EXHIBIT 10.2
March 12, 2003
Steven H. Jackman, Esq.
Vice President and Corporate Counsel
Sanmina-SCI Corporation
2700 North First Street
San Jose, CA 95134
Re: Release of Obligation to Provide Inventory
Dear Steve:
Reference is made to (a) the Settlement Agreement and Mutual General Release
dated January 12, 2002, as amended as of February 7, 2003 (as amended, the
"Settlement Agreement") by and between Novatel Wireless, Inc. ("Novatel
Wireless") on the one hand, and Sanmina-SCI Corporation and Sanmina Canada ULC,
on the other (collectively "Sanmina") and (b) the Security Agreement dated as of
January 12, 2002 executed by Novatel Wireless in favor of Sanmina (the "Security
Agreement"). Novatel Wireless represents and warrants that (i) as of February
14, 2003, the outstanding balance of the Inventory Purchase Commitment was at
least $3,481,870.94(1); (ii) Sanmina has satisfied all of its Obligations under
the Settlement Agreement accruing prior to March 12, 2003 (the "Effective
Date"), including but not limited to the obligations of Sanmina set forth in
Section II.B thereto; (iii) as of the date of this letter, Sanmina is not in
breach or default of the Settlement Agreement; and (iv) it knows of no
circumstances which would (with the passage of time or otherwise) render Sanmina
in breach or default of the Settlement Agreement.
Novatel Wireless understands that (i) pursuant to a letter agreement of even
date (the "Side Letter"), Sanmina has entered into a transaction with certain
investors (the "Investors") pursuant to which the Investors will immediately
invest $1.2 million in Novatel Wireless in exchange for subordinated secured
notes (the "Initial Investment"), and purchase Sanmina's rights and assume
Sanmina's obligations under the Settlement Agreement at a substantial discount
(the "Transaction") and (ii) that, as a condition precedent to entering into the
Transaction, Sanmina has required Novatel Wireless (a) to consent to the
assignment of Sanmina's rights and delegation of Sanmina's duties under the
Settlement Agreement to the Investors and (b) to forever release Sanmina from
any and all obligations under the Settlement Agreement, including but not
limited to any obligation to deliver any Inventory (as that term is defined
under the Settlement Agreement) after the Effective Date. The Transaction is
conditioned in part upon Novatel Wireless' obtaining stockholder approval for
the acquisition by the Investors of up to $6.755
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(1) Novatel Wireless believes that it has made payments of $4,518,129.06 towards
the Inventory Purchase Commitment and that the amount of the Inventory Purchase
Commitment has been reduced to $3,481,870.94. Sanmina's counsel has agreed to
verify the payments made by Novatel Wireless towards its Inventory Purchase
Commitment and adjust the balance accordingly. In the event the Inventory
Balance is $3,481,870.94 (rather than the $3,505,000 shown on Sanmina's books),
then at the Closing of the Transaction, Sanmina shall pay to Novatel Wireless,
an amount equal to the difference (which amount will not exceed $17,000). The
parties each acknowledge that, at most, the balance of the Inventory Purchase
Commitment would be reduced from $3,505,000 to $3,481,870.94.
million of Novatel Wireless' Series B Preferred Stock pursuant to a Securities
Purchase Agreement (the "Investment"). The Investment is expected to close in
July 2003 (the "Closing").
Novatel Wireless acknowledges that Sanmina's obligations to consummate the
Transaction are conditioned on, among other things, Novatel's releasing Sanmina
from any obligation it has under the Settlement Agreement to further deliver any
Inventory. Novatel has reasonably concluded, and now hereby acknowledges, that
the Inventory which has yet to be delivered to Novatel under the Settlement
Agreement (the "Remaining Inventory") is now old and obsolete and has only
marginal value. In addition, Novatel Wireless realizes that, by the time it
would be required under the Settlement Agreement to purchase the Remaining
Inventory, its value would decrease even more. Accordingly, Novatel Wireless, on
behalf of itself, and, anyone or any entity that can claim by or through it,
hereby releases and forever discharges Sanmina, including Sanmina's divisions,
affiliates, parents, and subsidiaries, and past and present directors, officers,
shareholders, agents, servants, employees, representatives, assigns, heirs,
administrators, attorneys, insurers, and lenders, from any and all claims,
demands, and causes of action, obligations, damages and liabilities whether
known or unknown in any way connected with any transactions, affairs or
occurrences between Novatel Wireless and Sanmina to date, of every nature, kind
and description, in law, equity or otherwise, which have arisen, occurred or
existed at any time prior to the signing of this Agreement, including but not
limited to any obligations under the Settlement Agreement to provide any
Remaining Inventory to Novatel Wireless.
Novatel Wireless acknowledges and agrees that they have been informed of the
provisions of California Civil Code Section 1542, and do hereby expressly waive
and relinquish all rights and benefits that they have or may have had under that
statute, which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTION OF THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Novatel Wireless acknowledges the significance and consequences of such specific
waiver of Section 1542, and hereby assume full responsibility for any damages or
losses it may incur as a result of the execution of this Agreement
In addition to the $165,000 payment required to be made on March 10, 2003,
Novatel Wireless agrees that, within twenty-four hours of the receipt of the
Initial Investment, it will pay Sanmina an additional $110,000, for a total
payment of $275,000. The $110,000 payment will be allocated as follows: (i)
$40,000 will be treated as Novatel Wireless's obligation under Section
II.A(4)(j) of the Settlement (relating to Financing Payments) and (ii) the
remaining $70,000 will be treated as a prepayment of the payment due on March
24, 2003. Sanmina hereby agrees that upon receipt of the $275,000 from Novatel
Wireless, the payment of the Initial Investment to Novatel Wireless and the
execution by the Investors of the Side Letter, it shall grant Novatel Wireless'
a forbearance from Novatel Wireless' obligation to make further payments to
Sanmina pursuant to the Settlement Agreement (as limited only by the following
provisos); provided, however, that if either (i) the Transaction has not been
consummated by August 1, 2003 (as such date may be extended pursuant to the Side
Letter) and Novatel Wireless has not raised debt or equity proceeds and made
payments to Sanmina as set forth in Section II.A.4(n) of the Settlement
Agreement or (ii) the Investors declare a default or event of default under any
agreement between Novatel Wireless and the Investors, including but not limited
to the notes used in connection with the
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Initial Investment, and accelerate the repayment of any amounts which Novatel
Wireless owes the Investors, then in each case the Covered Obligations (as
defined in the Security Agreement) shall become immediately due and payable, and
Novatel Wireless and Sanmina agree that Section II.A.4 of the Settlement
Agreement is hereby amended to require payment from Novatel Wireless in
accordance with this proviso; and provided further, that payment obligations
under Sections II.A.4(l), II.A.4(m), II.A.4(o), II.A.4(p), and II.A.4(q) and, in
the case of Section II.A.4(m) and II.A.4(q) as modified by the Side Letter to
the extent the Side Letter has not been terminated, shall remain in effect
subject to the conditions set forth therein.
For avoidance of doubt, the forbearance granted by Sanmina to Novatel Wireless
pursuant to this letter agreement shall terminate and be of no further effect on
August 1, 2003 (unless the termination date of the Side Letter has been
extended, in which case the termination of such forbearance period will
terminate on such later termination date of the Side Letter), and Sanmina may at
such time enforce all of its rights and remedies under the Settlement Agreement
and Security Agreement and any other agreements, documents or instruments
related thereto, including, but not limited to, its right to accelerate the
obligations thereunder in the event that Novatel Wireless has not raised at
least $5,000,000 in gross equity or debt proceeds by July 31, 2003 and paid
Sanmina at least $3,000,000 during 2003.
Novatel Wireless hereby consents to the assignment of Sanmina's rights under the
Settlement Agreement and delegation of Sanmina's obligations under the
Settlement Agreement to the Investors at Closing. By consenting to the
assignment, Novatel Wireless again acknowledges that Sanmina-SCI is released
from any obligations accruing on or after the Effective Date, including any
obligation on the part of Sanmina to provide Novatel Wireless with any
Inventory.
In addition to the foregoing, Novatel Wireless acknowledges that it has read the
Side Letter and, to the extent applicable and/or required consents to and agrees
to be bound by provisions set forth therein.
This letter shall be construed in accordance with, and be deemed governed by,
the laws of the State of California without regard to principles of conflict of
laws. The parties acknowledge and agree that the state courts of Santa Clara
County, California and the federal courts located in the Northern District of
the State of California shall have exclusive jurisdiction and venue to
adjudicate any and all disputes arising out of or in connection with this
Agreement. The parties consent to the exercise by such courts of personal
jurisdiction over them and each party waives any objection it might otherwise
have to venue, personal jurisdiction, inconvenience of forum, and any similar or
related doctrine.
Novatel Wireless and Sanmina acknowledge that each has read this letter; that
each fully understands its rights, privileges and duties under this Agreement;
and that each enters into this Agreement freely and voluntarily. Each party
further acknowledges that each has had the opportunity to consult with any
attorney of its choice to explain the terms of this Agreement and the
consequences of signing it.
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If the foregoing accurately states your complete understanding with respect to
this matter, please so indicate by signing this letter and returning a signed
original to the Company.
Very truly yours,
NOVATEL WIRELESS, INC.
By: /S/ Melvin L. Flowers
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Melvin L. Flowers
Its: Senior Vice President, Finance and
Chief Financial Officer
SANMINA-SCI CORPORATION
By: /S/ Steven H. Jackman
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Steven H. Jackman
Its: Vice President and Corporate Counsel
SANMINA CANADA ULC
By: /S/ Steven H. Jackman
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Steven H. Jackman
Its: Vice President and Corporate Counsel
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