EXHIBIT 4.1
FORM OF
SECURITIES PURCHASE AGREEMENT
BETWEEN
NOVATEL WIRELESS, INC.
AND
THE PURCHASERS LISTED ON THE SIGNATURE PAGES HERETO
MARCH 12, 2003
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made as of
March 12, 2003, between NOVATEL WIRELESS, INC. (the "COMPANY"), a corporation
organized under the laws of the State of Delaware, and the purchasers listed on
the signature pages hereto ("PURCHASERS").
WHEREAS, the Company wishes to sell to Purchasers up to 6,755 shares of
the Company's Series B Convertible Preferred Stock, $0.001 par value (the
"SERIES B PREFERRED STOCK"), together with warrants to purchase shares of common
stock, on the terms and conditions hereinafter provided; and
WHEREAS, as an inducement to Purchasers to enter into this Agreement,
certain executive officers and directors of the Company (the "PRINCIPAL
STOCKHOLDERS") have entered into agreements with Purchasers (the "VOTING
AGREEMENTS") pursuant to which, among other things, each Principal Stockholder
has agreed to vote all of such Principal Stockholder's shares of the Company's
capital stock in favor of the transactions contemplated hereby and has granted
Horst Pudwill ("PUDWILL") an irrevocable proxy to so vote its shares; and
WHEREAS, as a further inducement to Purchasers to enter into this
Agreement, certain holders of the Company's Series A Preferred Stock have
entered into agreements with Purchasers (the "SERIES A VOTING AGREEMENTS")
pursuant to which, among other things, each such holder has agreed to vote all
of such holder's of Series A Preferred Stock in favor of certain amendments to
the Certificate of Designation of the Series A Preferred Stock and has granted
Pudwill an irrevocable proxy to so vote its shares;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained in this Agreement, the Company and Purchasers agree as
follows:
1. Purchase and Sale of Securities. On the terms and subject to
the conditions set forth herein:
1.1. The Company agrees to issue and sell to the
Purchasers, and Purchasers agree (severally and not jointly) to purchase from
the Company (in accordance with the allocation set forth under the heading
"Tranche I Amount" on the signature page for each Purchaser) for an aggregate of
$1.2 Million, at the First Closing (as defined below), (i) secured subordinated
convertible promissory notes in the aggregate principal amount of $1.2 Million
in substantially the form of Exhibit A hereto (the "TRANCHE I NOTES"), which
shall be convertible into an aggregate Twelve Hundred (1,200) shares of Series B
Preferred Stock on the terms and conditions set forth therein (the "TRANCHE I
CONVERSION SHARES") and (ii) warrants to purchase an aggregate of 857,143 shares
of the Company's common stock, $0.001 par value ("COMMON STOCK") at a price of
Seventy Cents ($0.70) per share, in substantially the form of Exhibit B hereto
(the "FIRST ISSUANCE WARRANTS"). One half of the First Issuance Warrants shall
be allocated proportionately to the Purchasers in accordance with their
percentage participation indicated on the signatures pages hereto. The remaining
half of the First Issuance Warrants shall be issued to PS Capital LLC.
- 1 -
1.2. The Company understands and acknowledges that,
following the Stockholders Meeting (as defined in Section 5.2), the Purchasers
intend to purchase, from Sanmina-SCI Corporation ("SANMINA") and Sanmina Canada
ULC ("SANMINA ULC") certain of Sanmina's rights (including, without limitation,
the right to receive payments from the Company, but excluding Sanmina's and
Sanmina ULC's warrants to purchase Company stock) under the Settlement Agreement
and Mutual Release, dated January 12, 2002, by and the Company, Sanmina, and
Sanmina ULC (as amended, the "SETTLEMENT AGREEMENT"), together with the Security
Agreement, dated as of January 12, 2002, between the Company and Sanmina (the
"SANMINA SECURITY AGREEMENT"). Such purchase shall be referred to herein as the
"SANMINA PURCHASE." Each Purchaser hereby commits to the other Purchasers to
contribute its allocable share (in accordance with the allocation set forth
under the heading "Sanmina Tranche Percentage" on the signature page for each
Purchaser) toward the Sanmina Purchase. The Company hereby consents to the
Sanmina Purchase and acknowledges and agrees that, upon the consummation of the
Sanmina Purchase, the Company shall no longer have any right to receive any
product or inventory in exchange for such payments, and such payments shall be
due and payable (pursuant to the terms of the Sanmina Notes described below)
unconditionally without any obligation of Sanmina or the Purchasers or any
defense or right of set off. Accordingly, at the Sanmina Closing, the Company
shall (i) execute and deliver to Sanmina a mutual release of all claims; (ii)
execute and deliver to the Purchasers secured promissory notes in the form of
Exhibit C hereto in the aggregate principal amount equal to $3,505,000, with a
note payable to each Purchaser for the principal amount of such Purchaser's
percentage share of the Sanmina Purchase (as shown under the heading "Sanmina
Tranche Percentage" on the signature page for such Purchaser) times $3.505
Million (the "SANMINA NOTES"), together with a Security Agreement in the form of
Exhibit D hereto securing the obligations under the Sanmina Notes; and (iii)
execute and deliver to the Purchasers and Sanmina such other documents as may be
requested by the Purchasers to terminate (subject to Sanmina's concurrence and
execution of required documents, where necessary) all other obligations arising
out the Settlement Agreement other than the payments contemplated by the Sanmina
Notes. Shares of Series B Preferred Stock issued as repayment of any portion of
the Sanmina Notes are herein referred to as the "SANMINA CONVERSION SHARES." At
the Sanmina Closing, Purchaser shall pay to the Company (or, at its election,
cause Sanmina to repay to the Company at such time) cash in an amount equal to
(i) the sum of all payments made by the Company to Sanmina under the Settlement
Agreement between February 14, 2003 and the Sanmina Closing Date and (ii)
amounts paid by the Company under Section 1.9 of the Tranche I Notes to the
extent such amounts were used to pay Sanmina and applied toward or reduced the
Purchasers' aggregate purchase price paid to Sanmina. Each Purchaser
acknowledges and agrees that the Tranche I Notes and the Sanmina Notes shall be
pari passu in seniority (including seniority of liens) notwithstanding any
previous priority or seniority of Sanmina under the Settlement Agreement and
Sanmina Security Agreement. Notwithstanding the foregoing, at the request of the
Purchaser Representative, the Company and each Purchaser shall cooperate in
order to restructure the transactions at the Sanmina Closing, so long as such
restructuring does not cause the Company or any Purchaser to incur any
additional liability or obligation or reduce the benefits to the Company or such
Purchaser of the Sanmina Purchase. Without limiting the foregoing, such
restructuring may include the formation of a partnership or other legal entity
by the Purchasers (with ownership in accordance with the percentages indicated
on the signature pages hereto)
- 2 -
which would consummate the Sanmina Purchase and assume from Sanmina all
obligations of Sanmina under the Settlement Agreement, provided all obligations
and claims of the parties under the Settlement Agreement (other than as set
forth in the Sanmina Notes and the Sanmina Security Agreement) shall then be
immediately cancelled and waived by the parties at the Sanmina Closing.
1.3. The Company agrees to issue and sell to Purchasers,
and Purchasers agree (severally and not jointly) to purchase from the Company
(in accordance with the allocation set forth under the heading "Tranche III
Amount" on the signature page for each Purchaser) for an aggregate of $2.05
Million, at the Third Closing (as defined below), (i) an additional 2,050 shares
of Series B Preferred Stock, at a purchase price of One Thousand Dollars
($1,000) per share (the "THIRD ISSUANCE SHARES," and collectively with the
Tranche I Conversion Shares and the Sanmina Conversion Shares, the "SHARES"),
and (ii) warrants to purchase 1,983,929 shares of Common Stock at an exercise
price of Seventy Cents ($0.70) per share, in substantially the form of Exhibit B
hereto (the "THIRD ISSUANCE WARRANTS"; and, together with the First Issuance
Warrants, the "WARRANTS"). The shares issuable upon exercise of the Warrants are
herein referred to as the "WARRANT SHARES." The Series B Preferred Stock shall
have the terms designated in the Certificate of Designation of Series B
Convertible Preferred Stock attached hereto as Exhibit E hereto (the
"CERTIFICATE OF DESIGNATION").
2. Closing; Deliveries.
2.1. First Closing. The closing of the purchase and sale
of the Tranche I Notes and First Issuance Warrants (the "FIRST CLOSING") shall
occur at the offices of Irell & Manella LLP ("I&M"), 1800 Avenue of the Stars,
Suite 900, Los Angeles, California 90067, as soon as practicable (but not more
than five (5) business days) after the satisfaction or waiver of all of the
conditions to the First Closing set forth herein, or at such other place and
time as the Company and Purchasers may agree. At the First Closing, the Company
shall deliver to Purchasers the executed Tranche I Notes, the First Issuance
Warrants and an executed Security Agreement in the form of Exhibit F hereto, and
Purchasers shall deliver to the Company $1.2 Million (less fees to be paid
pursuant to Section 11.2) in immediately available funds. At the First Closing,
the parties hereto will also duly execute and deliver the Registration Rights
Agreement in the form of Exhibit G hereto (the "REGISTRATION RIGHTS AGREEMENT")
and Purchasers shall receive (i) an opinion from Latham & Watkins LLP covering
matters described in Exhibit H; (ii) the Voting Agreements in the form of
Exhibit I hereto from certain officers and directors of the Company; (iii) the
Series A Voting Agreements in the form of Exhibit J hereto from holders of a
majority of the outstanding shares of Series A Preferred Stock and (iv)
resolutions of the Board of Directors of the Company authorizing the
transactions contemplated hereby, certified by the Company's secretary in form
reasonably satisfactory to Purchasers. The date on which the First Closing
occurs is hereinafter referred to as the "FIRST CLOSING DATE."
2.2. Sanmina Closing. The closing of the Sanmina Purchase
(the "SANMINA CLOSING") shall occur at the offices of I&M at a date and time to
be agreed upon between the Purchasers and Sanmina (the "SANMINA CLOSING DATE"),
the which is expected to be one day following the satisfaction or waiver of all
of the conditions to the Sanmina Closing set forth herein. If the Sanmina
Closing is not to occur on the first day
- 3 -
following approval of the Shareholder Proposals the Stockholders Meeting, the
Purchasers shall notify the Company at least two days prior to the anticipated
Sanmina Closing Date to allow the Company to effect delivery of executed
documents. At the Sanmina Closing, the Company shall execute and deliver to
Purchasers and Sanmina the documents described in Section 1.2 above.
2.3. Third Closing. The closing of the purchase and sale
of the Third Issuance Shares and Third Issuance Warrants (the "THIRD CLOSING")
shall occur at the offices of I&M as soon as practicable (but not more than two
(2) business days) after the satisfaction or waiver of all of the conditions to
the Third Closing set forth herein, or at such other place and time as the
Company and Purchasers may agree. At the Third Closing, the Company shall
deliver to Purchasers one or more stock certificates evidencing the Third
Issuance Shares and the executed Third Issuance Warrants, in each case
registered in the name of the applicable Purchaser, and each Purchaser shall pay
to the Company the purchase price for its Third Issuance Shares and Third
Issuance Warrants (less fees to be paid pursuant to Section 11.2) by check or
wire transfer. At the Third Closing, the parties will also duly execute and
deliver the Registration Rights Agreement and Purchasers shall receive (i) an
opinion from Latham & Watkins LLP covering matters described in Exhibit K and
(ii) a certificate from an officer of the Company (in form reasonably
satisfactory to Purchasers) certifying that the resolutions of the Board of
Directors of the Company authorizing the transactions contemplated hereby, as
delivered at the First Closing, have not been amended or modified since the
First Closing Date and that such resolutions are the only resolutions relating
to this Agreement and the transactions contemplated hereby. The date on which
the Third Closing occurs is hereinafter referred to as the "THIRD CLOSING DATE."
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchasers as follows (it being agreed that
for purposes of the representations and warranties set forth in this Section 3,
the term the "COMPANY" shall be deemed to refer to the Company and each of its
Subsidiaries on a consolidated basis, except where the context reasonably
indicates otherwise):
3.1. Organization and Qualification. Except as disclosed
on Schedule 3.1, the Company and each of its Subsidiaries (as defined in Section
3.3) is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation, has all requisite corporate power
and authority to conduct its business as currently conducted and (assuming
approval by the holders of the Common Stock of the Shareholder Proposals, as
defined in Section 5.2, below, and approval by the holders of the Series A
Preferred Stock of the Certificate Amendments, as defined in Section 5.7, below)
to enter into and to carry out and perform its obligations under the Transaction
Documents. For purposes of this Agreement, "TRANSACTION DOCUMENTS" shall
include: (a) this Agreement, (b) the Registration Rights Agreement, (c) the
Warrants, (d) the Tranche I Notes, (e) the Sanmina Notes, (f) the Security
Agreements delivered at the First Closing and Sanmina Closing, (g) the
Certificate of Designation, and (h) the Certificate Amendments, as defined in
Section 5.7. Except as set forth on Schedule 3.1, the Company and each of its
Subsidiaries is duly qualified as a foreign corporation and is in good standing
in each jurisdiction in which the failure to be so qualified or in good standing
could reasonably be expected to have a material adverse effect on the business,
properties, results of operations, financial condition
- 4 -
or prospects of the Company and its Subsidiaries taken as a whole (a "MATERIAL
ADVERSE EFFECT").
3.2. Authorized Capital Stock. As of the date hereof, the
authorized capital stock of the Company consists of (a) Three Hundred Fifty
Million (350,000,000) shares of Common Stock, $0.001 par value per share; and
(b) Fifteen Million (15,000,000) shares of Preferred Stock, $0.001 par value per
share, Thirty Thousand (30,000) shares of which are designated as Series A
Preferred Stock. As of March 4, 2003, there were 6,984,823 shares of Common
Stock outstanding and 3,675 shares of Series A Preferred Stock outstanding, and
the Company has issued no shares of capital stock since that date other than as
may have been issued pursuant to the exercise of then outstanding warrants and
options and conversion of Series A Preferred Stock. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. The Company has reserved for issuance 1,400,000
shares of Common Stock upon exercise of options granted under its Amended and
Restated 2000 Stock Incentive Plan and Amended and Restated 1997 Stock Option
Plan (collectively, the "COMPANY OPTION PLANS"). As of March 4, 2003 and the
date hereof, there were not outstanding or existing any options, warrants,
rights (including conversion or preemptive rights, other than those described in
Section 3.6.1) or agreements for the purchase or acquisition from the Company or
any Subsidiary of any shares of its capital stock or any securities exercisable
for or convertible into shares of its capital stock, except for options
described above and warrants described on Schedule 3.2 hereto, which sets forth
for each warrant or group of identical warrants (x) the number of shares subject
to such warrants, (y) the exercise price thereof as of the date hereof without
giving effect to the transactions contemplated under this Agreement and (z) the
exercise price thereof after giving effect to the issuance of all Warrants and
Shares contemplated hereby (for which purpose it shall be assumed that the
Tranche I Notes and the Sanmina Notes are converted in full into Series B
Preferred Stock under the terms thereof). Upon consummation of the Third Closing
(assuming repayment of the Sanmina Notes entirely in Series B Preferred Stock),
Purchasers shall collectively own Series B Preferred Stock convertible into
54.94% of the Fully Diluted Common Shares of the Company. "FULLY DILUTED COMMON
SHARES" shall mean the sum of (i) all shares of Common Stock issued and
outstanding as of March 4, 2003, (ii) all shares of Common Stock issuable upon
conversion of outstanding Series A Preferred Stock (as of March 4, 2003) and
Series B Preferred Stock (making the aforementioned assumptions regarding the
conversion in full of the Tranche I Notes and Sanmina Notes into Series B
Preferred Stock under the terms thereof) and (iii) all shares of common stock
issuable upon exercise of options and warrants outstanding at March 4, 2003
which, after giving effect to all antidilution adjustments arising out of the
transactions contemplated hereby and the issuance of all Shares and Warrants
contemplated to be issued hereunder, will have an exercise price less than or
equal to $1.05 per share. There are no outstanding obligations of the Company or
any Subsidiary to purchase, redeem or otherwise acquire any equity interest
therein.
3.3. Subsidiaries. Except as set forth in Schedule 3.3,
the Company (a) owns no equity securities of any other corporation, limited
partnership or similar entity, directly or through any Subsidiary, beneficially
or of record and (b) is not, directly or through any Subsidiary, a participant
in any joint venture, partnership or similar arrangement. "SUBSIDIARY" means any
corporation, joint venture, limited liability company,
- 5 -
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
- 6 -
(collectively, "LIENS") on any of the Company's or any Subsidiary's properties,
other than as may be created as a consequence of the Security Agreement.
3.5. State Takeover Statutes. The Board has approved the
terms of this Agreement and the other Transaction Documents and the consummation
of the transactions contemplated hereby and thereby (including without
limitation the sale and issuance to Purchasers of the Shares, Tranche I Notes,
the Sanmina Notes and Warrants pursuant to this Agreement) and such approval
constitutes approval of such transactions by the Board under the provisions of
Section 203 of the Delaware General Corporation Law (the "DGCL"), and
constitutes all actions necessary to ensure that the restrictions contained in
Section 203 of the DGCL will not apply to any Purchaser or its affiliates in
connection with or following such transactions. No other state takeover statute
is applicable to the transactions contemplated by this Agreement and the other
Transaction Documents.
3.6. Issuance, Sale and Delivery of the Shares and
Warrants.
3.6.1. When issued in compliance with all the
provisions of this Agreement (including the delivery of payment therefor), the
Shares will be validly issued, fully paid and nonassessable, and will be free of
any Liens, other than restrictions on transfer under applicable state and/or
federal securities laws and any Liens created or imposed by the Purchasers. The
sale of the Shares and Warrants is not subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with,
except for participation rights granted to the holders of Series A Preferred
Stock in December 2001 and Common Stock issued in September 2002 (which
collectively entitle those holders to purchase securities in an amount up to
6.3% of the total number of securities offered hereby, after giving effect to
any sales to such holders pursuant to such participation rights). Upon the
filing with the Delaware Secretary of State and effectiveness of the Certificate
of Designation, the rights, privileges and preferences of the Series B Preferred
Stock set forth in the Certificate of Designation will constitute the valid and
binding obligations of the Company, enforceable against it in accordance with
their respective terms, except as may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally and (b) the effect of
general principles of equity, whether enforcement is considered in a proceeding
in equity or at law, concepts of materiality; reasonableness, good faith and
fair dealing, and the discretion of the court before which any proceeding
therefore may be brought.
3.6.2. The shares of Common Stock that are issuable
upon conversion of the Series B Preferred Stock or exercise of the Warrants,
when so issued and paid for, will be validly issued, fully paid and
nonassessable, and will be free of any Liens, other than restrictions on
transfer under state and/or federal securities laws and any Liens created or
imposed by the Purchasers. Issuance of such shares of Common Stock is not
subject to any preemptive rights or rights of first refusal that have not been
properly waived or complied with.
3.7. Governmental Consent. No consent, approval or
authorization of, or declaration or filing with, any federal, state, local,
municipal, foreign or other governmental body or authority ("GOVERNMENTAL
AUTHORITY") on the part of the Company or any Subsidiary is required for the
execution and delivery of the Transaction Documents or the
- 7 -
sale of the Shares to Purchasers pursuant to this Agreement, except for the
filing of the Certificate of Designation.
3.8. SEC Reports; Financial Statements.
3.8.1. The Company has filed all forms, reports and
documents required to be filed by it with the SEC since and including the filing
date of the Registration Statement with respect to the Company's initial public
offering (the "SEC REPORTS"). The SEC Reports (x) were prepared in accordance
with the requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT") and the Securities and Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), as the case may be, and the rules and regulations thereunder and (y) did
not at the time they were filed, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
3.8.2. Except as set forth on Schedule 3.8.2
hereto, each of (i) the financial statements (including, in each case, any notes
thereto) of the Company included in the SEC Reports, (ii) the unaudited
consolidated statement of operations for the Company and its Subsidiaries for
the year ended December 31, 2002 attached as Schedule 3.8.2(a) hereto and (iii)
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of December 31, 2002 attached as Schedule 3.8.2(b) hereto (the "UNAUDITED
BALANCE SHEET"; and items (i), (ii) and (iii) being collectively referred to
herein as the "FINANCIAL STATEMENTS"), was prepared in accordance with GAAP
(subject, in the case of unaudited statements, to the absence of footnotes
thereto and to normal and recurring year-end adjustments which were not and are
not expected to be material in amount) and each fairly presented the financial
position, results of operations and cash flows of the Company as at the
respective dates thereof and for the respective periods indicated therein
(except as may be indicated in the notes thereto) in all material respects.
3.8.3. Except as set forth in Schedule 3.8.3
hereto, as of the date hereof, the Company has no liability or obligation
(whether accrued, absolute, contingent or otherwise and whether or not required
to be reflected on the balance sheet under GAAP) other than (a) liabilities and
obligations reflected on the Unaudited Balance Sheet, and (b) liabilities or
obligations incurred since December 31, 2002 in the ordinary course of business
consistent with past practice, none of which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
3.8.4. The Company has previously furnished to the
Purchaser Representative true, correct and complete copies of all "management"
letters issued by the Company's independent auditors since January 1, 2000, and
all letters from the Company's outside counsel to its auditors delivered since
January 1, 2000 in connection with any audits.
3.9. Proxy Statement. The Proxy Statement described in
Section 5.3, including any amendments or supplements thereto, shall not, at the
time filed with the SEC, as of the date mailed to the Company's stockholders or
at the time of the Stockholders Meeting (as defined in Section 5.2), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
- 8 -
statements therein, in light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information provided by Purchasers specifically
for use in the Proxy Statement. The Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
3.10. Absence of Litigation. Except as set forth on
Schedule 3.10 hereto, there is no material claim, action, proceeding or
investigation (or collection of similar or related claims, actions, proceedings
or investigations which in the aggregate would be material) pending, and, to the
knowledge of the Company or its Subsidiaries, there is no material claim,
action, proceeding or investigation threatened, against the Company or any
Subsidiary, or any director or officer of the Company or any Subsidiary or any
property or asset of the Company or any Subsidiary, before any court, arbitrator
or administrative, governmental or regulatory authority or body, domestic or
foreign. Except as set forth on Schedule 3.10 hereto, neither the Company or any
Subsidiary, nor any of their properties or assets, is subject to any order,
writ, judgment, injunction, decree, determination or award.
3.11. Absence of Certain Changes or Events. Except as
disclosed in the Company's Form 10-Q dated September 30, 2002 or in subsequent
SEC Reports or in Schedule 3.11, or as specifically contemplated by this
Agreement, since September 30, 2002, there has not been (i) any transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) individually or in
the aggregate which has had or could reasonably be expected to have a Material
Adverse Effect; (ii) any damage, destruction or loss, whether or not covered by
insurance; (iii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
capital stock of the Company (for purposes of clarification, other than the
accrual of dividends on the Series A Preferred Stock); (iv) any increases by the
Company or its Subsidiaries in the wages, salaries, compensation, pension or
other fringe benefits or perquisites payable to any executive officer or
director, grants by the Company or any Subsidiary of any severance or
termination pay, execution by the Company or any Subsidiary of any contract to
make or grant any severance or termination pay, or payments by the Company or
any Subsidiary of any bonus, in each case with respect to any such executive
officer or director, other than pursuant to pre-existing agreements or
arrangements; or (v) entry into any commitment or transaction material to the
Company or any Subsidiary (including, without limitation, any material borrowing
or sale of assets).
3.12. Compliance with Laws; Permits. The Company and each
of its Subsidiaries has at all times materially complied, and it is currently in
material compliance, with all material applicable statutes, rules, regulations
and orders of the United States, Canada and all states or provinces in which the
Company or any Subsidiary is engaged in business and has obtained all required
licenses, permits and other approvals of any Governmental Authority (as defined
in Section 3.7).
3.13. Material Contracts. Except as set forth on Schedule
3.13, each of the contracts required to be filed as material contracts as
exhibits to the SEC Reports (the "MATERIAL CONTRACTS") (including all
amendments, modifications and waivers) (a) has been filed with the SEC, (b) to
the knowledge of the Company, has been duly authorized,
- 9 -
executed and delivered by the parties thereto, (c) remains in full force and
effect to the extent of its terms without any amendment, modification or waiver
not reflected in the Material Contracts, (d) to the knowledge of the Company, is
binding on the parties thereto in accordance with and to the extent of its terms
and applicable laws, and (e) is not subject to, and the Company has not received
any written notice threatening or declaring, termination as a result of any
alleged uncured breach or default. The Company and each Subsidiary has performed
all material obligations required to be performed by it to date under each
Material Contract, and neither the Company nor any Subsidiary is in material
breach or default under any Material Contract. To the Company's knowledge,
without a specific review having been conducted by the Company, no other party
to any Material Contract is in material breach or default thereunder or in
material violation thereof, and no condition exists that with notice or lapse of
time or both would constitute a material violation thereof or a material default
thereunder. Without limiting the foregoing, except as set forth on Schedule
3.13, any failure by the Company or any Subsidiary to receive an unqualified
opinion of its auditors in connection with its annual audit will not modify,
breach or constitute grounds for the occurrence or declaration of a default
under or give rise to a right to terminate, or accelerate or permit the
acceleration of any performance required by the terms of, any agreement,
license, indenture, undertaking or other instrument to which the Company or any
Subsidiary is a party or by which it or any of its assets may be bound or
affected.
3.14. Intellectual Property Rights.
3.14.1. The Company and its Subsidiaries own or have
licenses to use registered copyrights, copyright registration and copyright
applications, trademark registrations and applications for registration, patents
and patent applications, trademarks, service marks, trade names, Internet domain
names and other intellectual property rights (collectively, "INTELLECTUAL
PROPERTY RIGHTS") which are sufficient to carry on the business of the Company
and its Subsidiaries as presently conducted, except for Intellectual Property
Rights the failure of which to own or have licenses to use would not reasonably
be expected to result in a Material Adverse Effect.
3.14.2. The operation of the business of the Company
and its Subsidiaries does not, and except as identified on Schedule 3.14,
neither the Company nor any Subsidiary has received any notice from any person
claiming that the business of the Company or any Subsidiary does, infringe or
misappropriate the Intellectual Property Rights of any person, violate any
export control law or regulation, violate the rights of any person (including
rights to privacy or publicity), or constitute unfair competition or trade
practices under any applicable laws.
3.14.3. Except as set forth on Schedule 3.14, to the
knowledge of the Company, no person is infringing or misappropriating any
Intellectual Property Rights owned or licensed by the Company or any Subsidiary
or engaging in other conduct that may diminish or undermine such Intellectual
Property Rights, such as the disclosure of Company or Subsidiary confidential
information.
3.14.4. The Company and its Subsidiaries have taken
all reasonable steps to protect their rights in confidential information and
trade secrets of the Company and its Subsidiaries or provided by any other
person to the Company or a Subsidiary subject to a
- 10 -
duty of confidentiality. Without limiting the foregoing, the Company and its
Subsidiaries have, and enforce, a policy requiring each of its executive
officers and research and development personnel to execute proprietary
information, confidentiality and invention and copyright assignment agreements,
and all such individuals have executed such an agreement.
3.15. Certain Matters Regarding Employees. To the knowledge
of the Company, no officer or key employee of the Company or any Subsidiary is
subject to any contract, agreement, undertaking, commitment or instrument
(including any no hire or non-competition agreements) which would impair his or
her ability to perform the services on behalf of Company or any Subsidiary
contemplated to be performed by such officers or key employee.
3.16. Tax Matters.
3.16.1. The Company and its Subsidiaries (i) have
timely filed all material Tax Returns required to be filed by it as of the date
hereof, and (ii) have timely paid, or have made appropriate provision on their
balance sheets (in accordance with GAAP) for, all Taxes due or (to the Company's
knowledge) claimed to be due from it by any taxing authority with respect to any
liability for Taxes except where such failure, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Company. All Tax Returns described in clause (i) are complete and accurate in
all material respects. With respect to periods commencing on or after December
31, 2002, neither the Company nor any of its Subsidiaries has incurred any
liability for Taxes which could reasonably be expected to have a Material
Adverse Effect other than (i) as reflected on the audited balance sheet of the
Company as of December 31, 2001 contained in the Financial Statements (the
"AUDITED BALANCE SHEET") or the Unaudited Balance Sheet, or (ii) federal and
state income taxes payable on the Company's income after December 31, 2002.
There are no material Liens with respect to Taxes upon any of the Company's or
any Subsidiary's properties or assets, except for current Taxes not yet due.
3.16.2. To the Company's knowledge, none of the Tax
Returns of the Company or its Subsidiaries have been or are currently being
audited or examined by the Internal Revenue Service. Except to the extent
reserved for in the Audited Balance Sheet, no material issue of which the
Company or any of its Subsidiaries has received written notice has been raised
by a taxing authority in any audit or examination which reasonably could be
expected to result in a proposed deficiency, penalty or interest for any other
period, which could reasonably be expected to have a Material Adverse Effect on
the Company.
3.16.3. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any Tax
Returns required to be filed by, or which include or are treated as including,
the Company or any of its Subsidiaries.
3.16.4. Neither Company nor any Subsidiary is
involved in or subject to any joint venture, partnership or other arrangement or
contract which is treated as a partnership for federal, state, local or foreign
income tax purposes.
- 11 -
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.
- 14 -
(b) All principal, interest and other amounts owing under the
obligations secured by the liens described in the UCC-1 filings by Cupertino
National Bank, Venture Banking Group has been paid in full, and all such liens
have been cancelled.
3.20. Accounts Receivable. Schedule 3.20 sets forth a
receivables aging schedule for the Company and its Subsidiaries as of a recent
practicable date. All accounts receivable of the Company and its Subsidiaries
(a) to the Company's knowledge, are legal, valid and binding obligations of the
persons shown on the books of the Company or such Subsidiary as the respective
account debtors with respect thereto, except as may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally and
(ii) the effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or at law, concepts of materiality;
reasonableness, good faith and fair dealing, and the discretion of the court
before which any proceeding therefore may be brought, (b) arose out of bona fide
sales actually made or services actually performed on or prior to such date in
the ordinary course of business, (c) are not subject to any discount, rebate,
offset, return privilege or claim outside of the ordinary course of business
(and are reflected in the reserves established on the books of the Company or
such Subsidiary, as the case may be, in accordance with GAAP) and (d) to the
best knowledge of the Company, are valid and collectible in the ordinary course
of business. Except as set forth on Schedule 3.20, no customer has indicated an
unwillingness or an inability to pay any amount included in the accounts
receivables of the Company or any of its Subsidiaries.
3.21. Customers. Schedule 3.21 lists the names and
addresses of the six (6) most significant customers (by revenue) of the Company
and its Subsidiaries for the year ended December 31, 2002, and the amount and
percentage of total revenues accounted for by each such customer during each
such period. Except for the bankruptcy filing of Metricom, Inc., which is
disclosed in the Company's SEC Reports, neither the Company nor any Subsidiary
has received any notice or otherwise have knowledge that any of such six
significant customers has ceased, or will cease, to use the products or services
of the Company or its Subsidiaries, or has materially reduced, or will
materially reduce, the use of such products or services at any time.
3.22. Suppliers. Schedule 3.22 lists the three (3) largest
suppliers of any products or services to the Company and its Subsidiaries during
the year ended December 31, 2002, and the amount of purchases made by the
Company or any Subsidiary from each supplier during such period. Except for the
arrangements with Sanmina and Sanmina ULC pursuant to the Settlement Agreement
and related Sanmina Security Agreement, no material purchase order, commitment
or other obligation of the Company or any Subsidiary to take delivery is in
excess of normal requirements, nor are prices provided therein in excess of
current market prices for the products or services to be provided thereunder.
Except in connection with the Settlement Agreement and related Sanmina Security
Agreement, neither the Company nor any Subsidiary has any obligation to any
supplier with respect such supplier's work in process or inventory, and no such
obligation would arise as a result of any termination of any contract or
purchase order.
3.23. Business Relationships. There is no threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship
- 15 -
between the Company or its Subsidiaries, on the one hand, and any customer or
group of customers whose purchases, individually or in the aggregate, are
material to the business of the Company or any Subsidiary, or with any material
suppliers, on the other hand, and to the Company's knowledge there exists no
present condition or state of facts or circumstances with respect to any such
business relationship which could materially and adversely affect the Company or
its Subsidiaries or prevent the Company or its Subsidiaries from conducting such
business after the consummation of the transactions contemplated by this
Agreement in substantially the same manner in which it has been heretofore been
conducted.
3.24. Business Plan. The Company has delivered to the
Purchaser Representative a true and correct copy of its business plan for the
year 2003 (the "BUSINESS PLAN"). The information contained in the Business Plan
(including without limitation the projections) has been prepared by Company and
its representatives in good faith based upon assumptions believed by the
management of Company and its Subsidiaries to be reasonable at the time of such
preparation and as of the date hereof (excluding any analysis of the
transactions contemplated hereby, including Purchasers' acquisition of the
obligations owed to Sanmina), which constitute all assumptions reasonably
necessary and prudent in making such projections.
3.25. Employment Agreements. Schedule 3.25 sets forth a
true, correct and complete list of all material employment agreements and golden
parachute agreements to which the Company or any of its Subsidiaries is a party,
both with respect to current employees and officers and (to the extent any
obligations remain outstanding thereunder) former officers and employees. The
Company has previously delivered to the Purchaser Representative (or made
available to FTI Consulting) true, correct and complete copies of all such
agreements, including all amendments thereto. Each such agreement is in writing,
and to the Company's knowledge is a valid and binding agreement enforceable
against the respective parties thereto in accordance with its terms, except as
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium and
other similar laws and equitable principles relating to or limiting creditors'
rights generally and (ii) the effect of general principles of equity (whether
enforcement is considered in a proceeding in equity or at law), concepts of
materiality, reasonableness, good faith and fair dealing, and the discretion of
the court before which any proceeding therefore may be brought. To the knowledge
of the Company, no party to any such agreement is in breach of, or in default
with respect to, any of its obligations thereunder, nor is the Company or any of
its Subsidiaries aware of any facts or circumstances which might reasonably be
expected to result in any breach or default thereunder.
3.26. Transactions with Affiliated Persons.
3.26.1. Since December 31, 2001, except as set forth
on Schedule 3.26, neither the Company nor any of its Subsidiaries has at any
time, directly or indirectly, purchased, leased or otherwise acquired any
material property or obtained any material services from, or sold, leased or
otherwise disposed of any material property or furnished any material services
to (except in each case with respect to remuneration for services rendered as a
director, officer, consultant or employee of the Company or any of its
Subsidiaries), in the ordinary course of business or otherwise, any officer,
director, employee, stockholder, any family member of any officer, director,
employee, stockholder
- 16 -
or any other person (other than the Company and its Subsidiaries) that, directly
or indirectly, alone or together with others, controls, is controlled by or is
under common control with the Company, any of its Subsidiaries or any officer,
director, employee, stockholder or any family member of any officer, director,
employee or stockholder (the preceding persons listed in this sentence being
referred to herein collectively as "AFFILIATED PERSONS" and individually as an
"AFFILIATED PERSON").
3.26.2. Except as set forth in Item 13 of the
Company's Form 10-K/A for the year ended December 31, 2001, or in subsequent SEC
Reports, neither the Company nor any of its Subsidiaries is indebted, directly
or indirectly, to any Affiliated Person, in a material amount; and no Affiliated
Person is indebted in a material amount to the Company or any of its
Subsidiaries (except for advances for travel expenses to employees in the
ordinary course of business) or has any direct or indirect ownership interest in
any firm or corporation with which the Company or any of its Subsidiaries is
affiliated or with which the Company or any of its Subsidiaries has a business
relationship. To the Company's knowledge, no such Affiliated Person is, directly
or indirectly, interested in any material contract with the Company or any of
its Subsidiaries (other than bona fide employment agreements).
3.27. Listing of Common Stock. All shares of Common Stock
issuable upon conversion of the Shares or exercise of the Warrants will be
listed for trading on Nasdaq National Market or Nasdaq SmallCap Market,
effective on and as of the Third Closing Date. Except as disclosed in the SEC
Reports, as of the date hereof, the Company is, and as of each of the First
Closing Date and the Third Closing Date will be, in compliance with all
applicable Nasdaq SmallCap Market continued listing standards and requirements,
other than the $1.00 minimum bid requirement.
3.28. Full Disclosure. There is no fact known to the
Company relating to the Company or its Subsidiaries (other than facts related to
general economic conditions) which the Company has not disclosed to the
Purchasers herein, in the SEC Reports, in the Schedules hereto or in the
Financial Statements which the Company in good faith believes either materially
adversely affects, or could reasonably be expected to materially adversely
affect, the properties, business, operations, affairs, earnings, assets,
liabilities or condition (financial or otherwise) of the Company or the ability
of the Company to perform its obligations under this Agreement or any document
contemplated hereby.
3.29. Finders' Fees. There is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act
on behalf of Company or any Affiliated Person who might be entitled to any fee
or commission upon consummation of the transactions contemplated by this
Agreement and each of the other Transaction Documents.
3.30. No General Solicitation or General Advertising. In
the case of each issuance of securities, including, without limitation, the
Shares, Warrants, Tranche I Notes and Sanmina Notes, pursuant to the terms of
this Agreement, no form of general solicitation or general advertising was used
by the Company or its representatives, including without limitation,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any
- 17 -
seminar or meeting whose attendees have been invited by any general solicitation
or general advertising.
4. Representations and Warranties of Purchasers. Each of the
Purchasers, individually and not jointly, represents and warrants that:
4.1. Authorization. Such Purchaser has full power and
authority to enter into and to perform its obligations under this Agreement and
to carry out the transactions contemplated by this Agreement. This Agreement has
been duly executed and delivered by such Purchaser and constitutes a valid and
legally binding obligation of such Purchaser.
4.2. Investment Representations. Such Purchaser is
acquiring and will acquire the securities pursuant to this Agreement for such
Purchaser's own account, for investment purposes and not with a view to, or for
sale in connection with, any distribution of such securities or any part thereof
in violation of federal or state securities laws.
4.3. Investment Experience: Access to Information. Such
Purchaser is an "accredited investor" as that term is defined in Rule 501(a)
promulgated under the Securities Act, is a sophisticated investor, is able to
fend for itself in the transactions contemplated by this Agreement, has such
knowledge and experience in financial, business and investment matters as to be
capable of evaluating the merits and risks of this investment, has the ability
to bear the economic risks of this investment, has been furnished with copies of
and has read the SEC Reports, was not organized or reorganized for the specific
purpose of acquiring the securities pursuant to this Agreement; and (b) has been
afforded the opportunity to ask questions of, and to receive answers from, the
Company and to obtain any additional information, to the extent the Company has
or could have acquired such information without unreasonable effort or expense,
all as necessary for such Purchaser to make an informed investment decision with
respect to purchasing the securities pursuant to this Agreement. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in this Agreement or the right of such Purchaser to rely thereon.
4.4. No General Solicitation or General Advertising. In
the case of each issuance of securities, including, without limitation, the
Shares, Warrants, the Tranche I Notes and the Sanmina Notes, pursuant to the
terms of this Agreement, no form of general solicitation or general advertising
was used by any Purchaser or its representatives, including without limitation,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
4.5. Absence of Registration. Such Purchaser understands
that:
4.5.1. The securities to be sold and issued
hereunder (and all securities to be issued on conversion or exercise thereof)
are unregistered and may be required to be held indefinitely unless they are
subsequently registered under the Securities Act, or an exemption from such
registration is available.
- 18 -
4.5.2. Except as provided in the Registration
Rights Agreement, the Company is under no obligation to file a registration
statement with the SEC with respect to the securities acquired pursuant to this
Agreement or the securities to be issued on conversion or exercise thereof.
4.6. Restrictions on Transfer. Such Purchaser agrees that
(a) it will not offer, sell, pledge, hypothecate, or otherwise dispose of the
securities to acquired pursuant to this Agreement other than to its "affiliates"
unless such offer, sale, pledge, hypothecation or other disposition is (i)
registered under the Securities Act, or (ii) to the extent that such offer,
sale, pledge, hypothecation or other disposition thereof does not violate the
Securities Act, and (b) the securities acquired pursuant to this Agreement (and
all securities acquired on the conversion or exercise thereof) shall bear a
legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
OR THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES HAVE NOT BEEN
ACQUIRED WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT (A) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE ACT AND ANY APPLICABLE STATE LAWS OR TO THE EXTENT THAT
REGISTRATION OR QUALIFICATION IS NOT REQUIRED UNDER SUCH ACT OR UNDER
APPLICABLE STATE LAWS OR (B) PURSUANT TO AN EXEMPTION THEREFROM UNDER
SAID ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS WITH
RESPECT TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY
OPINION OF COUNSEL FOR THE PURCHASER THAT SUCH TRANSFER IS EXEMPT FROM
THE REQUIREMENTS OF THE ACT.
4.7. Proxy Statement. All information included in the
Proxy Statement (as defined in Section 5.3) furnished by such Purchaser will
not, at the date of mailing of the Proxy Statement to the stockholders of the
Company, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which made, not misleading.
4.8. Registration Required. Such Purchaser hereby
covenants with the Company not to make any sale of the Shares, Common Stock and
Warrant Shares without complying with the provisions hereof, and without
effectively causing the prospectus delivery requirement under the Securities Act
to be satisfied (unless the Purchaser is selling such Shares, Common Stock or
Warrant Shares in a transaction not subject to the prospectus delivery
requirement). Such Purchaser acknowledges that as set forth in, and subject to
the provisions of, the Registration Rights Agreement, there may occasionally be
times when the Company, based on the advice of its counsel, determines that it
must suspend the use of the any prospectus forming a part of the registration
statement required to be filed pursuant to the terms of the Registration Rights
Agreement until such time as an amendment to the registration statement has been
filed by the Company and declared effective by the SEC or until the Company has
amended or supplemented such prospectus.
- 19 -
4.9. No Tax or Legal Advice. Such Purchaser understands
that nothing in the Agreement, or any other materials presented to the Purchaser
in connection with the purchase and sale of the Shares, Common Stock and Warrant
Shares constitutes legal, tax or investment advice. Such Purchaser has consulted
such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of Shares,
Common Stock and Warrant Shares.
4.10. International Actions. Such Purchaser acknowledges,
represents and agrees that no action has been or will be taken in any
jurisdiction outside the United States by the Company that would permit an
offering of the Shares, Common Stock and Warrant Shares, or possession or
distribution of offering materials in connection with the issuance of the
Shares, Common Stock and Warrant Shares, in any jurisdiction outside the United
States. If such Purchaser is located outside the United States, it has or will
take all actions necessary for any resale of the Shares, Common Stock and
Warrant Shares by such Purchaser to comply with all applicable laws and
regulations in each foreign jurisdiction in which it offers, sells or delivers
Shares, Common Stock and Warrant Shares or distributes any offering material, in
all cases at its own expense.
4.11. Brokers or Finders. The Company has not and will not
incur, directly or indirectly, as a result of any action taken by any Purchaser,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or the transactions
contemplated hereby.
5. Covenants of the Company. The Company hereby covenants and
agrees with Purchasers as follows:
5.1. Access; Reports. At all times through the Third
Closing, the Company will permit Purchaser Representative and its authorized
representatives, full access at reasonable times, during normal business hours,
to all of the books, records, personnel and properties of the Company and its
Subsidiaries, wherever located, for the purpose of conducting its due diligence
review of the Company. No investigation will affect or limit the scope of any of
the representations, warranties, covenants and indemnities of the other in this
Agreement or in any Transaction Document or limit liability for any breach of
any of the foregoing. The Company shall (i) at the request of Purchaser
Representative, at reasonable times, meet with and/or report to the Purchaser
Representative regarding material operational matters and financial matters
(including monthly unaudited financial information); (ii) promptly and regularly
notify the Purchaser Representative of any change in the normal course of
operation of its business or its properties and of any material development in
the business, properties, or operations of the Company (including without
limitation any Material Adverse Effect or any governmental or third party
claims, complaints, investigations or hearings, or communications indicating
that the same may be forthcoming or contemplated).
5.2. Stockholders Meeting. The Company shall cause a
meeting of its stockholders to be duly called and held as soon as reasonably
practicable for the purpose of voting on the approval of the issuance and sale
to Purchasers of the Third Issuance Shares and Third Issuance Warrants (and the
conversion of the Tranche I Notes in connection therewith and the repayment of
the Sanmina Notes with Series B Preferred Stock) and the
- 20 -
election of directors pursuant to this Agreement (the "STOCKHOLDERS MEETING").
The proxy materials relating to such meeting shall contain the recommendation of
the Board (which shall be a unanimous recommendation of the disinterested
directors) that the stockholders approve (x) the issuance and sale to Purchasers
of the Third Issuance Shares, Third Issuance Warrants and Purchasers'
acquisition of the Tranche I Conversion Shares and Sanmina Conversion Shares on
conversion of the Tranche I Notes and repayment of the Sanmina Notes
(collectively, the "PURCHASER ACQUISITIONS") and (y) the Certificate Amendments
(collectively, the "SHAREHOLDER PROPOSALS").
5.3. Proxy Statement. As promptly as practicable after the
date of this Agreement, the Company shall prepare and cause to be filed with the
SEC a Proxy Statement in connection with the transactions contemplated hereby
(the "PROXY STATEMENT"), and the Company shall respond promptly to any comments
of the SEC or its staff with respect thereto. The Company will afford Purchasers
a reasonable opportunity to review and comment on the proposed form of Proxy
Statement prior to its filing with the SEC. Purchasers shall promptly furnish to
the Company all information concerning Purchasers as may be required or
reasonably requested in connection with any action contemplated by this Section
5.3. The Company shall (a) notify the Purchaser Representative promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and (b) supply the Purchaser Representative with copies
of all correspondence with the SEC or its staff with respect to the Proxy
Statement. Whenever any event occurs that should be set forth in an amendment or
supplement to the Proxy Statement, Purchasers or the Company, as the case may
be, shall promptly inform the other of such occurrence and shall cooperate in
filing with the SEC or its staff, and, if appropriate, mailing to stockholders
of the Company, such amendment or supplement.
5.4. Conduct of Business. From the date hereof through the
Third Closing (or, if the Third Closing does not occur, until all principal and
interest under the Tranche I Notes and Sanmina Notes (if issued) are repaid in
full under their terms), the Company shall and shall cause each of its
Subsidiaries to, except as contemplated by this Agreement, or as consented to by
the Purchaser Representative in writing, operate its businesses in the ordinary
course of business and in accordance with past practice, consistent with the
Business Plan, and not take any action inconsistent with this Agreement. Without
limiting the generality of the foregoing, except as specifically contemplated by
this Agreement, the Business Plan, or as consented to by the Purchaser
Representative in writing, the Company shall not and shall cause each of its
Subsidiaries not to:
(a) change or amend the Certificate of
Incorporation or Bylaws of the Company;
(b) enter into, extend, materially
modify, terminate or renew any Material Contract, except in the
ordinary course of business;
(c) sell, assign, transfer, convey,
lease, mortgage, pledge or otherwise dispose of or encumber any assets,
or any interests therein, except in the ordinary course of business;
- 21 -
(d) make new commitments for capital
expenditures in excess of either Fifty Thousand Dollars ($50,000) in
any one quarter or One Hundred Thousand Dollars ($100,000) during 2003;
(e) take any action with respect to the
grant of any bonus, severance or termination pay or with respect to any
increase of benefits payable (including the grant of stock options)
under its severance or termination pay policies or agreements in effect
on the date hereof or increase in any manner the compensation or
benefits of any executive officer except in the ordinary course of
business consistent with past practice or pay any benefit not required
by any existing agreement with any employee or former employee or
employee or by any existing benefit plan or policy;
(f) take any action with respect to the
hiring of additional executive officers or the termination or
replacement existing executive officers;
(g) subject to Section 5.5, acquire by
merger or consolidation with, or merge or consolidate with, or purchase
substantially all of the assets of, or otherwise acquire any material
assets or business of any corporation, partnership, association or
other business organization or division thereof;
(h) declare, set aside, make or pay any
dividend or other distribution in respect of its capital stock (for
purposes of clarification, other than the accrual of dividends on the
Series A Preferred Stock);
(i) take any action to effect any stock
dividend, split-up, recapitalization, combination, conversion, exchange
of shares or other similar change in the corporate or capital structure
of the Company;
(j) fail to comply in all material
respects with all legal requirements applicable to it, its assets and
its business;
(k) intentionally do any other act
which would cause any representation or warranty of the Company in this
Agreement to be or become untrue in any material respect;
(l) issue, repurchase or redeem or
commit to issue, repurchase or redeem, any shares of its capital stock,
any options or other rights to acquire such stock or any securities
convertible into or exchangeable for such stock, other than the
following: (i) issuance of shares in connection with the consummation
of a Superior Proposal (as defined in Section 5.5.3), (ii) issuance of
shares to employees, consultants and directors of the Company pursuant
to stock options existing as of the date hereof, and (iii) repurchases
of shares from employees or consultants as may be required by existing
agreements in connection with the termination of their employment or
consultancy with the Company;
(m) enter into any transaction or
arrangement described in Section 3.26;
- 22 -
(n) fail to use its commercially
reasonable efforts to (i) retain its key employees and (ii) maintain
existing relationships with material suppliers, customers and others
having business dealings with it and (iii) otherwise preserve the
goodwill of its business so that such relationships and goodwill will
be preserved on and after the Third Closing Date;
(o) other than as permitted by the
current Loan Agreement with Silicon Valley Bank, incur any indebtedness
for borrowed money or modify the terms of any existing indebtedness;
(p) Modify the Business Plan in any
material respect;
(q) become a guarantor or surety of any
indebtedness of any other person; or
(r) enter into any agreement, or
otherwise become obligated, to do any action prohibited under this
Section 5.4.
5.5. No Solicitation.
5.5.1. Subject to Section 5.5.3 and the fiduciary
duties to which the Board is subject under Delaware Law, prior to the Third
Closing, the Company shall not, and the Company shall cause its Affiliated
Persons and the respective officers, directors, employees, investment bankers,
attorneys, accountants and other representatives and agents (collectively,
"REPRESENTATIVES") of the Company and its Affiliated Persons not to, directly or
indirectly, initiate, solicit, encourage or participate in negotiations or
discussions relating to, or provide any information to any person concerning, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Transaction Proposal (as
defined below), or any inquiry with respect thereto, or agree to approve or
recommend any Transaction Proposal. The Company shall, and shall cause its
Affiliated Persons and the respective Representatives of the Company and its
Affiliated Persons to, immediately cease and cause to be terminated all existing
activities, discussions and negotiations, if any, with any parties conducted
heretofore with respect to any of the foregoing.
5.5.2. For purposes of this Agreement, "TRANSACTION
PROPOSAL" shall mean any proposal (other than any proposal by Purchasers or
their affiliates) regarding (i) any merger, consolidation, share exchange,
business combination or other similar transaction or series of related
transactions involving the Company or a Subsidiary of the Company; (ii) any
sale, lease, exchange, transfer or other disposition of more than twenty percent
(20%) of the assets of the Company or any Subsidiary of the Company; (iii) any
acquisition of a substantial equity interest in the Company or any equity
interest in any of its Subsidiaries (with "substantial equity interest" meaning
(a) in the case of an institutional investor acquiring such interest for
investment purposes only, equity interests representing at least 20% of the
Company's outstanding capital stock (by voting power or otherwise) prior to such
investment and (b) in any other case, at least 10% of the Company's outstanding
capital stock (by voting power or otherwise) prior to such investment); (iv) any
offer to purchase (whether from the Company or otherwise), tender offer,
exchange offer or similar
- 23 -
transaction involving the capital stock of the Company or any Subsidiary of the
Company; and (v) a liquidation or dissolution of the Company.
5.5.3. Notwithstanding anything to the contrary
contained in this Section 5.5 or elsewhere in this Agreement, the Company may,
in response to an unsolicited bona fide Transaction Proposal from an
unaffiliated third party, participate in discussions or negotiations with or
furnish information to the third party making such Transaction Proposal, if all
of the following events have occurred: (a) such third party has made a written
proposal to the Board of the Company to consummate a Transaction Proposal, which
proposal identifies a price to be paid for the capital stock or assets of the
Company that the Board reasonably has determined, if such transaction is
consummated, would be financially more favorable to the stockholders of the
Company than the transactions contemplated under this Agreement (a "SUPERIOR
PROPOSAL"); (b) the Board reasonably has determined that such third party is
financially capable of consummating such Superior Proposal and that such
Superior Proposal is at least as likely to be consummated, and is not subject to
materially greater conditions, than the transactions contemplated by this
Agreement; (c) the Board shall have reasonably determined, after consultation
with its outside legal counsel, that the failure to participate in discussions
or negotiations with or furnish information to such third party would result in
a substantial risk of liability for a breach of the fiduciary duties of the
members of such Board under applicable Delaware law; and (d) the Purchaser
Representative shall have been notified in writing of such Transaction Proposal,
including its principal financial and other material terms and conditions,
including the identity of the person and its affiliates (if relevant) making
such Transaction Proposal.
Notwithstanding the foregoing, the Company shall not provide any
non-public information to such third party unless (a) it has prior to the date
thereof provided such information to the Purchaser Representative, and (b) it
has provided such non-public information pursuant to a non-disclosure agreement
with terms which are at least as restrictive as the Nondisclosure Agreement
dated February 3, 2003, heretofore entered into between the Company and PS
Capital LLC. In addition to the foregoing, the Company shall not accept or enter
into any agreement concerning a Superior Proposal nor issue any securities or
agree to pay a termination or break-up fee in connection with a Superior
Proposal for a period of not less than 36 hours after Purchasers' receipt of the
notification in clause (d) of the preceding paragraph, and the Company will
afford Purchasers an opportunity to discuss with the Company what, if any,
response Purchasers may desire to make with to such Transaction Proposal. If the
Company intends to accept such Superior Proposal, the Company shall first offer
to the Purchasers in writing the right to enter into a transaction with the
Company on substantially equivalent terms and conditions, which offer shall
clearly set forth the terms thereof, and Purchasers shall then be entitled to 5
business days to determine whether to accept such offer. Upon the occurrence of
all of the events in the preceding paragraph and this paragraph, and if the
Purchasers have not elected within the required 5 day period to accept the offer
described in the preceding sentence, the Company shall be entitled to (1) change
its recommendations concerning the Purchaser Acquisitions, (2) accept such
Superior Proposal, and (3) enter into an agreement with such third party
concerning a Superior Proposal provided that the Company shall immediately make
payment in full of the expenses provided for in Section 11.2. Company will
promptly communicate to Purchasers the principal terms of any proposal or
inquiry, including the
- 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 be
- 28 -
pending to restrain or invalidate any material part of the transactions
contemplated by this Agreement.
7.1.5. Absence of Material Adverse Change. There
shall not have occurred after the date hereof any material adverse change in the
business, properties, results of operation, financial condition or prospects of
the Company and its Subsidiaries taken as a whole.
7.1.6. Voting Agreements. The Company shall have
delivered to Purchasers Voting Agreements covering 1,312,479 shares (17.91%) of
outstanding Common Stock and a majority of the shares of outstanding Series A
Preferred Stock.
7.1.7. Termination of Agreements. The agreements
set forth on Schedule 7.1.7 shall have been terminated by the parties thereto
and the Company released from all obligations thereunder.
7.1.8. Compliance Certificate. The Company shall
have delivered to Purchasers a Compliance Certificate, executed by the President
and the Chief Financial Officer of the Company, dated as of the First Closing
Date, to the effect that the conditions specified in Sections 7.1.1 through
7.1.7 have been satisfied.
7.1.9. Legal Opinion. Purchasers shall have
received from Latham & Watkins LLP an opinion addressed to it, dated as of the
First Closing date, covering the matters set forth in Exhibit H and otherwise in
form and substance satisfactory to Purchaser Representative.
7.2. Conditions to Obligations of the Company. The
Company's obligation to issue and sell the Tranche I Notes and First Issuance
Warrants at the First Closing is subject to the satisfaction (or waiver by the
Company), on or prior to the First Closing, of the following conditions:
7.2.1. Representations and Warranties True. All of
the Purchaser's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement, and shall be accurate in all material respects as of the
First Closing Date as if then made. Each of the representations and warranties
that contain an express materiality qualification or are qualified by "Material
Adverse Effect" shall have been accurate in all respects as of the date of this
Agreement, and shall be accurate in all respects as of the First Closing Date as
if then made. In either case, any representation or warranty made as of a
specific date shall be true and correct as of such specific date.
7.2.2. Performance of Obligations. Purchasers shall
have performed in all material respects all covenants and obligations herein
required to be performed or observed by it on or prior to the First Closing.
7.2.3. Consents, Permits, and Waivers. On or prior
to the First Closing Date, the Company shall have obtained the consents
necessary for consummation of
- 29 -
the transactions contemplated by this Agreement and the other Transaction
Documents from Silicon Valley Bank, Commercial Finance Division and Sanmina.
7.2.4. Absence of Restraint. No order to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated
hereby shall have been entered by any court or other Governmental Authority.
8. Conditions to the Sanmina Closing
8.1. Conditions to Purchasers' Obligations at the Sanmina
Closing. Purchasers' obligations to purchase the Sanmina Notes at the Sanmina
Closing is subject to the satisfaction (or waiver by Purchaser Representative),
at or prior to the Sanmina Closing, of the following conditions:
8.1.1. Stockholder Approval. On or prior to the
Sanmina Closing Date, the Shareholder Proposals shall have been approved by the
affirmative vote of the holders a majority of the each class of capital stock of
the Company represented and voting on such matters (the "REQUISITE VOTE").
8.1.2. Sanmina Deliveries. Sanmina and Sanmina ULC
shall have executed and delivered to the Purchasers an assignment of their
rights to payment and security under the Settlement Agreement and related
Sanmina Security Agreement in form and substance reasonably acceptable to the
Purchasers;
8.1.3. Sanmina Release. Sanmina and Sanmina ULC
shall have executed and delivered to the Purchasers a release of the Purchasers
and the Company from all claims arising out of the Settlement Agreement and
related Sanmina Security Agreement, signed by Sanmina and Sanmina ULC, the form
of which shall be reasonably acceptable to the Purchasers and the Company.
8.1.4. Legal Opinion. Purchasers shall have
received from Latham & Watkins LLP an opinion addressed to it, dated as of the
Sanmina Closing date, covering the matters set forth in Exhibit L and otherwise
in form and substance satisfactory to Purchaser Representative.
8.2. Conditions to the Company's Obligations at the
Sanmina Closing.
8.2.1. Delivery of Release. Sanmina shall have
executed and delivered to the Company a release of the Company from all claims
arising out of the Settlement Agreement and related Sanmina Security Agreement,
signed by Sanmina and Sanmina ULC and in form and substance reasonably
acceptable to the Company.
9. Conditions to the Third Closing.
9.1. Conditions to Purchasers' Obligations at the Third
Closing. Purchasers' obligations to purchase the Third Issuance Shares at the
Third Closing are subject to the satisfaction (or waiver by Purchaser
Representative), at or prior to the Third Closing, of the following conditions:
- 30 -
9.1.1. Representations and Warranties True. All of
the Company's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement, and shall be accurate in all material respects as of the
First Closing Date as if then made. In the reasonable discretion of Purchaser's
based on their ongoing due diligence investigation of the Company, each of the
representations and warranties that contain an express materiality qualification
or are qualified by "Material Adverse Effect" shall have been accurate in all
respects as of the date of this Agreement, and shall be accurate in all respects
as of the First Closing Date as if then made. In either case, any representation
or warranty made as of a specific date shall be true and correct as of such
specific date.
9.1.2. Performance of Obligations. The Company
shall have performed in all material respects all covenants and obligations
herein required to be performed or observed by it on or prior to the Third
Closing.
9.1.3. Consents, Permits, and Waivers. On or prior
to the Third Closing Date, Purchasers and the Company shall have obtained any
and all consents, permits and waivers necessary for consummation of the
transactions contemplated by this Agreement and the other Transaction Documents
(except for such as may be properly obtained subsequent to the Third Closing)
unless the failure to obtain such consents, permits or waivers is a result of a
breach by Purchasers.
9.1.4. Absence of Restraint. No order to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated
hereby shall have been entered by any court or other Governmental Authority and
not rescinded or overturned. No litigation instituted by any governmental body
or other regulatory authority shall be pending to restrain or invalidate any
material part of the transactions contemplated by this Agreement.
9.1.5. Absence of Material Adverse Change. There
shall not have occurred after the date hereof any material adverse change in the
business, properties, results of operation, financial condition or prospects of
the Company and its Subsidiaries taken as a whole. For purposes of the
foregoing, a mere change in the trading value of the Company's common stock or
change in the Company's listing from Nasdaq NM to Nasdaq SmallCap shall not be
deemed a material adverse change.
9.1.6. Stockholder Approval. On or prior to the
Third Closing Date, the Shareholder Proposals shall have been approved by the
affirmative vote of the holders a majority of the each class of capital stock of
the Company represented and voting on such matters (the "REQUISITE VOTE").
9.1.7. Certificate of Designation. The Certificate
of Designation and the Certificate Amendments shall have been duly filed with
the Secretary of State of the State of Delaware.
9.1.8. Compliance Certificate. The Company shall
have delivered to Purchasers a Compliance Certificate, executed by the President
and the Chief Financial
- 31 -
Officer of the Company, dated as of the Third Closing Date, to the effect that
the conditions specified in Sections 9.1.1 through 9.1.7 have been satisfied.
9.1.9. Sanmina Closing. The Sanmina Closing shall
have occurred as described herein.
9.1.10. Legal Opinion. Purchasers shall have
received from Latham & Watkins LLP an opinion addressed to it, dated as of the
Third Closing Date, covering the matters set forth in Exhibit K and otherwise in
form and substance satisfactory to Purchaser Representative.
9.1.11. Purchaser Comfort. Purchasers shall have
determined, in their reasonable and good faith discretion, that the conditions
set forth in Section 9.1.1 have been fulfilled.
9.2. Conditions to Obligations of the Company. The
Company's obligation to issue and sell the Third Issuance Shares at the Third
Closing is subject to the satisfaction (or waiver by the Company), on or prior
to the Third Closing, of the following conditions:
9.2.1. Representations and Warranties True. All of
the Purchaser's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement, and shall be accurate in all material respects as of the
First Closing Date as if then made. Each of the representations and warranties
that contain an express materiality qualification or are qualified by "Material
Adverse Effect" shall have been accurate in all respects as of the date of this
Agreement, and shall be accurate in all respects as of the First Closing Date as
if then made. In either case, any representation or warranty made as of a
specific date shall be true and correct as of such specific date.
9.2.2. Performance of Obligations. Purchasers shall
have performed in all material respects all covenants and obligations herein
required to be performed or observed by it on or prior to the Third Closing.
9.2.3. Absence of Restraint. No order to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated
hereby shall have been entered by any court or other Governmental Authority.
9.2.4. Stockholder Approval. On or prior to the
Third Closing Date, the Shareholder Proposals shall have been approved by the
Requisite Vote of the Company's stockholders.
10. Termination.
10.1. Termination. The obligations of the parties contained
herein relating to the sale and purchase of the Third Issuance Shares (the
"THIRD ISSUANCE AGREEMENTS") may be terminated at any time prior to the Third
Closing Date:
- 32 -
10.1.1. By mutual agreement of the Company and
Purchaser Representative;
10.1.2. By either the Company or Purchaser
Representative if:
(a) the Third Closing shall not have
been consummated by July 31, 2003 (such date being referred to as the
"Expiration Date"); provided, however, that if the Third Closing shall
not have been consummated by the Expiration Date due primarily to
delays in receiving clearance of the Proxy Statement from the SEC
despite the good faith efforts of the Company to file the Proxy
Statement and amendments thereto on a timely basis and obtain such
clearance, then the Expiration Date shall be extended to September 30,
2003, and provided further that no party may terminate this Agreement
under this Section 10.1.2(a) if the failure to consummate the Third
Closing is attributable to a failure on the part of the party seeking
to terminate this Agreement to perform any obligation required to be
performed by such party at or prior to the Third Closing Date;
(b) the Requisite Vote of the Company's
stockholders shall not have been obtained at the Stockholders Meeting
duly convened and finally adjourned; or
(c) any Governmental Authority shall
have issued an injunction, order or decree (a "RESTRAINT") or taken any
other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreement and such Restraint or other action shall become final and
non-appealable, provided the party seeking to terminate this Agreement
shall have used its best efforts to prevent entry of and to remove such
Restraint.
Notwithstanding the foregoing, the Expiration Date shall in no event be
extended beyond the expiration date of that certain letter agreement
dated as of March 12, 2003, from Sanmina to the Purchasers relating to
the Sanmina Purchase, unless (and only to the extent) the Purchaser
Representative specifies to the contrary by written notice to the
Company.
10.1.3. By Purchaser Representative if:
(a) the Board (i) shall have failed to
recommend, or shall have withdrawn, modified or changed in a manner
adverse to any Purchaser its approval or recommendation, of the
Transaction Documents, the Purchaser Acquisitions or the other
transactions contemplated thereby, or the Board or any committee
thereof shall have resolved to take any of the foregoing actions, (ii)
shall have submitted or recommended to the stockholders of the Company
or shall have approved a Transaction Proposal, (iii) shall have
accepted or recommended to its stockholders a Superior Proposal, or
(iv) shall have publicly announced its intention to do any of the
foregoing;
(b) the Company shall have breached or
failed to perform in any material respect any of its representations or
warranties (with respect to
- 33 -
materiality, in a manner such that the condition in Section 7.1.1 or
9.1.1 would not be satisfied), or covenants or other agreements
contained in this Agreement, which breach or failure to perform cannot
be or has not been cured within five days after the giving of written
notice to the Company of such breach and which, as a result of such
breach, considered either individually or in the aggregate, any
condition to Purchasers' obligations to consummate the First Closing or
the Third Closing set forth in Section 7.1 or 9.1 would not at that
time be satisfied (a "COMPANY MATERIAL BREACH") (provided that
Purchasers are not then in Purchaser Material Breach (as defined below)
of any representation, warranty, covenant or other agreement contained
in this Agreement); or
(c) the Company shall have breached or
failed to perform in any respect any of its obligations under Section
5.5; provided the Company shall be deemed to have breached its
obligations under Section 5.5 if any Affiliated Person of the Company,
or any Representative of the Company and its Affiliated Persons, shall
have engaged in any activities prohibited by Section 5.5.
10.1.4. By the Company, if (i) Purchasers shall have
breached or failed to perform in any material respect any of their
representations or warranties (with respect to materiality, in a manner such
that the condition in Section 7.2.1 or 9.2.1 would not be satisfied), or
covenants or other agreements contained in this Agreement, which breach or
failure to perform cannot be or has not been cured within five days after the
giving of written notice to Purchasers of such breach and which, as a result of
such breach, considered either individually or in the aggregate, any condition
to the Company's obligations to consummate the Sanmina Closing, the First
Closing or the Third Closing would not at that time be satisfied (a "PURCHASER
MATERIAL BREACH") (provided that the Company is not then in Company Material
Breach of any representation, warranty, covenant or other agreement contained in
this Agreement), or (ii) the Board shall have withdrawn or modified in a manner
adverse to any Purchaser the Board's approval of the Transaction Documents or
(iii) the Board has accepted a Superior Proposal in accordance with the
provisions of Section 5.5 hereof.
10.2. Effect of Termination. In the event of the
termination of the Third Issuance Agreements pursuant to Section 10.1, the Third
Issuance Agreements shall become void and have no effect, without any liability
on the part of any party or its directors, officers or stockholders, except as
set forth in Section 11. Notwithstanding the foregoing, nothing in this Section
10.2 or in Section 11 shall relieve any party to this Agreement of liability for
fraud in connection with this Agreement.
11. Fees and Expenses.
11.1. Except as contemplated by Section 10.2, all costs and
expenses incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
11.2. At the First Closing and the Third Closing (or upon
termination of this Agreement by the Company or Purchaser Representative under
Section 10.1.2 or by the Purchaser Representative under Section 10.1.3, other
than a termination by the Company
- 34 -
under 10.1.2(a) if the failure to close by the Expiration Date arises primarily
out of a Purchaser Material Breach), the Company shall pay from the proceeds of
the sale of the Tranche I Notes or the Third Issuance Shares (as applicable) the
reasonable fees and expenses of Irell & Manella LLP as counsel to Purchasers and
of FTI Consulting; provided that the Company's payments under this Section 11.2
combined shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate, of which no more than $125,000 shall be payable at the First Closing,
provided that remaining payments at the Third Closing (or upon the termination
described above) may include any costs incurred prior to the First Closing to
the extent not covered by the first $125,000; provided, the Purchaser
Representative shall provide the Company with copies of statements from Irell &
Manella LLP prior to the Third Closing. Further, the $20,000 paid to FTI
Consulting prior to the date hereof shall apply toward such payments. In
connection with the First Closing and the Third Closing, Purchasers may remit
payment for such fees directly to Irell & Manella LLP and FTI Consulting, and
such remittance shall constitute payment to the Company for purposes of
satisfying such Purchasers' payment obligations to the Company at such Closing.
12. Miscellaneous.
12.1. Purchaser Representative. Each Purchaser hereby
irrevocably appoints Henry Sweetbaum as agent and attorney-in-fact (the
"PURCHASER REPRESENTATIVE") for each such Purchaser, for and on behalf of the
Purchasers, to give and receive notices and communications, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of
this Agreement, comply with orders of courts and awards of arbitrators with
respect to such any claims under this Agreement, and to take all actions
necessary or appropriate in the judgment of the Purchaser Representative for the
accomplishment of the foregoing. Each of the Purchasers acknowledges and agrees
that this appointment and power of attorney is irrevocable during the term of
this Agreement and is coupled with an interest; provided, however, that such
agency may be changed by the Purchasers from time to time upon not less than
five (5) days prior written notice to Company; provided, further, that the
Purchaser Representative may not be removed unless Purchasers that are allocated
two-thirds of the Shares to be acquired hereunder agree to such removal and to
the identity of the substituted Purchaser Representative. Any vacancy in the
position of Purchaser Representative may be filled by approval of the holders of
a majority in interest of the Shares to be acquired hereunder. No bond shall be
required of the Purchaser Representative, and the Purchaser Representative shall
not receive compensation for his services other than compensation (if any) paid
to Purchaser Representative by the Purchasers which the Purchasers have
separately agreed to provide to Purchaser Representative. Notices or
communications to or from the Purchaser Representative shall constitute notice
to or from each of the Purchasers.
12.2. Survival of Representations, Warranties and
Agreement. Notwithstanding any investigation made by any party to this
Agreement, the representations and warranties made by the Company and Purchaser
in connection with the First Closing and the Third Closing shall survive the
First Closing and Third Closing, respectively, for a period of 18 months (other
than the representations and warranties of the Company set forth in Sections
3.1, 3.2, 3.4.1, 3.4.2(iii), 3.5 and 3.6, which shall survive indefinitely or,
if
- 35 -
applicable, for the period ending 90 days after the expiration of the applicable
statute of limitations), and shall thereafter be of no further force or effect,
except in the case of fraud in connection with this Agreement. All covenants and
agreements contained in this Agreement (except to the extent the Third Issuance
Agreements are terminated pursuant to Section 10) shall survive the First
Closing Date and Third Closing Date in accordance with their terms.
12.3. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be in writing, shall be
mailed by first-class registered or certified airmail, or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as follows:
if to the Company, to:
Novatel Wireless, Inc.
9360 Towne Centre Drive, Suite 110
San Diego, CA 92121
Attention: Patrick Waters, Esq., General
Counsel, and Peter
Leparulo, Chief Executive Officer
with a copy so mailed to:
Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Attention: J. Scott Hodgkins, Esq.
if to any Purchaser to the address set forth for such
Purchaser on the signature pages hereto;
with a copy so mailed to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attention: Alvin G. Segel, Esq.
12.4. Force Majeure. In addition to the foregoing, no party
shall be deemed to have breached this Agreement solely by reason of delay or
failure in performance resulting from any cause, condition or event beyond the
reasonable control of the Company, including, but not limited to, acts of God,
fire, flood, war (or significant terrorist activity), government action
(including eminent domain), accident, or inability to obtain material,
utilities, equipment or transportation (any such cause, condition or event a
"FORCE MAJEURE EVENT"). The parties agree to cooperate in an attempt to overcome
such Force Majeure Event and consummate the transactions contemplated by this
Agreement, but, if either party reasonably believes that its interests would be
materially and adversely affected by proceeding, such party shall be entitled to
terminate this Agreement.
- 36 -
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.
- 37 -
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:
- 38 -
(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;
- 40 -
(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
- 41 -
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;
- 42 -
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]
- 45 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
"COMPANY"
Novatel Wireless, Inc.
By:/s/ Peter V. Leparulo
Peter Leparulo, Chief Executive Officer
- 46 -
"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
$ 916,667
By: /s/ H. J. Pudwill
-------------------------
Name: H.J. Pudwill
Title: Director
Address: Suite 1806, 18/F Central Plaza
18 Harbour Road
WanChai,
Hong Kong
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
MUTUAL TRUST MANAGEMENT (BERMUDA)
LIMITED AS TRUSTEE OF SOFAER FUNDS/
GLOBAL HEDGE FUND $ 400,000 21.82% $ 447,272
$ 600,000
By: /s/ M. Sofaer
-------------------------
Name: Michael Sofaer
Title: Authorised signatory of Sofaer Capital Inc.
Authorised Investment Adviser
Address: Hemisphere House
9 Church Street
P.O. Box HM 951
Hamilton HM DX, Bermuda
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
RIT CAPITAL PARTNERS PLC. - 11.52% $ 236,061
$ 316,667
By: /s/ M. Sofaer
---------------------------------
Name: Michael Sofaer
Title: Authorised signatory of Sofaer Capital Inc.
Authorised Investment Adviser
Address: Spencer House
27 St James' Place
London
SW1A 1NR
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
SOEN YONG LEE $ 100,000 8.33% $ 170,833
$ 229,167
By: /s/ Soen Yong Lee
--------------------------
Soen Yong Lee
Address: # 25 - 8, Sangdo 2 -Dong
Dongjak - Gu
Seoul ,Korea 156-03
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
PAN INVEST & TRADE INC. $ 50,000 4.17% $ 85,417
$ 114,583
By: /s/Bruno Sidler
--------------------------
Name: Bruno Sidler
Title: Director
Address: 10th Floor
8 Queen's Road Central
Hong Kong
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
PETER LEPARULO $ 10,000 .83% $ 17,083
$ 22,917
By: /s/ Peter V. Leparulo
---------------------------------
Peter Leparulo
Address: 9360 Towne Centre Drive
Suite 110
San Diego, CA 92121
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
CORNERSTONE EQUITY INVESTORS, LLC $ 200,000 16.67% $ 341,667
$ 458,333
By: /s/ Robert H. Getz
---------------------------
Name: Robert H. Getz
Title: Managing Director
Address: 717 Fifth Avenue
Suite 1100
New York, NY 10022
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT
"PURCHASER"
SANMINA TRANCHE
TRANCHE I PERCENTAGE AND TRANCHE III
PRINTED NAME OF PURCHASER: AMOUNT AMOUNT AMOUNT
PS CAPITAL LLC $ 40,000 3.33% $ 68,333
$ 91,667
By: /s/ Stanley M. Blau
------------------------------
Name: Stanley M. Blau
Title: Managing Director
Address: 880 Fifth Ave, Suite 19A
New York City
New York 10021
SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT