Document:

Exhibit 10.2

 

August 7, 2012

 

Gerard T. Feeney

Chief Financial Officer

Wave Systems Corp.

480 Pleasant Street

Lee, MA 01238

 

Dear Mr. Feeney:

 

We are pleased to confirm the arrangements under which Security Research Associates, Inc. (“SRA”) is engaged by Wave Systems Corp. (the “Company”) as non-exclusive placement agent on a “best-efforts” basis in connection with one or more equity financing transactions to be completed by the Company (a “Financing”).  The term of this letter agreement (this “Agreement”) shall extend to August 17, 2012 (the “Term”).

 

During the term of our engagement, we will provide you with assistance in connection with the Financing, which may include performing valuation analyses and assisting you in negotiating the financial aspects of the transaction.  During the term of our engagement, we will also identify and contact potential investors for the Company (the “SRA Investors”).

 

In the event the Financing is consummated, the Company agrees to pay to SRA a transaction fee (the “Transaction Fee”) consisting of (i) 6% (six percent) of the gross proceeds from the Financing received by the Company at closing, and (ii) 36 month warrants to acquire a number of shares of the Company’s Class A Common Stock (“Common Stock”) equal to 6% (six percent) of the aggregate gross proceeds from the Financing received by the Company divided by the effective price per share of the Common Stock (on an as-if converted basis in the event of a convertible security) paid by all of the investors in the Financing received by the Company at closing (the “SRA Warrants”).  There will be no Transaction Fees or Warrants issued to SRA on the exercise of Warrants by Investors.

 

The SRA Warrants issued to SRA pursuant to this Agreement will have a “cashless exercise” provision and will have an exercise price of Market per share and the underlying shares will be fully registered and issued from the Company’s shelf.

 

The SRA Warrants received by SRA from the Company pursuant to this Agreement shall be subject to a lock-up restriction which complies with Financial Industry Regulatory Authority, Inc. (“FINRA”) Conduct Rule 5110(g)(1).  The SRA warrants shall not be sold by SRA during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of the public offering of the Company’s stock, except as provided in FINRA Conduct Rule 5110(g)(2).

 

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Subject to applicable laws, rules and regulations, the Company agrees to provide all information and documents reasonably required to permit the SRA Investors to make an informed investment decision with respect to an investment in the Company. Such information and documents shall be provided at the cost of the Company.

 

The Company also agrees to reimburse SRA periodically, upon request, or upon termination of our services pursuant to this Agreement, for our reasonable and reasonably documented out-of-pocket expenses, incurred in connection with our financial advisory services and the Financing, including the reasonable fees and expenses of legal counsel, travel expenses and printing. All such out-of-pocket fees and expenses shall not exceed a combined aggregate amount of $10,000.

 

Please note that any written or oral opinion or advice provided by SRA in connection with our engagement is exclusively for the information of the Board of Directors and senior management of the Company, and may not be disclosed to any third party (other than the Company’s legal, accounting or other advisors, who shall have been instructed with respect to the confidentiality of such advice) or circulated or referred to publicly without our prior written consent, except as to the extent required by law, judicial or administrative process or regulatory demand.

 

The Company or SRA shall be entitled to terminate this Agreement before the end of the Term on written notice to the other party at the address set forth for such party on the signature page hereof.  In the event of the termination of this Agreement, SRA shall be entitled to be paid its existing reasonable out-of-pocket expenses subject to the terms described above.  The confidentiality provisions of this Agreement shall be unaffected by the termination of this Agreement.  The Company shall not be obligated to reimburse any expenses incurred by SRA or its advisors with respect to activities undertaken after notification of termination is given.

 

SRA is an independent contractor and placement agent of the Company. SRA will not have any right or authority to bind the Company or otherwise create any obligations of any kind on behalf of the Company and will make no representation to any third party to the contrary.

 

During the term of this Agreement and thereafter, each of the Company and SRA agrees to keep confidential and not disclose to any third party any confidential information of the other party, and to use such confidential information only in connection with the engagement hereunder; provided, however, the foregoing will not prohibit disclosures (i) to the parties’ employees, agents and other representatives to the extent necessary to enable the Company or SRA to perform its responsibilities under this Agreement, (ii) to the extent required by law, judicial or administrative process or regulatory demand, or (iii) with respect to matters which become public other than by the actions of the disclosing party hereunder. This section will survive the termination of this Agreement for a period of five years.

 

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Each of the Company and SRA agrees that in connection with any Financing intended to qualify for the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”), provided by Section 4(2) of the Act, the Company and SRA shall limit offers to sell, and solicitations of offers to buy, securities of the Company in connection with the Financing to persons reasonably believed by it to be “qualified institutional buyers” as such term is defined in Rule 144A under the Act or “accredited investors” as such term is defined in Rule 501(a) of Regulation D promulgated under the Act.

 

Each of the Company and SRA agrees that any offers it makes in connection with the Financing will be made only to prospective purchasers on an individual basis and that it will not engage in any form of general solicitation or general advertising (within the meaning of Rule 502 under the Act) in connection with the Financing.  Each of the Company and SRA agrees to conduct the Financing in a manner intended to comply with the registration or qualification requirements, or available exemptions there from, under applicable state “blue sky” laws and applicable securities laws of other jurisdictions.

 

The Company may decline to consummate the Financing with any prospective purchaser in the Company’s sole discretion.

 

The Company agrees to:

 

(a)                                  Indemnify and hold SRA harmless against any and all losses, claims, damages or liabilities to which SRA may become subject arising out of or in connection with any of the services rendered by SRA pursuant to this Agreement, unless such losses, claims, damages or liabilities resulting  from the gross negligence or willful misconduct of SRA or a breach of this Agreement by SRA; and

 

(b)                                 Reimburse SRA periodically for reasonable legal or other expenses incurred by SRA in connection with investigating, preparing to defend or defending, or providing evidence in or preparing to serve or serving as a witness with respect to, any lawsuits, investigations, claims or other proceedings arising in any manner out of or in connection with the rendering of services by SRA pursuant to this Agreement (including, without limitation, in connection with the enforcement of this Agreement and the indemnification obligations set forth herein); it being understood however that the Company shall have no obligation to reimburse SRA for any such expenses and SRA shall immediately repay any such reimbursements by the Company in the event any losses, claims, damages or liabilities are finally judicially determined to have resulted from the gross negligence or willful misconduct of SRA or a breach of this Agreement by SRA.

 

The Company agrees that the indemnification and reimbursement commitments set forth in this document shall apply whether or not SRA is a formal party to any

 

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lawsuits, arbitrations, claims or other proceedings and that such commitments shall extend upon the terms set forth in this paragraph to any controlling person, affiliate, director, officer, employee or agent of SRA (each, with SRA, an “Indemnified Person”).  In the event an Indemnified Person is made a formal party to a lawsuit, claim or other proceeding arising out of or in connection with any of the services rendered by SRA pursuant to this Agreement, and the Company takes over the defense of such action for an Indemnified Person, the Company further agrees that it will not, without such Indemnified Person’s prior written consent, which consent shall not be unreasonably withheld, enter into any settlement of a lawsuit, claim or other proceeding arising out of or in connection with the transaction unless such settlement includes an express and unconditional release from the party bringing the lawsuit, claim or other proceeding of all Indemnified Persons.  With respect to the immediately preceding sentence, in the event an Indemnified Person reasonably withholds their consent to a settlement, the Indemnified Person shall be responsible for all subsequent costs and expenses arising out of the defense of the Indemnified Person.

 

The Company further agrees that the Indemnified Persons are entitled to retain separate counsel of their selection in connection with any of the matters in respect of which indemnification, reimbursement or contribution may be sought under this Agreement, provided that, in connection with any one action or proceeding, the Company shall not be responsible for the fees and expenses of more than one separate law firm or individual attorney in any one jurisdiction for all Indemnified Persons.

 

Any dispute arising out of this Agreement shall be resolved in an arbitration conducted pursuant to the rules of FINRA in New York, NY.

 

Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the enclosed copy of this Agreement, which shall become a binding agreement upon our receipt. We are delighted to accept this engagement and look forward to working with you on this assignment.

 

Very truly yours,

Timothy Collins, President and CEO

 

Agreement Confirmed by:

 

	
Security Research   Associates, Inc.
    	
Wave Systems Corp.
    
	
3 Embarcadero Center, Suite 1340
    	
480   Pleasant Street
    
	
San Francisco, CA 94111
    	
Lee,   MA 01238
    

 

	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Timothy   Collins
    	
 
    	
 
    	
Mr. Gerard   T. Feeney
    
	
 
    	
President   and CEO
    	
 
    	
 
    	
Chief   Financial Officer
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
Date:
    	
 
    

 

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Engagement Letter Expense Annex

 

CONFIDENTIAL

 

Security Research Associates, Inc. (“SRA”) and Wave Systems Corp. (the “Company”) are parties to an engagement letter dated April 8, 2009.  In connection with the engagement letter, SRA and the Company hereby agree as follows:

 

The Company also agrees to reimburse SRA periodically, upon request, or upon termination of our services pursuant to this letter (the “Agreement”), for our reasonable and reasonably documented out-of-pocket expenses, incurred in connection with our financial advisory services and the Financing, including the reasonable fees and expenses of legal counsel, travel expenses and printing.

 

It is agreed that SRA will not charge Wave System Corp. expenses associated with this financing.

 

	
 
    	
Security   Research Associates, Inc.
    	
 
    	
 
    	
Wave   Systems Corp.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
     By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
David   N. Olson
    	
 
    	
 
    	
Gerard   T. Feeney
    
	
 
    	
Managing   Director
    	
 
    	
 
    	
CFO
    

 

5Exhibit 10.1

 

CONSENT AND FIRST AMENDMENT TO SENIOR CONVERTIBLE NOTE

 

CONSENT AND FIRST AMENDMENT TO SENIOR CONVERTIBLE NOTE, dated _________________ (this “Consent and Amendment”), by and between A123 Systems, Inc., a Delaware corporation, (the “Company”), and ____________________ (the “Holders”).

 

WHEREAS, the Company entered into the Amended and Restated Securities Purchase Agreement, dated May 23, 2012 (the “Securities Purchase Agreement”), with the Holders and the other buyers party thereto (together with the Holders, the “Buyers”);

 

WHEREAS, pursuant to the Securities Purchase Agreement, on May 24, 2012 the Company issued to the Buyers 6.00% Senior Convertible Notes due 2013 in aggregate original principal amount of $50,000,000 (the “Notes”);

 

WHEREAS, Section 16 of the Notes provides that written consent of the Required Holder (as defined therein) shall be required for any change or amendment to the Notes;

 

WHEREAS, the Company desires to enter into a series of financing transactions with Wanxiang Group Corporation or certain of its affiliates, as lender or purchaser, as applicable (the “Financing”); and

 

WHEREAS, on the terms and subject to the conditions set forth herein, the Company hereby requests and the Holders hereby consent to amend the terms of the Notes as set forth below in order to permit the Financing and certain other transactions in lieu thereof and/or related thereto.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants contained herein and in the Notes, the parties hereby agree as follows:

 

Section 1.1  Definitions.  Unless otherwise specified herein, all capitalized terms used and not defined herein shall have the meanings ascribed to them in the Notes.

 

Section 2.1  Representations and Warranties.

 

(a)           Representations and Warranties of the Holders. As of the date hereof, each Holder is a holder of the aggregate principal amount of the Notes set forth above its name on the signature page hereto.

 

(b)           Representations and Warranties of the Company. The Company has the corporate power to execute and deliver this Consent and Amendment; all corporate action required to be taken by the Company for the due and proper authorization, execution, delivery and performance of this Consent and Amendment; and this Consent and Amendment constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws relating to or

 

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affecting the enforcement of creditors’ rights generally or by general equitable principles (whether considered in a proceeding in equity or law) relating to enforceability.

 

Section 3.1  Consent.

 

(a)           Each Holder hereby consents, in connection with the Financing, to the amendments described in Section 4.1 below.

 

(b)           The consent granted herein shall not be deemed a consent of any other amendment of the Company or waiver of any other requirement or provision contained in the Notes.  Except with respect to the foregoing consent, the Company and each Holder preserve all of their rights and remedies under the Notes.

 

Section 4.1 Amendments.

 

(a)           The first two sentences of Section 7(d) will be amended and restated in its entirety to read as follows:

 

(d)           Floating Rate Conversion Price.  The Holder may, at any time and from time to time on or after August 10, 2012, notify the Company by so indicating in one or more Conversion Notices of its election to convert all or any portion of the outstanding and unpaid Conversion Amount using a floating rate conversion price equal to (a) for each Trading Day from and including August 10, 2012 to and including August 20, 2012, 85%, and (b) for each Trading on or after August 21, 2012, 87%, of the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the applicable Conversion Date (the “Floating Rate Conversion Price”) in lieu of the Conversion Price then in effect.  The Holder shall not be permitted hereunder to specify any Floating Rate Conversion Price to convert a Conversion Amount that exceeds in the aggregate while the Notes are outstanding, the product of (x) $30,000,000.00 and (y) the Holder Pro Rata Amount.

 

(b)           The following definitions contained in Section 30 of the Note are hereby amended as follows:

 

The following clause is added to the end of the definition of Permitted Indebtedness: “and (v) intercompany Indebtedness among the Company and its Subsidiaries.”

 

(c)           The following definitions contained in Section 30 of the Note are hereby amended as follows:

 

The definition of “Permitted Senior Indebtedness” is hereby amended and restated in its entirety to mean: “Indebtedness incurred with respect to the Company’s existing credit facility pursuant to the Credit Agreement, the Letter of Credit Facility, the Bridge Facility, under the New Convertible Notes or any one or more additional credit facilities or any replacement thereof, and guarantees thereof provided by the Company’s subsidiaries; provided, however, that the aggregate outstanding amount of such

 

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Indebtedness outstanding at any time as permitted pursuant hereto does not at any time exceed the sum of (a) up to $10,000,000 of letters of credit, (b) solely with respect to Indebtedness outstanding at any time pursuant to the Bridge Facility and/or one or more additional credit facilities or a replacement thereof, in the aggregate, $75,000,000 and (c) solely with respect to Indebtedness outstanding at any time pursuant to the New Convertible Notes, $275,000,000.”

 

Clause (ix) of the definition of “Permitted Liens” shall be amended to read as follows: “Liens on all or any portion of the assets of the Company and its Subsidiaries securing Permitted Senior Indebtedness.”

 

(d)           Section 30 of the Note is amended by adding thereto, in its proper alphabetical order, the following definitions:

 

“Bridge Facility” means that certain Senior Secured Bridge Note Facility to be entered to by the Company and Wanxiang Group Corporation or one or more of its affiliates, as lender.

 

“New Convertible Notes” means those convertible notes that may be issued by the Company from time to time after the date hereof to Wanxiang Group Corporation or one or more of its affiliates, as purchaser.

 

“Letter of Credit Facility” means that certain Letter of Credit Facility to be entered into by and between the Company and Silicon Valley Bank, which facility will only extend letters of credit that are supported by cash collateral provided by the Company or letters of credit provided under the Bridge Facility.

 

(e)           The following sentence is added to the end of Section 15(l), “Transactions with Affiliates”:

 

Notwithstanding the foregoing, the issuance of the New Convertible Notes and performance of obligations thereunder and under other Permitted Senior Indebtedness shall not be prohibited by this Section 15(l).

 

(f)            Section 15(n) “Minimum Cash Balance” is revised as follows: the reference to $40,000,000 shall be changed to $20,000,000.

 

(g)           The following section will be added as a new Section 32:

 

(32)         REDEMPTION AT THE OPTION OF THE COMPANY.  At any time on or after the date the Company consummates the transactions contemplated by the Bridge Facility and the New Convertible Notes, whereby the Company receives proceeds of at least $225,000,000 (the “Requisite Financings”), the Company shall have the right, upon not less than twenty (20) Business Days’ nor more than thirty (30) Business Days’ prior written notice via facsimile and overnight courier, which notice shall be irrevocable (a “Voluntary Redemption Notice”), to redeem all (but not less than all) of the outstanding Notes; provided that no such redemption shall be consummated prior to the

 

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date on which the New Convertible Notes are issued (but, for absence of doubt, the Voluntary Redemption Notice may be provided (on an irrevocable basis) prior to the consummation of the Requisite Financings for a redemption being completed no earlier than the consummation of the Requisite Financings).  Each Note subject to redemption by the Company pursuant to this Section 32 shall be redeemed by the Company in cash by wire transfer of immediately available funds at a price equal to the sum of (a) the aggregate principal amount of the Note, (b) the aggregate principal amount of the Note multiplied by the Voluntary Redemption Premium and (c) accrued but unpaid interest on such aggregate principal amount of Notes (the “Voluntary Redemption Price”). The “Voluntary Redemption Premium” is equal to 10.00%.  Redemptions required by this Section 32 shall be made in accordance with the provisions of Section 12.  Notwithstanding anything to the contrary in this Section 32, but subject to Section 3(d), until the Voluntary Redemption Price (together with any interest thereon) is paid in full, the Conversion Amount subject to redemption under this Section 32 (together with any interest thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3.

 

(f)            The definition of “Redemption Notices” is hereby supplemented to include the Voluntary Redemption Notice.

 

(g)           The definition of “Redemption Prices” is hereby supplemented to include the Voluntary Redemption Price.

 

Section 5.1  8-K Filing.  On or before 8:30 a.m., New York City time, on August 10, 2012, the Company shall file a Current Report on Form 8-K describing the terms of the transactions contemplated by this Consent and Amendment and any Additional Consent and Amendment entered into by the other holders of Notes, if any, in the form required by the Exchange Act and attaching a form of this Consent and Amendment (including all attachments, the “8-K Filing”).  From and after the filing of the 8-K Filing with the SEC, the undersigned shall not be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing.  The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers, directors, employees and agents, not to, provide the undersigned with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the filing of the 8-K Filing with the SEC without the express prior written consent of the undersigned.

 

Section 6.1  Governing Law.  This Consent and Amendment will be governed by, and construed in accordance with, the laws of the State of New York without regard to any choice of law or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

 

Section 7.1  Effectiveness and Counterparts.  The Consent and Amendment shall become effective when, and only when, the Company and the Holders shall have executed and delivered this Consent and Amendment and the Company and, to the extent required under the Notes, one or more other holders of Notes representing in the aggregate with the undersigned the Required

 

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Holders shall have executed and delivered one or more Consent and Amendments in substance identical to this Consent and Amendment (collectively, the “Additional Consent and Amendment”).  Upon effectiveness of this Consent and Amendment and the Additional Consent and Amendment, this Consent and Amendment and the Additional Consent and Amendment shall be considered one and the same “instrument” for purposes of Section 16 of the Notes and shall amend the Notes as provided herein.  This Consent and Amendment may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument.

 

Section 8.1  Headings.  The headings in this Consent and Amendment are for reference purposes only and will not in any way affect the meaning or interpretation of this Consent and Amendment.

 

Section 9.1  Prior Agreements.  This Consent and Amendment and the other agreements contemplated hereby constitute the entire agreement between the parties concerning the subject matter hereof and supersedes any prior representations, understandings or agreements.  There are no representations, warranties, agreements, conditions or covenants, of any nature whatsoever (whether express or implied, written or oral) between the parties hereto with respect to such subject matter except as expressly set forth herein and in the other agreements contemplated hereby.

 

Section 10.1  Severability.  If any provision of this Consent and Amendment is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Consent and Amendment so long as this Consent and Amendment as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

Section 11.1  Amendments.  Any amendments or modifications must be executed in writing by all parties hereto.

 

Section 12.1  No Further Effect.  Except as explicitly modified by this Consent and Amendment, the Notes shall remain in full force and effect in accordance with their terms.

 

Section 13.1  Fees.  The Company hereby agrees to reimburse the Holder upon its request for its legal fees and expenses in connection with the preparation, review and negotiation of this Agreement and transactions contemplated thereby and any prior unpaid and outstanding legal fees and expenses incurred by Schulte Roth & Zabel LLP to date with respect to the Transaction Documents or any proposed amendments or waivers thereto, by promptly paying any such amount to Schulte Roth & Zabel LLP by wire transfer of immediately available funds in

 

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accordance with the written instructions of Schulte Roth & Zabel LLP.  Except as otherwise set forth above, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, review, execution, delivery and performance of this Consent and Amendment.

 

 

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have duly executed this Consent and Amendment as of the date first above written.

 

	
 
    	
A123   SYSTEMS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    
	
 
    	
Name:   Eric J. Pyenson
    
	
 
    	
Title:   Vice President and General Counsel
    

 

 

	
 
    	
[HOLDER]
    
	
 
    	
 
    	
 
    
	
 
    	
As   holder of $                    
   in aggregate principal amount of Notes
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    
	
 
    	
 
    	
Title:   Authorized Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
[HOLDER]
    
	
 
    	
 
    	
 
    
	
 
    	
As   holder of $                     
   in aggregate principal amount of Notes
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    
	
 
    	
 
    	
Title:   Authorized Signatory

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