EXECUTION COPY
AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of June 18, 2002, is made by and
between Sonus Corp. (the "Company"), a corporation continued and existing under
the laws of Yukon Territory, Canada, and Warburg, Xxxxxx Ventures, L.P.
("Warburg"), a Delaware limited partnership.
RECITALS
WHEREAS, the Company desires to enter into a Purchase Agreement (the
"Purchase Agreement"), by and between the Company and Amplifon (USA), Inc. (the
"Buyer"), a Delaware corporation, pursuant to which the Buyer will acquire all
of the outstanding equity interests of certain of the Company's subsidiaries and
certain of the assets of the Company; and
WHEREAS, pursuant to the terms of those certain Securities Purchase
Agreements, dated as of December 24, 1997 and October 1, 1999, each by and
between the Company and Warburg, the consent of Warburg is required in order for
the Company to enter into the transactions contemplated by the Purchase
Agreement; and
WHEREAS, it is a condition to the granting of such consent that the Company
enter into this Agreement.
NOW, THEREFORE, in consideration of the provisions hereof and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Liquidation Rights. The transactions contemplated by the Purchase
Agreement constitute the sale of all or substantially all of the assets of the
Company for purposes of the Company's Amended and Restated Terms of Series A
Convertible Preferred Shares (the "Series A Charter") and the Company's Terms of
Series B Convertible Preferred Shares (the "Series B Charter" and, together with
the Series A Charter, the "Charters"). Accordingly, the Company hereby
acknowledges that the transactions contemplated by the Purchase Agreement
constitute the liquidation, dissolution or winding up of the Company for
purposes of Section 3 of the Charters and that, upon consummation of the
transactions contemplated by the Purchase Agreement, Warburg shall be entitled
to the liquidation rights described in the Series A Charter in respect of each
share of Series A Convertible Preferred Shares (the "Series A Preferred
Shares"), without par value, of the Company held by it and shall be entitled to
the liquidation rights described in the Series B Charter in respect of each
share of Series B Convertible Preferred Shares (the "Series B Preferred
Shares"), without par value, of the Company held by it.
2. Liquidation Amount; Promissory Note Payoff Amount.
(a) On and as of May 31, 2002, the amount accrued and payable out of the
assets of the Company available for distribution to shareholders in accordance
with the provisions of Section 3 of the Series A Charter upon the consummation
of the transactions contemplated by the Purchase Agreement is $8.2481 per share
of Series A Preferred Shares held by Warburg (the "Series A Liquidation
Amount"). The Series A Liquidation Amount shall be increased by
$.0009374 per day from and including June 1, 2002 until it is paid in full in
accordance with the provisions of Section 3 of the Series A Charter.
(b) On and as of May 31, 2002, the amount accrued and payable out of the
assets of the Company available for distribution to shareholders upon the
consummation of the transactions contemplated by the Purchase Agreement is
$4.8533 per share of Series B Preferred Shares held by Warburg (the "Series B
Liquidation Amount"). The Series B Liquidation Amount shall be increased by
$.0008888 per day from and including June 1, 2002 until it is paid in full in
accordance with the provisions of Section 3 of the Series B Charter.
(c) On and as of the date hereof, the aggregate amount of principal
outstanding on the Unsecured Promissory Note (the "Promissory Note"), made by
the Company in favor of Warburg on December 19, 2001 in the original principal
amount of $1,500,000 is $749,583.33 (the "Promissory Note Payoff Amount"),
reflecting a prepayment by the Company of $825,000 on the date hereof and
Warburg's application (i) of the first $74,583.34 of such amount to the payment
of interest accrued on the Promissory Note through the date hereof and (ii) of
the remainder to the reduction of the outstanding principal balance of the
Promissory Note. The Company shall use its best efforts to pay the Promissory
Note Payoff Amount out of available cash after the approval by the shareholders
of the Company of the transactions contemplated by the Purchase Agreement by the
Required Vote (as such term is defined in the Purchase Agreement) at the Special
Meeting (as such term is defined in the Purchase Agreement) and prior to Closing
(as such term is defined in the Purchase Agreement) in accordance with the
provisions of the Promissory Note. The Promissory Note Payoff Amount shall be
increased per day from and including June 19, 2002 by the amount shown in the
table below until it is paid in full in accordance with the provisions of the
Promissory Note.
Period Per Day Amount
June 19, 2002 $208.21
June 20, 2002 until July 19, 2002 $249.93
July 20, 2002 until August 19, 2002 $252.42
August 20, 2002 until September 19, 2002 $254.95
September 20, 2002 until October 19, 2002 $257.50
October 20, 2002 until November 19, 2002 $260.08
November 20, 2002 and thereafter The amount resulting from an
equation, the numerator of which
is (1.01 raised to the power of
the number of full 30 day
periods elapsed since June 20,
2002) multiplied by $7,497.91
and the denominator of which is
30.
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3. Application of Proceeds.
(a) As soon as practicable after receipt by the Company of the portion of
the Purchase Price (as such term is defined in the Purchase Agreement) to be
paid to the Company at Closing, the Company shall pay to holders of Common
Shares (the "Common Shares"), without par value, of the Company, an amount equal
to $1.00 per Common Share issued and outstanding as of the Closing (the "Common
Share Liquidation Amount"), such number of Common Shares not to exceed
5,702,228.
(b) (i) Within one (1) business day of receipt by the Company of the
portion of the Purchase Price to be paid to the Company at Closing, the Company
shall pay to Warburg, by wire transfer of immediately available funds, an
aggregate amount equal to $35,438,000, less (1) any amounts paid by the Company
to Xxxxxxx X. Xxxxxx ("Xxxxxx") pursuant to Section 9(b)(i) of the Separation
Agreement and Release of Claims, dated as of March 22, 2002, by and between the
Company and Xxxxxx, such amount not to exceed $1,297,500, (2) any Purchase Price
Reduction (as such term is defined in the Purchase Agreement), (3) the Common
Share Liquidation Amount, (4) a provision for payment of any fees and expenses
(other than amounts included in the Purchase Price Reduction) incurred or likely
to be incurred by the Company in connection with the transactions contemplated
by the Purchase Agreement, such amount to be determined in good faith by Warburg
based on discussions with the Company's management and (5) $50,000 as a
provision for payment of the debts and other liabilities of the Company after
Closing (the "Retained Amount"). The amount paid to Warburg pursuant to the
previous sentence shall be applied first to the Promissory Note Payoff Amount
until the Promissory Note Payoff Amount shall have been paid in full and then,
if any amount shall be remaining, pro rata to the Series A Liquidation Amount
and Series B Liquidation Amount until the Series A Liquidation Amount and Series
B Liquidation Amount shall have been paid in full.
(ii) Ninety (90) days after Closing, the Company shall pay to Warburg
by wire transfer of immediately available funds, an aggregate amount equal to
the Retained Amount then remaining after payment of the debts and other
liabilities of the Company. Such amount shall be applied by Warburg first to the
Promissory Note Payoff Amount until the Promissory Note Payoff Amount shall have
been paid in full and then, if any amount shall be remaining, pro rata to the
Series A Liquidation Amount and Series B Liquidation Amount until the Series A
Liquidation Amount and Series B Liquidation Amount shall have been paid in full.
(c) Any amounts received by Warburg distributed from the Escrow Account (as
such term is defined in the Purchase Agreement) shall be applied by Warburg
first to the Promissory Note Payoff Amount, if any, until the Promissory Note
Payoff Amount shall have been paid in full and then, if any amount shall be
remaining, pro rata to the Series A Liquidation Amount and Series B Liquidation
Amount until the Series A Liquidation Amount and Series B Liquidation Amount
shall have been paid in full. Within one (1) business day of receipt by the
Company of any amounts distributed from the Escrow Account, the Company shall
pay to Warburg by wire transfer of immediately available funds, an aggregate
amount equal to 100% of any amount so received, which amounts shall be applied
by Warburg in the manner described in the immediately preceding sentence.
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4. Issuance of Shares. From the date of this Agreement until each of the
Promissory Note Payoff Amount, the Series A Liquidation Amount and the Series B
Liquidation Amount shall have been paid in full, the Company shall not (i)
split, combine or reclassify any of its outstanding capital stock or other
equity interests or (ii) issue, sell or dispose of any (A) shares of its capital
stock or other equity interests, (B) securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of its capital stock or other equity interests, or (C) of its other
securities, other than Common Shares issued upon the exercise of options
outstanding on the date hereof in accordance with option plans as in effect on
the date hereof.
5. Defense of Actions. In the event the Buyer asserts that the Company has
become obligated to the Buyer pursuant to Section 8 of the Purchase Agreement,
or if any suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Company may become obligated to the Buyer
pursuant to Section 8 of the Purchase Agreement, the Company shall give written
notice to Warburg. Warburg may, at its option, participate in and defend,
contest or otherwise protect the Company against any such suit, action,
investigation, claim or proceeding by counsel of Warburg's choice at its sole
cost and expense. Warburg may settle or compromise any such suit, action,
investigation, claim or proceeding on behalf of the Company without the prior
written consent of the Company.
6. Notices.
(a) Any notice hereunder shall be in writing and shall be effective when
delivered in person or by facsimile transmission, or seven business days after
being mailed by certified or registered mail, postage prepaid, return receipt
requested, to the appropriate party at the following addresses (or such other
address designated by written notice given by such party):
If to Warburg:
Warburg, Xxxxxx Ventures, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx Xxxxxxxx
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Company:
Sonus Corp.
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
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Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
with a copy to:
Xxxxxx Xxxx LLP
000 X.X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxx Xxxxxx
(b) Upon receipt by the Company of any notice, demand or other
communication given or delivered under or by reason of the provisions of the
Purchase Agreement or any of the agreements contemplated by the Purchase
Agreement, the Company shall deliver a copy of such notice, demand or other
communication promptly (but in no event later than two (2) business days after
receipt thereof by the Company) to Warburg at the address provided by Warburg
pursuant to paragraph (a) of this Section 6.
7. Severability. In the event that any one or more of the provisions (or
parts thereof) contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not in any way be
impaired or affected, it being intended that all of the rights and privileges of
each party shall be enforceable to the fullest extent permitted by law.
8. Governing Law. The validity, interpretation and performance of this
Agreement shall be governed by and construed under the laws of the state of New
York without regard to conflicts of laws principles.
9. Headings. Headings in this Agreement are included for convenience of
reference only and shall not be deemed a part of or in any manner affect this
Agreement or any provision hereof.
10. Counterparts. This Agreement may be executed in counterparts with the
same effect as if all parties hereto had signed the same document. All
counterparts so executed shall be deemed to be an original, shall be construed
together and shall constitute one agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be executed by its duly authorized officer, each as of the date first above
written.
SONUS CORP.
By:/s/ Xxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxx X. Xxxx
Title: Chief Executive Officer
WARBURG, XXXXXX VENTURES, L.P.
By: Warburg, Xxxxxx & Co.,
General Partner
By:/s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Partner
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