EXHIBIT 10.2
Arris Group, Inc.
00000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
March 11, 2003
Nortel Networks Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxx 00000-0000
Ladies and Gentlemen:
This letter memorializes the agreements that we have reached with
respect to the Option Agreement by and among Nortel Networks Inc. ("Nortel"), as
the successor in interest to Nortel Networks LLC (which was merged with and into
Nortel as of December 31, 2002), Arris Interactive L.L.C. ("Arris Interactive"),
and Arris Group, Inc. (the "Company") dated as of June 7, 2002 (the "Option
Agreement"), and the Second Amended and Restated Limited Liability Company
Agreement of Arris Interactive L.L.C., dated and effective as of August 3, 2001
(the "Operating Agreement"). Except as modified hereby, the referenced
agreements shall remain in full force and effect.
Upon the terms and conditions set forth herein, Nortel hereby grants to
the Company, for consideration of $1, an option to purchase in cash, from
time-to-time (but in no event on more than four occasions and in each event for
at least 1,000,000 shares of common stock of the Company), up to an aggregate of
16,000,000 shares of common stock of the Company owned by Nortel (the "Stock
Option"). The per share exercise price for the Stock Option shall be 90% of
either (A) in the event that the exercise occurs within seven calendar days of
the closing of the convertible subordinated note offering currently being
pursued by the Company (it being acknowledged and agreed by the parties to this
letter that the proposed terms of the notes, the principal amount being offered,
the initial purchaser and other terms and conditions of such offering may vary
from the current proposal and that such offering must close by March 31, 2003)
(the "Note Offering"), the closing price on the Nasdaq National Market System
for the common stock of the Company on the day that the Note Offering is priced,
and (B) otherwise, the five trading day weighted average price (which is
determined (based on Bloomberg's volume weighted average price function) by
dividing (x) the sum of the amounts derived by multiplying each sale price
during the five trading days immediately preceding the date of exercise by the
number of shares sold at such price by (y) the aggregate trading volume for such
five trading days) of the common stock of the Company. Notwithstanding the
foregoing, the exercise price shall not be less than $4.00 per share, except
that with respect to up to 8,000,000 shares the exercise price may be less than
$4.00 per share but not less than $3.50 per share, provided that to the extent
that the exercise price for any shares is between $3.50 and $4.00 per share,
there shall be a reduction in the forgiveness of the Class B Return described in
the next paragraph equal to 50% of the amount by which the aggregate exercise
price for all exercises is less than $4.00 per share. The Stock Option will
terminate upon the earliest of (i) March 31, 2003, in the event the Note
Offering does not close by such date, (ii) June 30, 2003, and (iii) at Nortel's
election on the occurrence of a "Change in Control" (as that term is defined in
the Company's current convertible note indenture), a material change in the
Company's business, or the commencement
of a third-party tender offer for the common stock of the Company. The Stock
Option may be exercised only if (w) the Note Offering has closed, (x) the
"Option" (as that term is defined in the Option Agreement) has been exercised in
full, (y) Arris Interactive is not in breach of the Settlement and Release
Agreement between Nortel and Arris Interactive dated the date hereof and (z) the
Company has obtained all necessary consents under its credit agreement.
Notwithstanding the terms of the Option Agreement, the parties hereto
agree that the Option may be exercised by Arris Interactive, Arris
International, Inc. or the Company. In the event the Note Offering closes, the
Company agrees to exercise in full the Option and pay the exercise price for
such Option, or cause Arris Interactive or Arris International, Inc. to exercise
in full the Option and pay the exercise price for such Option, so that Nortel
receives the funds for such Option exercise as soon as practicable but in no
event later than the close of the business day following the date of the
Company's receipt of funds in connection with the closing of the Note Offering.
In the event the Note Offering has closed and the Option is exercised in full in
accordance with the provisions of the preceding sentence, Nortel agrees to
forgive a portion of the "Class B Return" (as that term is defined in the
Operating Agreement) equal to (i) $7,500,000 (i.e., the net amount of this
forgiveness after the 21% discount provided for in the Option Agreement would be
$5,925,000) minus (ii) the reduction referenced in the preceding paragraph, if
any.
In order to exercise the Stock Option, the Company must deliver written
notice to Nortel (the "Exercise Notice"), which Exercise Notice shall specify
the number of shares of common stock of the Company being purchased thereunder.
Each closing of the transactions contemplated by the Exercise Notice (a
"Closing") shall take place at 10:00 a.m., Boston time, on the third business
day after the date of Nortel's receipt of such Exercise Notice. At each Closing,
the Company shall deliver to Nortel, by wire transfer of immediately available
U.S. funds to a bank account designated by Nortel by written notice to the
Company prior to the Closing, the amount of the aggregate exercise price. At
each Closing, Nortel shall deliver a stock power or other appropriate document
to effect the transfer of the shares of common stock of the Company being
purchased at such Closing.
Representations and Warranties of the Company and Arris Interactive.
Each of the Company and Arris Interactive represents and warrants to Nortel,
jointly and severally, as of the date hereof and as of the date of each Closing
that:
(a) Organization and Standing. The Company is a corporation and Arris
Interactive is a limited liability company, in each case duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) Authority.
(i) The execution and delivery of this letter, the exercise of
the Stock Option and the Option (collectively, the "Options")
and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate or
limited liability company (as applicable) action of the
Company and Arris Interactive prior to the date hereof (which
action has not been rescinded or modified in any way).
(ii) This letter is a legal, valid and binding agreement of the
Company and Arris Interactive, enforceable in accordance with
its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting
creditors' rights or by general equity principles, whether
considered at law or in equity).
(c) Noncontravention. Except for a consent that may be necessary under the
Company's credit agreement with respect to the exercise of the Stock
Option, the execution, delivery and performance of this letter, the
exercise of the Options and the consummation of the transactions
contemplated hereby by the Company and Arris Interactive do not and
will not (i) constitute a breach or violation of, or a default under,
any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument
of the Company or Arris Interactive or to which the Company or Arris
Interactive or any of their respective properties or assets are subject
or bound, (ii) constitute a breach, violation or default under, the
certificate of incorporation or by-laws of the Company or the
certificate of formation or limited liability company agreement of
Arris Interactive, or (iii) require any consent or approval under any
such law, rule, regulation, judgment, decree, order, governmental
permit or license, agreement, indenture or instrument, except in the
case of (i) and (iii), where such breach, violation or default or the
failure to obtain such consents or approvals would not in the aggregate
have a material adverse effect on the Company and would not prevent or
impair the Company's or Arris Interactive's ability to consummate the
transactions contemplated hereby.
(d) Regulatory Approvals. No consents or approvals of, or filings or
registrations with, any governmental authority are necessary for the
Company or Arris Interactive to exercise the Options or for the Company
or Arris Interactive to consummate the transactions contemplated
hereby.
(e) Solvency. Immediately after giving effect to the transactions
contemplated hereby and the closing of the Note Offering, the Company,
Arris Interactive and each of their relevant affiliates shall be able
to pay its debts as they become due and shall own property having a
fair saleable value greater than the amounts required to pay its debts
(including a reasonable estimate of the amount of all contingent
liabilities). Immediately after giving effect to the transactions
contemplated hereby and the closing of the Note Offering, the Company,
Arris Interactive and each of their relevant affiliates shall have
adequate capital to carry on its business. No transfer of property is
being made and no obligation is being incurred in connection with the
transactions contemplated hereby and the closing of the Note Offering
with the intent to hinder, delay or defraud either present or future
creditors of the Company, Arris Interactive or any of their affiliates.
Representations and Warranties of Nortel. Nortel represents and
warrants to the Company and Arris Interactive as of the date hereof and as of
the date of each Closing that:
(a) Organization and Standing. Nortel is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
(b) Authority.
(i) The execution and delivery of this letter and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary
corporate action of Nortel prior to the date hereof (which action has not been
rescinded or modified in any way).
(ii) This letter is a legal, valid and binding agreement of
Nortel, enforceable in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer
and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles,
whether considered at law or in equity).
(c) Noncontravention. The execution, delivery and performance of this
letter and the consummation of the transactions contemplated hereby by
Nortel do not and will not (i) constitute a breach or violation of, or
a default under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of Nortel or to which Nortel or any of its respective
properties or assets are subject or bound, (ii) constitute a breach,
violation or default under, the certificate of incorporation or by-laws
of Nortel, or (iii) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument, except in the case of (i)
and (iii), where such breach, violation or default or the failure to
obtain such consents or approvals would not in the aggregate have a
material adverse effect on Nortel and would not prevent or impair
Nortel's ability to consummate the transactions contemplated hereby.
(d) Regulatory Approvals. No consents or approvals of, or filings or
registration with, any governmental authority are necessary for Nortel
to consummate the transactions contemplated hereby.
(e) Title to Shares of Common Stock. Nortel has good and valid title to the
16,000,000 shares of common stock of the Company issuable upon exercise
of the Stock Option, free and clear of all liens or encumbrances (other
than liens or encumbrances, if any, imposed by the securities laws).
To the extent the matters set forth in this letter are inconsistent
with, or otherwise conflict with the provisions of, the Second Amended and
Restated Investor Rights Agreement by and among Nortel, Nortel Networks LLC and
the Company, dated as of June 7, 2002 (the "Investor Rights Agreement"), each of
Nortel and the Company hereby waives any such inconsistencies or conflicts. In
all other respects, the provisions of the Investor Rights Agreement shall
continue in full force and effect.
The parties hereto acknowledge and agree that none of the shares of
common stock of the Company subject to the Stock Option are registered for
resale on the Company's Registration Statement on Form S-3 (File No. 333-88498)
or deemed to be "Registered Shares" (as such term is defined in the Lock-Up
Agreement between Nortel Networks LLC and Liberty ANTC, Inc., dated as of June
7, 2002).
Xxxxxx agrees to execute and deliver to CIBC World Markets a lock-up
agreement substantially in the form attached hereto as Annex A (with such
changes as CIBC may reasonably request) at the closing of the Note Offering.
If the foregoing accurately reflects our agreements, please sign where
indicated below.
Sincerely yours,
Arris Group, Inc.
By:
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Xxxxxxxx Xxxxxxxx
Executive Vice President
Arris Interactive L.L.C.
By: Arris Group, Inc.
By:
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Xxxxxxxx Xxxxxxxx
Executive Vice President
Agreed to:
Nortel Networks Inc.
By:
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Its:
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