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
Xxxxx Xxxxxxx ("XXXXXXX") 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
Xxxxxxx 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.
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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)
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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 & Xxxxxxx LLP ("I&M"), 0000 Xxxxxx xx xxx Xxxxx,
Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, 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 Xxxxxx & Xxxxxxx 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
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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 Xxxxxx & Xxxxxxx 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 Xxxxx 0, 0000, (xx) 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
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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
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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.
- 12 -
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.
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(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.
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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
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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
- 24 -
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
- 25 -
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
- 26 -
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,
- 27 -
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
Xxxxxx & Xxxxxxx 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
Xxxxxx & Xxxxxxx 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
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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
Xxxxxx & Xxxxxxx 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
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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
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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 & Xxxxxxx 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 &
Xxxxxxx 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 & Xxxxxxx 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 Xxxxx Xxxxxxxxx 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.
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Esq., General Counsel, and
Xxxxx Xxxxxxxx, Chief Executive Officer
with a copy so mailed to:
Xxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Attention: J. Xxxxx Xxxxxxxx, 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 & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, 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,
-39-
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
-43-
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
-44-
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/ Xxxxx Xxxxxxxx
------------------------------------
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/ X.X. Xxxxxxx $ 916,667
-------------------------------------------
Title: Director
Address: Xxxxx 0000, 00/X Xxxxxxx Xxxxx
00 Xxxxxxx Xxxx
XxxXxxx,
Xxxx Xxxx
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/ Xxxxxxx Xxxxxx $ 600,000
-------------------------------------------
Title: Authorised signatory of Sofaer Capital Inc.
Authorised Investment Adviser
Address: Xxxxxxxxxx Xxxxx
0 Xxxxxx Xxxxxx
P.O. Box HM 951
Xxxxxxxx XX 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/ Xxxxxxx Xxxxxx $ 316,667
-------------------------------------------
Title: Authorised signatory of Sofaer Capital Inc.
Authorised Investment Adviser
Address: Xxxxxxx Xxxxx
00 Xx Xxxxx' Xxxxx
Xxxxxx
XX0X 0XX
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
------ ------ ------
SOEN XXXX XXX $ 100,000 8.33% $ 170,833
By: /s/ Soen Xxxx Xxx $ 229,167
-------------------------------------------
Address: # 00 - 0, Xxxxxx 0 - Xxxx
Xxxxxxx - Xx
Xxxxx ,Xxxxx 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/ Xxxxx Xxxxxx / Xxxxxx Xxxxxxxxx
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
------ ------ ------
XXXXX XXXXXXXX $ 10,000 .83% $ 17,083
By: /s/ Xxxxx Xxxxxxxx $ 22,917
-------------------------------------------
Address: 0000 Xxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
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/ Xxxxxx X. Xxxx $ 458,333
-------------------------------------------
Title: Managing Director
Address: 000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
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/ Xxxxxxx X. Xxxx $ 91,667
-------------------------------------------
Title: Managing Director
Address: 000 Xxxxx Xxx., Xxxxx 00X
Xxx Xxxx Xxxx, Xxx Xxxx 00000
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)