Stock (other than the Shares contemplated hereby) to any
purchaser without the consent of the Purchaser Representative. The participation
rights described in Section 3.6.1 shall be honored by increasing (to the extent
necessary) the number of securities to be sold hereunder, and not by reducing
any Purchaser's allocation hereunder.
7. Conditions to the First Closing
7.1. Conditions to Purchasers' Obligations at the First Closing. The
Purchasers' obligations to purchase the Tranche I Notes and First Issuance
Warrants at the First Closing are subject to the satisfaction (or waiver by
Purchaser Representative), at or prior to the First Closing, of the following
conditions:
7.1.1. Representations and Warranties True. All of the
Company's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement, and shall be accurate in all material respects as of the
First Closing Date as if then made. Each of the representations and warranties
that contain an express materiality qualification or are qualified by "Material
Adverse Effect" shall have been accurate in all respects as of the date of this
Agreement, and shall be accurate in all respects as of the First Closing Date as
if then made. In either case, any representation or warranty made as of a
specific date shall be true and correct as of such specific date.
7.1.2. Performance of Obligations. The Company shall have
performed in all material respects all covenants and obligations herein required
to be performed or observed by it on or prior to the First Closing.
7.1.3. Consents, Permits, and Waivers. On or prior to the
First Closing Date, Purchasers and the Company shall have obtained the consents
necessary for consummation of the transactions contemplated by this Agreement
and the other Transaction Documents from Silicon Valley Bank, Commercial Finance
Division and Sanmina. Purchasers shall also have received reasonable assurances
from NASDAQ that it will not object to the submission of the Shareholder
Proposals to the Company's stockholders or to the consummation of the
transactions contemplated hereby.
7.1.4. Absence of Restraint. No order to restrain, enjoin or
otherwise prevent the consummation of the transactions contemplated hereby shall
have been entered by any court or other Governmental Authority and not rescinded
or overturned. No litigation instituted by any governmental body or other
regulatory authority shall
- 28 -
be pending to restrain or invalidate any material part of the transactions
contemplated by this Agreement.
7.1.5. Absence of Material Adverse Change. There shall not
have occurred after the date hereof any material adverse change in the business,
properties, results of operation, financial condition or prospects of the
Company and its Subsidiaries taken as a whole.
7.1.6. Voting Agreements. The Company shall have delivered to
Purchasers Voting Agreements covering 1,312,479 shares (17.91%) of outstanding
Common Stock and a majority of the shares of outstanding Series A Preferred
Stock.
7.1.7. Termination of Agreements. The agreements set forth on
Schedule 7.1.7 shall have been terminated by the parties thereto and the Company
released from all obligations thereunder.
7.1.8. Compliance Certificate. The Company shall have
delivered to Purchasers a Compliance Certificate, executed by the President and
the Chief Financial Officer of the Company, dated as of the First Closing Date,
to the effect that the conditions specified in Sections 7.1.1 through 7.1.7 have
been satisfied.
7.1.9. Legal Opinion. Purchasers shall have received from
Latham & Watkins LLP an opinion addressed to it, dated as of the First Closing
date, covering the matters set forth in Exhibit H and otherwise in form and
substance satisfactory to Purchaser Representative.
7.2. Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Tranche I Notes and First Issuance Warrants at
the First Closing is subject to the satisfaction (or waiver by the Company), on
or prior to the First Closing, of the following conditions:
7.2.1. Representations and Warranties True. All of the
Purchaser's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement, and shall be accurate in all material respects as of the
First Closing Date as if then made. Each of the representations and warranties
that contain an express materiality qualification or are qualified by "Material
Adverse Effect" shall have been accurate in all respects as of the date of this
Agreement, and shall be accurate in all respects as of the First Closing Date as
if then made. In either case, any representation or warranty made as of a
specific date shall be true and correct as of such specific date.
7.2.2. Performance of Obligations. Purchasers shall have
performed in all material respects all covenants and obligations herein required
to be performed or observed by it on or prior to the First Closing.
7.2.3. Consents, Permits, and Waivers. On or prior to the
First Closing Date, the Company shall have obtained the consents necessary for
consummation of
- 29 -
the transactions contemplated by this Agreement and the other Transaction
Documents from Silicon Valley Bank, Commercial Finance Division and Sanmina.
7.2.4. Absence of Restraint. No order to restrain, enjoin or
otherwise prevent the consummation of the transactions contemplated hereby shall
have been entered by any court or other Governmental Authority.
8. Conditions to the Sanmina Closing
8.1. Conditions to Purchasers' Obligations at the Sanmina Closing.
Purchasers' obligations to purchase the Sanmina Notes at the Sanmina Closing is
subject to the satisfaction (or waiver by Purchaser Representative), at or prior
to the Sanmina Closing, of the following conditions:
8.1.1. Stockholder Approval. On or prior to the Sanmina
Closing Date, the Shareholder Proposals shall have been approved by the
affirmative vote of the holders a majority of the each class of capital stock of
the Company represented and voting on such matters (the "REQUISITE VOTE").
8.1.2. Sanmina Deliveries. Sanmina and Sanmina ULC shall have
executed and delivered to the Purchasers an assignment of their rights to
payment and security under the Settlement Agreement and related Sanmina Security
Agreement in form and substance reasonably acceptable to the Purchasers;
8.1.3. Sanmina Release. Sanmina and Sanmina ULC shall have
executed and delivered to the Purchasers a release of the Purchasers and the
Company from all claims arising out of the Settlement Agreement and related
Sanmina Security Agreement, signed by Sanmina and Sanmina ULC, the form of which
shall be reasonably acceptable to the Purchasers and the Company.
8.1.4. Legal Opinion. Purchasers shall have received from
Latham & Watkins LLP an opinion addressed to it, dated as of the Sanmina Closing
date, covering the matters set forth in Exhibit L and otherwise in form and
substance satisfactory to Purchaser Representative.
8.2. Conditions to the Company's Obligations at the Sanmina Closing.
8.2.1. Delivery of Release. Sanmina shall have executed and
delivered to the Company a release of the Company from all claims arising out of
the Settlement Agreement and related Sanmina Security Agreement, signed by
Sanmina and Sanmina ULC and in form and substance reasonably acceptable to the
Company.
9. Conditions to the Third Closing.
9.1. Conditions to Purchasers' Obligations at the Third Closing.
Purchasers' obligations to purchase the Third Issuance Shares at the Third
Closing are subject to the satisfaction (or waiver by Purchaser Representative),
at or prior to the Third Closing, of the following conditions:
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9.1.1. Representations and Warranties True. All of the
Company's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement, and shall be accurate in all material respects as of the
First Closing Date as if then made. In the reasonable discretion of Purchaser's
based on their ongoing due diligence investigation of the Company, each of the
representations and warranties that contain an express materiality qualification
or are qualified by "Material Adverse Effect" shall have been accurate in all
respects as of the date of this Agreement, and shall be accurate in all respects
as of the First Closing Date as if then made. In either case, any representation
or warranty made as of a specific date shall be true and correct as of such
specific date.
9.1.2. Performance of Obligations. The Company shall have
performed in all material respects all covenants and obligations herein required
to be performed or observed by it on or prior to the Third Closing.
9.1.3. Consents, Permits, and Waivers. On or prior to the
Third Closing Date, Purchasers and the Company shall have obtained any and all
consents, permits and waivers necessary for consummation of the transactions
contemplated by this Agreement and the other Transaction Documents (except for
such as may be properly obtained subsequent to the Third Closing) unless the
failure to obtain such consents, permits or waivers is a result of a breach by
Purchasers.
9.1.4. Absence of Restraint. No order to restrain, enjoin or
otherwise prevent the consummation of the transactions contemplated hereby shall
have been entered by any court or other Governmental Authority and not rescinded
or overturned. No litigation instituted by any governmental body or other
regulatory authority shall be pending to restrain or invalidate any material
part of the transactions contemplated by this Agreement.
9.1.5. Absence of Material Adverse Change. There shall not
have occurred after the date hereof any material adverse change in the business,
properties, results of operation, financial condition or prospects of the
Company and its Subsidiaries taken as a whole. For purposes of the foregoing, a
mere change in the trading value of the Company's common stock or change in the
Company's listing from Nasdaq NM to Nasdaq SmallCap shall not be deemed a
material adverse change.
9.1.6. Stockholder Approval. On or prior to the Third Closing
Date, the Shareholder Proposals shall have been approved by the affirmative vote
of the holders a majority of the each class of capital stock of the Company
represented and voting on such matters (the "REQUISITE VOTE").
9.1.7. Certificate of Designation. The Certificate of
Designation and the Certificate Amendments shall have been duly filed with the
Secretary of State of the State of Delaware.
9.1.8. Compliance Certificate. The Company shall have
delivered to Purchasers a Compliance Certificate, executed by the President and
the Chief Financial
- 31 -
Officer of the Company, dated as of the Third Closing Date, to the effect that
the conditions specified in Sections 9.1.1 through 9.1.7 have been satisfied.
9.1.9. Sanmina Closing. The Sanmina Closing shall have
occurred as described herein.
9.1.10. Legal Opinion. Purchasers shall have received from
Latham & Watkins LLP an opinion addressed to it, dated as of the Third Closing
Date, covering the matters set forth in Exhibit K and otherwise in form and
substance satisfactory to Purchaser Representative.
9.1.11. Purchaser Comfort. Purchasers shall have determined,
in their reasonable and good faith discretion, that the conditions set forth in
Section 9.1.1 have been fulfilled.
9.2. Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Third Issuance Shares at the Third Closing is
subject to the satisfaction (or waiver by the Company), on or prior to the Third
Closing, of the following conditions:
9.2.1. Representations and Warranties True. All of the
Purchaser's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement, and shall be accurate in all material respects as of the
First Closing Date as if then made. Each of the representations and warranties
that contain an express materiality qualification or are qualified by "Material
Adverse Effect" shall have been accurate in all respects as of the date of this
Agreement, and shall be accurate in all respects as of the First Closing Date as
if then made. In either case, any representation or warranty made as of a
specific date shall be true and correct as of such specific date.
9.2.2. Performance of Obligations. Purchasers shall have
performed in all material respects all covenants and obligations herein required
to be performed or observed by it on or prior to the Third Closing.
9.2.3. Absence of Restraint. No order to restrain, enjoin or
otherwise prevent the consummation of the transactions contemplated hereby shall
have been entered by any court or other Governmental Authority.
9.2.4. Stockholder Approval. On or prior to the Third Closing
Date, the Shareholder Proposals shall have been approved by the Requisite Vote
of the Company's stockholders.
10. Termination.
10.1. Termination. The obligations of the parties contained herein
relating to the sale and purchase of the Third Issuance Shares (the "THIRD
ISSUANCE AGREEMENTS") may be terminated at any time prior to the Third Closing
Date:
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10.1.1. By mutual agreement of the Company and Purchaser
Representative;
10.1.2. By either the Company or Purchaser Representative if:
(a) the Third Closing shall not have been consummated by
July 31, 2003 (such date being referred to as the "Expiration Date");
provided, however, that if the Third Closing shall not have been
consummated by the Expiration Date due primarily to delays in receiving
clearance of the Proxy Statement from the SEC despite the good faith
efforts of the Company to file the Proxy Statement and amendments
thereto on a timely basis and obtain such clearance, then the
Expiration Date shall be extended to September 30, 2003, and provided
further that no party may terminate this Agreement under this Section
10.1.2(a) if the failure to consummate the Third Closing is
attributable to a failure on the part of the party seeking to terminate
this Agreement to perform any obligation required to be performed by
such party at or prior to the Third Closing Date;
(b) the Requisite Vote of the Company's stockholders
shall not have been obtained at the Stockholders Meeting duly convened
and finally adjourned; or
(c) any Governmental Authority shall have issued an
injunction, order or decree (a "RESTRAINT") or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement and
such Restraint or other action shall become final and non-appealable,
provided the party seeking to terminate this Agreement shall have used
its best efforts to prevent entry of and to remove such Restraint.
Notwithstanding the foregoing, the Expiration Date shall in no event be
extended beyond the expiration date of that certain letter agreement
dated as of March 12, 2003, from Sanmina to the Purchasers relating to
the Sanmina Purchase, unless (and only to the extent) the Purchaser
Representative specifies to the contrary by written notice to the
Company.
10.1.3. By Purchaser Representative if:
(a) the Board (i) shall have failed to recommend, or
shall have withdrawn, modified or changed in a manner adverse to any
Purchaser its approval or recommendation, of the Transaction Documents,
the Purchaser Acquisitions or the other transactions contemplated thereby,
or the Board or any committee thereof shall have resolved to take any of
the foregoing actions, (ii) shall have submitted or recommended to the
stockholders of the Company or shall have approved a Transaction Proposal,
(iii) shall have accepted or recommended to its stockholders a Superior
Proposal, or (iv) shall have publicly announced its intention to do any of
the foregoing;
(b) the Company shall have breached or failed to perform
in any material respect any of its representations or warranties (with
respect to
-33-
materiality, in a manner such that the condition in Section 7.1.1 or 9.1.1
would not be satisfied), or covenants or other agreements contained in
this Agreement, which breach or failure to perform cannot be or has not
been cured within five days after the giving of written notice to the
Company of such breach and which, as a result of such breach, considered
either individually or in the aggregate, any condition to Purchasers'
obligations to consummate the First Closing or the Third Closing set forth
in Section 7.1 or 9.1 would not at that time be satisfied (a "COMPANY
MATERIAL BREACH") (provided that Purchasers are not then in Purchaser
Material Breach (as defined below) of any representation, warranty,
covenant or other agreement contained in this Agreement); or
(c) the Company shall have breached or failed to perform
in any respect any of its obligations under Section 5.5; provided the
Company shall be deemed to have breached its obligations under Section 5.5
if any Affiliated Person of the Company, or any Representative of the
Company and its Affiliated Persons, shall have engaged in any activities
prohibited by Section 5.5.
10.1.4. By the Company, if (i) Purchasers shall have breached
or failed to perform in any material respect any of their representations or
warranties (with respect to materiality, in a manner such that the condition in
Section 7.2.1 or 9.2.1 would not be satisfied), or covenants or other agreements
contained in this Agreement, which breach or failure to perform cannot be or has
not been cured within five days after the giving of written notice to Purchasers
of such breach and which, as a result of such breach, considered either
individually or in the aggregate, any condition to the Company's obligations to
consummate the Sanmina Closing, the First Closing or the Third Closing would not
at that time be satisfied (a "PURCHASER MATERIAL BREACH") (provided that the
Company is not then in Company Material Breach of any representation, warranty,
covenant or other agreement contained in this Agreement), or (ii) the Board
shall have withdrawn or modified in a manner adverse to any Purchaser the
Board's approval of the Transaction Documents or (iii) the Board has accepted a
Superior Proposal in accordance with the provisions of Section 5.5 hereof.
10.2. Effect of Termination. In the event of the termination of the
Third Issuance Agreements pursuant to Section 10.1, the Third Issuance
Agreements shall become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders, except as set
forth in Section 11. Notwithstanding the foregoing, nothing in this Section 10.2
or in Section 11 shall relieve any party to this Agreement of liability for
fraud in connection with this Agreement.
11. Fees and Expenses.
11.1. Except as contemplated by Section 10.2, all costs and expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
11.2. At the First Closing and the Third Closing (or upon
termination of this Agreement by the Company or Purchaser Representative under
Section 10.1.2 or by the Purchaser Representative under Section 10.1.3, other
than a termination by the Company
-34-
under 10.1.2(a) if the failure to close by the Expiration Date arises primarily
out of a Purchaser Material Breach), the Company shall pay from the proceeds of
the sale of the Tranche I Notes or the Third Issuance Shares (as applicable) the
reasonable fees and expenses of Irell & Manella LLP as counsel to Purchasers and
of FTI Consulting; provided that the Company's payments under this Section 11.2
combined shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate, of which no more than $125,000 shall be payable at the First Closing,
provided that remaining payments at the Third Closing (or upon the termination
described above) may include any costs incurred prior to the First Closing to
the extent not covered by the first $125,000; provided, the Purchaser
Representative shall provide the Company with copies of statements from Irell &
Manella LLP prior to the Third Closing. Further, the $20,000 paid to FTI
Consulting prior to the date hereof shall apply toward such payments. In
connection with the First Closing and the Third Closing, Purchasers may remit
payment for such fees directly to Irell & Manella LLP and FTI Consulting, and
such remittance shall constitute payment to the Company for purposes of
satisfying such Purchasers' payment obligations to the Company at such Closing.
12. Miscellaneous.
12.1. Purchaser Representative. Each Purchaser hereby irrevocably
appoints Henry Sweetbaum as agent and attorney-in-fact (the "PURCHASER
REPRESENTATIVE") for each such Purchaser, for and on behalf of the Purchasers,
to give and receive notices and communications, to object to such deliveries, to
agree to, negotiate, enter into settlements and compromises of this Agreement,
comply with orders of courts and awards of arbitrators with respect to such any
claims under this Agreement, and to take all actions necessary or appropriate in
the judgment of the Purchaser Representative for the accomplishment of the
foregoing. Each of the Purchasers acknowledges and agrees that this appointment
and power of attorney is irrevocable during the term of this Agreement and is
coupled with an interest; provided, however, that such agency may be changed by
the Purchasers from time to time upon not less than five (5) days prior written
notice to Company; provided, further, that the Purchaser Representative may not
be removed unless Purchasers that are allocated two-thirds of the Shares to be
acquired hereunder agree to such removal and to the identity of the substituted
Purchaser Representative. Any vacancy in the position of Purchaser
Representative may be filled by approval of the holders of a majority in
interest of the Shares to be acquired hereunder. No bond shall be required of
the Purchaser Representative, and the Purchaser Representative shall not receive
compensation for his services other than compensation (if any) paid to Purchaser
Representative by the Purchasers which the Purchasers have separately agreed to
provide to Purchaser Representative. Notices or communications to or from the
Purchaser Representative shall constitute notice to or from each of the
Purchasers.
12.2. Survival of Representations, Warranties and Agreement.
Notwithstanding any investigation made by any party to this Agreement, the
representations and warranties made by the Company and Purchaser in connection
with the First Closing and the Third Closing shall survive the First Closing and
Third Closing, respectively, for a period of 18 months (other than the
representations and warranties of the Company set forth in Sections 3.1, 3.2,
3.4.1, 3.4.2(iii), 3.5 and 3.6, which shall survive indefinitely or, if
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applicable, for the period ending 90 days after the expiration of the applicable
statute of limitations), and shall thereafter be of no further force or effect,
except in the case of fraud in connection with this Agreement. All covenants and
agreements contained in this Agreement (except to the extent the Third Issuance
Agreements are terminated pursuant to Section 10) shall survive the First
Closing Date and Third Closing Date in accordance with their terms.
12.3. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be in writing, shall be
mailed by first-class registered or certified airmail, or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as follows:
if to the Company, to:
Novatel Wireless, Inc.
9360 Towne Centre Drive, Suite 110
San Diego, CA 92121
Attention: Patrick Waters, Esq., General Counsel, and
Peter Leparulo, Chief Executive Officer
with a copy so mailed to:
Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Attention: J. Scott Hodgkins, Esq.
if to any Purchaser to the address set forth for such
Purchaser on the signature pages hereto;
with a copy so mailed to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attention: Alvin G. Segel, Esq.
12.4. Force Majeure. In addition to the foregoing, no party shall be
deemed to have breached this Agreement solely by reason of delay or failure in
performance resulting from any cause, condition or event beyond the reasonable
control of the Company, including, but not limited to, acts of God, fire, flood,
war (or significant terrorist activity), government action (including eminent
domain), accident, or inability to obtain material, utilities, equipment or
transportation (any such cause, condition or event a "FORCE MAJEURE EVENT"). The
parties agree to cooperate in an attempt to overcome such Force Majeure Event
and consummate the transactions contemplated by this Agreement, but, if either
party reasonably believes that its interests would be materially and adversely
affected by proceeding, such party shall be entitled to terminate this
Agreement.
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12.5. Assignability and Enforceability. This Agreement shall be
binding on and enforceable by the parties and their respective successors and
permitted assigns. No party may assign any of its rights, benefits or
obligations under this Agreement to any person without the prior written consent
of the other party (which shall not be unreasonably withheld); provided,
however, that any Purchaser may assign its rights or obligations to purchase any
securities under this Agreement, without the prior consent of the Company, to
any other Purchaser or to any affiliate of any Purchaser (or any fund or account
managed by any Purchaser) that is an "accredited investor" as defined in Rule
501(a) promulgated under the Securities Act, provided that the assignee executes
an assumption agreement reasonably satisfactory to the Company pursuant to which
it shall make the representations and warranties set forth in Section 4 hereof.
No such assignment shall relieve the Purchasers of their obligations under this
Agreement.
12.6. Amendments and Waivers. No amendment or waiver of any
provision of this Agreement shall be binding on any party unless consented to in
writing by such party. No waiver of any provision of this Agreement shall be
construed as a waiver of any other provision nor shall any waiver constitute a
continuing waiver unless otherwise expressly provided. No provision of this
Agreement shall be deemed waived by a course of conduct including the act of
closing unless such waiver is in writing signed by all parties and stating
specifically that it was intended to modify this Agreement.
12.7. Entire Agreement. This Agreement and the other Transaction
Documents, including the Schedules and Exhibits and any agreements or documents
referred to herein or therein or executed contemporaneously herewith or
therewith, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral. There are no conditions,
covenants, agreements, representations, warranties or other provisions, express
or implied, collateral, statutory or otherwise, relating to the subject matter
hereof except as herein provided.
12.8. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
12.9. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the choice of law provisions thereof.
12.11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
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13. Note Agent.
13.1. Appointment. With respect to the Tranche I Notes and the
Sanmina Notes, each Purchaser hereby irrevocably appoints PS Capital LLC as
agent and attorney-in-fact (the "AGENT"), for and on behalf of each such
Purchaser, and Agent is irrevocably authorized and empowered to (i) enter into
the security agreement with respect to the Tranche I Notes ("TRANCHE I SECURITY
AGREEMENT") for the pro rata benefit of holders of the Tranche I Notes ("TRANCHE
I HOLDERS") and enter into the security agreement with respect to the Sanmina
Notes ("SANMINA SECURITY AGREEMENT") for the pro rata benefit of holders of the
Sanmina Notes ("SANMINA HOLDERS"); hold the Collateral as defined in the Tranche
I Security Agreement ("TRANCHE I COLLATERAL") for the pro rata benefit of the
Tranche I Holders, and to hold the Collateral (as defined in the Sanmina
Security Agreement ("SANMINA COLLATERAL")) for the pro rata benefit of the
Sanmina Holders; (ii) exercise such authority, rights, powers, and duties
hereunder as specifically are delegated to and accepted by the Agent hereunder;
and (iii) take such other action in connection with the foregoing as the Tranche
I Holders and the Sanmina Holders, respectively, may from time to time direct in
accordance with the terms and conditions of this Agreement, the Tranche I Notes
and the Tranche I Security Agreement, and the Sanmina Notes and the Sanmina
Security Agreement, respectively. (For purposes of this Section 13: each of the
Tranche I Holders and the Sanmina Holders shall be referred to as a "HOLDER";
each of the Tranche I Collateral and the Sanmina Collateral shall be referred to
as the "COLLATERAL"; each of the Tranche I Notes and the Sanmina Notes shall be
referred to as a "NOTE"; each of the Tranche I Security Agreement and the
Sanmina Security Agreement shall be referred to as a "SECURITY AGREEMENT"; and,
"REQUIRED HOLDERS" shall mean, with respect to either the Tranche I Notes or the
Sanmina Notes, at any time, holders of such Notes having more than 50% of the
outstanding unpaid principal amounts thereunder.) PS Capital LLC hereby accepts
its appointment as Agent with respect to the Notes, the Collateral and the
Security Agreements and agrees to perform the duties of the Agent specified
herein, and therein, respectively and to exercise the powers granted hereby and
thereby, in either case in accordance with the terms hereof or thereof, as the
case may be.
13.2. Fees. Each Holder severally agrees to pay or cause to be paid
the Agent its pro rata share (based on the relative percentage of the Notes held
by such Holder) of all the fees, costs and expenses incurred in good faith by
the Agent (including, without limitation, the fees and disbursements of its
counsel and other advisers as the Agent reasonably elects to retain) (i) arising
in connection with this Agreement, the Notes and the Security Agreements, in
connection with the administration of the Collateral, the sale or other
disposition thereof pursuant to the Security Agreements and the preservation,
protection or defense of the Holders' rights under the Notes and the Agent's
rights under the Security Agreements and in and to the Collateral or (ii)
incurred in good faith by the Agent in connection with the resignation or
removal of the Agent pursuant to Section 13.12.
13.3. Duties, Powers and Rights of the Agent.
13.3.1. Specific Duties of the Agent. The Agent shall have the
following duties:
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(a) upon the receipt by it of instructions from the
Required Holders (as defined below), execute and deliver on behalf of the
Holders such documents as the Required Holders shall deem necessary or
appropriate and provide to the Agent from time to time to maintain the
perfection of any lien in, to or upon the Collateral or any portion
thereof, that has been, are or will be granted in favor of the Agent
pursuant to the Security Agreements;
(b) accept, on behalf of the Holders, any part of the
Collateral delivered to it, including, without limitation, any
certificated securities, instruments and documents, and execute and
deliver, on behalf of the Holders, such documents or instruments as the
Required Holders deem necessary or appropriate and provide to the Agent to
evidence the creation of any lien with respect thereto and to perfect such
lien;
(c) upon the receipt by it of written instructions
executed by the Required Holders, release the Collateral or any portion
thereof from any liens thereon that were created pursuant to the Security
Agreements;
(d) furnish to the Holders, promptly upon receipt
thereof, duplicates of all reports, notices, requests, demands,
certificates and other documents received by it under this Agreement, the
Notes, the Security Agreements or other documents provided for herein or
therein;
(e) provide to the Holders a copy of all written notices
received from the Company with respect to any capital stock or securities
that constitute Collateral and, upon receipt by it of written instructions
of the Holders, exercise all rights and powers determined by the Required
Holders that are appurtenant to any such capital stock or securities that
become a part of the Collateral, including, without limitation, the right
to vote stock, to receive dividends or other distributions, and to grant
or refrain from granting any consent or waiver, all in accordance with
such written instructions;
(f) inform the Holders in writing of the existence of
any Default or Event of Default (as defined in the Notes) promptly upon
learning of the same; provided, however, that the Agent shall not be
deemed to have any knowledge whatsoever of any Default or Event of Default
unless the Agent has actually received written notice stating that a
Default or an Event of Default has occurred from any of the Holders or the
Company;
(g) upon receipt by it of written instructions of the
Required Holders, take those actions determined by the Required Holders as
necessary to protect and preserve the Collateral and realize on and
foreclose upon the Collateral, including, without limitation, initiating
and defending any and all actions or proceedings that may be brought
affecting any of the Collateral or any portion thereof or otherwise pursue
any remedies available to any Holder or to it in respect of the Collateral
or any portion thereof, which actions may include, without limitation,
initiating and conducting any public or private sale or pursuing any other
actions or remedies relating to the Collateral or any portion thereof;
provided,
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however, that the Agent shall be under no obligation to exercise any of
its rights and powers under this Section 13 unless it shall have received
security and indemnity satisfactory to it against any loss, liability or
expense;
(h) provide, at the written direction of the Required
Holders, notices required by the Notes (including notices of default) or
the Security Agreements, or by law, to the Company, or any other party
entitled thereto, in order to take any actions required or authorized to
be taken under this Agreement or specified in written instructions of the
Required Holders;
(i) receive any and all amounts of any kind paid
pursuant to the Security Agreements and receive proceeds of the Collateral
subsequent to an Event of Default and apply such amounts or proceeds as
specified in Section 13.11;
(j) at the written direction of the Required Holders,
(x) deliver notices requiring repayment of all or any portion of the
principal amount of the Notes or declaring the Notes due and payable, (y)
commence and prosecute any action against the Company in connection with
any default pursuant to the Notes or the Security Agreements and otherwise
enforce the rights of the Holders pursuant to the Notes and the Security
Agreements, and (z) agree to waivers or amendments with respect to the
Notes or the Security Agreements; and
(k) take, or refrain from taking, such other actions
(but only such actions that are set forth in this Agreement) as the
Required Holders shall from time to time direct by written instruction;
provided, however, that the Agent may, in its sole discretion, refrain
from taking such action (other than an action required or necessary to
discharge any duty under Section 13.12 below) if the taking of such action
would expose it to liability, financial or otherwise for which it does not
receive adequate protection.
13.3.2. Duties Limited.
(a) The Agent shall be obligated to perform such duties
and only such duties as specifically set forth in this Agreement and no
implied covenants or obligations shall be read into this Agreement against
the Agent, and the Agent shall be obliged to take any actions or exercise
any rights, powers or remedies which are discretionary with the Agent
under this Agreement only as may be specified in a written notice from the
Required Holders; provided, however, that the Agent shall not take any
actions specified in a written notice if the provisions of this Agreement
expressly prohibit such action. Except as expressly provided herein or in
the Notes or the Security Agreements, the Agent shall not have any duty or
obligation, express or implied, to:
(i) manage, control, use, maintain, sell, dispose of, purchase,
bid for or otherwise deal with the Collateral or any portion
thereof, or to otherwise take or refrain from taking any
action under, or in connection with this Agreement, the Notes
or any Security Agreement, except to the extent required by
law;
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(ii) take any action that relates to, materially affects, or
impairs the amounts that the Holders may recover from
disposition of the Collateral, including, without limitation,
any election or waiver of remedies available under the
Security Agreements, or with respect to the Collateral or the
manner of foreclosure upon the same; any determination of the
order and timing of foreclosure upon any portion of the
Collateral or of the amount of any credit bid to be entered at
any public or private, judicial, or nonjudicial sale of the
Collateral; the pursuit of any remedies against the Company or
any of its Subsidiaries following the completion of
foreclosure upon the Collateral; the compromise or settlement
of any claims against the Company or any of its Subsidiaries,
including without limitation the conduct of any negotiations
relating to the same or with a view toward the termination of
any pending foreclosure proceedings;
(iii) obtain or maintain insurance on the Collateral or any other
insurance;
(iv) pay or discharge any tax, assessment or other governmental
charge or any lien or encumbrance of any kind owing with
respect to, or assessed or levied against, any part of the
Collateral;
(v) take any action or omit to take any action provided for in the
Security Agreements;
(vi) advance any monies for any purpose; or
(vii) except at the specific direction of the Required Holders,
record or file the Security Agreements, any other document or
any other instrument provided to it referred to herein or
therein with respect to any lien.
(b) In addition to and not in limitation of the
provisions of Section 13.3.2(a), under no circumstances shall the Agent
have any duty or obligation to take any actions hereunder other than those
under Section 13.12, even if instructed to do so by the Required Holders
or if expressly set forth herein, if the Agent determines, in its sole and
absolute discretion, that such actions would subject it to liability or
expense for which satisfactory indemnity to the Agent has not been
provided hereunder or otherwise.
(c) Except as otherwise provided herein, the Agent shall
have no obligation or liability in respect of the recording, rerecording,
filing or refiling of any instruments, documents, financing statements or
continuation statements or to take any other action hereunder with respect
to the security interests created pursuant to the Security Agreements, and
the Agent shall have no obligation to monitor the status of the security
interests as a perfected security interest created hereunder or under the
Security Agreements.
13.4. Specific Powers of the Agent. In addition to all powers
necessary, appropriate, desirable or incidental to the Agent's performance of
the specific duties set forth in Section 13.3.1, the Agent is hereby empowered
and authorized to do, in its sole and
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absolute discretion, any and all of the following in connection with its
performance of such duties; provided, however, that in no event shall it have
any obligation to do so:
13.4.1. establish bank accounts in its name with the right to
be the only party authorized to draw from such account or accounts;
13.4.2. employ such persons, firms or professionals as it
shall reasonably deem appropriate or desirable in connection with the
performance of its duties hereunder, including, without limitation, appraisers,
auctioneers, stockbrokers, custodians of securities, fiduciaries, commercial
banks, investment banks, accountants and attorneys; and
13.4.3. execute and deliver, as Agent and on behalf of the
Required Holders, any agreements, escrow instructions, bills of sale,
applications or any other documents related to or in any way connected with any
disposition of the Collateral, or any portion thereof, permitted under this
Agreement or directed by the Required Holders in accordance with the terms
hereof; provided, however, that in the event it is unwilling or unable for any
reason to execute and deliver such documents, then it promptly shall notify the
Holders of such unwillingness or inability and shall request execution and
delivery of such documents by the Holders.
13.5. Written Instructions. Any written request or written
instructions required or permitted to be given hereunder to the Agent with
respect to the Notes or the Security Agreements shall be given exclusively by
the Required Holders with respect to such Notes. In the event that the Agent
receives written instructions from the Required Holders that the Agent
determines, in its sole and absolute discretion, to be ambiguous, inconsistent,
in conflict with other instructions previously received or otherwise
insufficient to direct the actions of the Agent, then the Agent shall have no
obligation whatsoever to take or refrain from taking any action pursuant to such
written instructions, but shall instead do the following:
13.5.1. First, seek additional written instructions from the
Required Holders reasonably satisfactory to it; or
13.5.2. Second, if the Agent is reasonably dissatisfied with
the further instructions or does not receive further instructions pursuant to
Section 13.5.1, resign as Agent in accordance with this Agreement.
The Agent shall not be liable to any party hereto (or any Person claiming by,
through or under such party) by reason of its actions under this Section 13.5.
13.6. Reliance. In acting with respect to this Agreement, the Notes
or the Security Agreements, the Agent shall be entitled to rely conclusively:
13.6.1. on any communication reasonably believed by it to be
genuine and to have been made, sent or signed by the Person by whom it purports
to have been made, sent or signed;
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13.6.2. as to any matters of fact that might reasonably be
expected to be within the knowledge of the Holders or the Company, on a
certificate signed by or on behalf of any of the Holders or the Company;
13.6.3. on the advice or services of any persons, firms or
professionals employed by it pursuant to Section 13.4.2 and rely upon the
opinions and statements of any professional advisor so employed; and
13.6.4. on any resolution, statement, certificate, instrument,
opinion, report, notice, request, consent, order, bond or other paper or
document that it reasonably believes to be genuine and to have been signed or
presented by the proper person or, in the case of cables, facsimile
transmissions, telecopies and telexes, to have been sent by the proper person.
The Agent shall not be liable to any party hereto for any consequence of
any such relying, acting, or refraining to act. Nothing in this Section 13.6
shall impair the right of the Agent in its discretion to take or omit to take
any action that the Agent deems proper to take or omit to take if such action or
omission is not inconsistent with any notice or direction from the Holders;
provided, that the Agent shall not be under any obligation to take any action
that is discretionary with the Agent under this Agreement, the Notes or the
Security Agreements except as may be specified in a written notice from the
Required Holders.
13.7. No Responsibility. The Agent does not assume any
responsibility for:
13.7.1. any failure or delay in performance or breach by the
Company or its Subsidiaries of any of their respective obligations under this
Agreement, the Notes or the Security Agreements;
13.7.2. the truth or accuracy of any representation or
warranty or statement given or made in connection with this Agreement or the
Security Agreements;
13.7.3. the legality, validity, effectiveness, adequacy or
enforceability of this Agreement, the Notes or the Security Agreements; or
13.7.4. the validity, enforceability or sufficiency of any
agreement or instrument or any depreciation or diminution in the value of any
Collateral or income thereon.
As to any event or occurrence in which neither the Agent nor any Person
acting on its behalf is a participant, the Agent shall be conclusively presumed
to have no knowledge of such event or occurrence, absent gross negligence or
willful misconduct, except to the extent that Agent shall have received a
written notice from any of the Holders or the Company with respect thereto.
13.8. Agent Protected. The Agent shall be protected fully in acting
or refraining to act upon any certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond or paper or document reasonably
believed by it to be genuine and to have been signed or presented by the proper
party or parties. The Agent may consult with
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legal counsel with significant experience in transactions of the type
contemplated by this Agreement, and the advice of such counsel, promptly
confirmed in writing, shall constitute full and complete protection in respect
of any action taken, suffered or omitted by it under this Agreement, the Notes
and the Security Agreements in good faith and in accordance with such advice of
counsel. The Agent may execute any of its powers hereunder or perform any duties
hereunder either directly or through agents, attorneys or custodians, and the
Agent shall not be responsible for any misconduct or negligence on the part of,
or for the supervision of, any agent, attorney or custodian appointed with due
care by it hereunder; provided, however, that as between the other parties
hereto and the Agent, all such powers and duties are those of the Agent as
provided hereunder.
13.9. Limitation on Liability. The Agent may not be relieved from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct. The Agent shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction received
by it pursuant to this Section 13.
13.10. Liability for Money and Interest. The Agent shall not be
liable for any interest or any money received by it except as the Agent may
agree in writing. Money held in trust by the Agent need not be segregated from
other funds except as required by law.
13.11. Application of Proceeds of Collateral. The receipt of any
amounts on behalf of the Holders under the Notes, the Security Agreements or
otherwise with respect to the Collateral and the proceeds of any sale,
enforcement or other disposition of any of the Collateral or any other
distribution in respect of the Collateral shall be applied by the Holders and
the Agent first, to the payment of all proper costs incurred by the Agent in the
collection thereof (including stamp or other taxes in respect of the transfer or
sale of any Collateral and the reasonable compensation, expenses and the
disbursements of the Agent and its counselors) and then in with the provisions
of the applicable Security Agreement; provided, however, any amounts to be
applied in satisfaction of the principal and interest due pursuant to the Notes
shall be paid pro rata to the Holders thereof based on the proportion of the
aggregate principal amount of such Notes held by each such Holder.
13.12. Resignation Or Removal Of Agent. The Agent may, by written
notice to the Holders, at any time resign its agency under this Section 13. The
Required Holders may remove the Agent by written notice to the Agent. No such
resignation or removal shall become effective, unless and until a successor
Agent under this Agreement is appointed and has accepted the appointment, with
such successor Agent to be appointed by the Required Holders; provided, however,
that if no successor Agent shall have been so appointed and shall have accepted
such appointment within thirty (30) days after the retiring Agent's giving
notice of resignation or after notice to the retiring Agent of the retiring
Agent's removal, as the case may be, then the retiring Agent may apply to any
court of competent jurisdiction, at the expense of the Holders, to appoint a
successor Agent to act until such time as a successor shall have been appointed
by the Holders. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from any further duties and
obligations under this Agreement except the duty to execute and deliver any
documents necessary to vest or
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confirm the vesting of such rights, powers, privileges, and duties in such
successor Agent and to deliver possession of any Collateral in the possession of
such retiring Agent to such successor Agent. After the retiring Agent's
resignation or removal hereunder as Agent, each reference herein to a place for
giving of notice or deliveries to the Agent shall be deemed to refer to the
principal office of the successor Agent or such other office of the successor
Agent as it may specify to each party hereto.
13.13. Indemnification. The Holders severally agree to pay,
indemnify and hold the Agent and each director, officer, employee, agent, bailee
or other person acting on behalf of the Agent, and each stockholder of any
thereof, harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including,
without limitation, the reasonable fees and disbursements of counsel and other
advisers) or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of its
obligations pursuant to this Section 13, including, without limitation, any
amendment hereto, or to the Security Agreements or the Notes, or in connection
with the transactions contemplated by this Agreement, the Security Agreements
and the Notes (including arising from the ordinary negligence of the person
seeking indemnification), unless arising from the gross negligence or willful
misconduct of the person seeking indemnification.
13.14. Amendments and Waivers. Notwithstanding Section 12.6, any
terms of this Section 13 may be amended and the observance of any term hereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Agent and
the Required Holders; provided, however, no such amendment shall increase the
liability of the Company or impose additional obligations on the Company without
the written consent of the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
"COMPANY"
Novatel Wireless, Inc.
By: /s/ Peter Leparulo
------------------------------------
Chief Executive Officer
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"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
- -------------------------- ------ ------ ------
BAY INVESTMENTS LIMITED $ 400,000 33.33% $ 683,333
By: /s/ H.J. Pudwill $ 916,667
-------------------------------------------
Title: Director
Address: Suite 1806, 18/F Central Plaza
18 Harbour Road
WanChai,
Hong Kong
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
- -------------------------- ------ ------ ------
MUTUAL TRUST MANAGEMENT (BERMUDA)
LIMITED AS TRUSTEE OF SOFAER FUNDS/
GLOBAL HEDGE FUND $ 400,000 21.82% $ 447,272
By: /s/ Michael Sofaer $ 600,000
-------------------------------------------
Title: Authorised signatory of Sofaer Capital Inc.
Authorised Investment Adviser
Address: Hemisphere House
9 Church Street
P.O. Box HM 951
Hamilton HM DX, Bermuda
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
- -------------------------- ------ ------ ------
RIT CAPITAL PARTNERS PLC. -- 11.52% $ 236,061
By: /s/ Michael Sofaer $ 316,667
-------------------------------------------
Title: Authorised signatory of Sofaer Capital Inc.
Authorised Investment Adviser
Address: Spencer House
27 St James' Place
London
SW1A 1NR
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
------ ------ ------
SOEN YONG LEE $ 100,000 8.33% $ 170,833
By: /s/ Soen Yong Lee $ 229,167
-------------------------------------------
Address: # 25 - 8, Sangdo 2 - Dong
Dongjak - Gu
Seoul ,Korea 156-03
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
------ ------ ------
PAN INVEST & TRADE INC. $ 50,000 4.17% $ 85,417
By: Marcu Associated SA $ 114,583
-------------------------------------------
Name: /s/ Bruno Sidler / Roland Steinmann
Title: Director
Address: Pasea Estate, Road Town
Tortola, B.V.I.
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
------ ------ ------
PETER LEPARULO $ 10,000 .83% $ 17,083
By: /s/ Peter Leparulo $ 22,917
-------------------------------------------
Address: 9360 Towne Centre
Suite 110
San Diego, CA 92121
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
------ ------ ------
CORNERSTONE EQUITY INVESTORS, LLC $ 200,000 16.67% $ 341,667
By: /s/ Robert H. Getz $ 458,333
-------------------------------------------
Title: Managing Director
Address: 717 Fifth Avenue
Suite 1100
New York, NY 10022
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
------ ------ ------
PS CAPITAL LLC $ 40,000 3.33% $ 68,333
By: /s/ Stanley M. Blau $ 91,667
-------------------------------------------
Title: Managing Director
Address: 880 Fifth Ave., Suite 19A
New York City, New York 10021
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
List of Exhibits
Exhibit A - Form of Secured Convertible Note (Tranche I)
Exhibit B - Form of Warrant
Exhibit C - Form of Sanmina Note
Exhibit D - Form of Security Agreement (Tranche I Note)
Exhibit E - Form of Certificate of Designation (Series B)
Exhibit F - Form of Security Agreement (Sanmina Note)
Exhibit G - Form of Registration Rights Agreement
Exhibit H - Form of Legal Opinion (Tranche I)
Exhibit I - Form of Voting Agreement (Common Stock)
Exhibit J - Form of Voting Agreement (Series A Preferred)
Exhibit K - Form of Legal Opinion (Tranche III)
Exhibit L - Form of Legal Opinion (Sanmina)
Exhibit 99.3
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR STATE SECURITIES LAWS AND NO TRANSFER
OF SUCH SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER AND OF ALL
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, OR (B) PURSUANT TO AN EXEMPTION
THEREFROM UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS
WITH RESPECT TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY
OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE
REQUIREMENTS OF THE ACT.
WARRANT TO PURCHASE STOCK
Corporation: Novatel Wireless, Inc.
Number of Shares: [_______] (subject to increase as provided below)
Class of Stock: Common Stock, par value $0.001 per share
Initial Exercise Price: $0.70 (subject to adjustment as provided below)
Issue Date: [March 12, 2003][or][INSERT ISSUE DATE FOR WARRANTS
ISSUED AFTER FIRST CLOSING]
Expiration Date: [September 12, 2008][or][INSERT ISSUE DATE PLUS 5.5
YEARS FOR WARRANTS ISSUED AFTER FIRST CLOSING]
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, [________________] ("Holder"), is
entitled to purchase the number of fully paid and nonassessable shares of Common
Stock (the "Shares") of the corporation (the "Company") at the initial exercise
price per Share (the "Warrant Price") all as set forth above and as adjusted
pursuant to ARTICLE 2 of this Warrant, subject to the provisions and upon the
terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Commencing [SEPTEMBER 12, 2003][OR][INSERT ISSUE
DATE PLUS 6 MONTHS FOR WARRANTS ISSUED AFTER FIRST CLOSING], Holder
may exercise this Warrant in whole or in part from time to time by
delivering a duly executed Notice of Exercise in substantially the
form attached as Appendix 1 to the principal office of the Company.
Unless Holder is exercising the conversion right set forth in
Section 1.2, Holder shall also deliver to the Company a check for
the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a)
the aggregate fair market value of the Shares or other securities
otherwise issuable upon exercise of this Warrant or portion thereof
minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share; provided, however, the Holder shall not
be entitled to exercise this Warrant pursuant to this Section 1.2
prior to the first anniversary of the Issue Date of this Warrant.
The fair market value of the Shares shall be determined pursuant to
Section 1.2.1.
1.2.1 Fair Market Value. If the Shares are traded in a public
market, the fair market value of the Shares shall be the
closing price of the Shares (or the closing price of the
Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder
delivers its Notice of Exercise to the Company. If the Shares
are not traded in a public market, the Board of Directors of
the Company shall initially determine fair market value in its
reasonable good faith judgment. The Company shall provide the
Holder with written notice (within 10 days after delivery of
the Notice of Exercise) of its fair market value
determination. If the Holder objects to the determination
within 10 days after delivery by the Company of its fair
market value determination, the Holder may either (i) rescind
its Notice of Exercise in which case no exercise shall be
deemed to have occurred, or (ii) request that the fair market
value be determined pursuant to the Appraisal Procedure (as
defined below), which determination shall be binding on the
Holder and the Company.
1.3 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to
Holder certificates for the Shares acquired and, if this Warrant has
not been fully exercised or converted and has not expired, a new
Warrant representing the Shares not so acquired.
1.4 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of loss, theft or
destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of
mutilation, or surrender and cancellation of this Warrant, the
Company shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor.
1.5 Assumption on Sale, Merger, or Consolidation of the Company.
1.5.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or
substantially all of the
- 2 -
assets of the Company, or any reorganization, consolidation,
or merger of the Company in which the Company shall not be the
continuing or surviving entity of such consolidation or
merger.
1.5.2 Assumption of Warrant. Upon the closing of any Acquisition,
the successor entity shall assume the obligations of this
Warrant, and this Warrant shall be exercisable for the same
securities, cash, and property as would be payable for the
Shares issuable upon exercise of the unexercised portion of
this Warrant as if such Shares were outstanding on the record
date for the Acquisition and subsequent closing.
ARTICLE 2. ADJUSTMENTS TO THE WARRANT PRICE AND NUMBER OF SHARES.
2.1 Definitions. As used in this ARTICLE 2, the following terms have the
following respective meanings:
2.1.1 "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company (including those deemed
issued pursuant to Section 2.3) after March 12, 2003 for any
reason, including without limitation as a result of sales of
Common Stock or Options, the issuance of Options, stock
dividends, distributions payable in common stock, stock
splits, reverse stock splits, recapitalizations,
reclassifications, combinations or exchanges of shares,
separations, reorganizations, liquidations or other similar
event, other than:
(i) securities issued or issuable as a dividend or
distribution on the Series B Preferred Stock;
(ii) not more than ten (10) shares of capital stock of the
Company on an "as converted to common stock" basis, the
issuance of which resulted from mathematical or other
error or inadvertence, provided that the transaction in
which such shares were issued was approved at the time
by vote of a majority of the Board of Directors of the
Company;
(iii) the first 500,000 shares of Common Stock issued or
issuable pursuant to Employee Equity Issuances after
March 12, 2003 (it being understood that the first such
500,000 shares shall not be subject to Section 2.2.2,
and any subsequent Employee Equity Issuances shall be
subject to Section 2.2.2; provided, further, such
500,000 share figure shall be appropriately adjusted to
reflect transactions described in Sections 2.4 and 2.5);
- 3 -
(iv) securities issued or issuable as a dividend or
distribution on the Series A Preferred Stock upon the
conversion of the Series A Preferred Stock to Common
Stock; and
(v) any securities issued or issuable as a result of an
adjustment of the Warrant Price made pursuant to Section
2.2.
2.1.2 "Convertible Securities" means any evidences of indebtedness,
shares of stock, or other securities directly or indirectly
convertible into or exchangeable for common stock or the value
of which is otherwise derived from or based upon the value of
the Common Stock.
2.1.3 "Employee Equity Issuances" means the issuance of shares of
Common Stock or Options to officers, directors or employees
of, or consultants to, the Company pursuant to stock option or
stock purchase plans or agreements on terms approved by the
Board of Directors.
2.1.4 "Option" means any right, option, or warrant to subscribe for,
purchase, or otherwise acquire common stock or Convertible
Securities.
2.2 Adjustments for Dilutive Issuances.
2.2.1 Issuances Other than Employee Equity Issuances. If the Company
shall issue, after March 12, 2003, any Additional Shares of
Common Stock (other than issuances pursuant to transactions
described in Section 2.4 and Section 2.5 but expressly
excluding any new issuances concurrent with such transactions)
without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the
issuance of such Additional Shares of Common Stock, the
Warrant Price in effect immediately prior to each such
issuance shall forthwith be adjusted to be equal to the amount
of consideration per share received in connection with such
issuance, as determined pursuant to Section 2.6.
Notwithstanding the foregoing, the provisions of this Section
2.2.1 shall not apply to Additional Shares of Common Stock
issued through an Employee Equity Issuance.
2.2.2 Dilutive Issuances due to Employee Equity Issuances. If the
Company shall issue, after March 12, 2003, any Additional
Shares of Common Stock through an Employee Equity Issuance
without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the
issuance of such Additional Shares of Common Stock, the
Warrant Price in effect immediately prior to each such
issuance shall forthwith be adjusted to be equal to a price
determined by multiplying the Warrant Price then in effect by
a fraction (which shall in no event be greater than one), the
numerator
- 4 -
of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number
of shares of Common Stock that the aggregate consideration
received by the Company for such issuance would purchase at
the Warrant Price; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior
to such issuance plus the number of shares of such Additional
Shares of Common Stock. For purposes of the foregoing
computation, the number of shares of Common Stock outstanding
shall be deemed to include all shares of Common Stock actually
outstanding and all shares of Common Stock deemed to be
outstanding as a result of the application of the rules set
forth in Section 2.3.
2.3 Deemed Issuance of Additional Shares of Common Stock. In the case of
the issuance of Options or Convertible Securities, the following
provisions shall apply for all purposes of this ARTICLE 2:
2.3.1 The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation,
the passage of time, but without taking into account potential
antidilution adjustments) of such Options (and, in the case of
Options to acquire Convertible Securities, the maximum number
of shares of Common Stock issuable upon conversion or exchange
of such Convertible Securities) shall be deemed to have been
issued at the time such Options were issued and for a
consideration equal to the consideration (determined in the
manner provided in Section 2.6), if any, received by the
Company upon the issuance of such Options plus the minimum
exercise price provided in such Options (without taking into
account potential antidilution adjustments) for the Common
Stock covered thereby (plus, in the case of Options to acquire
Convertible Securities, the minimum additional consideration,
if any, deliverable upon conversion or exchange of such
Convertible Securities).
2.3.2 The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of
time, but without taking into account potential antidilution
adjustments) for such Convertible Securities or upon the
exercise of Options to purchase Convertible Securities and
subsequent conversion or exchange thereof shall be deemed to
have been issued at the time such Convertible Securities were
issued or such Options were issued and for a consideration
equal to the consideration, if any, received by the Company
for any such Convertible Securities and related Options
(excluding any cash received on account of accrued interest or
accrued dividends), plus the minimum additional consideration,
if any, to be received by the Company (without taking into
account potential antidilution
- 5 -
adjustments) upon the conversion or exchange of such
Convertible Securities or the exercise of any related Options
(the consideration in each case to be determined in the manner
provided in Section 2.6).
2.3.3 If, following the issuance of Options or Convertible
Securities and the determination of the impact of such
issuance pursuant to Section 2.3.1 or 2.3.2 above, there is
any change in the maximum number of shares of Common Stock
deliverable or in the minimum consideration payable to the
Company upon exercise of such Options or upon conversion of or
in exchange for such Convertible Securities, including, but
not limited to, a change resulting from the antidilution
provisions thereof, the Warrant Price shall be recomputed to
reflect such change, but no further adjustment shall be made
for the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such Options or the
conversion or exchange of such Convertible Securities.
2.3.4 The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to sections 2.3.1
and 2.3.2 shall be appropriately adjusted to reflect any
change of the type described in subsection 2.3.3. No
readjustment of the Warrant Price pursuant to a change
described in the preceding sentence shall increase the Warrant
Price more than the amount of any decrease made in respect of
the corresponding issue of Options or Convertible Securities.
2.3.5 For purposes of this ARTICLE 2, Securities (including Options
or Convertible Securities) shall be deemed to be issued on the
earliest to occur of the grant, issuance, or sale of, or the
fixing of a record date with respect to the distribution or
issuance of, such securities.
2.4 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its Common Stock payable in Common Stock, or other
securities, subdivides the outstanding Common Stock into a greater
amount of Common Stock, then upon exercise of this Warrant, for each
Share acquired, Holder shall receive, without cost to Holder, the
total number and kind of securities to which Holder would have been
entitled had Holder owned the Shares of record as of the date the
dividend or subdivision occurred. If the outstanding shares are
combined or consolidated, by reclassification or otherwise, into a
lesser number of shares, the Warrant Price shall be proportionately
increased.
2.5 Reclassification, Exchange, Combinations or Substitution. Upon any
reclassification, exchange, substitution, or other event that
results in a change of the number and/or class of the securities
issuable upon exercise or conversion of this Warrant, Holder shall
be entitled to receive, upon exercise or conversion of this Warrant,
the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised
immediately before such reclassification, exchange, substitution, or
- 6 -
other event. The Company or its successor shall promptly issue to
Holder a new Warrant for such new securities or other property. The
new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in
this ARTICLE 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable
upon exercise of the new Warrant. The provisions of this Section 2.5
shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.6 Computation of Consideration. The consideration received by the
Company for the issuance of any Additional Common Shares shall be
computed as follows:
2.6.1 In the case of the issuance of Additional Shares of Common
Stock for cash, the consideration shall be deemed to be the
amount of cash paid therefore after deducting any reasonable
discounts, commissions or other expenses allowed, paid or
incurred by this Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
2.6.2 In the case of the issuance of Additional Shares of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the
fair value thereof as determined in good faith by the Board of
Directors. The Company shall provide the Holder with written
notice of its fair market value determination pursuant to this
Section 2.6.2 within 30 days following such issuance. If the
holders of a majority of the outstanding warrants issued
pursuant to the Purchase Agreement ("Majority Holders")
deliver to the Company, within 30 days following delivery of
the Company's written notice, written notice of their
objection to such determination the fair market value shall be
determined pursuant to the Appraisal Procedure, which
determination shall be binding on the Holder and the company.
2.6.3 The consideration for Additional Shares of Common Stock issued
together with other property of the Company for consideration
that covers both shall be determined in good faith by the
Board of Directors. The Company shall provide the Holder with
written notice of its determination of the consideration
provided in connection with an issuance covered by Section
2.6.3 within 30 days following such issuance. If the Majority
Holders deliver to the Company, within 30 days following
delivery of the Company's written notice, objection to such
determination, the consideration provided shall be determined
pursuant to the Appraisal Procedure, which determination shall
be binding on the Holder and the Company.
2.7 No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer
of assets, consolidation,
- 7 -
merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed under
this Warrant by the Company, but shall at all times in good faith
assist in carrying out of all the provisions of this ARTICLE 2 and
in taking all such action as may be necessary or appropriate to
protect Holder's rights under this Article against impairment.
2.8 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be
issued shall be rounded down to the nearest whole Share. If a
fractional share interest arises upon any exercise or conversion of
the Warrant, the Company shall eliminate such fractional share
interest by paying Holder the amount computed by multiplying the
fractional interest by the fair market value of a full Share.
2.9 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Warrant Price pursuant to this
ARTICLE 2, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
furnish to the Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment is based; provided, however, that the Company shall not
be required to provide each holder with such a certificate more than
one time per calendar quarter. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished
to the Holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Warrant Price in effect at the time, and
(iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon exercise
of the Warrant.
2.10 Appraisal Procedure. In the event of a challenge to the fair market
value determinations of the board of directors pursuant to Section
1.2.1 or 2.6.2, or the amount of consideration determined pursuant
to Section 2.6.3, the Company and the Holder (or in case of Sections
2.6.2 and 2.6.3, the Majority Holders) shall attempt to select an
investment banking firm to resolve such dispute. In the event that
the Company and the Holder (or Majority Holders) are unable to agree
upon an investment banking firm, within 30 days following the
delivery of the Holder's (or Majority Holder's) written objections
("Objection Date"), the Company and the Holder (or Majority
Holders), within 45 days following the Objection Date, shall each
select an investment banking firm with a national reputation and the
two firms so selected shall agree upon a third investment banking
firm, which shall resolve such dispute. The findings of the
investment banking firm so selected shall be binding on the Company
and the Holder (or Majority Holders, as the case may be). The fees
and costs of the investment banking firm selected shall be borne
one-half by the Company and one-half by the Holder (or Majority
Holders, as the case may be).
- 8 -
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company represents and warrants
to the Holder that all Shares which may be issued upon the exercise
of the purchase right represented by this Warrant, shall, upon
issuance, be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for
restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether
in cash, property, stock, or other securities and whether or not a
regular cash dividend; (b) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of
stock of any class or series or other rights; (c) to effect any
reclassification or recapitalization of common stock; (d) to merge
or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration
rights the opportunity to participate in an underwritten public
offering of the company's securities for cash, then, in connection
with each such event, the Company shall give Holder (1) at least 10
days prior written notice of the date on which a record will be
taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (a), (b), (c) and (d) above;
(2) in the case of the matters referred to in (c) and (d) above at
least 10 days prior written notice of the date when the same will
take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities
or other property deliverable upon the occurrence of such event);
and (3) in the case of the matter referred to in (e) above, the same
notice as is given to the holders of such registration rights.
3.3 Registration Under Securities Act of 1933, as amended. The Company
agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the
registration rights set forth in the Registration Rights Agreement
between the Company, the Holder and certain other parties dated as
of March 12, 2003, as amended.
ARTICLE 4. MISCELLANEOUS.
4.1 Voting Rights. This Warrant shall not entitle the registered holder
to any voting rights or other rights as a stockholder of the Company
but upon presentation of this Warrant with the Notice of Exercise
duly executed and, if exercised pursuant to Section 1.1, the tender
of payment of the Warrant Price at the office of the Company
pursuant to the provisions of this Warrant, the registered holder
shall forthwith be deemed a stockholder of the Company in respect of
the Shares so subscribed for.
- 9 -
4.2 No Change Necessary. The form of this Warrant need not be changed
because of any adjustment in the Warrant Price or in the number of
Shares issuable upon its exercise. A Warrant issued after any
adjustment on any partial exercise or upon replacement may continue
to express the same Warrant Price and the same number of Shares
(appropriately reduced in the case of partial exercise) as are
stated on this Warrant as initially issued, and that Warrant Price
and that number of shares shall be considered to have been so
changed as of the close of business on the date of adjustment.
4.3 Term. This Warrant is exercisable in whole or in part at any time
and from time to time beginning six months after the date hereof,
through and including the Expiration Date.
4.4 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR STATE SECURITIES LAWS AND
NO TRANSFER OF SUCH SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND THE RULES AND
REGULATIONS THEREUNDER AND OF ALL APPLICABLE STATE SECURITIES OR "BLUE
SKY" LAWS, OR (B) PURSUANT TO AN EXEMPTION THEREFROM UNDER SAID ACT AND
ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS WITH RESPECT TO WHICH
THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE
ACT.
4.5 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if
any) may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws by the
transferor and the transferee (including, without limitation, the
delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, as reasonably requested by
the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or
if there is no material question as to the availability of current
information as referenced in Rule 144(c), Holder represents that it
has complied with Rule 144(d) and (e) in reasonable detail, the
selling broker represents that it has complied with Rule 144(f), and
the Company is provided with a copy of Holder's notice of proposed
sale.
4.6 Transfer Procedure. Subject to the provisions of Section 4.5, Holder
may transfer all or part of this Warrant or the Shares issuable upon
exercise of this
- 10 -
Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) to any affiliate of Holder at any
time without prior notice to Company; provided, however, if Holder
transfers this Warrant, Holder will give the Company notice of the
portion of the Warrant being transferred with the name, address and
taxpayer identification number of the transferee and surrendering
this Warrant to the Company for reissuance to the transferee(s) (and
Holder if applicable).
4.7 Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been
furnished to the Company or the Holder, as the case may be, in
writing by the Company or such holder from time to time. Notices
shall be addressed as follows:
If to Holder, to the address set forth on the signature page hereto.
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin G. Segel, Esq.
If to Company:
Novatel Wireless, Inc.
9360 Towne Centre Drive, Suite 110
San Diego, California
Attn: Peter Leparulo, Chief Executive Officer
With a copy to:
Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attn: J. Scott Hodgkins, Esq.
4.8 Waiver. This Warrant and any term hereof may be amended, changed,
waived, discharged or terminated only by an instrument in writing
signed by the Company and the Majority Holders.
4.9 Remedies. The Company stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of
this Warrant are not and will not be adequate, and that such terms
may be specifically enforced by
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a decree for the specific performance of any agreement contained
herein or by an injunction against a violation of any of the terms
hereof or otherwise.
4.10 Taxes. The Company shall pay any issue or transfer taxes payable in
connection with the exercise of the Warrant, provided, however, that
the Company shall not be required to pay any tax which may be
payable in respect of any transfer to a name other than that of the
Holder.
4.11 Attorney's Fees. In the event of any legal or equitable action
between the parties concerning the terms and provisions of this
Warrant, the party prevailing in such legal or equitable action
shall be entitled to collect from the other party all costs incurred
in such dispute, including reasonable attorneys' fees.
4.12 Automatic Conversion upon Expiration. In the event that, upon the
Expiration Date, the fair market value of one Share (or other
security issuable upon the exercise hereof) as determined in
accordance with Section 1.2.1 above is greater than the Exercise
Price in effect on such date, then this Warrant shall automatically
be deemed on and as of such date to be converted pursuant to Section
1.2 above as to all Shares (or such other securities) for which it
shall not previously have been exercised or converted, and the
Company shall deliver a certificate representing the Shares (or such
other securities) issued upon such conversion to the Holder.
4.13 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.
"COMPANY"
Novatel Wireless, Inc.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
- 12 -
HOLDER'S ADDRESS
[-------------------------------]
[-------------------------------]
[-------------------------------]
[-------------------------------]
- 13 -
NOTICE OF EXERCISE
To: Novatel Wireless, Inc.
(1) The undersigned hereby (A) elects to purchase ________ shares of
common stock of Novatel Wireless, Inc., pursuant to the provisions of Section
1.1 of the attached Warrant, and tenders herewith payment of the purchase price
for such shares in full, or (B) elects to exercise this Warrant with respect to
______ shares of common stock issuable upon exercise of the Warrant, pursuant to
the provisions of Section 1.2 of the attached Warrant.
(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)
--------------------------------------
(Name)
(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:
--------------------------------------
(Name)
- ------------------------------- --------------------------------------
(Date) (Signature)
Address of Holder:
- 14 -
Exhibit 99.4
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR STATE SECURITIES LAWS AND NO TRANSFER OF
THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER AND OF ALL
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, OR (B) PURSUANT TO AN EXEMPTION
THEREFROM UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS
WITH RESPECT TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY
OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE
REQUIREMENTS OF THE ACT.
NOVATEL WIRELESS, INC.
SECURED CONVERTIBLE SUBORDINATED NOTE
$[_______] March 12, 2003
San Diego, California
FOR VALUE RECEIVED, the undersigned, NOVATEL WIRELESS, INC., a
Delaware corporation (the "Company"), hereby promises to pay to [_______]
("Holder") at such place as Holder shall hereafter direct by notice in writing
to the Company, the principal sum of [_______] ($[_______]) or such greater or
lesser principal amount as is then currently outstanding, in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts, plus interest thereon at the rate
provided for herein from the date hereof, with principal and interest payable as
herein provided. At Holder's request, such payment (if required to be in cash
under the terms of this Note) shall be by wire transfer in immediately available
funds to an account to be specified by Holder.
1. Loan, Interest Rate; Payment Provisions; Increase to Principal.
1.1 This Note is issued pursuant to the Securities Purchase Agreement, of
even date herewith (the "Purchase Agreement"), among the Company, the Holder and
the other parties thereto. This Note is one of the Tranche I Notes (as defined
in the Purchase Agreement).
1.2 The principal amount of this Note outstanding from time to time shall
bear interest from the date hereof through the Maturity Date (as hereinafter
defined), at a rate (the "Note Rate") equal to eight percent (8%) per annum.
1.3 Interest on this Note shall be computed on the basis of a 360-day year
of twelve 30-day months. Unless previously paid or converted pursuant to the
terms of Sections 3.1 or 3.2 herein, all unpaid interest and principal on this
Note shall be paid in full on the Maturity Date.
1.4 All payments made by the Company on this Note shall be applied first
to the payment of accrued, but unpaid interest on this Note and then to the
reduction of the unpaid principal balance of this Note.
1.5 Unless converted pursuant to Section 3.2 herein, if payment of the
principal amount of this Note, together with accrued unpaid interest thereon at
the Note Rate, is not paid on the Maturity Date or when otherwise due, or if any
payment of interest is not paid when due, then interest shall accrue on such
unpaid amount at the Note Rate plus four percent (4%) from and after such date
of default to the date of the payment in full of such unpaid amount (including
from and after the date of the entry of judgment in favor of Holder in an action
to collect this Note). Any amount repaid under this Note may not be reborrowed.
1.6 In no event shall Holder be entitled to receive interest at an
effective rate in excess of the maximum rate permitted by law.
1.7 In the event the date for the payment of any amount payable under this
Note falls due on a Saturday, Sunday or public holiday under the laws of the
State of California, the time for payment of such amount shall be extended to
the next succeeding business day and interest at the Note Rate shall continue to
accrue on any principal amount so effected until the payment thereof on such
extended due date.
1.8 Capitalized terms used herein shall, unless otherwise defined herein,
have the meanings assigned thereto in the Purchase Agreement. For purposes of
this Agreement the following terms shall have the following meanings:
1.8.1 "Maturity Date" means the earliest of (i) March 12, 2005, or
(ii) the date on which this Note is otherwise due pursuant to Section 3.1
or 5.
1.8.2 "Note" means this Secured Convertible Subordinated Note.
1.8.3 "Tranche I Holders" means the holders of the Tranche I Notes,
including the Holder.
1.9 The Tranche I Holders have the right, at their election, to make
payments to Sanmina-SCI Corporation ("Sanmina") in order to continue the
Company's ability to defer payments to Sanmina beyond August 1, 2003 (at a rate
of $150,000 per month of extension), as contemplated by the letter agreement
between certain investors in the Company and Sanmina of even date herewith (the
"Sanmina Extension Payments"), which such Sanmina Extension Payments shall
reduce the Company's aggregate obligation to Sanmina under the Settlement
Agreement and Mutual Release, dated January 12, 2002, as amended. In the event
that Holder makes any Sanmina Extension Payments, the principal balance of this
Note shall be increased by the amount of such payments.
2. Replacement of Note. In case this Note is mutilated, destroyed, lost or
stolen, the Company shall, at its sole expense, execute and deliver a new Note,
in exchange and substitution for this Note. In the case of destruction, loss or
theft, Holder shall furnish to the Company indemnity reasonably satisfactory to
the Company, and in any such case, and in the case of mutilation, Holder shall
also furnish to the Company evidence to its reasonable
- 2 -
satisfaction of the mutilation, destruction, loss or theft of this Note and of
the ownership thereof. Any replacement Note so issued shall be in the same
outstanding principal amount as this Note and dated the date of this Note.
3. Repayment, Conversion and Security.
3.1 The Agent may, at its option, require repayment of all or any portion
of (i) the entire principal amount of, and (ii) all accrued interest on, this
Note and all of the other Tranche I Notes, to the extent then outstanding and
unpaid at any time following the occurrence of any of the following events:
3.1.1 in the event that prior to the Third Closing Date, the Company
receives financing (other than non-convertible debt or as proceeds as a
consequence of any exercise of common stock purchase warrants outstanding
as of the date hereof) from any third party, with such repayment to occur
concurrently with the closing of such financing, and from and to the
extent of the proceeds of such financing; provided, however, the Holder,
may, at its option, convert all or any portion of the outstanding
principal and accrued interest of this Note into any equity securities
issued in connection with such financing, on the same terms as the other
investors in such financing, instead of requiring repayment of the entire
principal amount and all accrued interest on the Note;
3.1.2 in the event that the Purchase Agreement terminates, other
than by reason of the Purchasers' material breach, prior to the Third
Closing Date, with such repayment to occur within sixty (60) days of such
termination date; or
3.1.3 in the event that, for any reason other than the Purchasers'
material breach, the Third Closing does not occur on or before the
Expiration Date, with such repayment to occur within sixty (60) days of
such date.
Such payment shall be made in cash; provided, however, that at Holder's
election, a portion of such payment (in an amount to be designated by Holder)
shall be effected by the issuance to Holder of that number of shares of the
Company's common stock equal to the amount of the accelerated portion of the
remaining balance divided by Seventy Cents ($0.70) (such figure shall be
adjusted appropriately to reflect any stock dividends, stock splits, reverse
stock splits, combinations, reorganizations or similar transactions affecting
the Common Stock); provided, further, that, the total number of shares of Common
Stock issuable to the Tranche I Holders in the aggregate pursuant to Section 3.1
of each of the Tranche I Notes, together with the total number of shares
issuable upon exercise of the warrants granted to Purchasers on the date of this
Note, shall not exceed 1,396,964 shares of Common Stock.
3.2 Notwithstanding anything to the contrary herein, at the Third Closing,
the Note, to the extent not repaid pursuant to Section 3.1 above, shall
automatically (and without the need for any further action by any party) convert
into a number of shares of Series B Preferred Stock equal to (i) the total
amount of principal outstanding and accrued, unpaid interest under the Note as
of the Third Closing Date divided by (ii) $1,000.
3.3 This Note shall be secured by a lien on all of the assets and property
of the Company (subordinate to the rights of Silicon Valley Bank and Sanmina-SCI
Corporation
- 3 -
("Sanmina") as set forth in Section 7 below) pursuant to the terms of a Security
Agreement (the "Security Agreement"), dated as the date hereof, between the
Company and the Agent (for the benefit of the Tranche I Holders).
3.4 Other than as set forth in Section 3.5, this Note shall not be
prepaid.
3.5 Notwithstanding Section 3.4, if the Agent submits a written request to
the Company stating that the Holder wishes to make a Sanmina Extension Payment,
then within 5 days of receipt of Agent's request, the Company shall pre-pay a
portion of the balance of this Note, in cash, in an amount sufficient for the
Holder to make such Sanmina Extension Payment.
4. Covenants of the Company. The Company covenants and agrees that, so long as
this Note remains outstanding and unpaid, in whole or in part:
4.1 The Company will faithfully and in all material respects perform all
of its covenants and agreements under the Security Agreement and the Purchase
Agreement and the Company will not make any loan to any person who is or becomes
a shareholder of the Company, other than for reasonable advances for expenses in
the ordinary course of business.
4.2 The Company will promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon it or upon its
income and profits, or upon any of its property, before the same shall become in
default; provided, however, that the Company shall not be required to pay and
discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings and
the Company, shall set aside on its books adequate reserves with respect to any
such tax, assessment, charge, levy or claim so contested.
4.3 The Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and comply with all laws applicable to the Company as its legal
counsel may advise.
4.4 The Company will, except for the effects of reasonable wear and tear
in the ordinary course of business, at all times maintain, preserve, protect and
keep its property used or useful in the conduct of its business in good repair,
working order and condition, and from time to time make all needful and proper
repairs, renewals, replacements, betterments and improvements thereto.
4.5 The Company will keep adequately insured, by financially sound
reputable insurers, all property of a character usually insured by similar
entities and carry such other insurance as is usually carried by similar
entities.
4.6 The Company will, promptly following its obtaining knowledge of the
occurrence of an Event of Default or of any condition or event which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default, furnish a statement of the Company's Chief Financial Officer, to Agent
setting forth the details of such Event of Default or condition or event and the
action which the Company intends to take with respect thereto.
- 4 -
4.7 The Company will at all times maintain books and records in which all
of its financial transactions are duly recorded in conformity in all material
respects with generally accepted accounting principles.
4.8 The Company will use the proceeds of the Note solely for the working
capital purposes of the Company and its Subsidiaries, including the discharge of
existing liabilities of the Company and its Subsidiaries.
4.9 The Company shall not make any distributions to any equity holders or
affiliates of the Company (other than in connection with arm's-length
obligations to equity holders or affiliates who are suppliers or customers). In
addition, the Company shall not make contributions to, or payments on behalf of,
any Subsidiary, except as permitted pursuant to that certain Loan and Security
Agreement, dated as of November 29, 2001, between the Company and Silicon Valley
Bank, Commercial Finance Division, as amended, as in effect on the date hereof.
5. Events of Default. If any of the following events (each an "Event of
Default") shall occur:
5.1 The Company shall fail to pay on the due date therefor, the principal
of, or interest on, or any other amount payable under the Note or any other
Tranche I Note and such failure shall continue uncured for a period of five (5)
days from such due date, or
5.2 The Company shall default in the due observance or performance of any
covenant, condition or agreement on the part of the Company to be observed or
performed pursuant to the terms of this Note or any other Tranche I Note (other
than the other defaults specified in Section 5) or the Company or any Subsidiary
shall default in the due observance or performance of any covenant, condition or
agreement on the part of the Company or such Subsidiary to be observed or
performed pursuant to the terms of the Security Agreement or the Purchase
Agreement and such defaults shall continue uncured for a period of fifteen (15)
days after notice thereof shall have been given to the Company by Agent; or
5.3 The dissolution of the Company or any Subsidiary or any vote in favor
thereof by the board of directors and shareholders of the Company or such
Subsidiary, as the case may be; or
5.4 The Company or any Subsidiary shall resolve (including without
limitation by board action) or otherwise establish any definitive intention in
writing to file a petition seeking relief under any provision of the Federal
Bankruptcy Code or any other federal or state statute now or hereafter in effect
affording relief to debtors, or make an assignment for the benefit of creditors,
or file with a court of competent jurisdiction an application for appointment of
a receiver or similar official with respect to it or any substantial part of its
assets, or there shall be filed against the Company or any such Subsidiary any
such application or petition, which application or petition is not dismissed or
withdrawn within thirty (30) days from the date of filing thereof; or
5.5 Any default or event of default occurs under the obligations to
Silicon Valley Bank or Sanmina (or any lender which refinances such obligations)
under the respective agreements listed on Schedule I, any of the Sanmina Notes,
if and when issued, or under any
- 5 -
other obligation of the Company or any Subsidiary for borrowed money, which
default is not cured during the applicable cure period or waived in writing by
the lender or obligee; or
5.6 The Company or any Subsidiary shall sell all or substantially all of
its assets or merge or be consolidated with or into another entity other than,
in the case of any such Subsidiary, the Company or another Subsidiary of the
Company; or
5.7 The commencement of a proceeding to foreclose a security interest or
lien in any property or assets of the Company or any Subsidiary upon default in
the payment or performance of any debt of the Company or any such Subsidiary in
excess of $25,000 which is secured thereby; or
5.8 Other than in connection with matters set forth on Schedule 3.10 to
the Purchase Agreement, the entry against the Company or any Subsidiary of a
final judgment for the payment of money in excess of $100,000 by a court of
competent jurisdiction, which judgment shall not be discharged (or the discharge
thereof not duly provided for) in accordance with its terms within thirty (30)
days of the date of entry thereof, or a stay of execution thereof procured
within thirty (30) days from the date of entry thereof and, within such period
(or such longer period during which execution of such judgment shall have been
effectively stayed) an appeal therefrom shall not have been prosecuted and the
execution thereof caused to be stayed during such appeal; or
5.9 An attachment or garnishment shall have been levied against the assets
of the Company or any Subsidiary involving an amount in excess of $100,000 and
such levy is not vacated, bonded or otherwise terminated within thirty (30) days
after the date of the effectiveness of the levy;
then, upon the occurrence of any such Event of Default and at any time
thereafter, the Agent shall have the right to declare the principal of, accrued
unpaid interest on, and all other amounts payable under all of the Tranche I
Notes (including this Note) to be forthwith due and payable, whereupon all such
amounts shall be immediately due and payable to Holder, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived; provided, however, in case of the occurrence of an Event of Default
under Section 5.3 or 5.4, such amounts shall become immediately due and payable
without any such declaration by the Agent.
6. Suits for Enforcement and Remedies. If any one or more Events of Default
shall occur and be continuing, the Agent may proceed to (i) protect and enforce
Holder's rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or agreement contained
in this Note or in any agreement or document referred to herein or in aid of the
exercise of any power granted in this Note or in any agreement or document
referred to herein, (ii) enforce the payment of this Note, or (iii) enforce any
other legal or equitable right of the holder of this Note. No right or remedy
herein or in any other agreement or instrument conferred upon the holder of this
Note is intended to be exclusive of any other right or remedy, and each and
every such right or remedy shall be cumulative and shall be in addition to every
other right and remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
- 6 -
7. Seniority. This Note shall be senior in priority to the payment of all other
debts of the Company, whether now existing or hereinafter incurred, other than
the obligations of the Company to Silicon Valley Bank and Sanmina now existing
as shown on the attached Schedule I hereto and trade payables and, if and when
issued, the Sanmina Notes described in the Purchase Agreement (each of which may
be pari passu with the repayment of this Note).
8. Unconditional Obligation; Fees, Waivers, etc.
8.1 The obligations to make the payments provided for in this Note are
absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
8.2 If Agent shall seek to enforce the collection of any amount of
principal of and/or interest on this Note, there shall be immediately due and
payable from the Company, in addition to the then unpaid principal of, and
accrued unpaid interest on, this Note, all reasonable costs and expenses
incurred by Agent or the Holder in connection therewith, including, without
limitation, attorneys' fees and disbursements.
8.3 No forbearance, indulgence, delay or failure to exercise any right or
remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
8.4 Any term, covenant, agreement or condition of this Note may be amended
or compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the signed
written consent of the Agent and the Company.
8.5 The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which Agent had or is existing as security for any amount called
for hereunder, except as specifically provided herein.
9. Restriction on Transfer. This Note has not been registered under the
securities laws of the United States of America or any state thereof. This Note
has been acquired for investment, accordingly, no interest in this Note may be
offered for sale, sold or transferred in the absence of registration and
qualification of this Note under applicable federal and state securities laws or
an opinion of counsel of Holder reasonably satisfactory to the Company that such
registration and qualification are not required.
10. Miscellaneous.
10.1 The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
- 7 -
10.2 The provisions of this Note are severable and, if any one provision
hereof shall be held invalid or unenforceable in whole or in part in any
jurisdiction, such invalidity or unenforceability shall affect only such
provision in such jurisdiction.
10.3 Notices, demands or other communications given or made in connection
with this Note shall be in writing and delivered in accordance with the
provisions of the Purchase Agreement.
10.4 This Note and the obligations of the Company and the rights of Holder
shall be governed by and construed in accordance with the internal substantive
laws of the State of California without giving effect to the choice of laws
rules thereof.
10.5 The Company and the Holder (a) agree that any legal suit, action or
proceeding arising out of or relating to this Note will be instituted
exclusively in the courts of the State of California sitting in the County of
Los Angeles, or any Federal court in such State, (b) waive any objection which
such party may have now or hereafter based upon forum non conveniens or to the
venue of any such suit, action or proceeding, and (c) irrevocably consent to the
jurisdiction of the State Courts located in said State in any such suit, action
or proceeding. Each such party further agrees to accept and acknowledge service
of any and all process which may be served in any such suit, action or
proceeding in said courts in said State, and agrees that service of process upon
such party, mailed by certified mail to such party's address, will be deemed in
every respect effective service of process upon such party, in any suit, action
or proceeding. FURTHER, BOTH THE COMPANY AND HOLDER HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION TO ENFORCE THIS NOTE.
10.6 This Note shall bind the Company and its successors and assigns.
10.7 Neither the Agent, the Holder nor the Company shall have any
liability under or in connection with this Note or the Security Agreement for
special, exemplary, punitive, incidental, indirect or consequential damages of
any sort in any action of any type or nature whatsoever in connection with this
Note or the Security Agreement and the parties waive any right that they have to
claim or recover in any such action any special, exemplary, punitive,
incidental, indirect or consequential damages or any sort other than actual
damages.
NOVATEL WIRELESS, INC.,
a Delaware corporation
By
------------------------------
Name: Peter Leparulo
Title: Chief Executive Officer
- 8 -
SCHEDULE I
PRIOR LIENS
1. Lien in favor of Silicon Valley Bank pursuant to Loan and Security Agreement
dated November 29, 2001.
2. Lien in favor of Sanmina-SCI Corporation pursuant to Security Agreement dated
January 12, 2002.
- 9 -
EXHIBIT 99.5
VOTING AGREEMENT
This Voting Agreement, dated as of March 12, 2003 (this "Agreement"), is made by
and among Henry Sweetbaum, as Purchaser Representative ("Purchaser
Representative") and each of the stockholders of NOVATEL WIRELESS, INC., a
Delaware corporation (the "Company") identified on the signature pages hereto
(collectively, the "Stockholders" and each, individually, a "Stockholder").
WITNESSETH:
WHEREAS, the Company and certain purchasers (collectively, the "Purchaser") are
entering into a Securities Purchase Agreement, dated as of the date hereof (as
it may be amended from time to time, the "Purchase Agreement"; capitalized terms
used and not otherwise defined in this Agreement have the respective meanings
ascribed to such terms in the Purchase Agreement), pursuant to which the Company
has agreed to issue the Tranche I Notes, certain shares of Series B Preferred
Stock and certain warrants to purchase Common Stock;
WHEREAS, each Stockholder is the record or beneficial owner of the number of
shares of Common Stock set forth on Schedule A hereto opposite such
Stockholder's name (all such shares of Common Stock and any shares of Common
Stock hereafter acquired by such Stockholder, including upon exercise, exchange
or conversion of any option or other convertible security, the "Shares");
WHEREAS, as a condition to entering into the Purchase Agreement and incurring
the obligations set forth therein, Purchaser has required that the Stockholders
agree to enter into this Agreement; and
WHEREAS, the Stockholders wish to induce Purchaser to enter into the Purchase
Agreement and, therefore, the Stockholders are willing to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
VOTING AGREEMENT
SECTION 1.01 Voting Agreement. Each Stockholder, in its capacity as such, hereby
agrees that, during the period commencing on the date hereof and continuing
until the termination of this Agreement as set forth in Section 4.01 (the
"Termination Date"), at any meeting of the stockholders of the Company, however
called, it will cause the Shares that such Stockholder beneficially owns to be
counted as present (or absent, if requested by Purchaser Representative )
thereat for purposes of establishing a quorum, and, at any such meeting or in
any action by consent of the stockholders of the Company, such Stockholder shall
vote (or cause to be voted) all of such Stockholder's Shares (i) in favor of the
approval and adoption of all of the
transactions contemplated by the Purchase Agreement and this Agreement and
otherwise in such manner as may be necessary to consummate the First Closing and
the Second Closing, including, without limitation, the Shareholder Proposals
described therein; (ii) against any action, proposal, agreement or transaction
that would result in a breach of any covenant, obligation, agreement,
representation or warranty of the Company under the Purchase Agreement or of
such Stockholder contained in this Agreement; and (iii) against any action,
agreement, transaction (other than the Purchase Agreement or the transactions
contemplated thereby) or proposal (including any Transaction Proposal) that
could reasonably be expected to result in any of the conditions to the First
Closing or the Second Closing or to the Company's obligations under the Purchase
Agreement not being fulfilled or that is intended, or could reasonably be
expected, to impede, interfere, delay, discourage or adversely affect the
Purchase Agreement, the First Closing, the Second Closing or this Agreement. Any
vote by such Stockholder that is not in accordance with this Section 1.01 shall
be considered null and void, and the provisions of Section 1.02 shall be deemed
to take immediate effect; provided, however, that nothing in this Agreement
shall limit or affect any signatory hereto solely in his capacity as a member of
the Board of Directors or officer of the Company; provided further, that nothing
in this Agreement shall be interpreted as obligating the Stockholders to
exercise any options to acquire shares of Common Stock of the Company.
SECTION 1.02 Irrevocable Proxy. If a Stockholder fails to comply with the
provisions of Section 1.01, such Stockholder hereby agrees that such failure
shall result, without any further action by such Stockholder, effective as of
the date of such failure, in the constitution and appointment of Horst Pudwill
and Henry Sweetbaum, and each of them, from and after the date of such failure
until the Termination Date (at which point such constitution and appointment
shall automatically be revoked) as such Stockholder's attorney, agent and proxy
(such constitution and appointment, the "Irrevocable Proxy"), with full power of
substitution, to vote and otherwise act with respect to all such Stockholder's
Shares at any meeting of the stockholders of the Company (whether annual or
special and whether or not an adjourned or postponed meeting), however called,
and in any action by written consent of the stockholders of the Company, on the
matters and in the manner specified in Section 1.01. Without limiting the
foregoing, in any such vote or other action pursuant to such proxy, neither
Horst Pudwill, Henry Sweetbaum nor any other person listed in the immediately
preceding sentence shall in any event have the right (and such proxy shall not
confer the right) to vote against the transactions contemplated by the Purchase
Agreement. THIS PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED WITH AN
INTEREST AND, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, SHALL BE VALID AND
BINDING ON ANY PERSON TO WHOM A STOCKHOLDER MAY TRANSFER ANY OF ITS SHARES IN
BREACH OF THIS AGREEMENT. Each Stockholder hereby revokes all other proxies and
powers of attorney with respect to all such Stockholder's Shares that may have
heretofore been appointed or granted, and no subsequent proxy or power of
attorney shall be given (and if given, shall not be effective) by such
Stockholder with respect thereto. All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of such Stockholder and any
obligation of such Stockholder under this Agreement shall be binding upon the
heirs, personal representatives, successors and assigns of such Stockholder.
-2-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder hereby severally, but not jointly, represents and warrants to
Purchaser Representative (for the benefit of Purchaser) as to such Stockholder
as follows:
SECTION 2.01 Organization and Authority of the Stockholders. Each Stockholder
that is an individual has full legal capacity, power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. Each
Stockholder that is not an individual is duly formed, validly existing and in
good standing under the laws of the jurisdiction of its formation and has all
necessary power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each Stockholder and the
performance by each Stockholder of such Stockholder's obligations hereunder have
been duly authorized by all requisite action on the part of each Stockholder.
This Agreement has been duly and validly executed and delivered by each
Stockholder and (assuming due authorization, execution and delivery by Purchaser
Representative) constitutes a legal, valid and binding obligation of each
Stockholder enforceable against each Stockholder in accordance with its terms,
except as limited by bankruptcy, insolvency and other similar laws or equitable
principles (but not those concerning fraudulent conveyance) generally affecting
creditors' rights and remedies.
SECTION 2.02 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each Stockholder does not,
and the performance of this Agreement by each Stockholder will not, (i) conflict
with or violate any agreement to which a Stockholder is a party, any trust
agreement or any equivalent organizational documents, as the case may be, of
such Stockholder, (ii) conflict with or violate any law applicable to such
Stockholder or by which any property or asset of such Stockholder is bound or
affected or (iii) result in any breach of, or constitute a default (or event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of an Lien on any Shares (other than pursuant to this
Agreement) pursuant to, any note, bond, mortgage, indenture, pledge, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
of such Stockholder, except, with respect to clauses (ii) and (iii) above, for
any such conflicts, violations, breaches, defaults or other occurrences that
would not prevent or materially delay the ability of such Stockholder to carry
out such Stockholder's obligations under this Agreement.
(b) The execution and delivery of this Agreement by each Stockholder does not,
and the performance of this Agreement by each Stockholder will not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any Governmental Authority, except (i) for applicable requirements, if any,
of the Exchange Act and state securities or "blue sky" laws, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay the
ability of such Stockholder to carry out such Stockholder's obligations under
this Agreement.
-3-
SECTION 2.03 Ownership of Shares. As of the date hereof, each Stockholder is the
record or beneficial owner (as defined in Rule 13d-3 under the Exchange Act,
which meaning will apply for all purposes of this Agreement) of, and has good,
valid and marketable title to, the number of Shares set forth opposite such
Stockholder's name on Schedule A hereto. Except as set forth on Schedule A, such
Shares are all the securities (as defined in Section 3(a)(10) of the Exchange
Act, which definition will apply for all purposes of this Agreement) of the
Company owned, either of record or beneficially, by such Stockholder as of the
date hereof and such Stockholder does not have any option or other right to
acquire any other securities of the Company. The Shares owned by such
Stockholder are owned free and clear of all Liens, other than any Liens created
by this Agreement or pledges disclosed in writing to Purchaser Representative
pursuant to Section 3.01 below. Except as provided in this Agreement, such
Stockholder has not appointed or granted any proxy, which appointment or grant
is still effective, with respect to the Shares owned by such Stockholder.
SECTION 2.04 Reliance by Purchaser. Each Stockholder understands and
acknowledges that Purchaser is entering into the Purchase Agreement in reliance
upon such Stockholder's execution, delivery and performance of this Agreement.
SECTION 2.05 No Finder's Fees. No broker, finder, investment banker or financial
advisor is entitled to any brokerage, finder's, financial advisor's or other fee
or commission in connection with the transactions contemplated by this Agreement
or the Purchase Agreement based upon arrangements made by or on behalf of such
Stockholder that is or will be payable by Purchaser, Purchaser Representative,
the Company or any of their respective Subsidiaries.
SECTION 2.06 Absence of Litigation. As of the date of this Agreement, there is
no litigation, suit, claim, action, proceeding or investigation pending, or to
the knowledge of such Stockholder, threatened against such Stockholder, or any
property or asset of such Stockholder, before any Governmental Body that seeks
to delay or prevent the consummation of the transactions contemplated by this
Agreement or the Purchase Agreement.
ARTICLE III
COVENANTS OF THE STOCKHOLDERS
SECTION 3.01 No Disposition or Lien of Shares. Except for pledges in existence
as of the date hereof that have been disclosed in writing to Purchaser
Representative, each Stockholder hereby agrees that, except as contemplated by
this Agreement, such Stockholder shall not (i) sell, transfer, tender, pledge,
assign, contribute to the capital of any entity, hypothecate, give or otherwise
dispose of, grant a proxy or power of attorney with respect to (other than the
Irrevocable Proxy), deposit into any voting trust, enter into any voting
agreement, or create or permit to exist any Liens of any nature whatsoever
(other than pursuant to this Agreement) with respect to, any of such
Stockholder's Shares (or agree or consent to, or offer to do, any of the
foregoing), or (ii) take any action that would make any representation or
warranty of such
-4-
Stockholder herein untrue or incorrect or have the effect of preventing,
delaying or disabling such Stockholder from performing such Stockholder's
obligations hereunder.
SECTION 3.02 No Solicitation of Transactions. None of the Stockholders shall,
directly or indirectly, through any Representative, or otherwise, (i) solicit,
initiate, facilitate or encourage, directly or indirectly, any inquiries
relating to, or the submission of, any Transaction Proposal, (ii) participate in
any discussions or negotiations regarding any Transaction Proposal, or in
connection with any Transaction Proposal, or furnish to any Person any
information or data with respect to or provide access to the properties of the
Company or any of its Subsidiaries, or take any other action to facilitate the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Transaction Proposal or (iii) enter into any agreement with respect to
any Transaction Proposal or approve or resolve to approve any Transaction
Proposal; provided, however, that nothing herein shall prevent a Stockholder
from acting in such Stockholder's capacity as a director or officer of the
Company, or taking any action in such capacity (including at the direction of
the Company's board of directors), but only in either such case as and to the
extent permitted by Section 5.5 of the Purchase Agreement. Except as otherwise
provided by Section 5.5 of the Purchase Agreement, each Stockholder shall, and
shall direct or cause such Stockholder's Representatives to, immediately cease
any existing activities, discussions or negotiations with any Person conducted
heretofore with respect to any of the foregoing actions described in (i), (ii)
and (iii) of this Section 3.02.
SECTION 3.03 Cooperation. Each Stockholder agrees to cooperate fully with
Purchaser Representative to execute and deliver such further documents,
certificates, agreements and instruments and to take such other actions as may
be reasonably requested by Purchaser Representative to evidence or reflect the
transactions contemplated by this Agreement and to carry out the intent and
purposes of this Agreement.
SECTION 3.04 Information for Offer Documents and Proxy Statement; Disclosure.
Each Stockholder covenants and agrees that none of the information relating to
such Stockholder and its affiliates for inclusion in any proxy statement or
other filings with the SEC with respect to the transactions contemplated by the
Purchase Agreement that has been or will be furnished to Purchaser
Representative by such Stockholder for inclusion in such documents will, at (i)
the time such proxy statement or other filing (or any amendment or supplement
thereto) is first filed with the SEC or mailed to stockholders of the Company or
(ii) the time of the Company Stockholders' Meeting (in the case of information
included in the proxy statement), not contain any untrue statement of a material
fact or omit to state any 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. Each Stockholder agrees to permit
Purchaser and Purchaser Representative to publish and disclose in such documents
and any related filings under applicable securities laws such Stockholder's
identity and ownership of Shares and the nature of its commitments, arrangements
and understandings under this Agreement and any other information regarding such
Stockholder as required by applicable laws, provided that each such Stockholder
shall be given reasonable opportunity to review and comment on the applicable
portion of such documents relating to such Stockholder and its affiliates.
-5-
ARTICLE IV
MISCELLANEOUS
SECTION 4.01 Termination. This Agreement shall automatically terminate with
respect to any Stockholder, on the earlier of (i) the mutual agreement of
Purchaser Representative and Stockholders, (ii) the consummation of the Second
Closing, or (iii) the termination of the Purchase Agreement in accordance with
its terms.
SECTION 4.02 Nature of Obligations. Each of the obligations of each of the
Stockholders hereunder is several and not joint.
SECTION 4.03 Legending of Certificates; Nominees Shares; Stop Transfer. Upon
request by Purchaser Representative, each Stockholder agrees to submit to
Purchaser Representative contemporaneously with or promptly following execution
of this Agreement all certificates representing their Shares so that Purchaser
Representative may note thereon a legend referring to the rights granted to it
under this Agreement. If any of the Shares beneficially owned by a Stockholder
are held of record by a brokerage firm in "street name" or in the name of any
other nominee (a "Nominee," and, as to such Shares, "Nominee Shares"), such
Stockholder agrees that, upon written request by Purchaser Representative, such
Stockholder will within five days of such request execute and deliver to
Purchaser Representative a limited power of attorney, in form and substance
reasonably satisfactory to Purchaser Representative, enabling Purchaser
Representative to require such Nominee to (i) enter into an agreement to the
same effect as Article I hereof with respect to the Nominee Shares held by such
Nominee, and (ii) submit to Purchaser Representative the certificates
representing such Nominee Shares for notation of the above-referenced legend
thereon.
SECTION 4.04 Disclosure. Purchaser Representative and the Stockholders shall
consult with each other before issuing any press release or otherwise making any
public statement with respect to this Agreement or the Purchase Agreement or the
transactions contemplated hereby or thereby.
SECTION 4.05 Adjustments.
(a) In the event (i) of any increase or decrease or other change in the Shares
by reason of stock dividend, stock split, reverse stock split,
recapitalizations, combinations, exchanges of shares or the like or (ii) that a
Stockholder becomes the beneficial owner of any additional shares of Common
Stock or other securities of the Company, then the terms of this Agreement shall
apply to the shares of capital stock and other securities of the Company held by
the Stockholders immediately following the effectiveness of the events described
in clause (i), or such Stockholder becoming the beneficial owner thereof
pursuant to clause (ii).
(b) Each Stockholder hereby agrees to promptly notify Purchaser Representative
of the number of any new Shares or other securities acquired by such
Stockholder, if any, after the date hereof.
-6-
SECTION 4.06 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 4.06):
(a) if to any Stockholder:
To the appropriate address set forth on Schedule B hereto
(b) if to Purchaser Representative:
Henry Sweetbaum
c/o Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin G. Segel
with a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin G. Segel
SECTION 4.07 Amendment. This Agreement may not be amended except by an
instrument in writing signed by all the parties hereto.
SECTION 4.08 Waiver. No failure on the part of any party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No party shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
SECTION 4.09 Entire Agreement. This Agreement (together with the Schedules
hereto) constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, other than the Purchase Agreement and the other agreements
contemplated thereby.
-7-
SECTION 4.10 Applicable Law; Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof or any other jurisdiction. In any action between any of the
parties arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement: (a) each of the parties irrevocably and
unconditionally consents and submits to the exclusive jurisdiction and venue of
the state and federal courts located in the State of Delaware (and agrees not to
commence any such action except in such courts) and irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action brought in such court has been brought in an inconvenient forum;
(b) if any such action is commenced in a state court, then, subject to
applicable law, no party shall object to the removal of such action to any
federal court located in the State of Delaware; (c) each of the parties
irrevocably waives the right to trial by jury; and (d) each of the parties
irrevocably consents to service of process by first class certified mail, return
receipt requested, postage prepaid, to the address at which such party is to
receive notice in accordance with Section 4.06.
SECTION 4.11 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity, without necessity of proof that there is no adequate
remedy at law or requirement to post any security bond.
SECTION 4.12 Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 4.13 Costs and Expenses. Except as otherwise provided in the Purchase
Agreement, all costs and expenses of the parties hereto, including fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the First
Closing or the Third Closing shall have occurred.
SECTION 4.14 Parties in Interest; Assignability. This Agreement shall be binding
upon, and shall be enforceable by and inure solely to the benefit of, the
parties hereto, Purchaser and their respective successors and assigns; provided,
however, that neither this Agreement nor any of the Stockholders' rights
hereunder may be assigned by any Stockholder without the prior written consent
of Purchaser Representative, and any attempted assignment of this Agreement or
any of such rights by any Stockholder without such consent shall be void and of
no effect; provided, further, that Purchaser may assign its rights under this
Agreement to any direct or indirect subsidiary of Purchaser. Except as noted in
the previous sentence, nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person (other than the parties hereto) any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement. Any assignment prohibited under this Section shall be null and void.
Purchaser Representative shall provide Stockholders with written notice of the
designation of any new person or entity as Purchaser Representative pursuant to
the Purchase Agreement, and such person or entity shall succeed to the rights
and obligations of Purchaser Representative hereunder.
-8-
SECTION 4.15 Severability. Any term or provision of this Agreement that is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is
invalid, void or unenforceable, the parties agree that the court making such
determination shall have the power to reduce the scope, duration, area or
applicability of the term or provision, to delete specific words or phrases, or
to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
SECTION 4.16 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 4.17 Interpretation of Representations. Each representation and warranty
made in this Agreement or pursuant hereto is independent of all other
representations and warranties made by the same parties, whether or not covering
related or similar matters, and must be independently and separately satisfied.
Exceptions or qualifications to any such representation or warranty shall not be
construed as exceptions or qualifications to any other representation or
warranty.
SECTION 4.18 Construction.
(a) For purposes of this Agreement, whenever the context requires: the singular
number shall include the plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; the feminine gender shall include the
masculine and neuter genders; and the neuter gender shall include masculine and
feminine genders.
(b) The parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) For purposes of this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
-9-
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the day and year first above written.
Purchaser Representative
By:/s/ Henry Sweetbaum
--------------------
-10-
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the day and year first above written.
Purchaser
By: /s/ Horst Pudwill
-----------------------------------------
Cornerstone Equity Investors, LLC
By: /s/ William Austin
----------------------------------------
Title: Chief Financial Officer
------------------------------
By: /s/ Mark Rossi
---------------------------------
Title: Chairman of the Board
------------------------------
By: /s/ Robert Getz
---------------------------------
Title: Director
------------------------------
Aether Capital LLC
By: /s/ David C. Reymann
---------------------------------
Title: Chief Financial Officer
------------------------------
By: /s/ David Oros
---------------------------------
Title: Director
------------------------------
By: /s/ Steven Sherman
-----------------------------------------
Title: Director
------------------------------
By: /s/ John E. Major
-----------------------------------------
Title: Director
------------------------------
By: /s/ Peng Lim
-----------------------------------------
Title: Director
------------------------------
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By: /s/ Daniel Pittard
-----------------------------------------
Title: Director
------------------------------
By: /s/ Peter V. Leparulo
-----------------------------------------
Title: Chief Executive Officer
------------------------------
By: /s/ Melvin L. Flowers
-----------------------------------------
Title: Senior Vice President, Finance
---------------------------------
Chief Financial Officer and
- --------------------------------------------
Secretary
- --------------------------------------------
-12-
SCHEDULE A
NUMBER OF SHARES OF NUMBER OF SHARES
COMMON STOCK ISSUABLE UPON
EXERCISE OF COMPANY
NAME OPTIONS AND WARRANTS
-13-
SCHEDULE B
-14-
Exhibit 99.6
SERIES A PREFERRED STOCK
VOTING AGREEMENT
This Voting Agreement, dated as of March 12, 2003 (this "Agreement"), is made by
and among Henry Sweetbaum, as purchaser representative ("Purchaser
Representative") and each of the stockholders of NOVATEL WIRELESS, INC., a
Delaware corporation (the "Company") identified on the signature pages hereto
(collectively, the "Stockholders" and each, individually, a "Stockholder").
WITNESSETH:
WHEREAS, the Company and certain purchasers (collectively, the "Purchaser") are
entering into a Securities Purchase Agreement, dated as of the date hereof (as
it may be amended from time to time, the "Purchase Agreement"; capitalized terms
used and not otherwise defined in this Agreement have the respective meanings
ascribed to such terms in the Purchase Agreement), pursuant to which the Company
has agreed to issue the Tranche I Notes, certain shares of Series B Preferred
Stock and certain warrants to purchase Common Stock;
WHEREAS, each Stockholder is the record or beneficial owner of the number of
shares of Series A Preferred Stock set forth on Schedule A hereto opposite such
Stockholder's name (all such shares of Series A Preferred Stock and any shares
of Series A Preferred Stock hereafter acquired by such Stockholder, including
upon exercise, exchange or conversion of any option or other convertible
security, the "Shares");
WHEREAS, as a condition to entering into the Purchase Agreement and incurring
the obligations set forth therein, Purchaser has required that the Stockholders
agree to enter into this Agreement; and
WHEREAS, the Stockholders wish to induce Purchaser to enter into the Purchase
Agreement and, therefore, the Stockholders are willing to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
VOTING AGREEMENT
SECTION 1.1 Voting Agreement. Each Stockholder, in its capacity as such, hereby
agrees that, during the period commencing on the date hereof and continuing
until the termination of this Agreement as set forth in Section 4.1 (the
"Termination Date"), at any meeting of the stockholders of the Company, however
called, it will cause the Shares that such Stockholder beneficially owns to be
counted as present (or absent, if requested by Purchaser Representative) thereat
for purposes of establishing a quorum, and, at any such meeting or in any action
by consent of the stockholders of the Company, such Stockholder shall vote (or
cause to be voted)
all of such Stockholder's Shares (i) in favor of the approval and adoption of
the amendment and restatement of the Certificate of Designation for the Series A
Preferred Stock, substantially in the form attached hereto as Exhibit 1 (the
"Amendment"); (ii) against any action, proposal, agreement or transaction that
would result in a breach of any covenant of such Stockholder contained in this
Agreement; and (iii) against any action, agreement, transaction that could
reasonably be expected, to impede, interfere, delay, discourage or adversely
affect the Amendment. Any vote by such Stockholder that is not in accordance
with this Section 1.1 shall be considered null and void, and the provisions of
Section 1.2 shall be deemed to take immediate effect; provided, however, that
nothing in this Agreement shall be interpreted as obligating the Stockholders to
exercise any options to acquire additional Shares.
SECTION 1.2 Irrevocable Proxy. If a Stockholder fails to comply with the
provisions of Section 1.1, such Stockholder hereby agrees that such failure
shall result, without any further action by such Stockholder, effective as of
the date of such failure, in the constitution and appointment of Horst Pudwill
and Henry Sweetbaum, and each of them, from and after the date of such failure
until the Termination Date (at which point such constitution and appointment
shall automatically be revoked) as such Stockholder's attorney, agent and proxy
(such constitution and appointment, the "Irrevocable Proxy"), with full power of
substitution, to vote and otherwise act with respect to all such Stockholder's
Shares at any meeting of the stockholders of the Company (whether annual or
special and whether or not an adjourned or postponed meeting), however called,
and in any action by written consent of the stockholders of the Company, on the
matters and in the manner specified in Section 1.1. THIS PROXY AND POWER OF
ATTORNEY ARE IRREVOCABLE AND COUPLED WITH AN INTEREST AND, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, SHALL BE VALID AND BINDING ON ANY PERSON TO WHOM
A STOCKHOLDER MAY TRANSFER ANY OF ITS SHARES IN BREACH OF THIS AGREEMENT. Each
Stockholder hereby revokes all other proxies and powers of attorney with respect
to all such Stockholder's Shares that may have heretofore been appointed or
granted, and no subsequent proxy or power of attorney shall be given (and if
given, shall not be effective) by such Stockholder with respect thereto. All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of such Stockholder and any obligation of such Stockholder under this
Agreement shall be binding upon the heirs, personal representatives, successors
and assigns of such Stockholder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder hereby severally, but not jointly, represents and warrants to
Purchaser Representative (for the benefit of Purchaser) as to such Stockholder
as follows:
SECTION 2.1 Organization and Authority of the Stockholders. Each Stockholder
that is an individual has full legal capacity, power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. Each
Stockholder that is not an individual is duly formed, validly existing and in
good standing under the laws of the jurisdiction of its formation and has all
necessary power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each Stockholder and the
performance by each Stockholder of such
Stockholder's obligations hereunder have been duly authorized by all requisite
action on the part of each Stockholder. This Agreement has been duly and validly
executed and delivered by each Stockholder and (assuming due authorization,
execution and delivery by Purchaser Representative) constitutes a legal, valid
and binding obligation of each Stockholder enforceable against each Stockholder
in accordance with its terms, except as limited by bankruptcy, insolvency and
other similar laws or equitable principles (but not those concerning fraudulent
conveyance) generally affecting creditors' rights and remedies.
SECTION 2.2 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each Stockholder does
not, and the performance of this Agreement by each Stockholder will not, (i)
conflict with or violate any agreement to which a Stockholder is a party, any
trust agreement or any equivalent organizational documents, as the case may be,
of such Stockholder, (ii) conflict with or violate any law applicable to such
Stockholder or by which any property or asset of such Stockholder is bound or
affected or (iii) result in any breach of, or constitute a default (or event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of an Lien on any Shares (other than pursuant to this
Agreement) pursuant to, any note, bond, mortgage, indenture, pledge, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
of such Stockholder, except, with respect to clauses (ii) and (iii) above, for
any such conflicts, violations, breaches, defaults or other occurrences that
would not prevent or materially delay the ability of such Stockholder to carry
out such Stockholder's obligations under this Agreement.
(b) The execution and delivery of this Agreement by each Stockholder does
not, and the performance of this Agreement by each Stockholder will not, require
any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Exchange Act and state securities or "blue sky"
laws, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or materially delay the ability of such Stockholder to carry out such
Stockholder's obligations under this Agreement.
SECTION 2.3 Ownership of Shares. As of the date hereof, each Stockholder is the
record or beneficial owner (as defined in Rule 13d-3 under the Exchange Act,
which meaning will apply for all purposes of this Agreement) of, and has good,
valid and marketable title to, the number of Shares set forth opposite such
Stockholder's name on Schedule A hereto. Except as set forth on Schedule A, such
Shares are all the securities (as defined in Section 3(a)(10) of the Exchange
Act, which definition will apply for all purposes of this Agreement) of the
Company owned, either of record or beneficially, by such Stockholder as of the
date hereof and such Stockholder does not have any option or other right to
acquire any other securities of the Company. The Shares owned by such
Stockholder are owned free and clear of all Liens, other than any Liens created
by this Agreement or pledges disclosed in writing to the Purchaser
Representative pursuant to Section 3.1 below. Except as provided in this
Agreement, such Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares owned by
such Stockholder.
SECTION 2.4 Reliance by Purchaser. Each Stockholder understands and acknowledges
that Purchaser is entering into the Purchase Agreement in reliance upon such
Stockholder's execution, delivery and performance of this Agreement.
SECTION 2.5 No Finder's Fees. No broker, finder, investment banker or financial
advisor is entitled to any brokerage, finder's, financial advisor's or other fee
or commission in connection with the transactions contemplated by this Agreement
or the Purchase Agreement based upon arrangements made by or on behalf of such
Stockholder that is or will be payable by Purchaser, the Company or any of their
respective Subsidiaries.
SECTION 2.6 Absence of Litigation. As of the date of this Agreement, there is no
litigation, suit, claim, action, proceeding or investigation pending, or to the
knowledge of such Stockholder, threatened against such Stockholder, or any
property or asset of such Stockholder, before any Governmental Body that seeks
to delay or prevent the Amendment from being approved by the holders of the
Series A Preferred Stock.
ARTICLE III
COVENANTS OF THE STOCKHOLDERS
SECTION 3.1 No Disposition or Lien of Shares. Except for pledges in existence as
of the date hereof that have been disclosed in writing to the Purchaser
Representative, each Stockholder hereby agrees that, except as contemplated by
this Agreement, such Stockholder shall not (i) sell, transfer, tender, pledge,
assign, contribute to the capital of any entity, hypothecate, give or otherwise
dispose of, grant a proxy or power of attorney with respect to (other than the
Irrevocable Proxy), deposit into any voting trust, enter into any voting
agreement, or create or permit to exist any Liens of any nature whatsoever
(other than pursuant to this Agreement) with respect to, any of such
Stockholder's Shares (or agree or consent to, or offer to do, any of the
foregoing), or (ii) take any action that would make any representation or
warranty of such Stockholder herein untrue or incorrect or have the effect of
preventing, delaying or disabling such Stockholder from performing such
Stockholder's obligations hereunder.
SECTION 3.2 Cooperation. Each Stockholder agrees to cooperate fully with
Purchaser Representative to execute and deliver such further documents,
certificates, agreements and instruments and to take such other actions as may
be reasonably requested by Purchaser Representative to evidence or reflect the
transactions contemplated by this Agreement and to carry out the intent and
purposes of this Agreement.
SECTION 3.3 Information for Offer Documents and Proxy Statement; Disclosure.
Each Stockholder covenants and agrees that none of the information relating to
such Stockholder and its affiliates for inclusion in any proxy statement or
other filings with the SEC with respect to the transactions contemplated by the
Purchase Agreement that has been or will be furnished to Purchaser
Representative by such Stockholder for inclusion in such documents will, at (i)
the time such proxy statement or other filing (or any amendment or supplement
thereto) is first filed with the SEC or mailed to stockholders of the Company or
(ii) the time of the Company Stockholders' Meeting (in the case of information
included in the proxy statement), not contain any untrue statement of a material
fact or omit to state any 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. Each Stockholder
agrees to permit Purchaser and Purchaser Representative to publish and disclose
in such documents and any related filings under applicable securities laws such
Stockholder's identity and ownership of Shares and the nature of its
commitments, arrangements and understandings under this Agreement and any other
information regarding such Stockholder as required by applicable laws, provided
that each such Stockholder shall be given reasonable opportunity to review and
comment on the applicable portion of such documents relating to such Stockholder
and its affiliates.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 Termination. This Agreement shall automatically terminate with
respect to any Stockholder, on the earlier of (i) the mutual agreement of
Purchaser Representative and Stockholders, (ii) the consummation of the Second
Closing, (iii) the termination of the Purchase Agreement in accordance with its
terms, or (iv) the Expiration Date. For purposes of this Agreement, "Expiration
Date" shall mean August 31, 2003; provided, however, that if the Third Closing
shall not have been consummated by July 31, 2003 due primarily to delays in
receiving clearance of the Proxy Statement from the SEC despite the good faith
efforts of the Company to file the Proxy Statement and amendments thereto on a
timely basis and obtain such clearance, then the Expiration Date shall be
extended to October 30, 2003.
SECTION 4.2 Nature of Obligations. Each of the obligations of each of the
Stockholders hereunder is several and not joint.
SECTION 4.3 Legending of Certificates; Nominees Shares; Stop Transfer. Upon
request by Purchaser Representative, each Stockholder agrees to submit to
Purchaser Representative contemporaneously with or promptly following execution
of this Agreement all certificates representing their Shares so that Purchaser
Representative may note thereon a legend referring to the rights granted to it
under this Agreement. If any of the Shares beneficially owned by a Stockholder
are held of record by a brokerage firm in "street name" or in the name of any
other nominee (a "Nominee," and, as to such Shares, "Nominee Shares"), such
Stockholder agrees that, upon written request by Purchaser Representative, such
Stockholder will within five days of such request execute and deliver to
Purchaser Representative a limited power of attorney, in form and substance
reasonably satisfactory to Purchaser Representative, enabling Purchaser
Representative to require such Nominee to (i) enter into an agreement to the
same effect as Article I hereof with respect to the Nominee Shares held by such
Nominee, and (ii) submit to Purchaser Representative the certificates
representing such Nominee Shares for notation of the above-referenced legend
thereon.
SECTION 4.4 Disclosure. Purchaser Representative and the Stockholders shall
consult with each other before issuing any press release or otherwise making any
public statement with respect to this Agreement or the Purchase Agreement or the
transactions contemplated hereby or thereby.
SECTION 4.5 Adjustments.
(a) In the event (i) of any increase or decrease or other change in the
Shares by reason of stock dividend, stock split, reverse stock split,
recapitalizations, combinations, exchanges of shares or the like or (ii) that a
Stockholder becomes the beneficial owner of any additional Shares, then the
terms of this Agreement shall apply to such Shares immediately following the
effectiveness of the events described in clause (i), or such Stockholder
becoming the beneficial owner thereof pursuant to clause (ii).
(b) Each Stockholder hereby agrees to promptly notify Purchaser
Representative of the number of any new Shares acquired by such Stockholder, if
any, after the date hereof.
SECTION 4.6 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 4.6):
(a) if to any Stockholder:
To the appropriate address set forth on Schedule B hereto
(b) if to Purchaser Representative:
Henry Sweetbaum
c/o Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin G. Segel
with a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin G. Segel
SECTION 4.7 Amendment. This Agreement may not be amended except by an instrument
in writing signed by all the parties hereto.
SECTION 4.8 Waiver. No failure on the part of any party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No party shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
SECTION 4.9 Entire Agreement. This Agreement (together with the Schedules
hereto) constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, other than the Purchase Agreement and the other agreements
contemplated thereby.
SECTION 4.10 Applicable Law; Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof or any other jurisdiction. In any action between any of the
parties arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement: (a) each of the parties irrevocably and
unconditionally consents and submits to the exclusive jurisdiction and venue of
the state and federal courts located in the State of Delaware (and agrees not to
commence any such action except in such courts) and irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action brought in such court has been brought in an inconvenient forum;
(b) if any such action is commenced in a state court, then, subject to
applicable law, no party shall object to the removal of such action to any
federal court located in the State of Delaware; (c) each of the parties
irrevocably waives the right to trial by jury; and (d) each of the parties
irrevocably consents to service of process by first class certified mail, return
receipt requested, postage prepaid, to the address at which such party is to
receive notice in accordance with Section 4.6.
SECTION 4.11 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity, without necessity of proof that there is no adequate
remedy at law or requirement to post any security bond.
SECTION 4.12 Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 4.13 Costs and Expenses. Except as otherwise provided in the Purchase
Agreement, all costs and expenses of the parties hereto, including fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the First
Closing or the Third Closing shall have occurred.
SECTION 4.14 Parties in Interest; Assignability. This Agreement shall be binding
upon, and shall be enforceable by and inure solely to the benefit of, the
parties hereto, Purchaser and their respective successors and assigns; provided,
however, that neither this Agreement nor any of the Stockholders' rights
hereunder may be assigned by any Stockholder without the prior written consent
of Purchaser Representative, and any attempted assignment of this Agreement or
any of such rights by any Stockholder without such consent shall be void and of
no effect; provided,
further, that Purchaser may assign its rights under this Agreement to any direct
or indirect subsidiary of Purchaser. Except as noted in the preceding sentence,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person (other than the parties hereto) any right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement. Any assignment
prohibited under this Section shall be null and void. Purchaser Representative
shall provide Stockholders with written notice of the designation of any new
person or entity as Purchaser Representative pursuant to the Purchase Agreement,
and such person or entity shall succeed to the rights and obligations of
Purchaser Representative hereunder.
SECTION 4.15 Severability. Any term or provision of this Agreement that is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is
invalid, void or unenforceable, the parties agree that the court making such
determination shall have the power to reduce the scope, duration, area or
applicability of the term or provision, to delete specific words or phrases, or
to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
SECTION 4.16 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 4.17 Interpretation of Representations. Each representation and warranty
made in this Agreement or pursuant hereto is independent of all other
representations and warranties made by the same parties, whether or not covering
related or similar matters, and must be independently and separately satisfied.
Exceptions or qualifications to any such representation or warranty shall not be
construed as exceptions or qualifications to any other representation or
warranty.
SECTION 4.18 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include masculine
and feminine genders.
(b) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(c) For purposes of this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the day and year first above written.
Purchaser Representative
By: /s/ Henry Sweetbaum
--------------------------------------
[STOCKHOLDER SIGNATURE PAGE
TO SERIES A PREFERRED STOCK VOTING AGREEMENT]
"STOCKHOLDER"
PRINTED NAME OF STOCKHOLDER:
Ventures West Investments Ltd.
By: /s/ Sam Znaimer
-------------------------------------------
BMO Capital Corporation
- ------------------------------
By: its Manager
-------------------------------------------
Ventures West Management TIP Inc.
-------------------------------------------
By: /s/ Sam Znaimer
-------------------------------
/s/ Michael Mitgang
- ------------------------------
/s/ David F. Millet
- ------------------------------
GMN Investors II, L.P.
- ------------------------------
By: /s/ David F. Millet
-------------------------------------------
Title: Managing Director
----------------------------------------
SCHEDULE A
NUMBER OF
SHARES ISSUABLE
UPON EXERCISE
OF COMPANY
NUMBER OF SHARES OF OPTIONS AND
NAME COMMON STOCK WARRANTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit 99.6
SCHEDULE B
NAME ADDRESS
---- -------
David F. Millet Managing Director
Gemini Investors Inc.
20 William Street, Ste 250
Wellesley, MA 02481
Ventures West Investments Limited 1285 West Pender Street, Suite 280
Vancouver, BC V6E 4B1
CANADA
Attention: Sam Znaimer
Michael Mitgang Rigel Associates, LLC
101 Jefferson Drive
Menlo Park, CA 94025
Exhibit 99.6
EXHIBIT 1
FORM OF AMENDED AND RESTATED CERTIFICATE OF DESIGNATION
Exhibit 99.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into this
12th day of March, 2003, by and between NOVATEL WIRELESS, INC., a Delaware
corporation (the "Company"), and the purchasers listed on the signature pages
hereto (the "Purchasers" and, collectively with the Company, the "Parties").
PRELIMINARY STATEMENTS
In connection with the consummation of the transactions contemplated by
that certain Securities Purchase Agreement (the "Purchase Agreement"), dated as
of March 12, 2003, between the Purchasers and the Company, the Company has
agreed to issue and sell to the Purchasers, (i) a secured convertible preferred
promissory note (the "Convertible Note"), convertible into shares of the Series
B Preferred Stock, which Series B Preferred Stock is convertible into shares of
Common Stock; (ii) additional shares of the Company's Series B Preferred Stock;
and (iii) certain warrants to purchase shares of the Company's Common Stock (the
"Warrants").
The obligations of the Purchasers to purchase the Convertible Note, the
Third Issuance Shares and the Warrants pursuant to the Purchase Agreement are
conditioned upon, among other things, the Parties' execution of this Agreement,
pursuant to which the Purchasers will be entitled to certain registration rights
with respect to the Common Stock issuable upon conversion of the Series B
Preferred Stock and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement and covenants hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. Certain Definitions.
1.1 Terms Defined in this Section. For purposes of this Agreement,
the following terms have the following meanings:
"Business Day" means any day other than a Saturday, Sunday, or other day
on which commercial banking institutions in New York, New York are required or
authorized by law to remain closed.
"Company Indemnified Parties" means the Company, its officers, directors,
employees, and agents, and each Person, if any, who controls the Company within
the meaning of either the Securities Act or the Exchange Act, and the officers,
directors, employees, and agents of the foregoing parties.
"Common Stock" means the Company's common stock, par value $0.001 per
share, and any securities into or for which such securities are converted or
exchanged by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, or any successor
federal statute, and the rules and regulations of the SEC promulgated
thereunder, in each case as amended from time to time.
"Indemnified Party" means a Person claiming a right to indemnification
pursuant to Section 6 of this Agreement.
"Indemnifying Party" means a Person required to provide indemnification
pursuant to Section 6 of this Agreement.
"Losses" means any losses, claims, damages, or liabilities, and any
related legal or other fees and expenses.
"Person" means any individual, corporation, partnership, limited
partnership, limited liability partnership, limited liability company, trust,
association, organization, or other entity.
"Prospectus" means the prospectus included in a Registration Statement as
of the date it becomes effective under the Securities Act and, in the case of
references to the Prospectus as of a date subsequent to the effective date of
the Registration Statement, as amended or supplemented as of such date,
including all documents incorporated by reference therein, each as amended, and
each applicable prospectus supplement relating to the offering and sale of any
of the Registrable Securities pursuant to such Registration Statement.
"Registrable Securities" means:
(i) Common Stock issued or issuable upon the conversion of the
Series B Preferred Stock (including the Series B Preferred Stock issued upon
conversion of the Convertible Note); or
(ii) Common Stock issued or issuable upon the exercise of the
Warrants.
Securities that are Registrable Securities will cease to be Registrable
Securities:
(i) when a registration statement with respect to the sale of such
securities has become effective under the Securities Act and such securities
have been disposed of in accordance with such registration statement,
(ii) when such securities shall have been sold pursuant to Rule 144
or Rule 145 (or any successor provisions) under the Securities Act or in any
other transaction in which the applicable purchaser does not receive "restricted
securities" (as that term is defined for purposes of Rule 144 under the
Securities Act), or
(iii) when such securities cease to be outstanding.
"Registration Statement" means a registration statement (including the
related Prospectus) of the Company under the Securities Act on any form selected
by the Company for which the Company then qualifies and which permits the sale
thereunder of the number and type of Registrable Securities (and any other
securities of the Company) to be included therein in accordance with this
Agreement by the applicable sellers in the manner described therein. The term
"Registration Statement" shall also include all exhibits, financial statements,
and schedules and all documents incorporated by reference in such Registration
Statement when it becomes
- 2 -
effective under the Securities Act, and in the case of the references to the
Registration Statement as of a date subsequent to the effective date, as amended
or supplemented as of such date.
"SEC" means the Securities and Exchange Commission, or any other federal
agency at the time administering the Securities Act or the Exchange Act.
"Securities Act" means the Securities Act of 1933, or any successor
federal statute, and the rules and regulations of the SEC promulgated
thereunder, in each case as amended from time to time.
"Selling Stockholder" means any Stockholder whose Registrable Securities
are included at the request of such Stockholder in any Registration Statement
pursuant to Section 2 or Section 3.
"Series B Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $0.001 per share.
"Stockholder" means each Purchaser who has the right to acquire
Registrable Securities and any other Person:
(i) to whom any Registrable Securities or any rights to acquire any
Registrable Securities are transferred by any Person that was, immediately prior
to such transfer, a Stockholder,
(ii) who continues to hold such Registrable Securities or the right
to acquire such Registrable Securities,
(iii) to whom the transferring Stockholder has assigned any of its
rights under this Agreement, in whole or in part, in accordance with the
provisions of Section 8.6 of this Agreement with respect to such Registrable
Securities, and
(iv) who has executed a counterpart hereof in connection with the
transfer of such Registrable Securities.
"Stockholder Indemnified Parties" means each Selling Stockholder, its
officers, directors, employees, and agents, each Person (if any) who controls
such Selling Stockholder within the meaning of either the Securities Act or the
Exchange Act, and the officers, directors, employees, and agents of the
foregoing parties.
"Third-Party Demand Stockholder" means any Person having the right to
require that the Company effect a registration under the Securities Act of
securities owned by such Person, other than pursuant to this Agreement.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have the meanings set forth in the sections
indicated:
Term Section
- ---- -------
Demand Notice Section 2.2(a)
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Demand Registration Section 2.1
Demanding Stockholders Section 2.2(a)
Incidental Registration Section 3.1(a)
Initiating Stockholder Section 2.2(a)
Material Event Section 2.6(a)
Minimum Condition Section 2.2(d)
Registration Expenses Section 5.1
1.3 Terms Generally. The definitions in this Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context requires, any pronoun includes the corresponding masculine, feminine,
and neuter forms. The words "include," "includes," and "including" are not
limiting. Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
2. Demand Registration.
2.1 Demand Registration Rights. Each Stockholder shall have the
right to require that the Company register under the Securities Act the offer or
sale of all or a portion of the Registrable Securities held by such Stockholder
on the terms and subject to the conditions and limitations set forth herein. The
registration of Registrable Securities under the Securities Act in accordance
with this Section 2 is referred to in this Agreement as a "Demand Registration."
The Stockholders shall be entitled to four Demand Registrations in the
aggregate.
2.2 Procedures for Demand Registrations.
(a) A Stockholder holding Registrable Securities may elect to
initiate a Demand Registration pursuant to this Section 2 by furnishing the
Company with a written notice (the "Demand Notice") specifying the number of
Registrable Securities that such Stockholder desires to have registered, and
such Stockholder's intended method or methods of distribution of all such
Registrable Securities. The Stockholder delivering a notice pursuant to the
preceding sentence is referred to as the "Initiating Stockholder." Within twenty
(20) days of its receipt of the Demand Notice, the Company shall notify the
Stockholders of its receipt of a Demand Notice. Each Stockholder may, within
thirty (30) days of the Company's receipt of the Demand Notice, deliver a
written notice to the Company specifying the number of shares that such
Stockholder (each, together with the Initiating Stockholder, a "Demanding
Stockholder") wishes to have registered, and such Stockholder's intended method
or methods of distribution of such securities. If Stockholders holding
Registrable Securities representing a majority of the outstanding Registrable
Securities provide the Company with written notice that they desire that such
Demand Registration not take place, the Company shall not be required to proceed
with such Demand Registration and, irrespective of whether the Company proceeds
with such registration, such registration shall not be deemed to have been a
Demand Registration for purposes of the limitations on the number of Demand
Registrations set forth in Section 2.1.
- 4 -
(b) If the number of Registrable Securities that the Demanding
Stockholders desire to have registered (as specified in their notices pursuant
to Section 2.2(a)) does not satisfy the Minimum Condition (as set forth in
Section 2.2(d), below), then the Company will have no obligation to effect a
Demand Registration in response to such notices pursuant to Section 2.2(a)
(except as otherwise required in Section 2.4), but nothing herein will limit the
rights of the Stockholders to require on a subsequent occasion that the Company
effect a Demand Registration to which the Stockholders are entitled under
Section 2.1.
(c) On the thirty-first (31st) day following its receipt of a
Demand Notice, the Company will notify each Demanding Stockholder whether the
number of Registrable Securities that the Stockholders desire to have registered
(as specified in their notices pursuant to Section 2.2(a)) satisfies the Minimum
Condition.
(d) The "Minimum Condition" means that the number of
Registrable Securities that the Stockholders desire to have registered (as
specified in their notices pursuant to Section 2.2(a)) have an aggregate market
value on the date of the delivery of the Initiating Stockholder's notice
pursuant to Section 2.2(a) (before any underwriting or brokerage discounts and
commissions) of not less than seven hundred and fifty thousand dollars
($750,000); or
(e) Following the effectiveness of a Registration Statement
filed in connection with a Demand Registration, the Company will not be required
to file a Registration Statement for a subsequent Demand Registration within
four months after the date on which it received the Initiating Stockholder's
notice pursuant to Section 2.2(a) for the immediately preceding Demand
Registration.
(f) As soon as reasonably practicable after the Stockholders
have notified the Company that they desire to have registered a number of
Registrable Securities that satisfies the Minimum Condition, subject to Section
2.6(a) and Section 2.6(e), the Company will file with the SEC and use its
reasonable best efforts to cause to become effective as promptly as practicable
thereafter a Registration Statement that covers the Registrable Securities
requested to be registered in the manner set forth above. Subject to the
provisions of Section 2.3 below, each Registration Statement may also include
securities to be sold for the account of the Company, for Stockholders who do
not participate as Demanding Stockholders but who exercise their rights under
Section 3 below, or for any stockholder of the Company not holding Registrable
Securities.
2.3 Underwriters. One or more Demanding Stockholders owning more than 50%
of the Registrable Securities to be included in a Demand Registration shall
collectively have the right to select the lead book running managing underwriter
for any underwritten public offering in connection with a Demand Registration,
which lead managing underwriter shall be reasonably acceptable to the Company.
Each Demanding Stockholder electing to participate in a Demand Registration
involving an underwritten public offering shall, as a condition to the Company's
obligation under this Section 2 to include such Demanding Stockholder's
Registrable Securities in the Demand Registration, enter into and perform its
obligations under an underwriting agreement or other similar arrangement in
customary form with the lead underwriter of such offering.
- 5 -
2.4 Shelf Registration. One or more Demanding Stockholders owning more
than 50% of the Registrable Securities may elect to require that a Demand
Registration be effected pursuant to a shelf registration under Rule 415 of the
Securities Act; provided, however, that (a) notwithstanding any thing to the
contrary herein, the Minimum Condition shall not apply; (b) the Company shall
cause a registration statement with respect to the first such shelf registration
to be filed within the (10) days following the Third Closing, (as defined in the
Purchase Agreement); (c) during the time any such shelf registration is
effective, the Company may require from time to time that the Selling
Stockholders refrain from selling pursuant to such registration under the
circumstances, in the manner, and for the time period described in Section 2.6;
and (d) the Company will not be required under this Section 2.4 to effect more
than two Demand Registrations as a shelf registration under Rule 415 of the
Securities Act. The Company will use its reasonable best efforts to cause any
Demand Registration effected as a shelf registration under Rule 415 of the
Securities Act to remain effective for a period ending on the earlier of (i) the
date that is a number of days after the effective date of the Registration
Statement equal to 730 plus the number of days that the Selling Stockholders
must refrain from selling pursuant to Section 2.6, and (ii) the date on which
all Registrable Securities covered by the Registration Statement have been sold
pursuant to the Demand Registration.
2.5 Limitation on Inclusion of Registrable Securities.
(a) If the book running managing underwriter of any underwritten
public offering in connection with a Demand Registration determines in good
faith that the aggregate number of Registrable Securities to be offered exceeds
the number of shares that could be sold without having an adverse effect on such
offering (including the price at which the Registrable Securities may be sold),
then the number of Registrable Securities to be offered for the accounts of the
Demanding Stockholders in such offering shall be reduced or limited, on a pro
rata basis, based on the respective numbers of Registrable Securities requested
to be included in such offering by all Demanding Stockholders, to the extent
necessary to reduce the total number of shares to be included in such offering
to the amount recommended by the book running managing underwriter; provided,
however, that if such registration includes securities other than Registrable
Securities of the Demanding Stockholders (whether for the account of the Company
or for any stockholder of the Company not exercising rights under this Section
2), such reduction shall be made:
(i) first, from securities held by Persons who are not
Stockholders and from securities being offered for the account of the Company,
allocated between the Company and such other Persons as the Company may
determine, subject to any agreements between the Company and such other Persons
as in effect as of the date hereof;
(ii) second, from the number of Registrable Securities
requested to be i*ncluded in such offering by Stockholders pursuant to their
rights under Section 3, on a pro rata basis, based on the number of Registrable
Securities requested to be included in the registration by Stockholders pursuant
to their rights under Section 3; and
(iii) last, from the number of Registrable Securities
requested to be included in such offering by the Demanding Stockholders, on a
pro rata basis, based on the
- 6 -
number of Registrable Securities requested to be included in the registration by
the Demanding Stockholders.
(b) One or more Demanding Stockholders owning more than 50% of the
Registrable Securities to be included in a requested Demand Registration may
elect not to proceed with the registration if less than 75% of the Registrable
Securities requested to be registered by each of the Demanding Stockholders are
included in such registration. If Demanding Stockholders owning more than 50% of
the Registrable Securities to be included in a requested Demand Registration
elect not to proceed with the registration pursuant to this Section 2.5(b), the
Registration Statement for such registration shall be promptly withdrawn, a
Demand Registration shall not be deemed to have been effected for purposes of
this Agreement (including the limitations on the number of Demand Registrations
set forth in Section 2.1 above) and the Company shall bear the Registration
Expenses in connection with such Registration Statement.
2.6 Delay of Filing or Sales.
(a) The Company shall have the right, exercisable by giving notice
of the exercise of such right to the applicable Selling Stockholders, subject to
Section 2.6(b), at any time and from time to time, to delay filing or the
declaration of effectiveness of a Registration Statement or to require the
applicable Selling Stockholders not to sell any Registrable Securities pursuant
to an effective Registration Statement for a period not in excess of 120 days
beginning on the date on which such notice is given, or such shorter period of
time as may be specified in such notice or in a subsequent notice delivered by
the Company to such effect prior to or during the effectiveness of the
Registration Statement, if:
(i) the Company is engaged in discussions or negotiations with
respect to, or there otherwise is pending, any merger, acquisition, or other
form of business combination that is "probable" (within the meaning of the
Securities Act), any divestiture, tender offer, financing, or other event that,
in any such case, is material to the Company (any such activity or event, a
"Material Event"),
(ii) such Material Event would, in the judgment of the
Company's board of directors (after consultation with counsel), require
disclosure so as to permit the Registrable Securities to be sold in compliance
with law, and
(iii) disclosure of such Material Event would, in the judgment
of the Company's board of directors (after consultation with counsel), be
adverse to its interests.
(b) the Company may not delay the filing of a Registration Statement
or the sale of any Registrable Securities, whether pursuant to one or more
notices pursuant to Section 2.6(a), for more than an aggregate of 120 days
within any 12-month period.
(c) If the Company postpones its obligations under this Agreement by
reason of a Material Event as described in Section 2.6(a), any Selling
Stockholder will have the right to withdraw its Registrable Securities from the
applicable Demand Registration or Incidental Registration, by giving notice to
the Company at any time following delivery of the Company's notice pursuant to
Section 2.6(a).
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(d) No Stockholder may deliver a notice pursuant to the first
sentence of Section 2.2(a) during the period of any postponement pursuant to
Section 2.6(a) until the Company notifies all Stockholders of the end of such
Material Event or the expiration of the 120-day period described in Section
2.6(a).
(e) The Company shall have the right, exercisable by giving notice
of the exercise of such right to the applicable Selling Stockholders, to delay
filing or the declaration of effectiveness of a Registration Statement during
any period in which, as a result of the Company's failure to satisfy the
conditions in Rule 3-01(c) of Regulation S-X, the Company is required to include
in the Registration Statement audited financial statements of the Company prior
to the date on which such audited financial statements would normally have been
prepared in accordance with the Company's past practices and the SEC's periodic
reporting requirements.
2.7 Withdrawal.
(a) If (i) a Registration Statement filed pursuant to this Section 2
does not remain effective under the Securities Act for the period specified in
Section 2.8(a) due to a stop order, injunction, or other order of the SEC or
other governmental agency, and (ii) each of the Demanding Stockholders has not
sold at least two-thirds of its Registrable Securities registered under such
Registration Statement, then the Demanding Stockholders may elect to withdraw
such Registration Statement by written notice to the Company; and, in such an
event, such registration shall not be deemed to have been a Demand Registration
for purposes of the limitations on the number of Demand Registrations contained
in Section 2.1.
(b) Each Selling Stockholder may, no less than five (5) Business
Days before any Registration Statement becomes effective, withdraw some or all
of its Registrable Securities from inclusion in the Registration Statement. If
such withdrawals result in the Minimum Condition not being satisfied, then the
Company may withdraw such Registration Statement unless the remaining Demanding
Stockholders agree to include additional Registrable Securities in the
registration such that the Minimum Condition would be satisfied or agree to bear
the Registration Expenses incurred by the Company in connection with such
registration.
(c) If the Company withdraws a Registration Statement pursuant to
Section 2.7(b), then the requested registration shall be deemed to have been a
Demand Registration for purposes of the limitations on the number of Demand
Registrations contained in Section 2.1 unless
(i) at the time of a Stockholder's withdrawal of Registrable
Securities pursuant to Section 2.7(b), there has been a material adverse change
in the operating results, financial condition, or business of the Company that
was not publicly known at the time that the Minimum Condition was originally
satisfied; or
(ii) The Company has postponed its obligations under this
Agreement by reason of a Material Event as described in Section 2.6(a).
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2.8 Effectiveness of Registration Statement.
(a) In connection with any Demand Registration pursuant to this
Section 2, subject to Section 2.6, the Company will use its reasonable best
efforts to prepare and file with the SEC any amendments and supplements to the
Registration Statement and the Prospectus used in connection therewith, and to
take any other actions, that may be necessary to keep the Registration Statement
and the Prospectus effective, current, and in compliance with the provisions of
the Securities Act, until the sooner to occur of (i) the sale of all of the
Registrable Securities covered by such Registration Statement in accordance with
the intended methods of distribution thereof or (ii) the 90th day following the
effective date of such Registration Statement.
(b) A Demand Registration shall not be deemed to have been effected
for purposes of this Agreement (including the limitations on the number of
Demand Registrations set forth in Section 2.1 above) until the Registration
Statement therefor shall have been declared effective under the Securities Act
by the SEC (and is not then subject to any stop order, injunction, or other
order or requirement of the SEC or other governmental agency or court for any
reason) for the period specified in Section 2.8.
3. Incidental Registration.
3.1 Notice of Incidental Registration.
(a) Subject to Section 3.1(b) and Section 3.1(c), if the
Company at any time proposes to register under the Securities Act any shares of
the same class as any of the Registrable Securities (whether in an underwritten
public offering or otherwise and whether or not for the account of the Company
or for any stockholder of the Company, including Selling Stockholders
registering Registrable Shares in a Demand Registration pursuant to Section 2),
in a manner that would permit the registration under the Securities Act of
Registrable Securities for sale to the public, the Company will give written
notice to each Stockholder of its intention to do so not later than ten (10)
days prior to the anticipated filing date of the applicable Registration
Statement. If the proposed registration is intended to be a Demand Registration,
the Company shall give the notice described in the preceding sentence but only
to the Stockholders that did not previously elect to become Demanding
Stockholders pursuant to Section 2 with respect to such registration. Any
Stockholder may elect to participate in such registration on the same basis as
the planned method of distribution contemplated by the proposed registration by
delivering written notice of its election to the Company within five (5) days
after its receipt of the Company's notice pursuant to this Section 3.1(a). A
Stockholder's election pursuant to this Section 3.1(a) must (i) specify the
amount of Registrable Securities desired to be included in such registration by
such Stockholder and (ii) include any other information that the Company
reasonably requests be included in such registration statement. Upon its receipt
of a Stockholder's election pursuant to this Section 3.1(a), the Company will,
subject to Section 3.2, use its reasonable best efforts to include in such
registration all Registrable Securities requested to be included. Any
registration of Registrable Securities pursuant to this Section 3 is referred to
as an "Incidental Registration."
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(b) The Company shall have no obligation under this Section 3 with
respect to any registration effected pursuant to a registration statement on
Form S-4 (or any other registration statement registering shares issued in a
merger, consolidation, acquisition, or similar transaction) or Form S-8 or any
successor or comparable forms, or a registration statement filed in connection
with an exchange offer or any offering of securities solely to the Company's
existing stockholders or otherwise pursuant to a dividend reinvestment plan,
stock purchase plan, or other employee benefit plan.
(c) The Company shall have no obligation under this Section 3 with
respect to any registration initiated by one or more Third-Party Demand
Stockholders pursuant to one or more registration rights agreements in existence
as of the date hereof under which the rights of all of such Third-Party Demand
Stockholders are pari passu, if:
(i) the applicable registration rights agreement between the
Company and such Third-Party Demand Stockholders prohibits the inclusion in such
registration of securities other than those offered by such Third-Party Demand
Stockholders and the Company; and
(ii) no securities other than those offered by such
Third-Party Demand Stockholders are included in such registration.
3.2 Limitation on Inclusion of Registrable Securities; Priorities. If the
proposed method of distribution in connection with an Incidental Registration is
an underwritten public offering and the lead managing underwriter thereof
determines in good faith that the amount of securities to be included in such
offering would adversely affect such offering (including an adverse effect on
the price at which the securities proposed to be registered may be sold), the
amount of securities to be offered may be reduced or limited to the extent
necessary to reduce the total number of securities to be included in such
offering to the amount recommended by the lead managing underwriter as follows
(subject to any existing agreements as in effect on the date hereof):
(a) in connection with an offering initiated by the Company, if
securities are being offered for the account of other Persons (including any
Stockholders) such reduction shall be made:
(i) first, from the securities intended to be offered by such
other Persons (including any Stockholders), on a pro rata basis, based on the
number of Registrable Securities and other securities that are requested to be
included in such offering; and
(ii) last, from the number of securities to be offered for the
account of the Company;
(b) in connection with an offering initiated by a Third-Party Demand
Stockholder, such reduction shall be made:
(i) first, from securities held by Persons who are not
Stockholders, Third-Party Demand Stockholders, or other stockholders entitled
under any agreements between them and the Company to participate pari passu with
the Selling
- 10 -
Stockholders in such Incidental Registration, and from securities being offered
for the account of the Company, allocated between the Company and such other
Persons as the Company may determine, subject to any agreements between the
Company and such other Persons;
(ii) second, from the number of Registrable Securities
requested to be included in such offering by the Selling Stockholders and any
other stockholders entitled under any agreements between them and the Company to
participate pari passu with the Selling Stockholders in such Incidental
Registration, on a pro rata basis, based on the number of Registrable Securities
and other securities which are requested to be included in the registration; and
(iii) last, from securities being offered by the Third-Party
Demand Stockholders.
3.3 Delay or Withdrawal of Registration. The Company may, without
the consent of any Stockholder, delay, suspend, abandon, or withdraw any
proposed registration in which any Stockholder has requested inclusion of such
Stockholder's Registrable Securities pursuant to this Section 3.
3.4 Withdrawal by Selling Stockholder. Each Selling Stockholder may,
no less than five (5) Business Days before the anticipated effective date of the
applicable Registration Statement for an Incidental Registration, withdraw some
or all of its Registrable Securities from inclusion in the Registration
Statement.
3.5 Underwriters; Underwriting Agreement. In connection with any
Incidental Registration involving an underwritten public offering of securities
for the account of the Company or a Third-Party Demand Stockholder, (a) the
managing and lead underwriters shall be selected by the Company, unless
otherwise provided in any agreement between the Company and any Third-Party
Demand Stockholder, and (b) each Selling Stockholder electing to participate in
the Incidental Registration shall, as a condition to the Company's obligation
under this Section 3 to include such Selling Stockholder's Registrable
Securities in such Incidental Registration, enter into and perform its
obligations under an underwriting agreement or other similar arrangement in
customary form with the managing underwriter of such offering.
4. Obligations with Respect to Registration.
4.1 Obligations of the Company. Whenever the Company is obligated by
the provisions of this Agreement to effect the registration of any Registrable
Securities under the Securities Act, the Company shall:
(a) Subject to the provisions of Section 4.2, use its
reasonable best efforts to cause the applicable Registration Statement to become
effective as promptly as practicable, and to prepare and file with the SEC any
amendments and supplements to the Registration Statement and to the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement and the Prospectus effective, current, and in compliance with the
provisions of the Securities Act, during the periods when the Company is
required by this Agreement to keep the Registration Statement effective and
current.
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(b) Within a reasonable time not to exceed ten (10) Business
Days prior to filing a Registration Statement or Prospectus or any amendment or
supplement thereto (other than any amendment or supplement in the form of a
filing that the Company makes pursuant to the Exchange Act), furnish to each
Selling Stockholder and each underwriter, if any, of the Registrable Securities
covered by such Registration Statement copies of such Registration Statement or
Prospectus as proposed to be filed, which documents will be subject to the
reasonable review and comments of the Selling Stockholders (and their respective
counsel) during such period, and the Company will not file any Registration
Statement or any Prospectus or any amendment or supplement thereto containing
any statements with respect to any Selling Stockholder or the distribution of
the Registrable Securities to be included in such Registration Statement for
sale by such Selling Stockholder if such Selling Stockholder reasonably objects
in writing. Thereafter, the Company will furnish to each Selling Stockholder and
each underwriter, if any, such number of copies of such Registration Statement,
each amendment and supplement thereto (in each case including all exhibits
thereto), the Prospectus included in such Registration Statement (including each
preliminary Prospectus), and such other documents as such Selling Stockholder or
underwriter may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Selling Stockholder.
(c) After the filing of the Registration Statement, promptly
notify each Selling Stockholder of the effectiveness thereof and of any stop
order issued or threatened by the SEC and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered and promptly
notify each Selling Stockholder of the lifting or withdrawal of any such order.
(d) Immediately notify each Selling Stockholder holding
Registrable Securities covered by the applicable Registration Statement at any
time when a Prospectus relating thereto is required to be delivered under the
Securities Act, of (i) the determination that a Material Event exists or (ii)
the occurrence of an event requiring the preparation of a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and promptly make
available to such Selling Stockholder any such supplement or amendment, and
subject to the provisions of this Agreement regarding the existence of a
Material Event, the Company will promptly prepare and furnish to each such
Selling Stockholder a supplement to or an amendment of such Prospectus so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
(e) Enter into customary agreements (including an underwriting
agreement in customary form including customary indemnification provisions) and
perform its obligations under any such agreements and shall take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities.
(f) Make available for inspection by any Selling Stockholder
covered by such Registration Statement, any underwriter selected by a Selling
Stockholder pursuant to
- 12 -
Section 2.3 participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant, or other professional retained by any
such Selling Stockholder or underwriter, all financial and other records,
pertinent corporate documents, and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility in connection therewith, and cause the Company's officers,
directors, and employees to supply all information reasonably requested by any
of such Persons in connection with such Registration Statement. Information that
the Company determines, in good faith, to be confidential and notifies such
Persons is confidential shall not be disclosed by such Persons unless (i) the
release of such information is ordered pursuant to a subpoena or other order
from a court, or other governmental agency or tribunal, of competent
jurisdiction or (ii) such information becomes public other than through a breach
by such Persons of the confidentiality obligations of such Persons. Each Selling
Stockholder agrees that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any transactions in the securities of the Company or for any other
purpose unless and until such information is made generally available to the
public.
(g) Furnish, in the case of an underwritten public offering,
to each Selling Stockholder and to each underwriter a signed counterpart of (i)
an opinion or opinions of in-house counsel or outside counsel to the Company
addressed to such Selling Stockholder and underwriters (on which opinion both
such Selling Stockholder and each such underwriter shall be entitled to rely)
and (ii) a comfort letter or comfort letters from the Company's independent
public accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
holders of a majority of the Registrable Securities included in such
Registration Statement or the managing underwriter therefor reasonably requests.
(h) Register or qualify the Registrable Securities covered by
a Registration Statement under the securities or blue sky laws of such United
States jurisdictions as the Selling Stockholders shall reasonably request, and
do any and all other acts and things which may be necessary to enable each
Selling Stockholder to consummate the disposition in such jurisdictions of such
Registrable Securities in accordance with the method of distribution described
in such Registration Statement; provided, however, that the Company shall not be
required (i) to qualify to do business as a foreign corporation in any
jurisdiction where it is not otherwise required to be so qualified, (ii) to
conform its capitalization or the composition of its assets at the time to the
securities or blue sky laws of such jurisdiction, (iii) to execute or file any
general consent to service of process under the laws of any jurisdiction, or
(iv) to subject itself to taxation in any jurisdiction where it has not
theretofore done so.
(i) Use its reasonable best efforts to cause such Registrable
Securities covered by a Registration Statement to be listed on the principal
exchange or exchanges or qualified for trading on the principal over-the-counter
market or listed on the automated quotation market on which securities of the
same class and series as the Registrable Securities (or into which such
Registrable Securities will be or have been converted) are then listed, traded,
or quoted upon the sale of such Registrable Securities pursuant to such
Registration Statement.
(j) Make and keep information publicly available relating to
the Company so as to satisfy the requirements of Rule 144 under the Securities
Act (or any successor
- 13 -
or corresponding rule) and file with the SEC all reports and other documents
required of the Company under the Securities Act and the Exchange Act in a
timely manner.
(k) Make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act (provided that the
Company shall not be deemed in violation of this paragraph so long as it files
customary quarterly reports with the SEC for such period), and not file any
amendment or supplement to such Registration Statement or Prospectus to which
any of the Selling Stockholders shall have reasonably objected on the grounds
that such amendment or supplement does not comply in all material respects with
the requirements of the Securities Act.
4.2 Selling Stockholders' Obligations. The Company's obligations
under this Agreement to a Selling Stockholder shall be conditioned upon such
Selling Stockholder's compliance with the following:
(a) Such Selling Stockholder shall cooperate with the Company
in connection with the preparation of the Registration Statement, and for so
long as the Company is obligated to keep the Registration Statement effective,
such Selling Stockholder will provide to the Company, in writing, for use in the
Registration Statement, all information regarding such Selling Stockholder, its
intended method of disposition of the applicable Registrable Securities, and
such other information as the Company may reasonably request to prepare the
Registration Statement and Prospectus covering the Registrable Securities and to
maintain the currency and effectiveness thereof.
(b) Such Selling Stockholder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4.1(d), such Selling Stockholder will discontinue its offering and sale
of Registrable Securities pursuant to the applicable Registration Statement
until such Selling Stockholder's receipt of either (i) notice from the Company
that a Material Event no longer exists (but for no longer than the end of the
120-day period described in Section 2.6) or (ii) the copies of the supplemented
or amended Prospectus contemplated by Section 4.1(d), and, in either case, if so
directed by the Company, such Stockholder will deliver to the Company all copies
in its possession of the most recent Prospectus covering such Registrable
Securities at the time of receipt of such notice.
4.3 Underwriting Agreement. Neither the Company nor any other Person
may participate in any underwritten public offering in connection with a Demand
Registration or an Incidental Registration unless such Person (i) agrees to sell
its securities on the basis provided in any underwriting arrangements approved
by the Person or Persons selecting the lead managing underwriters for such
offering and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements, and other documents reasonably required
under the terms of such underwriting arrangements and this Agreement.
4.4 Holdback by the Company. The Company agrees not to engage in any
public sale or distribution by it of any securities of the same class or series
as the Registrable Securities or securities convertible into, or exchangeable or
exercisable for, or the value of which relates to or is based upon, such
securities during the ten days prior to, and during the 45-day
- 14 -
period beginning on, the effective date of any Registration Statement filed with
respect to any public offering of Registrable Securities to the extent the lead
book running managing underwriter for such offering advises the Company in
writing that a public sale or distribution during such 45-day period (including
a sale pursuant to Rule 144 under the Securities Act) of Registrable Securities
by the Company other than pursuant to the underwritten public offering
contemplated by such registration statement would materially adversely impact
such underwritten public offering), except as part of such registration;
provided, however, that the limitation set forth in this Section 4.4 shall not
apply: (a) to registrations by the Company on Form S-4 or any other registration
of shares issued in a merger, consolidation, acquisition, or similar transaction
or on Form S-8, or any successor or comparable forms, or a registration
statement filed in connection with an exchange offer of securities of the
Company made solely to the Company's existing stockholders or otherwise pursuant
to a dividend reinvestment plan, stock purchase plan, or other employee benefit
plan; (b) to sales by the Company upon exercise or exchange, by the holder
thereof, of options, warrants or convertible securities; (c) to any employee
benefit plan (if necessary to allow such plan to fulfill its funding obligations
in the ordinary course); or (d) to any Demand Registration effected as a shelf
registration under Rule 415 of the Securities Act. This Section 4.4 shall not
limit any public sale or distribution of any securities of the Company by any
Third-Party Demand Stockholder or any Person having the right to require that
the Company include its securities in any registration initiated by any
Third-Party Demand Stockholder.
4.5 Holdback by Stockholders. To the extent not inconsistent with
applicable law, each Stockholder whose securities are included in a Registration
Statement in connection with an underwritten public offering agrees not to
effect any sale or distribution of the issue being registered or a similar
security of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
Securities Act, during the ten days prior to, and during the 45-day period
beginning on, the effective date of such Registration Statement (except as part
of such registration), if and to the extent requested in writing by the managing
underwriter or Underwriters of such underwritten public offering.
5. Expenses of Registration.
5.1 Registration Expenses. Except as provided in Section 5.2, all
Registration Expenses incurred in connection with any Demand Registration or
Incidental Registration and the distribution of any Registrable Securities in
connection therewith shall be borne by the Company. For purposes of this
Agreement, the term "Registration Expenses" means all:
(a) registration, application, filing, listing, transfer, and
registrar fees,
(b) NASD fees and fees and expenses of registration or
qualification of Registrable Securities under state securities or blue sky laws,
(c) printing expenses (or comparable duplication expenses),
delivery charges, and escrow fees,
(d) fees and disbursements of counsel for the Company,
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(e) fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters),
(f) fees and expenses of any special experts retained by the
Company in connection with such registration;
(g) reasonable fees and disbursements of underwriters and
broker-dealers customarily paid by issuers or sellers of securities,
(h) fees and expenses of listing the Registrable Securities on
a securities exchange or over-the-counter market; and
(i) all reasonable fees and disbursements of one (1) counsel
for the Selling Stockholders attributable to the distribution of the Registrable
Securities of such Selling Stockholders included in such registration.
5.2 Selling Stockholder Expenses. Each Selling Stockholder shall pay
all:
(a) stock transfer fees or expenses (including the cost of all
transfer tax stamps), if any; and
(b) all underwriting or brokerage discounts and commissions.
6. Indemnification.
6.1 By the Company. The Company agrees to indemnify and hold
harmless each Stockholder Indemnified Party from and against any Losses, joint
or several, to which such Stockholder Indemnified Party may become subject under
the Securities Act, the Exchange Act, state securities or blue sky laws, common
law or otherwise, insofar as such Losses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the applicable Registration Statement or Prospectus,
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Company will
reimburse each such Stockholder Indemnified Party for any reasonable fees and
expenses of outside legal counsel for such Stockholder Indemnified Parties, or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such claims; provided, however, that the Company
will not indemnify or hold harmless any Stockholder Indemnified Party from or
against any such Losses (including any related expenses) to the extent such
Losses (including any related expenses) result from an untrue statement,
omission or allegation thereof which were (a) made in reliance upon and in
conformity with written information provided by or on behalf of the applicable
Selling Stockholder specifically and expressly for use or inclusion in the
applicable Registration Statement or Prospectus or (b) made in any Prospectus
used after such time as the Company advised such Selling Stockholder that the
filing of a post-effective amendment or supplement thereto was required, except
that this proviso shall not apply if the untrue statement, omission, or
allegation thereof is contained in the Prospectus as so amended or supplemented.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on
- 16 -
behalf of the Stockholder Indemnified Parties and shall survive the transfer of
such securities by the Selling Stockholders.
6.2 By Selling Stockholders. Each Selling Stockholder, individually
and not jointly, agrees to indemnify and hold harmless each Company Indemnified
Party and each other Stockholder Indemnified Party from and against any Losses,
joint or several, to which such Company Indemnified Party or any other
Stockholder Indemnified Party may become subject, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the applicable
Registration Statement or the Prospectus, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, if the statement or omission was made in reliance upon and
in conformity with written information provided by or on behalf of such Selling
Stockholder or any Person who controls such Selling Stockholder specifically and
expressly for use or inclusion in the applicable Registration Statement or
Prospectus; provided, however, that such Selling Stockholder will not indemnify
or hold harmless any Company Indemnified Party or other Stockholder Indemnified
Party from or against any such Losses (including any related expenses) (a) to
the extent the untrue statement, omission, or allegation thereof upon which such
Losses (including any related expenses) are based was made in any Prospectus
used after such time as such Selling Stockholder advised the Company that the
filing of a post-effective amendment or supplement thereto was required, except
that this proviso shall not apply if the untrue statement, omission, or
allegation thereof is contained in the Prospectus as so amended or supplemented,
or (b) in an amount that exceeds the net proceeds received by such Selling
Stockholder from the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation by or on behalf of Company Indemnified Parties
or the Stockholder Indemnified Parties, and shall survive the transfer of such
securities by the Selling Stockholder.
6.3 Procedures. Each Indemnified Party shall give notice to each
Indemnifying Party promptly after such Indemnified Party has actual knowledge of
any claim as to which indemnity may be sought, and the Indemnifying Party may
participate at its own expense in the defense, or if it so elects, assume the
defense of any such claim and any action or proceeding resulting therefrom,
including the employment of counsel and the payment of all expenses. The failure
of any Indemnified Party to give notice as provided in this Section 6.3 shall
not relieve the Indemnifying Party from its obligations to indemnify such
Indemnified Party, except to the extent the Indemnified Party's failure to so
notify actually prejudices the Indemnifying Party's ability to defend against
such claim, action, or proceeding. If the Indemnifying Party elects to assume
the defense in any action or proceeding, an Indemnified Party shall have the
right to employ separate counsel in such action or proceeding and to participate
in the defense thereof, but such Indemnified Party shall pay the fees and
expenses of such separate counsel unless (a) the Indemnifying Party has agreed
to pay such fees and expenses or (b) the named parties to any such action or
proceeding (including any impleaded parties) include such Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that there is or would be a conflict of interest between such
Indemnified Party and the Indemnifying Party in the conduct of the defense of
such action (in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall
- 17 -
not assume the defense of such action or proceeding on such Indemnified Party's
behalf). No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of the Indemnified Party (which consent will not
be unreasonably withheld), consent to entry of any judgment, or enter into any
settlement that 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.
6.4 Contribution. If the indemnification provided for under this
Section 6 is unavailable to or insufficient to hold the Indemnified Party
harmless under Section 6.1 or Section 6.2 above in respect of any Losses
referred to therein for any reason other than as specified therein, then the
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other, in connection with the
statements or omissions that resulted in such Losses. The relative fault of each
Indemnifying Party or Indemnified Party, as the case may be, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by (or that was failed to be
supplied by) such Indemnifying Party or Indemnified Party, such party's relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission. If contribution based upon the relative fault of the
Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand, is not available, then the Indemnifying Party shall contribute to the
amount paid or payable by Indemnified Party as a result of Losses in such
proportion as is appropriate to reflect the relative benefits received by the
Indemnifying Party, on the one hand, and such Indemnified Party, on the other,
from the subject offering or distribution. The relative benefits received by the
Indemnifying Party, on the one hand, and the Indemnified Party, on the other,
shall be deemed to be in the same proportion as the net proceeds of the offering
or other distribution received by the Indemnifying Party bears to the net
proceeds of the offering or other distribution received by the Indemnified
Party. 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.
7. Limitation on Other Registration Rights. The Company shall not grant to
any Person any demand registration right, incidental registration right, or
other right that would conflict with any of the rights granted to Stockholders
herein.
8. Miscellaneous.
8.1 Notices.
(a) All notices, requests, demands, waivers, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given if delivered personally, mailed, certified or registered
mail with postage prepaid, or sent by reliable overnight courier, or facsimile
transmission, to the address or facsimile number specified for the applicable
party on Schedule A attached to this Agreement, or to such other Person,
address, or facsimile number as any party shall specify by notice in writing to
the other Parties.
- 18 -
(b) Any notice or other communication to a party in accordance
with the provisions of this Agreement shall be deemed to have been given (i)
three (3) Business Days after it is sent by certified or registered mail,
postage prepaid, return receipt requested, (ii) upon receipt when delivered by
hand or transmitted by facsimile (confirmation received), or (iii) one (1)
Business Day after it is sent by a reliable overnight courier service, with
acknowledgment of receipt requested. Notwithstanding the preceding sentence,
notice of change of address shall be effective only upon actual receipt thereof.
8.2 Amendment. Any provision of this Agreement may be amended or
modified in whole or in part at any time by an agreement in writing among the
Company and the Stockholder holding a majority of the Registrable Securities,
executed in the same manner as this Agreement. No consent, waiver, or similar
act shall be effective unless in writing.
8.3 Entire Agreement. This Agreement constitutes the entire
agreement among the Parties and supersedes all prior agreements and
understandings, oral and written, among the Parties with respect to the subject
matter hereof.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
8.5 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of California,
without giving effect to principles of conflicts of laws.
8.6 Assignment.
(a) Except as expressly provided in this Section 8.6, the
rights of the Parties cannot be transferred or assigned and any purported
assignment or transfer to the contrary shall be void ab initio. So long as the
terms of this Section 8.6 are followed, any Stockholder may transfer any of its
rights under this Agreement, without the consent of the Company, to any Person
to whom such holder transfers any Registrable Securities or any rights to
acquire Registrable Securities, whether such transfer is by sale, gift,
assignment, pledge, or otherwise, so long as:
(i) such transfer is not made pursuant to an effective
Registration Statement or pursuant to Rule 144 or Rule 145 (or any successor
provisions) under the Securities Act or in any other manner the effect of which
is to cause the transferred securities to be freely transferable without regard
to the volume and manner of sale limitations set forth in Rule 144 (or any
successor provision) in the hands of the transferee as of the date of such
transfer; and
(ii) such transfer is made (A) to another Stockholder;
(B) to any Person that, directly or indirectly, through the ownership of voting
securities, controls, is controlled by, or is commonly controlled with such
Stockholder; (C) to any investment fund formed by an affiliate of such
Stockholder that is commonly controlled with such Stockholder; (D) to a trust
for the benefit of the equity owners of such Stockholder and of which the
trustee or trustees are one or more Persons that either control, or are commonly
controlled with, such
- 19 -
Stockholder or are banks, trust companies, or similar entities; (E) any Person
for which such Stockholder is acting as nominee or any trust controlled by or
under common control with such Person; (F) any Person, so long as such Person
acquires, pursuant to such transfer or series of related transfers, not less
than fifty thousand (50,000) Registrable Securities (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like), or (G) where
the transferring Stockholder is an individual, (i) to the estate, heirs, or
legatees of such Stockholder upon such Stockholder's death; (ii) to or for the
benefit of any member of such Stockholder's family or to any Person controlled
by such Stockholder or one or more members of such Stockholder's family; or
(iii) to any charitable foundation, charitable trust, or similar entity.
(b) In addition to the transfers permitted by Section 8.6(a),
so long as the other terms of this Section 8.6 are followed, any Stockholder may
transfer any of its rights under this Agreement (other than its rights under
Section 2), without the consent of the Company, to any charitable organization
to which Registrable Securities are transferred by any charitable foundation,
charitable trust, or similar entity to which Registrable Securities were
previously transferred in accordance with Section 8.6(a); provided that any
notice under this Agreement that the Company would otherwise be required to
deliver to such charitable organization, as transferee of any of the
transferor's rights under this Agreement, may be given to the transferor of such
Registrable Securities at the address or facsimile number specified by the
transferor in accordance with Section 8.1(a).
(c) Notwithstanding Section 8.6(a) or Section 8.6(b), no
Stockholder may assign any of its rights under this Agreement to any Person to
whom such Stockholder transfers any Registrable Securities unless the transfer
of such Registrable Securities did not require registration under the Securities
Act.
(d) The nature and extent of any rights assigned shall be as
agreed to between the assigning party and the assignee. Any assignee hereunder
shall receive such assigned rights subject to all the terms and conditions of
this Agreement, including the provisions of this Section 8.6. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and assigns.
8.7 Binding Agreement; No Third Party Beneficiaries. This Agreement
will be binding upon and inure to the benefit of the Parties and their
successors and permitted assigns. This Agreement shall constitute a binding
agreement among the Company and each other Persons executing this Agreement at
such time as it has been executed by the Company and such other Persons, even if
additional Persons whose names appear on the signature page to this Agreement
have not executed and delivered this Agreement and may or may not do so at a
later time. Except as set forth herein and by operation of law, no party to this
Agreement may assign or delegate all or any portion of its rights, obligations,
or liabilities under this Agreement without the prior written consent of each
other party to this Agreement.
[Signature page follows.]
- 20 -
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth herein.
NOVATEL WIRELESS, INC.
By: /s/ Peter Leparulo
------------------
Title: Chief Executive Officer
"PURCHASERS"
BAY INVESTMENTS LIMITED
By: /s/ H. J. Pudwell
-----------------
Title: Director
MUTUAL TRUST MANAGEMENT (BERMUDA)
LIMITED AS TRUSTEE OF SOFAER FUNDS/
GLOBAL HEDGE FUND
By: /s/ Michael Sofaer
------------------
Title: Authorised signatory of Sofaer Capital Inc.
Authorised Investment Adviser
RIT CAPITAL PARTNERS PLC.
By: /s/ Michael Sofaer
------------------
Title: Authorised signatory of Sofaer Capital Inc.
Authorised Investment Adviser
SOEN YONG LEE
By: /s/ Soen Yong Lee
-----------------
SIGNATURE PAGE TO REGISTRATION
RIGHTS AGREEMENT
PETER LEPARULO
By: /s/ Peter Leparulo
------------------
CORNERSTONE EQUITY INVESTORS, LLC
By: /s/ Robert H. Getz
------------------
Title: Managing Director
PS CAPITAL LLC
By: /s/ Stanley M. Blau
-------------------
Title: Managing Director
SIGNATURE PAGE TO REGISTRATION
RIGHTS AGREEMENT
PAN INVEST & TRADE INC.
By: Marcu Associated NA
-------------------
By: Bruno Sidler/Roland Steinmann
------------------------------
Title: Directors
SIGNATURE PAGE TO REGISTRATION
RIGHTS AGREEMENT
SCHEDULE A
Addresses for Notice Purposes
IF TO THE COMPANY:
Novatel Wireless, Inc.
9360 Towne Centre Drive, Suite 110
San Diego, CA 92121
Attention: Peter Leparulo,
Chief Executive Officer
Fax: (858) 812-3414
With a copy to:
Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: J. Scott Hodgkins, Esq.
Fax: (213) 891-8763
SIGNATURE PAGE TO REGISTRATION
RIGHTS AGREEMENT
IF TO THE PURCHASERS:
Mutual Trust Management (Bermuda) RIT Capital Partners plc.
Limited as Trustee of Sofaer Funds/Global Hedge Fund Spencer House
Hemisphere House 27 St. James' Place
9 Church Street London
P.O. Box HM 951 SW1A 1NR
Attention: Michael Sofaer Attention: Michael Sofaer
Pan Invest & Trade Inc. Bay Investments Limited
Pasea Estate Suite 1806, 18/F Central Plaza
Road Town 18 Harbour Road
Portola BVI WanChai
Attention: Bruno Sidler Hong Kong
Attention: Horst Pudwill
Soen Yong Lee Peter Leparulo
#25 - 8, Sangdo 2 - Dong Novatel Wireless, Inc.
Dongjak - Gu 9360 Towne Centre Drive, Suite 110
Seoul, Korea 156-03 San Diego, CA 92121
Cornerstone Equity Investors, LLC PS Capital LLC
717 Fifth Avenue 800 Fifth Avenue, Suite 19a
Suite 1100 New York, NY 10002
New York, NY 10022 Attention: Stan Blau
Attention: Robert H. Getz
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attention: Alvin G. Segel, Esq.
Fax: (310) 203-7199
