Exhibit 2
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of June 16, 2002 (this
"Agreement"), among Proxim Corporation, a Delaware corporation (together with
its successors, the "Company"), Ripplewood Partners, L.P., a Delaware limited
partnership (together with its successors, permitted assigns and affiliates,
"Partners"), Ripplewood Co-Investment Fund I, L.L.C., a Delaware limited
liability company (together with its successors, permitted assigns and
affiliates, "Co-Investment") and Ripplewood Investments L.L.C. (formerly known
as Ripplewood Holdings, L.L.C.), a Delaware limited liability company
(together with its successors, permitted assigns and affiliates,
"Investments," and together with Partners and Co-Investment, the "Investors").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company proposes to enter into an Asset Purchase
Agreement (as amended, supplemented otherwise modified from time to time, the
"Asset Purchase Agreement") between the Company and Agere Systems Inc., a
Delaware corporation ("Agere"), pursuant to which, among other things, upon
the terms and subject to the conditions set forth therein, Agere will sell to
the Company and the Company will purchase from Agere all of the right, title
and interest in, to and under certain assets, properties and rights used or
held for us by Agere primarily in the operation or conduct of the ORiNOCO
business (the "Asset Purchase");
WHEREAS, in connection with the Asset Purchase and as a condition to
closing the Asset Purchase Agreement, the Company will execute certain
agreements with one or more financial investors pursuant to which such
financial investors will purchase convertible preferred stock of the Company,
warrants to purchase common stock of the Company and/or subordinate debt
convertible into preferred stock of the Company (the "Financing");
WHEREAS, concurrently with the execution of the Asset Purchase
Agreement and as a condition and inducement to Agere's willingness to enter
into the Asset Purchase Agreement with Agere, each of the Investors has agreed
to enter into a Voting Agreement to approve the Financing (each as amended,
supplemented otherwise modified from time to time, a "Voting Agreement," and
collectively, the "Voting Agreements"); and
WHEREAS, concurrently with the execution of the Voting Agreements
and as a condition and inducement to the Investors' willingness to enter into
the Voting Agreements, the Company has agreed to indemnify each of the
Investors and certain other persons pursuant to the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
Section 1 Indemnification.
2
(a) The Company shall indemnify and hold harmless (x) each of the
Investors and each of its Affiliates (as defined below) and any controlling
person of any of the foregoing, (y) each of the foregoing's respective
directors, officers, employees and agents and (z) each of the heirs,
executors, successors and assigns of any of the foregoing from and against any
and all damages, claims, losses, expenses, costs, obligations and Liabilities
(as defined below) including, without limiting the generality of the
foregoing, Liabilities for all reasonable attorneys' fees and expenses
(including attorney and expert fees and expenses incurred to enforce the terms
of this Agreement) (collectively, "Losses and Expenses") suffered or incurred
by any such indemnified person or entity to the extent arising from, relating
to or otherwise in respect of, any governmental or other third party claim
against such indemnified person that arises from, relates to or is otherwise
in respect of the execution, delivery or performance of the Asset Purchase
Agreement or the Voting Agreements or the consummation or proposed
consummation of the Asset Purchase and the transactions related thereto or
arising therefrom, including, without limitation, any Losses and Expenses
arising from or under any federal, state or other securities law, but
excluding any Losses and Expenses in respect of any breach by such Investor of
the Voting Agreement to which such Investor is a party. The indemnification
provided by the Company pursuant to this Section 1 is separate from and in
addition to any other indemnification by the Company to which the indemnified
person may be entitled.
(b) With respect to third-party claims, all claims for
indemnification by an indemnified person (an "Indemnified Party") hereunder
shall be asserted and resolved as set forth in this Section 1. In the event
that any written claim or demand for which the Company would be liable to any
Indemnified Party hereunder is asserted against or sought to be collected from
any Indemnified Party by a third party, such Indemnified Party shall promptly
notify the Company in writing of such claim or demand (the "Claim Notice"),
provided that the failure to promptly provide a Claim Notice will not affect
an Indemnified Party's right to indemnification except to the extent such
failure materially prejudices the Company. The Company shall have twenty (20)
days from the date of receipt of the Claim Notice (the "Notice Period") to
notify the Indemnified Party (i) whether or not the Company disputes the
liability of the Company to the Indemnified Party hereunder with respect to
such claim or demand and (ii) whether or not it desires to defend the
Indemnified Party against such claim or demand. All costs and expenses
incurred by the Company in defending such claim or demand shall be a liability
of, and shall be paid by, the Company. Except as hereinafter provided, in the
event that the Company notifies the Indemnified Party within the Notice Period
that it desires to defend the Indemnified Party against such claim or demand,
the Company shall have the right to defend the Indemnified Party by
appropriate proceedings and shall have the sole power to direct and control
such defense; provided, however, that (A) if the Indemnified Party reasonably
determines that there may be a conflict between the positions of the Company
and of the Indemnified Party in conducting the defense of such claim or that
there may be legal defenses available to such Indemnified Party different from
or in addition to those available to the Company, then counsel for the
Indemnified Party shall be entitled to conduct the defense at the expense of
the Company to the extent reasonably determined by such counsel to be
necessary to protect the interests of the Indemnified Party and (B) in any
event, the Indemnified Party shall be entitled at its cost and expense to have
counsel chosen by such Indemnified Party participate in, but not conduct, the
defense. The Indemnified Party shall not settle a claim or demand without the
consent of the Company. The Company shall not, without the prior written
consent of the Indemnified Party, settle, compromise or offer to settle or
compromise any such claim or demand on a basis which would
2
3
result in the imposition of a consent order, injunction or decree which would
restrict the future activity or conduct of the Indemnified Party or any
Affiliate thereof or if such settlement or compromise does not include an
unconditional release of the Indemnified Party for any liability arising out
of such claim or demand. If the Company elects not to defend the Indemnified
Party against such claim or demand, whether by not giving the Indemnified
Party timely notice as provided above or otherwise, then the amount of any
such claim or demand or, if the same be contested by the Indemnified Party,
that portion thereof as to which such defense is unsuccessful (and the
reasonable costs and expenses pertaining to such defense) shall be the
liability of the Company hereunder. The Indemnified Party and Company shall
each render to each other such assistance as may reasonably be requested in
order to insure the proper and adequate defense of any such claim or
proceeding.
(c) If the indemnification provided for in this Section 1 is
unavailable or insufficient to hold harmless an Indemnified Party under this
Section 1, then the Company, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of the Losses and Expenses referred to in this Section 1: (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Indemnified Party from the matter giving rise to
indemnification hereunder or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Indemnified Party in connection
with the matter that resulted in such Losses and Expenses, as well as any
other relevant equitable considerations. Relative fault shall be determined by
reference to, among other things, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the matter giving
rise to such Losses and Expenses.
(d) The parties agree that it would not be just and equitable if
contributions pursuant to Section 1(c) were to be determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the first sentence of
Section 1(c). The amount paid by any Indemnified Party as a result of the
losses, claims, damages or liabilities, or actions in respect thereof,
referred to in the first sentence of Section 1(c) shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigation, preparing to defend or defending against any
claim which is the subject of this Section 1.
(e) For purposes of this Agreement, "Affiliate" shall mean, with
respect to any person, any other person that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with, such person. For purposes of the foregoing sentence, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any person, means the direct or
indirect possession of the power to direct or cause the direction of the
management or policies of such person, whether through the ownership of voting
securities, by contract or otherwise.
(f) For purposes of this Agreement, "Liabilities" means, as to any
person or entity, all debts, liabilities and obligations, direct, indirect,
absolute or contingent of such person or entity, whether accrued, vested or
otherwise, whether known or unknown and whether or not
4
actually reflected, or required by generally accepted accounting principles to
be reflected, in such person or entity's balance sheets or other books and
records.
Section 2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given, if delivered
personally, by telecopier or sent by overnight courier as follows:
(a) if to Company, to:
Proxim Corporation
000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
00 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Fax No.: (000) 000-0000
(b) if to any of the Investors, to:
Ripplewood Investments L.L.C.
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
and:
Cravath, Swaine & Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx Xxxx
Facsimile No.: (000) 000-0000
5
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
Section 3 Entire Agreement; Amendment. This Agreement sets forth
the entire agreement between the parties hereto with respect to the matters
subject to this Agreement. Any provision of this Agreement may be amended or
modified in whole or in part at any time by an agreement in writing between
the parties hereto executed in the same manner as this Agreement. No failure
on the part of any party to exercise, and no delay in exercising, any right
shall operate as a waiver thereof nor shall any single or partial exercise by
any party of any right preclude any other or future exercise thereof or the
exercise of any other right.
Section 4 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such instrument.
Section 5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to constitute an original,
but all of which together shall constitute one and the same document.
Section 6 Governing Law; Jurisdiction; Waiver of Jury. This
Agreement shall be governed and construed in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed in the
State of Delaware. Each party hereby submits to the exclusive jurisdiction of
the Court of Chancery or other courts of the State of Delaware in any matter
based upon or arising out of this Agreement or the matters contemplated
herein. The parties hereto waive all right to trial by jury in any action,
suit or proceeding brought to enforce or defend any rights or remedies under
this Agreement.
Section 7 Successors and Assigns; Third Party Beneficiaries. The
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties
hereto. Each of the indemnified persons described in Section 1 hereto shall be
deemed third party beneficiaries of this Agreement and shall be entitled to
the benefit of, and to enforce, its terms.
Section 8 Headings and Captions. The section headings and captions
contained in this Agreement are for reference purposes only, are not part of
this Agreement and shall not affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto, all as of the date first above written.
PROXIM CORPORATION
By: /s/ Xxxxx X. Xxxx
--------------------------------
Name: Xxxxx X. Xxxx
Title: President and COO
RIPPLEWOOD PARTNERS, L.P.
By: Ripplewood Investments L.L.C.,
its general partner
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
RIPPLEWOOD CO-INVESTMENT FUND I, L.L.C.
By: Ripplewood Investments L.L.C.,
its general partner
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
RIPPLEWOOD INVESTMENTS L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
