Exhibit 10.1
USURF America, Inc.
Shares of Series A Convertible Preferred Stock and Common Stock Warrants
SUBSCRIPTION AGREEMENT
October 29, 2004
Mercator Advisory Group LLC
Monarch Pointe Fund, Ltd.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
USURF America, Inc., a Nevada corporation (the "Company"), hereby confirms its
agreement with Monarch Pointe Fund, Ltd. ("Purchaser") and Mercator Advisory
Group, LLC ("MAG"), as set forth below.
1. The Securities. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the Purchasers an aggregate of: (a)
Ten Thousand (10,000) shares of its Series A Convertible Preferred Stock (the
"Series A Stock"), which shall be convertible into shares (the "Conversion
Shares") of the Company's Common Stock (the "Common Stock") in accordance with
the formula set forth in the Certificate of Designations further described below
and (b) an aggregate of Seven Million (7,000,000) warrants, substantially in the
forms attached hereto at Exhibits A-1 and A-2 (the "Warrants"), to acquire an
aggregate of up to Seven Million (7,000,000) shares of Common Stock (the
"Warrant Shares"). The rights, preferences and privileges of the Series A Stock
are as set forth in the Certificate of Designations of Series A Preferred Stock
as filed with the Secretary of State of the State of Nevada (the "Certificate of
Designations") in the form attached hereto as Exhibit B. The number of
Conversion Shares and Warrant Shares that any Purchaser may acquire at any time
are subject to limitation in the Certificate of Designations and in the
Warrants, respectively, so that the aggregate number of shares of Common Stock
of which such Purchaser and all persons affiliated with such Purchaser have
beneficial ownership (calculated pursuant to Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) does not at any time exceed 9.99% of the
Company's then-outstanding Common Stock.
The Series A Stock and the Warrants are sometimes herein collectively
referred to as the "Securities." This Agreement and the Certificate of
Designations are sometimes herein collectively referred to as the "Transaction
Documents."
The Securities will be offered and sold to the Purchasers without such
offers and sales being registered under the Securities Act of 1933, as amended
(together with the rules and regulations of the Securities and Exchange
Commission (the "SEC") promulgated thereunder, the "Securities Act"), in
reliance on exemptions therefrom.
In connection with the sale of the Securities, the Company has made
available (including electronically via the SEC's XXXXX system) to Purchasers
its periodic and current reports, forms, schedules, proxy statements and other
documents (including exhibits and all other information incorporated by
reference) filed with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These reports, forms, schedules, statements,
documents, filings and amendments, are collectively referred to as the
"Disclosure Documents." All references in this Agreement to financial statements
and schedules and other information which is "contained," "included" or "stated"
in the Disclosure Documents (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules, documents,
exhibits and other information which is incorporated by reference in the
Disclosure Documents.
2. Representations and Warranties of the Company. Except as set forth on
the Disclosure Schedule (the "Disclosure Schedule") delivered by the Company to
Purchasers on the Closing Date (as defined in Section 3 below), the Company
represents and warrants to and agrees with Purchasers and MAG as follows:
(a) The Disclosure Documents as of their respective dates did not,
and will not (after giving effect to any updated disclosures therein) as of the
Closing Date, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Disclosure
Documents and the documents incorporated or deemed to be incorporated by
reference therein, at the time they were filed or hereafter are filed with the
SEC, complied and will comply, at the time of filing, in all material respects
with the requirements of the Securities Act and/or the Exchange Act, as the case
may be, as applicable.
(b) Schedule A attached hereto sets forth a complete list of the
subsidiaries of the Company (the "Subsidiaries"). Each of the Company and its
Subsidiaries has been duly incorporated and each of the Company and the
Subsidiaries is validly existing in good standing as a corporation under the
laws of its jurisdiction of incorporation, with the requisite corporate power
and authority to own its properties and conduct its business as now conducted as
described in the Disclosure Documents and is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or other), properties or results of operations of
the Company and the Subsidiaries, taken as a whole (any such event, a "Material
Adverse Effect"); as of the Closing Date, the Company will have the authorized,
issued and outstanding capitalization set forth in on Schedule B attached hereto
(the "Company Capitalization"); except as set forth in the Disclosure Documents
or on Schedule A, the Company does not have any subsidiaries or own directly or
indirectly any of the capital stock or other equity or long-term debt securities
of or have any equity interest in any other person or entity; all of the
outstanding shares of capital stock of the Company and the Subsidiaries have
been duly authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights and are owned
free and clear of all liens, encumbrances, equities, and restrictions on
transferability (other than those imposed by the Securities Act and the state
securities or "Blue Sky" laws) or voting; except as set forth in the Disclosure
Documents, all of the outstanding shares of capital stock of the Subsidiaries
are owned, directly or indirectly, by the Company; except as set forth in the
Disclosure Documents, no options, warrants or other rights to purchase from the
Company or any Subsidiary, agreements or other obligations of the Company or any
Subsidiary to issue or other rights to convert any obligation into, or exchange
any securities for, shares of capital stock of or ownership interests in the
Company or any Subsidiary are outstanding; and except as set forth in the
Disclosure Documents or on Schedule C, there is no agreement, understanding or
arrangement among the Company or any Subsidiary and each of their respective
stockholders or any other person relating to the ownership or disposition of any
capital stock of the Company or any Subsidiary or the election of directors of
the Company or any Subsidiary or the governance of the Company's or any
Subsidiary's affairs, and, if any, such agreements, understandings and
arrangements will not be breached or violated as a result of the execution and
delivery of, or the consummation of the transactions contemplated by, the
Transaction Documents.
(c) The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Transaction Documents.
Each of the Transaction Documents has been duly and validly authorized by the
Company and, when executed and delivered by the Company, will constitute a valid
and legally binding agreement of the Company, enforceable against the Company in
accordance with its terms except as the enforcement thereof may be limited by
(A) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally or (B) general principles of equity and the
discretion of the court before which any proceeding therefore may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity) (collectively, the "Enforceability Exceptions").
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(d) The Series A Stock and the Warrants have been duly authorized
and, when issued upon payment thereof in accordance with this Agreement, will
have been validly issued, fully paid and non-assessable. The Conversion Shares
issuable have been duly authorized and validly reserved for issuance, and when
issued upon conversion of the Series A Stock in accordance with the terms of the
Certificate of Designations, will have been validly issued, fully paid and
non-assessable. The Warrant Shares have been duly authorized and validly
reserved for issuance, and when issued upon exercise of the Warrants in
accordance with the terms thereof, will have been validly issued, fully paid and
non-assessable. The Common Stock of the Company conforms to the description
thereof contained in the Disclosure Documents. The stockholders of the Company
have no preemptive or similar rights with respect to the Common Stock.
(e) No consent, approval, authorization, license, qualification,
exemption or order of any court or governmental agency or body or third party is
required for the performance of the Transaction Documents by the Company or for
the consummation by the Company of any of the transactions contemplated thereby,
or the application of the proceeds of the issuance of the Securities as
described in this Agreement, except for such consents, approvals,
authorizations, licenses, qualifications, exemptions or orders (i) as have been
obtained on or prior to the Closing Date, (ii) as are not required to be
obtained on or prior to the Closing Date that will be obtained when required, or
(iii) the failure to obtain which would not, individually or in the aggregate,
have a Material Adverse Effect.
(f) Except as set forth on Schedule D, none of the Company or the
Subsidiaries is (i) in material violation of its articles of incorporation or
bylaws (or similar organizational document), (ii) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to it or any of
its properties or assets, which breach or violation would, individually or in
the aggregate, have a Material Adverse Effect, or (iii) except as described in
the Disclosure Documents, in default (nor has any event occurred which with
notice or passage of time, or both, would constitute a default) in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate or agreement or
instrument to which it is a party or to which it is subject, which default
would, individually or in the aggregate, have a Material Adverse Effect.
(g) The execution, delivery and performance by the Company of the
Transaction Documents and the consummation by the Company of the transactions
contemplated thereby and the fulfillment of the terms thereof will not (a)
violate, conflict with or constitute or result in a breach of or a default under
(or an event that, with notice or lapse of time, or both, would constitute a
breach of or a default under) any of (i) the terms or provisions of any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease,
license, franchise agreement, permit, certificate or agreement or instrument to
which any of the Company or the Subsidiaries is a party or to which any of their
respective properties or assets are subject, (ii) the Certificate of
Incorporation or bylaws of any of the Company or the Subsidiaries (or similar
organizational document) or (iii) any statute, judgment, decree, order, rule or
regulation of any court or governmental agency or other body applicable to the
Company or the Subsidiaries or any of their respective properties or assets or
(b) result in the imposition of any lien upon or with respect to any of the
properties or assets now owned or hereafter acquired by the Company or any of
the Subsidiaries; which violation, conflict, breach, default or lien would,
individually or in the aggregate, have a Material Adverse Effect.
(h) The audited consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations, cash flows and changes in shareholders' equity of the entities,
at the dates and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis; the interim un-audited consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations and cash flows of the entities, at the dates and for the periods
to which they relate subject to year-end audit adjustments and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis with the audited consolidated financial statements included
therein; the selected financial and statistical data included in the Disclosure
Documents present fairly the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial statements
included therein, except as otherwise stated therein; and each of the auditors
previously engaged by the Company or to be engaged in the future by the Company
is an independent certified public accountant as required by the Securities Act
for an offering registered thereunder.
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(i) Except as described in the Disclosure Documents, there is not
pending or, to the knowledge of the Company, threatened any action, suit,
proceeding, inquiry or investigation, governmental or otherwise, to which any of
the Company or the Subsidiaries is a party, or to which their respective
properties or assets are subject, before or brought by any court, arbitrator or
governmental agency or body, that, if determined adversely to the Company or any
such Subsidiary, would, individually or in the aggregate, have a Material
Adverse Effect or that seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold hereunder
or the application of the proceeds therefrom or the other transactions described
in the Disclosure Documents.
(j) The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks, service marks, trade
names, copyrights and know-how that are necessary to conduct their businesses as
described in the Disclosure Documents. None of the Company or the Subsidiaries
has received any written notice of infringement of (or knows of any such
infringement of) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how that, if such
assertion of infringement or conflict were sustained, would, individually or in
the aggregate, have a Material Adverse Effect.
(k) Each of the Company and the Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all federal, state, local
and other governmental authorities, all self-regulatory organizations and all
courts and other tribunals presently required or necessary to own or lease, as
the case may be, and to operate its respective properties and to carry on its
respective businesses as now or proposed to be conducted as set forth in the
Disclosure Documents ("Permits"), except where the failure to obtain such
Permits would not, individually or in the aggregate, have a Material Adverse
Effect and none of the Company or the Subsidiaries has received any notice of
any proceeding relating to revocation or modification of any such Permit, except
as described in the Disclosure Documents and except where such revocation or
modification would not, individually or in the aggregate, have a Material
Adverse Effect.
(l) Subsequent to the respective dates as of which information is
given in the Disclosure Documents and except as described therein, (i) the
Company and the Subsidiaries have not incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions not
in the ordinary course of business or (ii) the Company and the Subsidiaries have
not purchased any of their respective outstanding capital stock, or declared,
paid or otherwise made any dividend or distribution of any kind on any of their
respective capital stock or otherwise (other than, with respect to any of such
Subsidiaries, the purchase of capital stock by the Company), (iii) there has not
been any material increase in the long-term indebtedness of the Company or any
of the Subsidiaries, (iv) there has not occurred any event or condition,
individually or in the aggregate, that has a Material Adverse Effect, and (v)
the Company and the Subsidiaries have not sustained any material loss or
interference with respect to their respective businesses or properties from
fire, flood, hurricane, earthquake, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or governmental
proceeding.
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(m) There are no material legal or governmental proceedings nor are
there any material contracts or other documents required by the Securities Act
to be described in a prospectus that are not described in the Disclosure
Documents. Except as described in the Disclosure Documents, none of the Company
or the Subsidiaries is in default under any of the contracts described in the
Disclosure Documents, has received a notice or claim of any such default or has
knowledge of any breach of such contracts by the other party or parties thereto,
except for such defaults or breaches as would not, individually or in the
aggregate, have a Material Adverse Effect.
(n) Each of the Company and the Subsidiaries has good and marketable
title to all real property described in the Disclosure Documents as being owned
by it and good and marketable title to the leasehold estate in the real property
described therein as being leased by it, free and clear of all liens, charges,
encumbrances or restrictions, except, in each case, as described in the
Disclosure Documents or such as would not, individually or in the aggregate,
have a Material Adverse Effect. All material leases, contracts and agreements to
which the Company or any of the Subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company or any such Subsidiary,
are, to the knowledge of the Company, valid and enforceable against the other
party or parties thereto and are in full force and effect.
(o) Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid all taxes shown as due thereon; and
other than tax deficiencies which the Company or any Subsidiary is contesting in
good faith and for which adequate reserves have been provided in accordance with
generally accepted accounting principles, there is no tax deficiency that has
been asserted against the Company or any Subsidiary that would, individually or
in the aggregate, have a Material Adverse Effect.
(p) None of the Company or the Subsidiaries is, or immediately after
the Closing Date will be, required to register as an "investment company" or a
company "controlled by" an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act").
(q) None of the Company or the Subsidiaries or, to the knowledge of
any of such entities' directors, officers, employees, agents or controlling
persons, has taken, directly or indirectly, any action designed, or that might
reasonably be expected, to cause or result in the stabilization or manipulation
of the price of the Common Stock.
(r) None of the Company, the Subsidiaries or any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act)
directly, or through any agent, engaged in any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) in connection with the offering of the Securities or engaged in
any other conduct that would cause such offering to be constitute a public
offering within the meaning of Section 4(2) of the Securities Act. Assuming the
accuracy of the representations and warranties of the Purchasers in Section 6
hereof, it is not necessary in connection with the offer, sale and delivery of
the Securities to the Purchasers in the manner contemplated by this Agreement to
register any of the Securities under the Securities Act.
(s) There is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company or any of the Subsidiaries which is pending
or, to the knowledge of the Company or any of the Subsidiaries, threatened.
(t) Each of the Company and the Subsidiaries carries general
liability insurance coverage comparable to other companies of its size and
similar business.
(u) Each of the Company and the Subsidiaries maintains internal
accounting controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B) transactions are
recorded as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, and (C) access to its material assets is
permitted only in accordance with management's authorization and (D) the values
and amounts reported for its material assets are compared with its existing
assets at reasonable intervals.
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(v) Except for a fee payable to MAG, the Company does not know of
any claims for services, either in the nature of a finder's fee or financial
advisory fee, with respect to the offering of the Securities and the
transactions contemplated by the Transaction Documents.
(w) The Common Stock is traded on the Over-the-Counter Bulletin
Board (the "OTC BB"). Except as described in the Disclosure Documents, the
Company currently is not in violation of, and the consummation of the
transactions contemplated by the Transaction Documents will not violate, any
rule of the National Association of Securities Dealers.
(x) The Company is eligible to use SB-2 for the resale of the
Conversion Shares and the Warrant Shares by Purchasers or their transferees and
the Warrant Shares by Purchasers, MAG or their transferees. The Company has no
reason to believe that it is not capable of satisfying the registration or
qualification requirements (or an exemption therefrom) necessary to permit the
resale of the Conversion Shares and the Warrant Shares under the securities or
"blue sky" laws of any jurisdiction within the United States.
(y) Set forth on Schedule E is the Company's intended use of the
proceeds from this transaction.
(z) Except as set forth on Schedule F, none of the officers or
directors of the Company (i) has been convicted any crime (other than traffic
violations or misdemeanors not involving fraud) or is currently under
investigation or indictment for any such crime, (ii) has been found by a court
or governmental agency to have violated any securities or commodities law or to
have committed fraud or is currently a party to any legal proceeding in which
either is alleged, (iii) has been the subject of a proceeding under the
bankruptcy laws or any similar state laws, or (iv) has been an officer,
director, general partner, or managing member of an entity which has been the
subject of such a proceeding. .
3. Purchase, Sale and Delivery of the Securities. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Purchasers, and Purchasers agree to purchase from the
Company, 10,000 shares of Series A Stock at $100.00 per share in the amounts
shown on the signature page hereto. In connection with the purchase and sale of
Series A Stock, for no additional consideration, the Purchasers and MAG will
receive Warrants to purchase up to an aggregate of 7,000,000 shares of Common
Stock, subject to adjustment as set forth in the Warrants.
The closing of the transactions described herein (the "Closing")
shall take place at a time and on a date (the "Closing Date") to be specified by
the parties, which will be no later than 5:00 p.m. (Pacific time) on October 29,
2004. On the Closing Date, the Company shall deliver (a) certificates in
definitive form for the Series A Stock in the names and amounts set forth on the
signature page hereto, (b) Warrants, in the names and amounts set forth on the
signature page hereto, (c) the Subscription Agreement, Certificate of
Designation and Registration Rights Agreement, each duly executed on behalf of
the Company, and (d) the Opinion of Counsel in the form attached hereto as
Exhibit C. On the Closing Date, Purchasers shall deliver (i) 50% of the Purchase
Price or $500,000 by wire transfer of immediately available funds to an escrow
account mutually acceptable to the parties, and (ii) the Subscription Agreement
and Registration Rights Agreement, each duly executed on behalf of the
Purchasers and MAG. The Closing will occur when all documents and instruments
necessary or appropriate to effect the transactions contemplated herein are
exchanged by the parties and all actions taken at the Closing will be deemed to
be taken simultaneously.
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Upon receipt of written confirmation from MAG that all documents and
instruments have been duly executed and delivered, the escrow holder shall
release (a) to the Company, the sum of $477,500 and (b) to MAG, the sum of 50%
of the Due Diligence Fee (I.E., $12,500), and the legal fees in the amount of
$10,000.
Provided that Company is not in default under Paragraph 10(i) (iv)
or (v) hereof, the Purchasers covenant and agree to pay, within two trading days
after Company files the Registration Statement (as defined in Paragraph 9
below), the balance of the Purchase Price or $500,000 to an escrow account
mutually acceptable to the parties by wire transfer of immediately available
funds. MAG shall then instruct the escrow to release (a) $487,500 to the
Company, and (b) the balance of the Due Diligence fee in the amount of $12,500
to MAG.
4. Certain Covenants of the Company. The Company covenants and agrees with
each Purchaser as follows:
(a) None of the Company or any of its Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Securities Act) which could be integrated with the
sale of the Securities in a manner which would require the registration under
the Securities Act of the Securities.
(b) The Company will not become, at any time prior to the expiration
of three years after the Closing Date, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under the Investment Company
Act.
(c) None of the proceeds of the Series A Stock will be used to
reduce or retire any insider note or convertible debt held by an officer or
director of the Company.
(d) Subject to Section 10 of this Agreement, the Conversion Shares
and the Warrant Shares will be eligible for trading on the OTC BB, or such
market on which the Company's shares are subsequently listed or traded,
immediately following the effectiveness of the Registration Statement.
(e) The Company will use commercially reasonable efforts to do and
perform all things required to be done and performed by it under this Agreement
and the other Transaction Documents and to satisfy all conditions precedent on
its part to the obligations of the Purchasers to purchase and accept delivery of
the Securities.
(f) The Purchasers shall have a right of first refusal on any
financing in which the Company is the issuer of debt or equity securities.
5. Conditions of the Purchasers' Obligations. The obligation of each
Purchaser to purchase and pay for the Securities is subject to the following
conditions unless waived in writing by the Purchaser:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects (other than
representations and warranties with a Material Adverse Effect qualifier, which
shall be true and correct as written) on and as of the Closing Date; the Company
shall have complied in all material respects with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date.
(b) None of the issuance and sale of the Securities pursuant to this
Agreement or any of the transactions contemplated by any of the other
Transaction Documents shall be enjoined (temporarily or permanently) and no
restraining order or other injunctive order shall have been issued in respect
thereof; and there shall not have been any legal action, order, decree or other
administrative proceeding instituted or, to the Company's knowledge, threatened
against the Company or against any Purchaser relating to the issuance of the
Securities or any Purchaser's activities in connection therewith or any other
transactions contemplated by this Agreement, the other Transaction Documents or
the Disclosure Documents.
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(c) The Purchasers shall have received certificates, dated the
Closing Date and signed by the Chief Executive Officer and the Chief Financial
Officer of the Company, to the effect of paragraphs 5(a) and (b).
(d) The Purchasers shall have received an opinion of Xxxxxxxxxxx X.
Xxxxxxx, P.C. with respect to the authorization of the Series A Stock, the
Conversion Shares, the Warrants and the Warrant Shares and other customary
matters in the form attached hereto as Exhibit C.
(e) The Purchasers shall have received pro forma financial
statements relating to the Company's prospective acquisitions and biographical
information regarding the Company's officers and directors.
(f) The Company shall have received obtained and delivered to
Purchasers approval by Crestview Captial ___ of the terms of this transaction.
6. Representations and Warranties of the Purchasers.
(a) Each Purchaser and MAG represents and warrants to the Company
that the Securities to be acquired by it hereunder (including the Conversion
Shares and the Warrant Shares that it may acquire upon conversion or exercise
thereof, as the case may be) are being acquired for its own account for
investment and with no intention of distributing or reselling such Securities
(including the Conversion Shares and the Warrant Shares that it may acquire upon
conversion or exercise thereof, as the case may be) or any part thereof or
interest therein in any transaction which would be in violation of the
securities laws of the United States of America or any State. Nothing in this
Agreement, however, shall prejudice or otherwise limit a Purchaser's right to
sell or otherwise dispose of all or any part of such Conversion Shares or
Warrant Shares under an effective registration statement under the Securities
Act and in compliance with applicable state securities laws or under an
exemption from such registration. By executing this Agreement, each Purchaser
further represents that such Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to any Person with respect to any of the Securities.
(b) Each Purchaser and MAG understands that the Securities
(including the Conversion Shares and the Warrant Shares that it may acquire upon
conversion or exercise thereof, as the case may be) have not been registered
under the Securities Act and may not be offered, resold, pledged or otherwise
transferred except (a) pursuant to an exemption from registration under the
Securities Act (and, if requested by the Company, based upon an opinion of
counsel acceptable to the Company) or pursuant to an effective registration
statement under the Securities Act and (b) in accordance with all applicable
securities laws of the states of the United States and other jurisdictions.
Each Purchaser and MAG agrees to the imprinting, so long as
appropriate, of the following legend on the Securities (including the Conversion
Shares and the Warrant Shares that it may acquire upon conversion or exercise
thereof, as the case may be):
The shares of stock evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered,
sold, pledged or otherwise transferred ("transferred") in the absence of
such registration or an applicable exemption therefrom. In the absence of
such registration, such shares may not be transferred unless, if the
Company requests, the Company has received a written opinion from counsel
in form and substance satisfactory to the Company stating that such
transfer is being made in compliance with all applicable federal and state
securities laws.
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The legend set forth above may be removed if and when the Conversion
Shares or the Warrant Shares, as the case may be, are disposed of pursuant to an
effective registration statement under the Securities Act or in the opinion of
counsel to the Company experienced in the area of United States Federal
securities laws such legends are no longer required under applicable
requirements of the Securities Act. The Series A Stock, the Warrants, the
Conversion Shares and the Warrant Shares shall also bear any other legends
required by applicable Federal or state securities laws, which legends may be
removed when in the opinion of counsel to the Company experienced in the
applicable securities laws, the same are no longer required under the applicable
requirements of such securities laws. The Company agrees that it will provide
each Purchaser, upon request, with a substitute certificate, not bearing such
legend at such time as such legend is no longer applicable. Each Purchaser
agrees that, in connection with any transfer of the Conversion Shares or the
Warrant Shares by it pursuant to an effective registration statement under the
Securities Act, such Purchaser will comply with all prospectus delivery
requirements of the Securities Act. The Company makes no representation,
warranty or agreement as to the availability of any exemption from registration
under the Securities Act with respect to any resale of the Series A Stock, the
Warrants, the Conversion Shares or the Warrant Shares.
(c) Each Purchaser and MAG is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. Neither
Purchaser nor MAG learned of the opportunity to acquire Securities or any other
security issuable by the Company through any form of general advertising or
public solicitation.
(d) Each Purchaser and MAG represents and warrants to the Company
that it has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, having been represented by counsel,
and has so evaluated the merits and risks of such investment and is able to bear
the economic risk of such investment and, at the present time, is able to afford
a complete loss of such investment.
(e) Each Purchaser represents and warrants to the Company that (i)
the purchase of the Securities to be purchased by it has been duly and properly
authorized and this Agreement has been duly executed and delivered by it or on
its behalf and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; (ii) the
purchase of the Securities to be purchased by it does not conflict with or
violate its charter, by-laws or any law, regulation or court order applicable to
it; and (iii) the purchase of the Securities to be purchased by it does not
impose any penalty or other onerous condition on the Purchaser under or pursuant
to any applicable law or governmental regulation.
(f) Each Purchaser and MAG represents and warrants to the Company
that neither it nor any of its directors, officers, employees, agents, partners,
members, controlling persons or shareholders holding 5% or more of the Common
Stock outstanding on the Closing Date, has taken or will take, directly or
indirectly, any actions designed, or might reasonably be expected to cause or
result in the stabilization or manipulation of the price of the Common Stock.
(g) Each Purchaser and MAG acknowledges it or its representatives
have reviewed the Disclosure Documents and further acknowledges that it or its
representatives have been afforded (i) the opportunity to ask such questions as
it has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities
and the merits and risks of investing in the Securities; (ii) access to
information about the Company and the Company's financial condition, results of
operations, business, properties and management sufficient to enable it to
evaluate its investment in the Securities; and (iii) the opportunity to obtain
such additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy and
completeness of the information contained in the Disclosure Documents.
9
(h) Each Purchaser and MAG represents and warrants to the Company
that it has based its investment decision solely upon the information contained
in the Disclosure Documents and such other information as may have been provided
to it or its representatives by the Company in response to their inquiries, and
has not based its investment decision on any research or other report regarding
the Company prepared by any third party ("Third Party Reports"). Each Purchaser
understands and acknowledges that (i) the Company does not endorse any Third
Party Reports and (ii) its actual results may differ materially from those
projected in any Third Party Report.
(i) Each Purchaser and MAG understands and acknowledges that (i) any
forward-looking information included in the Disclosure Documents supplied to
Purchaser by the Company or its management is subject to risks and
uncertainties, including those risks and uncertainties set forth in the
Disclosure Documents; and (ii) the Company's actual results may differ
materially from those projected by the Company or its management in such
forward-looking information.
(j) Each Purchaser and MAG understands and acknowledges that (i) the
Securities are offered and sold without registration under the Securities Act in
a private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption depends in part on,
and that the Company and its counsel will rely upon, the accuracy and
truthfulness of the foregoing representations and Purchaser hereby consents to
such reliance.
7. Covenants of Purchasers Not to Short Stock. Purchasers, on behalf of
themselves and their affiliates, hereby covenant and agree not to, directly or
indirectly, offer to "short sell", contract to "short sell" or otherwise "short
sell" the securities of the Company, including, without limitation, shares of
Common Stock that will be received as a result of the conversion of the Series A
Stock or the exercise of the Warrants. Purchaser and MAG, on behalf of
themselves and their affiliates, hereby covenant and agree not to, directly or
indirectly, sell in the aggregate during any trading day shares of Common Stock
totaling more than 20% of the total number of shares of Common Stock traded on
such day.
8. Termination.
(a) This Agreement may be terminated in the sole discretion of the
Company by notice to each Purchaser if at the Closing Date:
(i) the representations and warranties made by any Purchaser
in Section 6 are not true and correct in all material respects; or
(ii) as to the Company, the sale of the Securities hereunder
(i) is prohibited or enjoined by any applicable law or governmental regulation
or (ii) subjects the Company to any penalty, or in its reasonable judgment,
other onerous condition under or pursuant to any applicable law or government
regulation that would materially reduce the benefits to the Company of the sale
of the Securities to such Purchaser, so long as such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement.
(b) This Agreement may be terminated by any Purchaser or MAG by
notice to the Company given in the event that the Company shall have failed,
refused or been unable to satisfy all material conditions on its part to be
performed or satisfied hereunder on or prior to the Closing Date, or if after
the execution and delivery of this Agreement and immediately prior to the
Closing Date, trading in securities of the Company on the OTC BB shall have been
suspended.
(c) This Agreement may be terminated by mutual written consent of
all parties.
9. Registration. Within 45 days after the Closing Date, the Company shall
prepare and file with the SEC a Registration Statement covering the resale of
the maximum number of Conversion Shares issuable upon conversion of the Series A
Stock and the Warrant Shares (collectively, the "Registrable Securities"), as
set forth in the Registration Rights Agreement attached hereto as Exhibit D.
10
10. Event of Default. If an Event of Default (as defined below) occurs and
remains uncured for a period of 5 days, the Purchasers and MAG shall have the
right to exercise any or all of the rights given to the Purchasers and MAG
relating to the Securities, as further described in the Certificate of
Designations. In addition, if the Event of Default relates to items (i), (iii),
(iv) or (v) below, then the Company shall pay to Purchaser the sum of $15,000
for each Event of Default.
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 Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.
An "Event of Default" shall include the commencement by the Company of a
voluntary case or proceeding under the bankruptcy laws or the Company's failure
to: (i) discharge or stay a bankruptcy proceeding within 60 days of such action
being taken against the Company, (ii) file the Registration Statement with the
SEC within 45 days after the Closing Date, (iii) maintain trading of the
Company's Common Stock on the OTC BB except for any periods when the stock is
listed on the NASDAQ Small Stock Market, the NASDAQ National Stock Market, the
AMEX or the NYSE; or (iv) deliver to Purchasers, or Purchasers' broker, as
directed, Common Stock that Purchasers have converted within five (5) business
days of such conversions.
IN THE EVENT THAT THE COMPANY FAILS TO FILE THE REGISTRATION STATEMENT WITH THE
SEC WITHIN 45 DAYS AFTER THE CLOSING DATE, AS A REMEDY FOR SUCH AN EVENT OF
DEFAULT, COMPANY SHALL PAY TO PURCHASERS, IN CASH, $667 FOR EACH DAY THAT THE
REGISTRATION STATEMENT FILING IS DELAYED. PURCHASERS AND COMPANY ACKNOWLEDGE AND
AGREE THAT THEY HAVE MUTUALLY DISCUSSED THE IMPRACTICALITY AND EXTREME
DIFFICULTY OF FIXING THE ACTUAL DAMAGES PURCHASERS WOULD INCUR IN THE CASE OF
SUCH AN EVENT OF DEFAULT, AND THAT AS A RESULT OF SUCH DISCUSSION THE PARTIES
AGREE THAT $667 FOR EACH DAY THAT THE REGISTRATION STATEMENT FILING IS DELAYED
REPRESENTS A REASONABLE ESTIMATE OF THE ACTUAL DAMAGES WHICH PURCHASERS WOULD
INCUR IN THE CASE OF SUCH AN EVENT OF DEFAULT. BY SIGNING IN THE SPACES WHICH
FOLLOW, PURCHASERS AND COMPANY SPECIFICALLY AND EXPRESSLY AGREE TO ABIDE BY THE
TERMS AND PROVISIONS OF THIS PARAGRAPH CONCERNING LIQUIDATED DAMAGES.
11
Company:
USURF America, Inc.
a Nevada corporation
By: /s/ Xxxxxxx X. XxXxxxxx
-------------------------------------
Xxxxxxx X. XxXxxxxx
Chief Executive Officer and President
Monarch Pointe Fund, Ltd.,
a British Virgin Islands
International Business Company
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------------
Xxxxx Xxxxxxxxx
President
11. Notices. All communications hereunder shall be in writing and shall be
hand delivered, mailed by first-class mail, couriered by next-day air courier or
by facsimile and confirmed in writing (i) if to the Company, at the addresses
set forth below, or (ii) if to a Purchaser or MAG, to the address set forth for
such party on the signature page hereto.
If to the Company:
USURF America, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed certified
mail, return receipt requested; (iii) one business day after being timely
delivered to a next-day air courier guaranteeing overnight delivery; (iv) the
date of transmission (as evidenced by telecopier confirmation sheet) if sent via
facsimile to the facsimile number as set forth in this Section or the signature
page hereof prior to 6:00 p.m. on a business day, or (v) the business day
following the date of transmission if sent via facsimile at a facsimile number
set forth in this Section (as evidenced by telecopier confirmation sheet) or on
the signature page hereof after 6:00 p.m. or on a date that is not a business
day. Change of a party's address or facsimile number may be designated hereunder
by giving notice to all of the other parties hereto in accordance with this
Section.
12
12. Survival Clause. The respective representations, warranties,
agreements and covenants of the Company and the Purchasers set forth in this
Agreement shall survive until the first anniversary of the Closing.
13. Omitted.
14. Prevailing Party. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the Warrants or the
Certificate of Designations, the prevailing party or parties shall be entitled
to receive from the other party or parties reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which the prevailing
party or parties may be entitled.
15. Successors. This Agreement shall inure to the benefit of and be
binding upon Purchasers, MAG and the Company and their respective successors and
legal representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person. Neither the Company nor any Purchaser may
assign this Agreement or any rights or obligation hereunder without the prior
written consent of the other party.
16. No Waiver; Modifications in Writing. No failure or delay on the part
of the Company, MAG or any Purchaser in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company, MAG or any Purchaser at law or in
equity or otherwise. No waiver of or consent to any departure by the Company,
MAG or any Purchaser from any provision of this Agreement shall be effective
unless signed in writing by the party entitled to the benefit thereof, provided
that notice of any such waiver shall be given to each party hereto as set forth
below. Except as otherwise provided herein, no amendment, modification or
termination of any provision of this Agreement shall be effective unless signed
in writing by or on behalf of each of the Company, MAG and the Purchasers. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Company, MAG or any Purchaser from the terms of any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.
17. Entire Agreement. This Agreement, together with Transaction Documents,
constitutes the entire agreement among the parties hereto and supersedes all
prior agreements, understandings and arrangements, oral or written, among the
parties hereto with respect to the subject matter hereof and thereof.
18. Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby.
19. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR FEDERAL
COURTS LOCATED IN THE CITY OF LOS ANGELES, CALIFORNIA AND HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE.
13
20. Counterparts. This Agreement may be executed in two or more
counterparts and may be delivered by facsimile transmission, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
21. Redemption. In the event that the closing price of the Common Stock
for 20 consecutive trading days is less than $0.05 per share, then the Company
shall be obligated to redeem (a "Redemption Obligation") on or before the 5th
day of each calendar month thereafter, 5% of the shares of Series A Stock
outstanding as of the 1st day of such calendar month for a redemption price
equal to $100 per share. Notwithstanding the foregoing, in the event that the
closing price of the Common Stock is equal to or greater than $0.05 for ten (10)
consecutive trading days, then the Redemption Obligation shall terminate. The
Redemption Obligation may be reinstated at any time if the closing price of the
Common Stock is less than $0.05 for 20 consecutive trading days.
Intentionally Left Blank
14
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this Agreement shall constitute a binding agreement among the Company, the
Purchasers and MAG.
Very truly yours,
USURF America, Inc.
By: /s/ Xxxxxxx X. XxXxxxxx
-------------------------------------
Name: Xxxxxxx X. XxXxxxxx
Title: Chief Executive Officer and
President
ACCEPTED AND AGREED:
Mercator Advisory Group, LLC Monarch Pointe Fund, Ltd.
By: /s/ Xxxxx Xxxxxxxxx /s/ Xxxxx Firestons
-------------------------------- ----------------------------------------
Xxxxx Xxxxxxxxx
Managing Member By: Xxxxx Xxxxxxxxx
Its: President
Shares of Series A Stock Purchased:10,000
Purchase Price: $1,000,000
Addresses for Notice to Purchaser and MAG:
Mercator Advisory Group, LLC
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
with copy to:
Xxxxx X. Xxxxx, Esq.
Sheppard, Mullin, Xxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
15
