EXHIBIT 4.3
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR STATE SECURITIES LAWS AND NO TRANSFER OF
THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER AND OF ALL
APPLICABLE STATE SECURITIES OR "BLUE SKY" 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 HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE
REQUIREMENTS OF THE ACT.
FORM OF NOVATEL WIRELESS, INC.
SECURED CONVERTIBLE SUBORDINATED NOTE
$[_____] _____________, 2003
San Diego, California
FOR VALUE RECEIVED, the undersigned, NOVATEL WIRELESS, INC., a
Delaware corporation (the "Company"), hereby promises to pay to [_____]
("Holder") at such place as Holder shall hereafter direct by notice in writing
to the Company, the principal sum of [_____] ($[_____]) or such lesser principal
amount as is then currently outstanding, in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public
and private debts, plus interest thereon at the rate provided for herein from
the date hereof, with principal and interest payable as herein provided. At
Holder's request, such payment (if required to be in cash under the terms of
this Note) shall be by wire transfer in immediately available funds to an
account to be specified by Holder.
1. Loan, Interest Rate and Payment Provisions.
1.1 This Note is issued pursuant to the Securities Purchase Agreement,
dated as of March 12, 2003 (the "Purchase Agreement"), among the Company, the
Holder and the other parties thereto. This Note is one of the Sanmina Notes (as
defined in the Purchase Agreement).
1.2 Except as expressly provided below, this Note shall not bear
interest.
1.3 If payment of any portion of the principal amount of this Note is
not paid on the Maturity Date thereof, then interest shall accrue on such unpaid
amount at the rate of twelve percent (12%) per annum from and after such date of
default to the date of the payment in full of such unpaid amount (including from
and after the date of the entry of judgment in favor of Holder in an action to
collect this Note). Any amount repaid under this Note may not be reborrowed.
1.4 Interest on this Note shall be computed on the basis of a 360-day
year of twelve 30-day months.
1.5 All payments made by the Company on this Note shall be applied first
to the payment of accrued but unpaid interest (if any) on this Note and then to
the reduction of the unpaid principal balance of this Note.
1.6 In no event shall Holder be entitled to receive interest at an
effective rate in excess of the maximum rate permitted by law.
1.7 In the event the date for the payment of any amount payable under
this Note falls due on a Saturday, Sunday or public holiday under the laws of
the State of California, the time for payment of such amount shall be extended
to the next succeeding business day and interest (if applicable) shall continue
to accrue on any principal amount so effected until the payment thereof on such
extended due date.
1.8 Capitalized terms used herein shall, unless otherwise defined
herein, have the meanings assigned thereto in the Purchase Agreement. For
purposes of this Note the following terms shall have the following meanings:
1.8.1 "Maturity Date" means the date any payment is due under the
terms of this Note.
1.8.2 "Note" means this Secured Convertible Subordinated Note.
1.8.3 "Sanmina Holders" means the holders of the Sanmina Notes,
including the Holder.
2. Replacement of Note. In case this Note is mutilated, destroyed, lost or
stolen, the Company shall, at its sole expense, execute and deliver a new Note,
in exchange and substitution for this Note. In the case of destruction, loss or
theft, Holder shall furnish to the Company indemnity reasonably satisfactory to
the Company, and in any such case, and in the case of mutilation, Holder shall
also furnish to the Company evidence to its reasonable satisfaction of the
mutilation, destruction, loss or theft of this Note and of the ownership
thereof. Any replacement Note so issued shall be in the same outstanding
principal amount as this Note and dated the date of this Note.
3. Repayment, Conversion and Security.
3.1 The Agent may, at its option, require repayment of the entire
principal amount of this Note and all of the other Sanmina Notes, to the extent
then outstanding and unpaid upon the occurrence of any of the following events:
3.1.1 in the event that the Purchase Agreement terminates, other
than by reason of the Purchasers' material breach, prior to the Third
Closing Date; or
3.1.2 in the event that, for any reason other than the
Purchasers' material breach, the Third Closing Date does not occur on or
before the Expiration Date;
in which case the Note shall be repaid, in cash, as follows:
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(a) On or before the Catch Up Date (as defined below), the Company shall
make all payments shown on the attached Schedule I with scheduled
payment dates on or prior to the Catch Up Date; and
(b) thereafter, the Company shall pay the remaining balance under this
Note (if any) in accordance with the remainder of Schedule I.
"Catch Up Date" shall mean the 60th day after deliver of the notice of the
Agent's election to require payment under Section 3.1.2 or 3.1.3 above.
3.2 The Agent may, at its option, require repayment of the entire
principal amount of this Note and all of the other Sanmina Notes, to the extent
then outstanding and unpaid upon any breach by the Company of Section 3 of the
Purchase Agreement that results in, or could reasonably be expected to result
in, a liability of the Company in excess of One Million Dollars ($1,000,000),
whether such breach is discovered before or after the Third Closing Date, with
such repayment to occur in cash within sixty (60) days of the date discovered by
the Company, Agent or Holder; provided, however, that this Section 3.2 shall not
apply with respect to any liability the existence or potential of which has been
disclosed to Holder or Agent in writing with in either the Schedules to the
Purchase Agreement or in the due diligence report delivered to the Purchasers by
FTI Consulting, so long as the nature and amount of such liability is reasonably
apparent from the disclosure.
3.3 Subject to Sections 5 below, following the Third Closing, the Note,
to the extent not repaid (or required to be repaid) pursuant to Section 3.2
above, shall be repaid as follows:
3.3.1 An amount equal to (i) the note percentage with respect to
the Holder set forth on Schedule II hereto ("Note Percentage") times
(ii) Four Hundred Thousand Dollars ($400,000) on the date three months
following the Third Closing Date;
3.3.2 An amount equal to (i) the Note Percentage times (ii) Four
Hundred Thousand Dollars ($400,000) on the date six months following the
Third Closing Date;
3.3.3 An amount equal to (i) the Note Percentage times (ii) Four
Hundred Thousand Dollars ($400,000) on the date nine months following
the Third Closing Date; and
3.3.4 All remaining principal and interest (if any) on the date
twelve months following the Third Closing Date;
provided, however, that the Holder may, at any time at its option by notice to
the Company on or following the Third Closing Date, convert the entire balance
(including all principal and accrued but unpaid interest) of this Note into
Series B Preferred Stock, with such balance to be converted at the rate of
$1,000 per share.
Payments under this Section 3.3 shall be effected by delivery of Series B
Preferred Stock of the Company, issued in the name of Holder or its designees,
with principal balance
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hereunder being repaid at a rate of $1,000 per share (subject to adjustment for
stock splits and similar events). By way of example, the payment under Section
3.3.1 above shall be effected by delivery of a number of shares of Series B
Preferred Stock equal to (i) the Note Percentage, times (ii) Four Hundred (400).
For purposes of clarity, any payment under Section 3.1 or 3.2 above shall be
made solely in cash (whether before or after the Third Closing Date).
3.4 This Note shall be secured by a lien on all of the assets and
property of the Company (subordinate to the rights of Silicon Valley Bank as set
forth in Section 7 below) pursuant to the terms of a Security Agreement (the
"Security Agreement"), dated as the date hereof, between the Company and Agent
(for the benefit of the Sanmina Holders).
4. Covenants of the Company. The Company covenants and agrees that, so long
as this Note remains outstanding and unpaid, in whole or in part:
4.1 The Company will faithfully and in all material respects perform all
of its covenants and agreements under the Security Agreement and the Purchase
Agreement and the Company will not make any loan to any person who is or becomes
a shareholder of the Company, other than for reasonable advances for expenses in
the ordinary course of business.
4.2 The Company will promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon it or upon its
income and profits, or upon any of its property, before the same shall become in
default; provided, however, that the Company shall not be required to pay and
discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings and
the Company, shall set aside on its books adequate reserves with respect to any
such tax, assessment, charge, levy or claim so contested.
4.3 The Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and comply with all laws applicable to the Company as its legal
counsel may advise.
4.4 The Company will, except for the effects of reasonable wear and tear
in the ordinary course of business, at all times maintain, preserve, protect and
keep its property used or useful in the conduct of its business in good repair,
working order and condition, and from time to time make all needful and proper
repairs, renewals, replacements, betterments and improvements thereto.
4.5 The Company will keep adequately insured, by financially sound
reputable insurers, all property of a character usually insured by similar
entities and carry such other insurance as is usually carried by similar
entities.
4.6 The Company will, promptly following its obtaining knowledge of the
occurrence of an Event of Default or of any condition or event which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default, furnish a statement of the Company's Chief Financial Officer, to Agent
setting forth the details of such Event of Default or condition or event and the
action which the Company intends to take with respect thereto.
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4.7 The Company will at all times maintain books and records in which
all of its financial transactions are duly recorded in conformity in all
material respects with generally accepted accounting principles.
4.8 The Company shall not make any distributions to any equity holders
or affiliates of the Company (other than in connection with arm's-length
obligations to equity holders or affiliates who are suppliers or customers). In
addition, the Company shall not make contributions to, or payments on behalf of,
any Subsidiary, except as permitted pursuant to that certain Loan and Security
Agreement, dated as of November 29, 2001, between the Company and Silicon Valley
Bank, Commercial Finance Division, as amended, as in effect on the date hereof.
5. Events of Default. If any of the following events (each an "Event of
Default") shall occur:
5.1 The Company shall fail to pay on the due date therefor, the
principal of, or interest on, or any other amount payable under the Note or any
other Sanmina Note and such failure shall continue uncured for a period of five
(5) days from such due date, or
5.2 The Company shall default in the due observance or performance of
any covenant, condition or agreement on the part of the Company to be observed
or performed pursuant to the terms of this Note or any other Sanmina Note (other
than the other defaults specified in Section 5) or the Company or any Subsidiary
shall default in the due observance or performance of any covenant, condition or
agreement on the part of the Company or such Subsidiary to be observed or
performed pursuant to the terms of the Security Agreement or the Purchase
Agreement and such defaults shall continue uncured for a period of fifteen (15)
days after notice thereof shall have been given to the Company by Agent; or
5.3 The dissolution of the Company or any Subsidiary or any vote in
favor thereof by the board of directors and shareholders of the Company or such
Subsidiary, as the case may be; or
5.4 The Company or any Subsidiary shall resolve (including without
limitation by board action) or otherwise establish any intention in writing to
file a petition seeking relief under any provision of the Federal Bankruptcy
Code or any other federal or state statute now or hereafter in effect affording
relief to debtors, or make an assignment for the benefit of creditors, or file
with a court of competent jurisdiction an application for appointment of a
receiver or similar official with respect to it or any substantial part of its
assets, or there shall be filed against the Company or any such Subsidiary any
such application or petition, which application or petition is not dismissed or
withdrawn within thirty (30) days from the date of filing thereof; or
5.5 Any default or event of default occurs under the obligations to
Silicon Valley Bank (or any lender which refinances such obligations) under the
agreement described on Schedule II, any of the Tranche I Notes or under any
other obligation of the Company or any Subsidiary for borrowed money, which
default is not cured during the applicable cure period or waived in writing by
the lender or obligee; or
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5.6 The Company or any Subsidiary shall sell all or substantially all of
its assets or merge or be consolidated with or into another entity other than,
in the case of any such Subsidiary, the Company or another Subsidiary of the
Company; or
5.7 The commencement of a proceeding to foreclose a security interest or
lien in any property or assets of the Company or any Subsidiary upon default in
the payment or performance of any debt of the Company or any such Subsidiary in
excess of $25,000 which is secured thereby; or
5.8 Other than in connection with matters set forth on Schedule 3.10 to
the Purchase Agreement, the entry against the Company or any Subsidiary of a
final judgment for the payment of money in excess of $100,000 by a court of
competent jurisdiction, which judgment shall not be discharged (or the discharge
thereof not duly provided for) in accordance with its terms within thirty (30)
days of the date of entry thereof, or a stay of execution thereof procured
within thirty (30) days from the date of entry thereof and, within such period
(or such longer period during which execution of such judgment shall have been
effectively stayed) an appeal therefrom shall not have been prosecuted and the
execution thereof caused to be stayed during such appeal; or
5.9 An attachment or garnishment shall have been levied against the
assets of the Company or any Subsidiary involving an amount in excess of
$100,000 and such levy is not vacated, bonded or otherwise terminated within
thirty (30) days after the date of the effectiveness of the levy;
then, upon the occurrence of any such Event of Default and at any time
thereafter, the Agent shall have the right to declare the principal of, accrued
unpaid interest on, and all other amounts payable under all of the Sanmina Notes
(including this Note) to be forthwith due and payable, in cash, whereupon all
such amounts shall be immediately due and payable to Holder, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived; provided, however, in case of the occurrence of an
Event of Default under Section 5.3 or 5.4, such amounts shall become immediately
due and payable without any such declaration by the Agent.
6. Suits for Enforcement and Remedies. If any one or more Events of Default
shall occur and be continuing, the Agent may proceed to (i) protect and enforce
Holder's rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or agreement contained
in this Note or in any agreement or document referred to herein or in aid of the
exercise of any power granted in this Note or in any agreement or document
referred to herein, (ii) enforce the payment of this Note, or (iii) enforce any
other legal or equitable right of the holder of this Note. No right or remedy
herein or in any other agreement or instrument conferred upon the holder of this
Note is intended to be exclusive of any other right or remedy, and each and
every such right or remedy shall be cumulative and shall be in addition to every
other right and remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
7. Seniority. This Note shall be senior in priority to the payment of all
other debts of the Company, whether now existing or hereinafter incurred, other
than the obligations of the Company to Silicon Valley Bank now existing as shown
on the attached Schedule II hereto
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and trade payables and the obligations under the Tranche I Notes (each of which
may be pari passu with the repayment of this Note).
8. Unconditional Obligation; Fees, Waivers, etc.
8.1 The obligations to make the payments provided for in this Note are
absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
8.2 If Holder or the Agent shall seek to enforce the collection of any
amount of principal of and/or interest on this Note, there shall be immediately
due and payable from the Company, in addition to the then unpaid principal of,
and accrued unpaid interest on, this Note, all reasonable costs and expenses
incurred by Holder or the Agent in connection therewith, including, without
limitation, attorneys' fees and disbursements.
8.3 No forbearance, indulgence, delay or failure to exercise any right
or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
8.4 Any term, covenant, agreement or condition of this Note may be
amended or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
signed written consent of the Agent and the Company.
8.5 The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which Agent or Holder had or is existing as security for any
amount called for hereunder, except as specifically provided herein.
9. Restriction on Transfer. This Note has not been registered under the
securities laws of the United States of America or any state thereof. This Note
has been acquired for investment, accordingly, no interest in this Note may be
offered for sale, sold or transferred in the absence of registration and
qualification of this Note under applicable federal and state securities laws or
an opinion of counsel of Holder reasonably satisfactory to the Company that such
registration and qualification are not required.
10. Miscellaneous.
10.1 The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
10.2 The provisions of this Note are severable and, if any one provision
hereof shall be held invalid or unenforceable in whole or in part in any
jurisdiction, such invalidity or unenforceability shall affect only such
provision in such jurisdiction.
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10.3 Notices, demands or other communications given or made in
connection with this Note shall be in writing and delivered in accordance with
the provisions of the Purchase Agreement.
10.4 This Note and the obligations of the Company and the rights of
Holder shall be governed by and construed in accordance with the internal
substantive laws of the State of California without giving effect to the choice
of laws rules thereof.
10.5 The Company and the Holder (a) agree that any legal suit, action or
proceeding arising out of or relating to this Note will be instituted
exclusively in the courts of the State of California sitting in the County of
Los Angeles, or any Federal court in such State, (b) waive any objection which
such party may have now or hereafter based upon forum non conveniens or to the
venue of any such suit, action or proceeding, and (c) irrevocably consent to the
jurisdiction of the State Courts located in said State in any such suit, action
or proceeding. Each such party further agrees to accept and acknowledge service
of any and all process which may be served in any such suit, action or
proceeding in said courts in said State, and agrees that service of process upon
such party, mailed by certified mail to such party's address, will be deemed in
every respect effective service of process upon such party, in any suit, action
or proceeding. FURTHER, BOTH THE COMPANY AND HOLDER HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION TO ENFORCE THIS NOTE.
10.6 This Note shall bind the Company and its successors and assigns.
10.7 Neither the Holder nor the Company shall have any liability under
or in connection with this Note or the Security Agreement for special,
exemplary, punitive, incidental, indirect or consequential damages of any sort
in any action of any type or nature whatsoever in connection with this Note or
the Security Agreement and the parties waive any right that they have to claim
or recover in any such action any special, exemplary, punitive, incidental,
indirect or consequential damages or any sort other than actual damages.
NOVATEL WIRELESS, INC.,
a Delaware corporation
By
-------------------------------------
Name: Peter Leparulo
Title: Chief Executive Officer
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SCHEDULE I
PAYMENT SCHEDULE
SCHEDULE II
SCHEDULE OF NOTE PERCENTAGES FOR HOLDERS
INVESTOR NOTE PERCENTAGE
-------- ---------------
Bay Investments Limited 33.33%
Mutual Trust Management (Bermuda) Limited as 21.82%
trustee of Sofaer Funds/Global Hedge Fund
RIT Capital Partners plc 11.52%
Soen Yong Lee 8.33%
Pan Invest & Trade Inc. 4.17%
Peter Leparulo 0.83%
Cornerstone Equity Investors, LLC 16.67%
PS Capital LLC 3.33%
SCHEDULE III
PRIOR LIENS
1. Lien in favor of Silicon Valley Bank pursuant to Loan and Security
Agreement dated November 29, 2001.
SCHEDULE I TO SANMINA NOTE
This Schedule I sets forth the due dates of payments for purposes of Section
3.1.3 of the Note.
Column A set forth below will only apply if the Company raises at least $3.8
million in additional cash equity financing between February 26, 2003 and July
31, 2003. The purchase of the Sanmina obligations by the investors will not be
counted as additional cash equity financing for these purposes.
In addition, in the event that Column A applies, the Company will be required to
pay to the Note holder a prepayment equal to 20% of the amount of additional
cash equity financing raised by the Company between February 26, 2003 and July
31, 2003. This prepayment will be due on the date that that equity financing
closes. The prepayment will reduce the last payments otherwise required by
Column A Column B provides an example of the application of these principles,
assuming a hypothetical cash equity raise by the Company of $4 million on July
31, 2003.
If the Company fails to raise at least $3.8 million in additional cash equity
financing between February 26, 2003 and July 31, 2003, then the payment due
date schedule in Column C will apply. The purchase of the Sanmina obligations
by the investors will not be counted as additional cash equity financing for
these purposes.
COLUMN A COLUMN B COLUMN C
PAYMENT PAYMENT PAYMENT
DATE AMOUNT AMOUNT AMOUNT
24-Feb-03 $ 165,000 $ 165,000 $ 165,000
25-Feb-03 80,000 80,000 80,000
10-Mar-03 165,000 165,000 165,000
24-Mar-03 165,000 165,000 165,000
07-Apr-03 165,000 165,000 165,000
21-Apr-03 165,000 165,000 165,000
05-May-03 165,000 165,000 165,000
19-May-03 165,000 165,000 165,000
02-Jun-03 165,000 165,000 165,000
16-Jun-03 165,000 165,000 165,000
30-Jun-03 165,000 165,000 165,000
14-JUl-03 165,000 165,000 165,000
28-Jul-03 165,000 165,000 165,000
31-Jul-03 800,000 1,445,000
11-Aug-03 165,000 165,000
25-Aug-03 165,000 165,000
08-Sep-03 165,000 165,000
22-Sep-03 165,000 150,000
06-Oct-03 165,000
20-Oct-03 165,000
03-Nov-03 165,000
17-Nov-03 165,000
01-Dec-03 125,000
TOTAL $3,505,000 $3,505,000 $3,505,000