EXHIBIT 10.2
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: November 12, 2004
Original Set Price (subject to adjustment herein): $0.286
$________________
CONVERTIBLE DEBENTURE
DUE NOVEMBER 12, 2007
THIS DEBENTURE is one of a series of duly authorized and issued
Convertible Debentures of WaveRider Communications Inc., a Nevada corporation,
having a principal place of business at 000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx X0X 0X0 (the "Company"), designated as its Convertible Debenture, due
November 12, 2007 (the "Debenture(s)").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ on November 12, 2007 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"Maturity Date"). This Debenture is subject to the following additional
provisions:
Section 1. Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Purchase Agreement,
and (b) the following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in
Section 5(d).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence after the
date hereof of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 33% of the voting securities
of the Company, or (ii) a replacement at one time or within a three
year period of more than one-half of the members of the Company's board
of directors which is not approved by a majority of those individuals
who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors
on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on
the date hereof), or (iii) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i) or (ii).
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"Conditional Redemption Price" shall have the meaning set
forth in Section 6(b).
"Conditional Redemption Right" shall have the meaning set
forth in Section 6(b).
"Conversion Date" shall have the meaning set forth in Section
4(a) hereof.
"Conversion Shares" means the shares of Common Stock issuable
upon conversion of Debentures.
"Dilutive Issuance" shall have the meaning set forth in
Section 5(b) hereof.
"Effectiveness Period" shall have the meaning given to such
term in the Registration Rights Agreement.
"Equity Conditions" shall mean, during the period in question,
(i) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notice of
Conversions, if any, (ii) all liquidated damages and other amounts
owing in respect of the Debentures shall have been paid; (iii) there is
an effective Registration Statement pursuant to which the Holder is
permitted to utilize the prospectus thereunder to resell all of the
shares issuable pursuant to the Transaction Documents (and the Company
believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iv) the Common Stock is
trading on the Trading Market and all of the shares issuable pursuant
to the Transaction Documents are listed for trading on a Trading Market
(and the Company believes, in good faith, that trading of the Common
Stock on a Trading Market will continue uninterrupted for the
foreseeable future), (v) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction
Documents, (vi) there is then existing no Event of Default or event
which, with the passage of time or the giving of notice, would
constitute an Event of Default, (vii) all of the shares issued or
issuable pursuant to the transaction proposed would not violate the
limitations set forth in Section 4(c) and (viii) no public announcement
of a pending or proposed Fundamental Transaction, Change of Control
Transaction or acquisition transaction has occurred that has not been
consummated.
"Event of Default" shall have the meaning set forth in
Section 8.
"Fundamental Transaction" shall have the meaning set forth in
Section 5(d).
"Mandatory Prepayment Amount" for any Debentures shall equal
the sum of (i) the greater of: (A) 120% of the principal amount of
Debentures to be prepaid, or (B) the principal amount of Debentures to
be prepaid divided by the Set Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the Closing Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in
respect of such Debentures; provided, however, in connection with a
Fundamental Transaction pursuant to Section 8(a)(viii), subsection
(i)(A) of this definition shall be equal to 100% of the principal
amount of the Debentures to be prepaid.
"Notice Date" shall have the meaning set forth in Section
6(a).
"Optional Redemption Notice" shall have the meaning set forth
in Section 6(a).
"Optional Redemption Price" shall have the meaning set forth
in Section 6(a).
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
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"Purchase Agreement" means the Securities Purchase Agreement,
dated as of November 12, 2004, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Conversion
Shares and naming the Holder as a "selling stockholder" thereunder.
"Set Price" shall have the meaning set forth in Section 4(b).
Section 2. Interest.
a) No Payment of Interest. Except as specifically set forth in
this Debenture, the Holder acknowledges and agrees that the Company
shall not pay interest to the Holder on this Debenture.
b) Prepayment. Except as otherwise set forth in this
Debenture, the Company may not prepay any portion of the principal
amount of this Debenture without the prior written consent of the
Holder.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable for
an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration of transfer
or exchange.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged
only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment to
the Company for transfer of this Debenture, the Company and any agent
of the Company may treat the Person in whose name this Debenture is
duly registered on the Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other
purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
Section 4. Conversion.
a) Voluntary Conversion. At any time after the Original Issue
Date until this Debenture is no longer outstanding, this Debenture
shall be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time (subject
to the limitations on conversion set forth in Section 4(c) hereof). The
Holder shall effect conversions by delivering to the Company the form
of Notice of Conversion attached hereto as Annex A (a "Notice of
Conversion"), specifying therein the principal amount of Debentures to
be converted and the date on which such conversion is to be effected (a
"Conversion Date"). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of
Conversion is provided hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender Debentures to the
Company unless the entire principal amount of this Debenture has been
so converted. Conversions hereunder shall have the effect of lowering
the outstanding principal amount of this Debenture in an amount equal
to the applicable conversion. The Holder and the Company shall maintain
records showing the principal amount converted and the date of such
conversions. The Company shall deliver any objection to any Notice of
Conversion within 1 Business Day of receipt of such notice. In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and
unconverted principal amount of this Debenture may be less than the
amount stated on the face hereof.
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b) Conversion Price. The conversion price in effect on any
Conversion Date shall be equal to $0.286 (subject to adjustment
herein)(the "Set Price").
c) Conversion Limitations; Xxxxxx's Restriction on Conversion.
The Company shall not effect any conversion of this Debenture, and the
Holder shall not have the right to convert any portion of this
Debenture, pursuant to Section 4(a), Section 6(b) or otherwise, to the
extent that after giving effect to such conversion, the Holder
(together with the Holder's affiliates), as set forth on the applicable
Notice of Conversion, would beneficially own in excess of 4.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to such conversion. For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by
the Holder and its affiliates shall include the number of shares of
Common Stock issuable upon conversion of this Debenture with respect to
which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, nonconverted portion of this
Debenture beneficially owned by the Holder or any of its affiliates and
(B) exercise or conversion of the unexercised or nonconverted portion
of any other securities of the Company (including, without limitation,
any other Debentures or the Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates. Except as
set forth in the preceding sentence, for purposes of this Section 4(c),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act. To the extent that the limitation contained
in this section applies, the determination of whether this Debenture is
convertible (in relation to other securities owned by the Holder) and
of which a portion of this Debenture is convertible shall be in the
sole discretion of such Holder. To ensure compliance with this
restriction, the Holder will be deemed to represent to the Company each
time it delivers a Notice of Conversion that such Notice of Conversion
has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of
such determination. For purposes of this Section 4(c), in determining
the number of outstanding shares of Common Stock, the Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x)
the Company's most recent Form 10-QSB or Form 10-KSB, as the case may
be, (y) a more recent public announcement by the Company or (z) any
other notice by the Company or the Company's Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon the
written or oral request of the Holder, the Company shall within two
Trading Days confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Debenture, by the Holder or its affiliates since the
date as of which such number of outstanding shares of Common Stock was
reported. The provisions of this Section 4(c) may be waived by the
Holder upon, at the election of the Holder, not less than 61 days'
prior notice to the Company, and the provisions of this Section 4(c)
shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of
waiver).
d) Mechanics of Conversion
i. Conversion Shares Issuable Upon Conversion of
Principal Amount. The number of shares of Common Stock
issuable upon a conversion hereunder shall be determined by
the quotient obtained by dividing (x) the outstanding
principal amount of this Debenture to be converted by (y) the
Set Price.
ii. Delivery of Certificate Upon Conversion. Not
later than three Trading Days after any Conversion Date, the
Company will deliver to the Holder a certificate or
certificates representing the Conversion Shares which shall be
free of restrictive legends and trading restrictions (other
than those required by the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the
conversion of Debentures. The Company shall, if available and
if allowed under applicable securities laws, use its best
efforts to deliver any certificate or certificates required to
be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another
established clearing corporation performing similar functions.
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iii. Failure to Deliver Certificates. If in the case
of any Notice of Conversion such certificate or certificates
are not delivered to or as directed by the applicable Holder
by the fifth Trading Day after a Conversion Date, the Holder
shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the
Company shall immediately return the certificates representing
the principal amount of Debentures tendered for conversion.
iv. Obligation Absolute; Partial Liquidated Damages.
If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(d)(ii)
by the third Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $5,000 of principal
amount being converted, $50 per Trading Day (increasing to
$100 per Trading Day after 3 Trading Days after such damages
begin to accrue) for each Trading Day after such third Trading
Day until such certificates are delivered. Nothing herein
shall limit a Xxxxxx's right to pursue actual damages or
declare an Event of Default pursuant to Section 8 herein for
the Company's failure to deliver Conversion Shares within the
period specified herein and such Holder shall have the right
to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit the Holders from seeking to enforce
damages pursuant to any other Section hereof or under
applicable law.
v. Compensation for Buy-In on Failure to Timely
Deliver Certificates Upon Conversion. In addition to any other
rights available to the Holder, if the Company fails for any
reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third Trading
Day after the Conversion Date, and if after such third Trading
Day the Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by such Holder of the
Conversion Shares which the Holder anticipated receiving upon
such conversion (a "Buy-In"), then the Company shall (A) pay
in cash to the Holder (in addition to any ------ remedies
available to or elected by the Holder) the amount by which (x)
the Holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds
(y) the product of (1) the aggregate number of shares of
Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the actual sale price of
the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation
and (B) at the option of the Holder, either reissue Debentures
in principal amount equal to the principal amount of the
attempted conversion or deliver to the Holder the number of
shares of Common Stock that would have been issued had the
Company timely complied with its delivery requirements under
Section 4(d)(ii). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of Debentures
with respect to which the actual sale price of the Conversion
Shares at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation
was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect
of the Buy-In. Notwithstanding anything contained herein to
the contrary, if a Holder requires the Company to make payment
in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full
such payment, the Company shall not be required to pay such
Holder liquidated damages under Section 4(d)(iv) in respect of
the certificates resulting in such Buy-In.
5
vi. Reservation of Shares Issuable Upon Conversion.
The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of
Common Stock solely for the purpose of issuance upon
conversion of the Debentures, free from preemptive rights or
any other actual contingent purchase rights of persons other
than the Holders, not less than such number of shares of the
Common Stock as shall (subject to any additional requirements
of the Company as to reservation of such shares set forth in
the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the conversion
of the outstanding principal amount of the Debentures. The
Company covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Registration Statement is then effective under the Securities
Act, registered for public sale in accordance with such
Registration Statement.
vii. Fractional Shares. Upon a conversion hereunder
the Company shall not be required to issue stock certificates
representing fractions of shares of the Common Stock, but may
if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Price at such
time. If the Company elects not, or is unable, to make such a
cash payment, the Holder shall be entitled to receive, in lieu
of the final fraction of a share, one whole share of Common
Stock.
viii. Transfer Taxes. The issuance of certificates
for shares of the Common Stock on conversion of the Debentures
shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided
that the Company shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issuance
and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debentures so converted
and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any
time while the Debentures are outstanding: (A) shall pay a stock
dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall
not include any shares of Common Stock issued by the Company pursuant
to this Debenture), (B) subdivide outstanding shares of Common Stock
into a larger number of shares, (C) combine (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller
number of shares, or (D) issue by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then the Set
Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock outstanding after such event.
Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Company or any Subsidiary
thereof, as applicable, at any time while Debentures are outstanding,
shall offer, sell, grant any option to purchase or offer, sell or grant
any right to reprice its securities, or otherwise dispose of or issue
(or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any
Person to acquire shares of Common Stock, at an effective price per
share less than the then Set Price (such lower price, the "Base Set
Price" and such issuances collectively, a "Dilutive Issuance"), as
adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options
or rights per share which is issued in connection with such issuance,
be entitled to receive shares of Common Stock at an effective price per
share which is less than the Set Price, such issuance shall be deemed
to have occurred for less than the Set Price), then the Set Price shall
be reduced to equal the Base Set Price. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The
Company shall notify the Holder in writing, no later than the Business
Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable
issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms.
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c) Pro Rata Distributions. If the Company, at any time while
Debentures are outstanding, shall distribute to all holders of Common
Stock (and not to Holders) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security, then in
each such case the Set Price shall be determined by multiplying such
Set Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Closing Price
determined as of the record date mentioned above, and of which the
numerator shall be such Closing Price on such record date less the then
fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in
good faith. In either case the adjustments shall be described in a
statement provided to the Holders of the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately
after the record date mentioned above.
d) Fundamental Transaction. If, at any time while this
Debenture is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the
Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or
property (in any such case, a "Fundamental Transaction"), then upon any
subsequent conversion of this Debenture, the Holder shall have the
right to receive, for each Conversion Share that would have been
issuable upon such conversion absent such Fundamental Transaction, the
same kind and amount of securities, cash or property as it would have
been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the "Alternate
Consideration"). For purposes of any such conversion, the determination
of the Set Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Set Price among the
Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration
it receives upon any conversion of this Debenture following such
Fundamental Transaction. To the extent necessary to effectuate the
foregoing provisions, any successor to the Company or surviving entity
in such Fundamental Transaction shall issue to the Holder a new
debenture consistent with the foregoing provisions and evidencing the
Holder's right to convert such debenture into Alternate Consideration.
The terms of any agreement pursuant to which a Fundamental Transaction
is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c)
and insuring that this Debenture (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to
a Fundamental Transaction.
e) Calculations. All calculations under this Section 5 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 5, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
f) Exempt Issuance. Notwithstanding the foregoing, no
adjustment will be made under this Section 5 in respect of an Exempt
Issuance.
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g) Re-Adjustment of Set Price. If the Set Price has been
adjusted based on the issuance of a right, option, warrant and/or
Common Stock Equivalent and all of such right, option, warrant and/or
Common Stock Equivalent expires pursuant to its own terms before it is
exercised, exchanged and/or converted, an upward adjustment will be
made such that the Set Price will no longer reflect the issuance of
such right, option, warrant and/or Common Stock Equivalent.
h) Notice to Holders.
i. Adjustment to Set Price. Whenever the Set Price is
adjusted pursuant to any of this Section 5, the Company shall
promptly mail to each Holder a notice setting forth the Set
Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. If the
Company issues a variable rate security, the Company shall be
deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible conversion or exercise price at which
such securities may be converted or exercised in the case of a
Variable Rate Transaction (as defined in the Purchase
Agreement), or the lowest possible adjustment price in the
case of an MFN Transaction (as defined in the Purchase
Agreement). The term "Variable Rate Transaction" shall mean a
transaction in which the Company issues or sells (i) any debt
or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional
shares of Common Stock either (A) at a conversion, exercise or
exchange rate or other price that is based upon and/or varies
with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such
debt or equity securities, or (B) with a conversion, exercise
or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the
Company or the market for the Common Stock. The term "MFN
Transaction" shall mean a transaction in which the Company
issues or sells any securities in a capital raising
transaction or series of related transactions which grants to
an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable
than those granted to such investor in such offering.
ii. Notice to Allow Conversion by Xxxxxx. If (A) the
Company shall declare a dividend (or any other distribution)
on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of
any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of
conversion of the Debentures, and shall cause to be mailed to
the Holders at their last addresses as they shall appear upon
the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled
to exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange;
provided, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in
such notice. Holders are entitled to convert Debentures during
the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
8
Section 6. Redemption.
a) Optional Redemption by the Company. The Company shall have
the right, at any time after the Effective Date if the Closing Price on
each of the 20 Trading Days (which Trading Days shall only commence
after the Effective Date) immediately prior to the Notice Date (as
defined below) is greater than 200% of the then Set Price, upon 10
Trading Days' prior written notice to the Holder (an "Optional
Redemption Notice" (the date such notice is received by the Holder is
the "Notice Date"), to redeem no less than the entire principal amount
of this Debenture then held by the Holder, at a cash price equal to the
120% of the principal amount outstanding plus any fees owing thereon
(the "Optional Redemption Price"). The Company may only effect an
Optional Redemption Notice if each of the Equity Conditions shall be
true, unless such Equity Condition, applicable to such Optional
Redemption, is waived by the Holder, in writing. If any of the Equity
Conditions shall cease to be in effect during the period between the
Notice Date and the date the Optional Redemption Price is paid in full,
then the Holders subject to such redemption may elect, by written
notice to the Company given at any time after any of the foregoing
conditions shall cease to be in effect, to invalidate ab initio
--------- such redemption, notwithstanding anything herein contained to
the contrary. In any case, the Holders may convert any portion of the
outstanding principal amount of the Debentures subject to an Optional
Redemption Notice prior to the date that the Optional Redemption Price
is due and paid in full.
b) Conditional Redemption at Election of Holder. On any
Conversion Date after the earlier of the Effective Date or the 150th
day after the Closing Date ("Conditional Redemption Commencement
Date"), if the Closing Price for each of the 20 consecutive Trading
Days during the period prior to such date is less than 120% of the Set
Price then in effect, the Holder shall have the right ("Conditional
Redemption Right") to cause the Company to either (i) redeem the
portion of this Debenture then subject to the Notice of Conversion
applicable to such Conversion Date based on a redemption price equal to
120% of the principal amount of such portion of the Debenture (the
"Conditional Redemption Price") or (ii) issue Conversion Shares based
on a conversion price equal to 90% of the average of the lowest 3
Closing Prices during such 20 day period. The determination of whether
to honor a Conditional Redemption Right in cash or shares shall be at
the election of the Company subject to at least 10 prior Trading Days'
notice to the Holder. The notice requirement for the Company's election
to honor a Conditional Redemption Right in cash or shares shall operate
as follows: Prior to the 10th Trading Day prior to the Conditional
Redemption Commencement Date, the Company shall notify the Holder of
its election to issue shares or cash upon the Holder's future exercise
of its Conditional Redemption Right. Failure to so notify the Holder
prior to such date shall be deemed an election to pay shares until
further notified hereunder. The Company may notify the Holder that it
changes its election any time thereafter provided any such change in
election shall not be effective until the 11th Trading Day following
such duly delivered notice. All conversions hereunder shall be made as
if pursuant to Section 4 and the other sub-sections relating thereto,
including but not limited to, liquidated damages and fees for late
delivery of Conversion Shares. Nothing herein shall preclude the Holder
from converting this Debenture to the extent this Debenture remains
unpaid and unconverted after the redemption date as set forth in
sub-section (c) below.
c) Redemption Procedure. The Optional Redemption Price is due
on the 20th Trading Day following the Notice Date and the Conditional
Redemption Price is due on the 5th Trading Day following the applicable
Conversion Date unless otherwise paid in shares of Common Stock, in
which case the delivery of such shares shall be otherwise subject to
Section 4. If any portion of the Optional Redemption Price or
Conditional Redemption Price shall not be paid by the Company by the
date such payment is due, interest shall accrue thereon at the rate of
18% per annum (or the maximum rate permitted by applicable law,
whichever is less) until such redemption price plus all such interest
is paid in full. In addition, if any portion of the Optional Redemption
Price or Conditional Redemption Price remains unpaid after such date,
the Holders subject to such redemption may elect, by written notice to
the Company given at any time thereafter, to invalidate ab initio such
redemption, notwithstanding anything herein contained to the contrary.
If a Holder elects to invalidate such redemption the Company shall
promptly, and, in any event, not later than 3 Trading Days from receipt
of such Xxxxxx's notice of such election, return to such Holder all of
the Debentures for which the Optional Redemption Price or Conditional
Redemption Price shall not have been paid in full.
9
Section 7. Negative Covenants. So long as any portion of this Debenture
is outstanding, the Company will not and will not permit any of its Subsidiaries
to, directly or indirectly:
(i) enter into, create, incur, assume or suffer to exist any
indebtedness or liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom that is senior to, or pari
passu with, in any respect, the Company's obligations under the
Debentures;
(ii) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder;
(iii) repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a de minimis number of shares of its Common
Stock or other equity securities other than as to the Conversion Shares
to the extent permitted or required under the Transaction Documents or
as otherwise permitted by the Transaction Documents; or
(iv) enter into any agreement with respect to any of the
foregoing.
Section 8. Events of Default.
a) "Event of Default", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. any default in the payment of the principal amount
or liquidated damages in respect of, any Debenture, in each
case free of any claim of subordination, as and when the same
shall become due and payable (whether on a Conversion Date or
the Maturity Date or by acceleration or otherwise) which
default, is not cured, if possible to cure, within 3 days of
notice of such default sent by the Holder;
ii. the Company shall materially fail to observe or
perform any other covenant, agreement or warranty contained in
this Debenture or any of the other Transaction Documents
(other than a breach by the Company of its obligations to
deliver shares of Common Stock to the Holder upon conversion
which breach is addressed in clause (xii) below) which failure
is not cured, if possible to cure, within the earlier to occur
of (A) 5 Trading Days after notice of such default sent by the
Holder or by any other Holder and (B)10 Trading Days after the
Company shall become or should have become aware of such
failure;
iii. a material default or material event of default
(subject to any grace or cure period provided for in the
applicable agreement, document or instrument) shall occur
under (A) any of the Transaction Documents other than the
Debentures, or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary
is bound;
iv. any representation or warranty made herein, in
any other Transaction Document, shall be untrue or incorrect
in any material respect as of the date when made or deemed
made;
10
v. (i) the Company or any of its Subsidiaries shall
commence, or there shall be commenced against the Company or
any such Subsidiary, a case under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary commences any other
proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any Subsidiary
thereof or (ii) there is commenced against the Company or any
Subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days;
or (iii) the Company or any Subsidiary thereof is adjudicated
by a court of competent jurisdiction insolvent or bankrupt; or
any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company or any Subsidiary
thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or (v) the
Company or any Subsidiary thereof makes a general assignment
for the benefit of creditors; or (vi) the Company shall fail
to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or
(vii) the Company or any Subsidiary thereof shall call a
meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or
(viii) the Company or any Subsidiary thereof shall by any act
or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or (ix) any
corporate or other action is taken by the Company or any
Subsidiary thereof for the purpose of effecting any of the
foregoing;
vi. the Company or any Subsidiary shall default in
any of its obligations under any mortgage, credit agreement or
other facility, indenture agreement, factoring agreement or
other instrument under which there may be issued, or by which
there may be secured or evidenced any indebtedness for
borrowed money or money due under any long term leasing or
factoring arrangement of the Company in an amount exceeding
$150,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise become due and
payable;
vii. the Common Stock shall not be eligible for
quotation on or quoted for trading on a Trading Market and
shall not again be eligible for and quoted or listed for
trading thereon within five Trading Days;
viii. the Company shall be a party to any Change of
Control Transaction or Fundamental Transaction, shall agree to
sell or dispose of all or in excess of 40% of its assets in
one or more transactions (whether or not such sale would
constitute a Change of Control Transaction) or shall redeem or
repurchase more than a de minimis number of its outstanding
shares of Common Stock or other equity securities of the
Company (other than redemptions of Conversion Shares and
repurchases of shares of Common Stock or other equity
securities of departing officers and directors of the Company;
provided such repurchases shall not exceed $100,000 for any
officer or director during the term of this Debenture);
ix. a Registration Statement shall not have been
declared effective by the Commission on or prior to the 180th
calendar day after the Original Issue Date (210th calendar day
in the event of a "full review" by the Commission);
x. if, during the Effectiveness Period (as defined in
the Registration Rights Agreement), the effectiveness of the
Registration Statement lapses for any reason or the Holder
shall not be permitted to resell Registrable Securities (as
defined in the Registration Rights Agreement) under the
Registration Statement, in either case, for more than 15
consecutive Trading Days or 25 non-consecutive Trading Days
during any 12 month period; provided, however, that in the
event that the Company is negotiating a merger, consolidation,
acquisition or sale of all or substantially all of its assets
or a similar transaction and in the written opinion of counsel
to the Company, the Registration Statement, would be required
to be amended to include information concerning such
transactions or the parties thereto that is not available or
may not be publicly disclosed at the time, the Company shall
be permitted an additional 15 consecutive Trading during any
12 month period relating to such an event;
xi. an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of
the Holder prior to the expiration of thirty days from the
Event Date (as defined in the Registration Rights Agreement)
relating thereto (other than an Event resulting from a failure
of an Registration Statement to be declared effective by the
Commission on or prior to the Effectiveness Date (as defined
in the Registration Rights Agreement), which shall be covered
by Section 8(a)(ix);
11
xii. the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after
a Conversion Date pursuant to and in accordance with Section
4(d) or the Company shall provide notice to the Holder,
including by way of public announcement, at any time, of its
intention not to comply with requests for conversions of any
Debentures in accordance with the terms hereof; or
xiii. the Company shall fail for any reason to pay in
full the amount of cash due pursuant to a Buy-In within 5
Trading Days after notice therefor is delivered hereunder or
shall fail to pay all amounts owed on account of an Event of
Default within five days of the date due.
b) Remedies Upon Event of Default. If any Event of Default
occurs and is continuing, the full principal amount of this Debenture,
together with any other amounts owing in respect thereof, to the date
of acceleration shall become, at the Holder's election, immediately due
and payable in cash. The aggregate amount payable upon an Event of
Default shall be equal to the Mandatory Prepayment Amount. Commencing 5
days after the occurrence of any Event of Default that results in the
eventual acceleration of this Debenture, the interest rate on this
Debenture shall accrue at the rate of 12% per annum, or such lower
maximum amount of interest permitted to be charged under applicable
law. All Debentures for which the full Mandatory Prepayment Amount
hereunder shall have been paid in accordance herewith shall promptly be
surrendered to or as directed by the Company. The Holder need not
provide and the Company hereby waives any presentment, demand, protest
or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have
all rights as a Debenture holder until such time, if any, as the full
payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
Section 9. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth
above, facsimile number (000) 000-0000, Attn: X. Xxxxx Xxxxxxxxxxx or
such other address or facsimile number as the Company may specify for
such purposes by notice to the Holders delivered in accordance with
this Section. Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
telephone number or address of such Xxxxxx appearing on the books of
the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (New York
City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required
to be given.
b) Absolute Obligation. Except as expressly provided herein,
no provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal
of and liquidated damages (if any) on, this Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct debt obligation of the Company and was issued at
an original issue discount to the principal amount. This Debenture
ranks pari passu with all other Debentures now or hereafter issued
under the terms set forth herein.
12
c) Lost or Mutilated Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new debenture for the principal amount
of this Debenture so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
d) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be
determined in accordance with the provisions of the Purchase Agreement.
e) Waiver. Any waiver by the Company or the Holder of a breach
of any provision of this Debenture shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach
of any other provision of this Debenture. The failure of the Company or
the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
f) Severability. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any interest or
other amount deemed interest due hereunder violates applicable laws
governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of
interest. The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the
Company from paying all or any portion of the principal of or interest
on this Debenture as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefits or advantage of
any such law, and covenants that it will not, by resort to any such
law, hinder, delay or impeded the execution of any power herein granted
to the Holder, but will suffer and permit the execution of every such
as though no such law has been enacted.
g) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
h) Headings. The headings contained herein are for convenience
only, do not constitute a part of this Debenture and shall not be
deemed to limit or affect any of the provisions hereof.
*********************
13
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
WAVERIDER COMMUNICATIONS INC.
By:__________________________________________
Name: X. Xxxxx Xxxxxxxxxxx
Title: Vice President and Chief Financial Officer
14
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert $__________ principal under
the Convertible Debenture of WaveRider Communications Inc., a Nevada corporation
(the "Company"), due on November 12, 2007, into shares of common stock, par
value $0.001 per share (the "Common Stock"), of the Company according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the holder for any conversion, except for
such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned
represents and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection with any
transfer of the aforesaid shares of Common Stock.
Holder
Holder is exercising Conditional Redemption Right ________(yes/no)
Conditional Redemption Price (in accordance with current Company
Election): $ ________
And/or Conversion Shares to be issued: ________ at a conversion
price of: $ ________
Conversion Date: ________
The Shares are to be issued in the name of _______________________., and stock
certificates representing such Shares are to be delivered to:
in accordance with the Transfer Agent Instructions, dated April ____, 2004,
delivered by the Company to Corporate Stock Transfer Inc.
Holder Signature: __________________________________________________________
Company
The Company confirms acceptance of this Notice of Conversion
(To be faxed to _______________________________________________within 1 Trading
Day of receipt by the Company).
Company Signature: ___________________________________ Date: _____________
Name:
Title:
Tel:
15
Schedule 1
CONVERSION SCHEDULE
The Convertible Debentures due on November 12, 2007, in the aggregate principal
amount of $____________ issued by WaveRider Communications Inc., a Nevada
corporation. This Conversion Schedule reflects conversions made under Section 4
of the above referenced Debenture.
Dated:
----------------------------------------------------------------------------------------------------------------
Aggregate Principal
Amount Remaining
Date of Conversion Subsequent to
(or for first entry, Original Conversion
Issue Date) Amount of Conversion (or original Company Attest
Principal Amount)
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16
