Exhibit 99.2
SETTLEMENT AGREEMENT BY AND BETWEEN
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, AS COURT-APPOINTED RECEIVER
FOR THE WOOD RIVER ENTITIES, AND ENDWAVE CORPORATION
This Settlement Agreement (this "Agreement") is dated as of May 17,
2007, and is by and between (a) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as court-appointed receiver
(the "Receiver") for Wood River Partners, L.P. ("Wood River Domestic"), Wood
River Partners Offshore, Ltd. ("Wood River Offshore" and, together with Wood
River Domestic, the "Wood River Funds"), Wood River Capital Management, L.L.C.
("Wood River Capital"), and Wood River Associates, L.L.C. (collectively,
including the Wood River Funds and Wood River Capital, the "Wood River
Entities") and (b) Endwave Corporation ("Endwave").
WHEREAS, on October 13, 2005, the United States Securities and
Exchange Commission (the "Commission") commenced an action (the "SEC Action")
against the Wood River Entities and ▇▇▇▇ ▇▇▇▇▇▇▇ Whittier ("Whittier") in the
United States District Court for the Southern District of New York (the
"Court");
WHEREAS, in the SEC Action, the Commission alleges that Whittier and
the Wood River Entities violated sections 10(b), 13(d) and 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and certain
rules promulgated thereunder and sections 206(1) and 206(2) of the Investment
Advisers Act of 1940, as amended, by, among other things, acquiring beneficial
ownership of a large percentage of the outstanding common stock of Endwave
without disclosing such beneficial ownership through required filings with the
Commission, and by making misrepresentations and omissions of material facts
concerning the Wood River Funds;
WHEREAS, also on October 13, 2005, the Commission filed an Application
for Entry of an Order Granting a Preliminary Injunction, Freezing Assets, and
Appointing a
Receiver (the "Preliminary Injunction Application") seeking, among other things,
the appointment of a receiver;
WHEREAS, the Commission and Whittier, on consent of his counsel,
agreed to, and the Court subsequently entered, a Stipulation And Order Granting
Preliminary Injunction, Freezing Assets And Appointing Receiver (the
"Preliminary Injunction Order") granting certain of the relief requested in the
Preliminary Injunction Application and providing for the immediate appointment
of the Receiver;
WHEREAS, beginning in at least 2004 and during the first nine months
of 2005, at the direction of Whittier, the Wood River Funds purchased
substantial quantities of Endwave common stock and continued to own a large
number of such shares at the time of the commencement of the SEC Action;
WHEREAS, the 4,102,247 shares of Endwave common stock beneficially
owned by the Wood River Funds (the "Endwave Shares") constitute the largest
asset of the Wood River Entities in receivership;
WHEREAS, on or about January 6, 2006, upon the application of the
Receiver, the Court entered an order fixing February 28, 2006 as the last date
for creditors and equity security holders to file proofs of claim and/or equity
interest against any of the Wood River Entities (the "Bar Date");
WHEREAS, prior to the Bar Date, on or about February 6, 2006, Endwave
filed a proof of claim against each of the Wood River Entities in an
unliquidated amount (the "Endwave Filed Claim"). By so doing, Endwave asserted a
claim for disgorgement of presumed profits realized by any of the Wood River
Entities pursuant to section 16(b) of the Exchange Act (the "Section 16(b)
Claim") and for other damages to which Endwave asserted it may be entitled as a
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result of Whittier's and the Wood River Entities' accumulation of Endwave common
stock allegedly in violation of the securities laws;
WHEREAS, after an exchange of documents and information, and after
extensive good faith negotiations between the Receiver on behalf of the Wood
River Entities and Endwave (each a "Party" and, collectively, the "Parties"),
the Parties have agreed to resolve any and all claims the Parties have or may
have against each other, including, without limitation, the Endwave Filed Claim,
and to provide a mechanism for the ultimate disposition of the Endwave Shares,
in accordance with the terms of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Parties hereto agree
as follows:
1. (a) The Parties acknowledge that this Agreement is subject to
approval of the Court. The Receiver shall apply to the Court for the entry of an
order authorizing and approving this Agreement in the form annexed hereto as
Exhibit "A," or in such other form as the Parties hereto may mutually agree (the
"Approval Order"). The Receiver shall use his reasonable best efforts to obtain
the Approval Order and, if requested by the Receiver, Endwave shall file a
joinder to the Receiver's application for entry of the Approval Order. Within
one business day after the Approval Order is entered by the Court, the Parties
shall execute this Agreement and deliver executed signature pages to one
another.
(b) This Agreement shall become effective (such date, the
"Effective Date") on the third business day after the Approval Order has been
entered on the docket by the Clerk of the Court in the SEC Action. If the
Effective Date does not occur before June 15, 2007 (unless extended in writing
by the Parties), or if the Approval Order entered by the Court is
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reversed or vacated on appeal, then this Agreement shall be null and void, the
Parties shall be restored to the status quo ante, and nothing herein shall be
deemed an admission by any Party hereto. If the Approval Order is entered by the
Court but its effectiveness is thereafter stayed by a court of competent
jurisdiction (a "Stay"), then the effectiveness of this Agreement and the
Parties' obligations hereunder shall be stayed until such Stay is vacated.
2. Upon the Effective Date, Endwave and the Receiver shall execute and
deliver a registration rights agreement in the form annexed hereto as Exhibit
"B," or in such other form as the Parties hereto may mutually agree (the
"Registration Rights Agreement") providing for the filing of a shelf
registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), registering for
resale all of the Endwave Shares. The Registration Rights Agreement is
incorporated as if set forth in this Agreement in its entirety.
3. On the terms and subject to the conditions set forth in the
Registration Rights Agreement, the Receiver shall (i) pay to the underwriters or
placement agents to be engaged as contemplated by the Registration Rights
Agreement all underwriting discounts and commissions or placement agent fees for
the offering or placement and (ii) pay to Endwave the other reasonable and
documented expenses incurred by Endwave relating to the offering or placement,
including legal fees, accounting fees, printing fees and road show expenses up
to a maximum of $550,000 in the case of a registered direct offering or $750,000
in the case of an underwritten offering (all of the foregoing amounts in clauses
(i) and (ii) collectively, the "Offering or Placement Expenses"). The Offering
or Placement Expenses shall be paid by the Receiver at such time as the Wood
River Entities have sold at least a number (the "Minimum Number") of the Endwave
Shares so that after giving effect to such sale the Wood River Entities
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hold in the aggregate less than 10% of Endwave's outstanding common stock (the
"Minimum Sale Date"); provided, however, that in the event the Company commences
a registered direct offering or an underwritten offering pursuant to the
Registration Rights Agreement but the Receiver subsequently terminates such
offering or elects to sell fewer than the Minimum Number of shares in such
offering, the Offering or Placement Expenses shall be paid promptly following
the termination or closing of such offering, as applicable (the "Offering
Termination Date"). The Offering or Placement Expenses may be paid (a) in cash
or (b) if mutually agreed by Endwave and the Receiver, in Endwave Shares or a
combination of cash and Endwave Shares; provided, however, that in the event the
Company commences a registered direct offering or an underwritten offering
pursuant to the Registration Rights Agreement but the Receiver subsequently
terminates such offering, the Offering or Placement Expenses may be paid, at the
Receiver's discretion, by returning to the Company such number of Endwave Shares
as is obtained by dividing the Offering or Placement Expenses by the average
closing price of Endwave common stock over the 20 trading days ending
immediately prior to the date the Receiver notifies Endwave of his intent to
terminate the offering. For the purposes of calculating whether the Minimum
Number of Endwave Shares has been sold, unless otherwise notified by Endwave in
writing, the Receiver shall be entitled to use the number of shares of
outstanding common stock reported in Endwave's most recently-filed report on
Form 10-K or 10-Q.
4. Solely in consideration for Endwave's release and settlement of its
claims against the Wood River Entities, including, without limitation, the
Endwave Filed Claim (including the Section 16(b) Claim), and in full and final
satisfaction thereof, the Receiver, on behalf of the Wood River Entities, shall
pay to Endwave cash in the amount of $425,000 for out-of-pocket expenses
incurred by Endwave arising out of the Wood River Entities' accumulation
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of Endwave common stock (the "Payment"). The Payment shall be made by the
Receiver on the Minimum Sale Date; provided, however, that in the event the
Company commences a registered direct offering or an underwritten offering
pursuant to the Registration Rights Agreement but the Receiver subsequently
terminates such offering or elects to sell fewer than the Minimum Number of
shares in such offering, the Payment shall be made promptly following the
Offering Termination Date. The Payment may be made (a) in cash or (b) if
mutually agreed by Endwave and the Receiver, in Endwave Shares or a combination
of cash and Endwave Shares; provided, however, that in the event the Company
commences a registered direct offering or an underwritten offering pursuant to
the Registration Rights Agreement but the Receiver subsequently terminates such
offering, the Offering or Placement Expenses may be paid, at the Receiver's
discretion, by returning to the Company such number of Endwave Shares as is
obtained by dividing the Payment by the average closing price of Endwave common
stock over the 20 trading days ending immediately prior to the date the Receiver
notifies Endwave of his intent to terminate the offering.
5. Effective on the occurrence of either the Minimum Sale Date or the
Offering Termination Date, by operation of this section (for the avoidance of
doubt, without the need for any further steps or actions to be taken by any
party), the Receiver, on behalf of the Wood River Entities, hereby releases
Endwave and each of its affiliates, and the officers, directors and employees of
each of them (collectively, "Endwave Parties") from any and all claims, actions,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, liabilities, expenses and
demands whatsoever, at law or in equity, whether contingent or matured,
liquidated or unliquidated, known or unknown, direct or
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derivative ("Claims"), including, without limitation, any and all Claims that
the Receiver and/or the Wood River Entities ever had, now have or hereafter can,
shall or may have, relating to Endwave, the circumstances giving rise to the SEC
Action and the Endwave Filed Claim from the beginning of time until the date of
this Agreement; provided however, that nothing herein shall release the Endwave
Parties from any of their obligations under the terms of this Agreement and the
Registration Rights Agreement.
6. Effective on the occurrence of either the Minimum Sale Date or the
Offering Termination Date, by operation of this section (for the avoidance of
doubt, without the need for any further steps or actions to be taken by any
party), the Endwave Parties hereby release the Receiver and the Wood River
Entities from any and all Claims, including, without limitation, any and all
Claims that any of the Endwave Parties ever had, now have or hereafter can,
shall or may have, relating to the Wood River Entities, the circumstances giving
rise to the SEC Action and the Endwave Filed Claim from the beginning of time
until the date of this Agreement; provided however, that nothing herein shall
release the Receiver and the Wood River Entities from any of their obligations
under the terms of this Agreement and the Registration Rights Agreement.
7. Endwave and the Receiver each understand that this Agreement
includes a release of all unknown and unsuspected claims and acknowledge that it
or he has read and understands Section 1542 of the California Civil Code, which
states:
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 EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Endwave and the Receiver hereby waive, on their own behalf and, in the case of
the Receiver, on behalf of the Wood River Entities, all rights and benefits
under Section 1542 of the California
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Civil Code and any other similar law with regard to this Agreement, including
the release of unknown and unsuspected claims contained herein.
8. To more fully effectuate the release contained in paragraph 6
above, within three business days of its receipt of the Payment and the Offering
or Placement Expenses, Endwave shall withdraw with prejudice the Endwave Filed
Claim.
9. The Parties hereto represent and warrant that they are fully
authorized to enter into and perform under this Agreement, on behalf of
themselves (and, in the case of the Receiver, the Wood River Entities), without
any further or other consent or authorization from any person or entity, except
with respect to the Receiver, whose authority to perform this Agreement is
subject to approval by the Court.
10. This Agreement may not be modified, amended or waived except in
writing by the Party against whom such modification, amendment or waiver is
sought to be enforced.
11. This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of New York without regard to the conflict
of law rules thereof. The Court shall have exclusive jurisdiction over all
matters related to this Agreement, including, among other things, for the
purpose of ensuring that the Offering or Placement Expenses referred to in
paragraph 3 above and the Payment referred to in paragraph 4 above are not
subject to disgorgement for any reason.
12. This Agreement shall be binding upon and shall inure to the
benefit of the Parties hereto and their respective successors and assigns.
13. This Agreement constitutes the sole and entire agreement and
understanding of the Parties hereto with respect to the subject matter of this
Agreement and
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supersedes all prior agreements, whether written or oral, with respect hereto.
All prior discussions, agreements and understandings of every kind and nature
among the Parties with respect thereto are merged into and superseded by this
Agreement.
14. This Agreement may be executed by facsimile and in any number of
counterparts, each of which when so executed shall be deemed an original, but
all such counterparts shall constitute but one and the same Agreement.
15. It is expressly understood and agreed by the Parties hereto that
(i) this Agreement is executed and delivered by the Receiver, not individually
or personally but solely in his capacity as Receiver for the Wood River
Entities, in the exercise of the powers and authority conferred and vested in
him under the Preliminary Injunction Order; (ii) each of the representations,
undertakings, and agreements made herein on the part of the Receiver is made and
intended not as personal representations, undertakings and agreements by the
Receiver but is made and intended for the purpose of binding only the Receiver
in his capacity as Receiver for the Wood River Entities; and (iii) under no
circumstances shall the Receiver be personally liable for the payment of any
indebtedness or expenses of the Wood River Entities or be liable for the breach
or failure of any obligation, representation, warranty, or covenant made or
undertaken by the Wood River Entities under this Agreement.
16. All notices, requests and other communications provided in
connection with this Agreement, whether or not required, shall be in writing,
shall be delivered by hand, by first-class mail or overnight courier, shall be
deemed given when received (whether or not accepted) or, in the case of a
mailing, upon deposit with the U.S. Mail, and shall be addressed as set forth
below or to such other persons or addresses as may designated by the Parties in
writing from time to time.
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NOTICE TO THE RECEIVER: NOTICE TO ENDWAVE:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq. ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. President and Chief Executive Officer
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. Endwave Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ LLP ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ III, Esq.
Cooley Godward Kronish LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, AS RECEIVER ENDWAVE CORPORATION
FOR THE WOOD RIVER ENTITIES
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- --------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, not individually but ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
solely as the Receiver for the Wood President and Chief Executive Officer
River Entities Endwave Corporation
▇/▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇
▇▇▇▇▇▇▇ "▇"
▇▇▇▇▇▇ ▇▇▇▇▇▇ DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - - - - - x
SECURITIES AND EXCHANGE COMMISSION :
:
Plaintiff, :
:
-against- : Civil Action No.
: 05-CV-8713 (NRB)
WOOD RIVER CAPITAL MANAGEMENT, L.L.C., :
WOOD RIVER ASSOCIATES, L.L.C., ▇▇▇▇ :
HUNTING WHITTIER, WOOD RIVER PARTNERS, : ECF Case
L.P., and WOOD RIVER PARTNERS OFFSHORE, :
LTD., :
:
Defendants.
- - - - - - - - - - - - - - - - - - - - - - - x
ORDER AUTHORIZING AND APPROVING SETTLEMENT AGREEMENT
BY AND BETWEEN ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, AS COURT-APPOINTED
RECEIVER FOR THE WOOD RIVER ENTITIES, AND ENDWAVE CORPORATION
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as court-appointed receiver (the "Receiver") for
Wood River Partners, L.P., Wood River Partners Offshore, Ltd., Wood River
Capital Management, L.L.C., and Wood River Associates, L.L.C. (collectively, the
"Wood River Entities"), having presented to the Court for approval a certain
Settlement Agreement with Endwave Corporation ("Endwave"), dated as of May 17,
2007 (the "Settlement Agreement") (a copy of which is annexed hereto as Exhibit
"A"); and the Court having considered the Settlement Agreement and any and all
pleadings filed herein; and after due deliberation and sufficient cause
appearing therefor; it is
ORDERED, that the Settlement Agreement be, and the same hereby is,
approved in all respects; and it is further
ORDERED, that the Receiver is hereby authorized to execute and deliver
the Settlement Agreement, and to take any and all actions required to consummate
the transactions contemplated thereby; and it is further
ORDERED, that the Receiver is hereby authorized to execute and deliver
the Registration Rights Agreement (as defined in the Settlement Agreement), and
to take any and all actions required to consummate the transactions contemplated
thereby; and it is further
ORDERED, that the Receiver is hereby authorized to enter into such
underwriting, placement or similar agreements as are necessary or appropriate
for purposes of completing the transactions contemplated by the Registration
Rights Agreement and to pay such underwriting or placement commissions, fees or
discounts, up to a maximum of 6% of the gross proceeds of any offering or
placement, in connection with those transactions; and it is further
ORDERED, that nothing set forth in this Order or the Settlement
Agreement is intended to or shall in any way alter or modify the Preliminary
Injunction Order or prejudice the rights of the SEC, and the SEC's rights are
specifically and fully reserved; and it is further
ORDERED, that this Court shall retain exclusive jurisdiction to
construe and enforce this Order.
Dated: New York, New York
May ___, 2007
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▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
United States District Judge
2EXHIBIT "B"
