EXHIBIT 2.2
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT
Dated as of December 29, 2000
among
GLOBUS WIRELESS, LTD.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
PAGE
----
ARTICLE I Purchase and Sale of Preferred Stock.....................4
Section 1.1 Purchase and Sale of Stock...................................4
Section 1.2 The Conversion Shares........................................4
Section 1.3 Purchase Price and Closing...................................5
Section 1.4 Delivery of Certificates.....................................5
Section 1.5 Warrants.....................................................5
ARTICLE II Representations and Warranties...........................6
Section 2.1 Representations and Warranties of the Company................6
Section 2.2 Representations and Warranties of the Purchasers............17
ARTICLE III Covenants...............................................19
Section 3.1 Securities Compliance.......................................19
Section 3.2 Registration and Listing....................................20
Section 3.3 Inspection Rights...........................................20
Section 3.4 Compliance with Laws........................................20
Section 3.5 Keeping of Records and Books of Account.....................20
Section 3.6 Reporting Requirements......................................20
Section 3.7 Amendments..................................................21
Section 3.8 Other Agreements............................................21
Section 3.9 Distributions...............................................21
Section 3.10 Status of Dividends.........................................21
Section 3.11 Reservation of Shares.......................................22
Section 3.12 Transfer Agent Instructions.................................22
Section 3.13 Redemption of the Preferred Shares..........................23
Section 3.14 Other Financings............................................23
ARTICLE IV Conditions..............................................24
Section 4.1 Conditions Precedent to the Obligation of the
Company to Sell the Shares..................................24
Section 4.2 Conditions Precedent to the Obligation of the
Purchasers to Purchase the Shares...........................25
ARTICLE V Stock Certificate Legend................................27
Section 5.1 Legend......................................................27
ARTICLE VI Indemnification.........................................28
Section 6.1 General Indemnity...........................................28
Section 6.2 Indemnification Procedure...................................28
ARTICLE VII Miscellaneous...........................................29
Section 7.1 Fees and Expenses...........................................29
Section 7.2 Specific Enforcement, Consent to Jurisdiction...............30
Section 7.3 Entire Agreement; Amendment.................................30
Section 7.4 Notices.....................................................31
Section 7.5 Waivers.....................................................32
Section 7.6 Headings....................................................32
Section 7.7 Successors and Assigns......................................32
Section 7.8 No Third Party Beneficiaries................................32
Section 7.9 Governing Law...............................................32
Section 7.10 Survival....................................................32
Section 7.11 Counterparts................................................32
Section 7.12 Publicity...................................................33
Section 7.13 Severability................................................33
Section 7.14 Further Assurances..........................................33
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SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is dated as of December 29, 2000 by and among Globus Wireless,
Ltd., a Nevada corporation (the "Company"), and each of the Purchasers of shares
of Series A Convertible Preferred Stock of the Company whose names are set forth
on Exhibit A hereto (individually, a "Purchaser" and collectively, the
"Purchasers").
The parties hereto agree as follows:
ARTICLE XI
Purchase and Sale of Preferred Stock
Section 11.1 Purchase and Sale of Stock. Upon the following terms and
conditions, the Company shall issue and sell to the Purchasers and each of the
Purchasers shall purchase from the Company, the number of shares of the
Company's Series A Convertible Preferred Stock, $.001 par value (the "Preferred
Shares"), at a purchase price of One Thousand Dollars ($1,000) per share, set
forth with respect to such Purchaser on Exhibit A hereto. Upon the following
terms and conditions, the Purchasers shall be issued Warrants, in substantially
the form attached hereto as Exhibit B (the "Warrants"), to purchase the
Company's Common Stock, $.001 par value (the "Common Stock"). The aggregate
purchase price for the Preferred Shares and the Warrants shall be One Million
Five Hundred Thousand Dollars ($1,500,000). The designation, rights, preferences
and other terms and provisions of the Series A Convertible Preferred Stock are
set forth in the Certificate of Designation of the Relative Rights and
Preferences of the Series A Convertible Preferred Stock attached hereto as
Exhibit C (the "Certificate of Designation"). The Company and the Purchasers are
executing and delivering this Agreement in accordance with and in reliance upon
the exemption from securities registration afforded by Rule 506 of Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act") or Section 4(2) of the Securities Act.
Section 11.2 The Conversion Shares. The Company has authorized and has
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock, to effect the conversion of
the Preferred Shares and exercise of the Warrants. Any shares of Common Stock
issuable upon conversion of the Preferred Shares and exercise of the Warrants
(and such shares when issued) are herein referred to as the "Conversion Shares"
and the "Warrant Shares", respectively. The Preferred Shares, the Conversion
Shares and the Warrant Shares are sometimes collectively referred to
collectively as the "Shares".
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Section 11.3 Purchase Price and Closing. The Company agrees to issue
and sell to the Purchasers and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchasers, severally but not jointly, agree to purchase that
number of the Preferred Shares and Warrants set forth opposite their respective
names on Exhibit A. The aggregate purchase price of the Preferred Shares and
Warrants being acquired by each Purchaser is set forth opposite such Purchaser's
name on Exhibit A (for each such purchaser, the "Purchaser Price" and
collectively referred to as the "Purchase Prices"). The Company acknowledges
that the Purchase Price for the pro rata portions of the Preferred Shares and
the Warrants purchased by each of Magellan International, Ltd., Aspen
International, Ltd. and Warwick Corporation, Ltd. was advanced and evidenced by
separate promissory notes dated October 24, 2000 and November 21, 2000, issued
by the Company in favor of Aspen International, Ltd. for the aggregate principal
amount of $750,000. The closing of the purchase and sale of the Preferred Shares
and Warrants (the "Closing") to be acquired by the Purchasers from the Company
under this Agreement shall take place at the offices of Xxxxxx Xxxxxx LLP, The
Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
"Closing") at 1:00 p.m. Eastern Time (i) on the date on which the last to be
fulfilled or waived of the conditions set forth in ARTICLE IV hereof and
applicable to such Closing shall be fulfilled or waived in accordance herewith
or (ii) at such other time and place or on such date as the Purchasers and the
Company may agree upon (the "Closing Date").
Section 11.4 Delivery of Certificates. On or before the Closing Date,
the Company shall deliver to Xxxxxx Xxxxxx LLP, the counsel to the Purchasers
the certificates for the number and series of Preferred Shares and Warrants set
forth opposite each Purchaser's name under the heading "Number of Preferred
Shares to be Purchased" on Exhibit A hereto, registered in such Purchaser's name
(or its nominee) and upon confirmation of receipt of the certificates by the
counsel to the Purchasers, then each Purchaser shall pay by wire transfer of
funds to the Company the Purchase Price set forth opposite each such Purchaser's
name on Exhibit A. In addition, each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
Section 11.5 Warrants. The Company agrees to issue to each of the
Purchasers Warrants to purchase the number of shares of Common Stock set forth
opposite such Purchaser's name on Exhibit A hereto, such number determined as
follows: Purchaser's Purchase Price divided by the lesser of (i) $4.00, and (ii)
the average of the five (5) closing bid prices of the Company's shares of Common
Stock (as reported by Bloomberg Financial Markets on the OTC Bulletin Board or
such other United States stock exchange or public trading market which is at the
time the principal exchange for trading of the Common Stock) during the five (5)
consecutive trading days ending on the trading day immediately preceding the
Closing Date, multiplied by fifty percent (50%). The Warrants shall have an
exercise price equal to the Warrant Price (as defined in the Warrants) and shall
expire on the fifth (5th) anniversary of the Closing Date.
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ARTICLE XII
Representations and Warranties
Section 12.1 Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers, except as set forth in the Company's disclosure schedule delivered
with this Agreement as follows:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada and has the requisite corporate power to own, lease
and operate its properties and assets and to conduct its business as it is now
being conducted. As of the date hereof, the Company does not have any
subsidiaries other than the Subsidiaries (as defined in Section 2.1(g)) except
as set forth in the Company's Form 10-KSB and Form 10-KSB/A for the year ended
October 31, 1999, including the accompanying financial statements (the "Form
10-KSB"), or in the Company's Form 10-QSB for the quarters ended July 31, 2000
and April 30, 2000, including the accompanying financial statements (the "Form
10-QSB"), or in Schedule 2.1(g) hereto. The Company and each Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect (as defined in Section 2.1(e) hereof) on the
Company's financial condition.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement attached hereto as Exhibit D (the "Registration
Rights Agreement"), the Irrevocable Transfer Agent Instructions (as defined in
Section 3.12 hereof), and the Warrants (collectively, the "Transaction
Documents") and to issue and sell the Shares and the Warrants in accordance with
the terms hereof, the Certificate of Designation and the Warrants. The
execution, delivery and performance of the Transaction Documents and the
Certificate of Designation by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
The other Transaction Documents will have been duly executed and delivered by
the Company at the Closing. Each of the Transaction Documents constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
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(c) Capitalization. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of the date hereof are set forth on
Schedule 2.1(c) attached hereto. All of the outstanding shares of the Company's
Common Stock and Series A Convertible Preferred Stock have been duly and validly
authorized, and are fully paid and non-assessable. Except as set forth in this
Agreement or in Schedule 2.1(c) attached hereto, no shares of Common Stock are
entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement, as of the date hereof, there are no
contracts, commitments, understandings, or arrangements by which the Company is
or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities,
as of the date hereof, the Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. The Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company. The offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable Federal and state securities laws,
and no stockholder has a right of rescission or claim for damages with respect
thereto which would have a Material Adverse Effect on the Company's financial
condition or operating results. The Company has furnished or made available to
the Purchasers true and correct copies of the Company's Articles of
Incorporation, as amended and as in effect on the date hereof (the "Charter"),
and the Company's Bylaws as in effect on the date hereof (the "Bylaws").
(d) Issuance of Shares. The sale and issuance of the Preferred Shares
and the Warrants in accordance with the terms and on the basis of the
representations and warranties set forth in this Agreement shall be exempt from
the registration requirements of the Securities Act in reliance upon Regulation
D promulgated thereunder. The Preferred Shares and the Warrants issued at the
Closing have been duly authorized by all necessary corporate action and the
Preferred Shares, when paid for or issued in accordance with the terms hereof,
shall be validly issued and outstanding, fully paid and nonassessable and
entitled to the rights and preferences set forth in the Certificate of
Designation. When the Conversion Shares and the Warrant Shares are issued in
accordance with the terms of the Preferred Shares as set forth in the
Certificate of Designation and the Warrants, respectively, such shares will be
duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, and the holders shall be entitled to
all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Designation and the consummation by the
Company of the transactions contemplated herein and therein do not and will not
(i) violate any provision of the Company's Charter or Bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
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both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party or by which it or its properties or assets are
bound, (iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property of the Company under any agreement or
any commitment to which the Company is a party or by which the Company is bound
or by which any of its respective properties or assets are bound, or (iv) result
in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including Federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected, except, in all cases other than
violations pursuant to clauses (i) and (iv) above, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. For the
purposes of this Agreement, "Material Adverse Effect" means any adverse effect
on the business, operations, properties, prospects, or financial condition of
the Company and which is material to such entity or other entities controlling
or controlled by such entity. The business of the Company is not being conducted
in violation of any laws, ordinances or regulations of any governmental entity,
except for possible violations which singularly or in the aggregate do not and
will not have a Material Adverse Effect. The Company is not required under
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under the Transaction Documents or the Certificate of Designation,
or issue and sell the Preferred Shares, the Warrants, the Conversion Shares and
the Warrant Shares in accordance with the terms hereof or thereof (other than
any filings which may be required to be made by the Company with the Commission
or state securities administrators subsequent to the Closing, any registration
statement which may be filed pursuant hereto, and the Certificate of
Designation); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchasers herein.
(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
in the Commission Filings ("Commission Filings" means the Company's Form 10-KSB
and Form 10-KSB/A for the fiscal year ended October 31, 1999, its Form 10-QSBs
for the fiscal quarters ended January 31, 2000, April 30, 2000 and July 31,
2000, its Form 8-K dated May 1, 2000, its Definitive Proxy Statement dated July
7, 2000 and all other filings made by the Company after the date hereof pursuant
to the Exchange Act), the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "Commission Documents"). The Company has delivered or made
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available to each of the Purchasers true and complete copies of the Commission
Documents filed with the Commission since October 31, 1999. The Company has not
provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, was required
to have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. As of their respective dates, the Form 10-KSB for the year ended
October 31, 1999 and the Commission Documents complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such documents, and, as of their respective dates,
none of such documents referred to above contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Form 10-KSB and the Commission
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 2.1(g) attached
hereto set forth each subsidiary of the Company as of the date hereof, showing
the jurisdiction of its incorporation or organization and showing the percentage
of each person's ownership of the outstanding stock or other interests of such
subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any
corporation or other entity of which at least a majority of the securities or
other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries. Except as set forth in the Commission Documents or
the Commission Filings, none of such subsidiaries is a "significant subsidiary"
as defined in Regulation S-X under the Securities Act.
(h) No Material Adverse Change. Since September 14, 2000, the date
through which the most recent quarterly report of the Company on Form 10-QSB has
been prepared and filed with the Commission, a copy of which is included in the
Commission Documents, the Company has not experienced or suffered any Material
Adverse Effect, except continued losses from operations.
(i) No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
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or otherwise) that would be required to be disclosed on a balance sheet of the
Company or any Subsidiary (including the notes thereto) other than those
incurred in the ordinary course of the Company's or its subsidiaries' respective
businesses prior to October 31, 1999 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.
(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. The Commission Documents or the Commission Filings
set forth as of the respective date of each thereof, all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $100,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the balance sheet of the Company or any
Subsidiary (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments in
excess of $100,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any Subsidiary is in default with respect to
any Indebtedness.
(l) Title to Assets. Each of the Company and the Subsidiaries has good
and marketable title to all of its real and personal property reflected in the
Commission Documents, free and clear of any mortgages, pledges, charges, liens,
security interests or other encumbrances. All said leases of the Company and
each of its subsidiaries are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary which questions the validity of this Agreement or any of the
other Transaction Documents or the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Filings or Commission Documents, there is no action,
suit, claim, investigation, arbitration, alternate dispute resolution proceeding
or any other proceeding pending or, to the knowledge of the Company, threatened,
against or involving the Company, any Subsidiary or any of their respective
properties or assets. There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or regulatory body
against the Company, any Subsidiary or any of their respective officers or
directors in their capacities as such.
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(n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or Commission
Filings or such that, individually or in the aggregate, do not cause a Material
Adverse Effect. The Company and each of its Subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it unless the failure to possess such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(o) Taxes. Except as set forth in the Commission Documents or
Commission Filings, the Company and the Subsidiaries have accurately prepared
and filed all federal, state and other tax returns required by law to be filed
by them, have paid or made provisions for the payment of all taxes shown to be
due and all additional assessments, and adequate provisions have been and are
reflected in the financial statements of the Company and the Subsidiaries for
all current taxes and other charges to which the Company or any Subsidiary is
subject and which are not currently due and payable. None of the federal income
tax returns of the Company or the Subsidiaries for the years subsequent to
October 31, 1995 has been audited by the Internal Revenue Service. The Company
and the Subsidiaries have no knowledge of any additional assessments,
adjustments or contingent tax liability (whether federal or state) of any nature
whatsoever, whether pending or threatened against the Company or any Subsidiary
for any period, nor of any basis for any such assessment, adjustment or
contingency.
(p) Disclosure. Neither this Agreement or the schedules or exhibits
hereto nor any other documents, certificates or instruments furnished to the
Purchasers by or on behalf of the Company or any Subsidiary in connection with
the transactions contemplated by this Agreement contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(q) Operation of Business. The Company or its Subsidiaries own or
possess all patents, trademarks, domain names (whether or not registered) and
any patentable improvements or copyrightable derivative works thereof, websites
and intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Commission Documents
or the Commission Filings and all rights with respect to the foregoing, which
are necessary for the conduct of its business as now conducted without any
conflict with the rights of others, except to the extent set forth in the
Commission Documents or that a Material Adverse Effect could not reasonably be
expected to result from such conflict.
(r) Environmental Compliance. The Company and each of its Subsidiaries
have obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
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Laws. The Commission Documents or Commission Filings set forth all material
permits, licenses and other authorizations issued under any Environmental Laws
to the Company or any Subsidiary, to the extent required under Federal
securities law. "Environmental Laws" shall mean all applicable laws relating to
the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. The Company and the Subsidiaries have all necessary
governmental approvals required under all Environmental Laws and used in its
business. The Company and the Subsidiaries are also in compliance with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or any Subsidiary that violate or could violate any Environmental Law after the
Closing or that could give rise to any environmental liability, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to
the manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of any hazardous
substance. "Environmental Liabilities" means all liabilities of a person
(whether such liabilities are owed by such person to governmental authorities,
third parties or otherwise) whether currently in existence or arising hereafter
which arise under or relate to any Environmental Law.
(s) Books and Record Internal Accounting Controls. The records and
documents of the Company accurately reflect in all material respects the
information relating to the business of the Company, the location and collection
of its assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company. The Company maintains a system of
internal accounting controls sufficient, in the judgment of the Company's Board
of Directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions is taken with respect to any
differences.
(t) Material Agreements. Except as set forth in the Commission
Documents, the Commission Filings or Schedule 2.1(t) attached hereto, neither
the Company nor any Subsidiary is a party to any written or oral contract,
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instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission as an exhibit to a
registration statement on Form S-3 or applicable form (collectively, "Material
Agreements") if the Company or any Subsidiary were registering securities under
the Securities Act. The Company and each of its Subsidiaries have in all
material respects performed all the obligations required to be performed by them
to date under the foregoing agreements, have received no notice of default and,
are not in default under any Material Agreement now in effect, the result of
which could cause a Material Adverse Effect. No written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement of the
Company or any Subsidiary limits the payment of dividends on the Company's
Preferred Shares.
(u) No Integrated Offering. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers or sales of any security or solicited any offers to buy any security,
other than pursuant to this Agreement, under circumstances that would require
registration of the Common Stock or the Preferred Shares under the Securities
Act. Neither the Company nor any of its Subsidiaries or affiliates nor any
person acting on its behalf has conducted or will conduct any general
solicitation (as that term is defined in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Common Stock, the Preferred Shares, the
Warrants or the Warrant Shares.
(v) Transactions with Affiliates. Except as set forth in the
Commission Documents or the Commission Filings, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company, any
Subsidiary or any of their respective customers (excluding agreements related to
the purchase or lease of the Company's or any Subsidiary's products) or
suppliers on the one hand, and (b) on the other hand, any officer, employee,
consultant or director of the Company or any Subsidiary, or any person who would
be covered by Item 404(a) of Regulation S-K or any corporation or other entity
controlled by such officer, employee, consultant, director or person.
(w) Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company any each of its
Subsidiaries have complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the Shares
and the Warrants hereunder. Neither the Company or any Subsidiary nor, to the
best of the Company's knowledge, anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of the
Shares, the Warrants or similar securities to, or solicit offers with respect
thereto from, or enter into any preliminary conversations or negotiations
relating thereto with, any person, or has taken or will take any action so as to
bring the issuance and sale of any of the Shares and the Warrants under the
registration provisions of the Securities Act and applicable state securities
laws, and neither the Company nor any of its Subsidiaries or affiliates, nor any
person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (including, without exclusion, general
solicitation or general advertising within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of any of the Shares and
the Warrants.
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(x) Governmental Approvals. Except as set forth in the Commission
Documents or Commission Filings, and except for the filing of any notice prior
or subsequent to the Closing that may be required under applicable state and/or
Federal securities laws (which if required, shall be filed on a timely basis),
including the filing of a registration statement or statements pursuant to the
Registration Rights Agreement, and the filing of the Certificate of Designation
with the Secretary of State for the State of Nevada, no authorization, consent,
approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the
execution or delivery of the Preferred Shares and the Warrants, or for the
performance by the Company of its obligations under the Transaction Documents or
the Certificate of Designation.
(y) Employees. The Company and the Subsidiaries have no collective
bargaining arrangements or agreements covering any of their respective
employees, except as set forth in the Commission Documents or Commission
Filings. Except as set forth in the Commission Documents or Commission Filings,
the Company and the Subsidiaries have no employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or any Subsidiary. Since
October 31, 1999, no officer, consultant or key employee of the Company or any
Subsidiary whose termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.
(z) Absence of Certain Developments. Except as provided in the
Commission Documents or Commission Filings, since October 31, 1999, neither the
Company nor any Subsidiary has:
(i) other than as listed in Schedule 2.1(c), issued any stock,
bonds or other corporate securities or any rights, options or warrants with
respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or any Subsidiary's business;
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(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock; (v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) entered into any other transaction other than in the ordinary
course of business, or entered into any other material transaction, whether or
not in the ordinary course of business;
(xi) made charitable
contributions or pledges in excess of $25,000;
(xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xiii) experienced any material problems with labor or management
in connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind which
in the aggregate would be material to the Company; or
(xv) entered into an agreement, written or otherwise, to take any
of the foregoing actions.
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(aa) Use of Proceeds. The proceeds from the sale of the Preferred
Shares will be used by the Company for working capital and general corporate
purposes.
(bb) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(cc) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any Subsidiary
which is or would be materially adverse to the Company or any Subsidiary. The
execution and delivery of this Agreement and the issue and sale of the Preferred
Shares will not involve any transaction which is subject to the prohibitions of
Section 406 of ERISA or in connection with which a tax could be imposed pursuant
to Section 4975 of the Internal Revenue Code of 1986, as amended, provided that,
if any of the Purchasers, or any person or entity that owns a beneficial
interest in any of the Purchasers, is an "employee pension benefit plan" (within
the meaning of Section 3(2) of ERISA) with respect to which the Company or any
Subsidiary is a "party in interest" (within the meaning of Section 3(14) of
ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(cc), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or any Subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any Subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.
(dd) Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
and the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Preferred Shares in accordance
with this Agreement and the Certificate of Designation and its obligations to
issue the Warrant Shares upon the exercise of the Warrants in accordance with
this Agreement and the Warrants, is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.
(ee) Nevada General Corporation Law. The Company is not an "issuing
corporation" as defined under Section 78.3788 of the Nevada General Corporation
Law. Therefore, the holders of the Conversion Shares and the Warrant Shares will
not be subject to the provisions of Nevada's anti-takeover statutes.
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Section 12.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation or partnership duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the Preferred
Shares being sold to it hereunder. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by such Purchaser and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action (if the
Purchaser is an entity), and no further consent or authorization of such
Purchaser or its Board of Directors, stockholders, or partners, as the case may
be, is required. Each of this Agreement and the Registration Rights Agreement
has been duly authorized, executed and delivered by such Purchaser and
constitutes a valid and binding obligation of such Purchaser enforceable against
such Purchaser in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or relating hereto
do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which such Purchaser
is a party, or (iii) result in a violation of any law, rule, or regulation, or
any order, judgment or decree of any court or governmental agency applicable to
such Purchaser or its properties (except for such conflicts, defaults and
violations as would not, individually or in the aggregate, have a material
adverse effect on such Purchaser). Such Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or the Registration Rights Agreement or
to purchase the Preferred Shares or acquire the Warrants in accordance with the
terms hereof, provided that for purposes of the representation made in this
sentence, such Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
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have been requested by such Purchaser. Such Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Such
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Such Purchaser understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
(e) Acquisition for Investment. Such Purchaser is acquiring the
Preferred Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Such Purchaser does not have a present intention to sell the Preferred Shares or
the Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Preferred Shares or the Warrants to
or through any person or entity; provided, however, that by making the
representations herein and subject to Section 2.2(g) below, such Purchaser does
not agree to hold the Shares or the Warrants for any minimum or other specific
term and reserves the right to dispose of the Shares or the Warrants at any time
in accordance with Federal and state securities laws applicable to such
disposition. Such Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Preferred Shares and the Warrants,
and that such investment is not pursuant to any offer involving general
advertising or solicitation.
(f) Accredited Purchasers. Such Purchaser is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act.
(g) Rule 144. Such Purchaser understands that the Shares must be held
indefinitely unless such Shares are registered under the Securities Act or an
exemption from registration is available. Such Purchaser acknowledges that such
Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(h) General. Such Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws, including by virtue of Section
4(2) of the Securities Act, and the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of such Purchaser to
acquire the Shares. The Purchaser understands that the Shares and Warrants
purchase hereunder have not been, and may never be, registered under the
Securities Act and that none of the Shares and Warrants can be sold,
transferred, assigned, pledged, subjected to any lien or security interest or
otherwise conveyed unless pursuant to the registration of the Shares and
Warrants under the Securities Act and such state and other securities laws as
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may be applicable or in the opinion of counsel for the Company an exemption from
registration under the Securities Act is available (and then the Shares and the
Warrants may be sold, transferred, assigned, pledged, subjected to a lien or
security interest or otherwise conveyed only in compliance with such exemption
and all applicable state and other securities laws).
(i) Communication of Offer. The offer to sell the Shares and the
Warrants was directly communicated to the Purchaser. At no time was the
Purchaser presented with any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or solicited
or invited to attend any promotional meeting otherwise than in connection with
and concurrently with such communicated offer.
(j) Compliance with Law. Such Purchaser's trading activities with
respect to the purchase and resale of the Shares and Warrants shall be in
compliance with all applicable federal securities laws, rules and regulations.
(k) Residence. Such Purchaser's permanent domicile is as set forth in
Exhibit A.
ARTICLE XIII
Covenants
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
Section 13.1 Securities Compliance.
(a) The Company shall notify the Commission in accordance with its
rules and regulations, of the transactions contemplated by any of the
Transaction Documents, including filing a Form D, if applicable, with respect to
the Preferred Shares, Warrants, Conversion Shares and Warrant Shares as required
under Regulation D, if applicable, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Preferred Shares, the
Warrants, the Conversion Shares and the Warrant Shares to the Purchasers or
subsequent holders.
(b) The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Purchasers set forth herein in order to determine the applicability of
Federal and state securities laws exemptions and the suitability of such
Purchasers to acquire the Preferred Shares.
Section 13.2 Registration and Listing. The Company will take all
action necessary to cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects with
its reporting and filing obligations under the Exchange Act, will comply with
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all requirements related to any registration statement filed pursuant to this
Agreement or the Registration Rights Agreement, and will not take any action or
file any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the
over-the-counter electronic bulletin board.
Section 13.3 Inspection Rights. The Company shall permit, during
normal business hours and upon reasonable request and reasonable notice, each
Purchaser or any employees, agents or representatives thereof, so long as such
Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall
beneficially own any Preferred Shares, or shall own Conversion Shares which, in
the aggregate, represent more than two percent (2%) of the total combined voting
power of all voting securities then outstanding, for purposes reasonably related
to such Purchaser's interests as a stockholder to examine and make reasonable
copies of and extracts from the records and books of account of, and visit and
inspect the properties, assets, operations and business of the Company, and to
discuss the affairs, finances and accounts of the Company with any of its
officers, consultants, directors, and key employees.
Section 13.4 Compliance with Laws. The Company shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which could
reasonably be expected to have a Material Adverse Effect.
Section 13.5 Keeping of Records and Books of Account. The Company
shall keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
Section 13.6 Reporting Requirements. Upon written request, if the
Company ceases to file its periodic reports with the Commission, or if the
Commission ceases making these periodic reports available via the Internet
without charge, then the Company shall furnish the following to each Purchaser
so long as such Purchaser shall be obligated hereunder to purchase the Preferred
Shares or shall beneficially own any Preferred Shares, or shall own Conversion
Shares which, in the aggregate, represent more than 2% of the total combined
voting power of all voting securities then outstanding:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as soon
as available, and in any event within forty-five (45) days after the end of each
of the first three fiscal quarters of the Company;
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(b) Annual Reports filed with the Commission on Form 10-KSB as soon as
available, and in any event within ninety (90) days after the end of each fiscal
year of the Company; and
(c) Copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to holders of shares of Common Stock, contemporaneously with the
delivery of such notices or information to such holders of Common Stock.
Section 13.7 Amendments. The Company shall not amend or waive any
provision of the Charter or Bylaws of the Company, or Registration Rights
Agreement in any way that would adversely affect the liquidation preferences,
dividends rights, conversion rights, voting rights or redemption rights of the
holders of the Preferred Shares.
Section 13.8 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company under any Transaction Document or the
Certificate of Designation.
Section 13.9 Distributions. So long as any Preferred Shares remain
outstanding, the Company agrees that it shall not (i) declare or pay any
dividends or make any distributions to any holder(s) of Common Stock or (ii)
purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
Section 13.10 Status of Dividends. The Company covenants and agrees
that (i) no Federal income tax return or claim for refund of Federal income tax
or other submission to the Internal Revenue Service will adversely affect the
Preferred Shares, any other series of its preferred stock, or the Common Stock,
and any deduction shall not operate to jeopardize the availability to Purchasers
of the dividends received deduction provided by Section 243(a)(1) of the Code or
any successor provision, (ii) in no report to shareholders or to any
governmental body having jurisdiction over the Company or otherwise will it
treat the Preferred Shares other than as equity capital or the dividends paid
thereon other than as dividends paid on equity capital unless required to do so
by a governmental body having jurisdiction over the accounts of the Company or
by a change in generally accepted accounting principles required as a result of
action by an authoritative accounting standards setting body, and (iii) other
than pursuant to this Agreement or the Certificate of Designation, it will take
no action which would result in the dividends paid by the Company on the
Preferred Shares out of the Company's current or accumulated earnings and
profits being ineligible for the dividends received deduction provided by
Section 243(a)(1) of the Code. The preceding sentence shall not be deemed to
prevent the Company from designating the Preferred Shares as "Convertible
Preferred Stock" in its annual and quarterly financial statements in accordance
with its prior practice concerning other series of preferred stock of the
Company. Notwithstanding the foregoing, the Company shall not be required to
restate or modify its tax returns for periods prior to the Closing Date. In the
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event that the Purchasers have reasonable cause to believe that dividends paid
by the Company on the Preferred Shares out of the Company's current or
accumulated earnings and profits will not be treated as eligible for the
dividends received deduction provided by Section 243(a)(1) of the Code, or any
successor provision, the Company will, at the reasonable request of the
Purchasers of fifty-one percent (51%) of the outstanding Preferred Shares, join
with the Purchasers in the submission to the Service of a request for a ruling
that dividends paid on the Shares will be so eligible for Federal income tax
purposes, at the Purchasers' expense. In addition, the Company will reasonably
cooperate with the Purchasers (at Purchasers' expense) in any litigation, appeal
or other proceeding challenging or contesting any ruling, technical advice,
finding or determination that earnings and profits are not eligible for the
dividends received deduction provided by Section 243(a)(1) of the Code, or any
successor provision to the extent that the position to be taken in any such
litigation, appeal, or other proceeding is not contrary to any provision of the
Code or incurred in connection with any such submission, litigation, appeal or
other proceeding. Notwithstanding the foregoing, nothing herein contained shall
be deemed to preclude the Company from claiming a deduction with respect to such
dividends if (i) the Code shall hereafter be amended, or final Treasury
regulations thereunder are issued or modified, to provide that dividends on the
Preferred Shares or Conversion Shares should not be treated as dividends for
Federal income tax purposes or that a deduction with respect to all or a portion
of the dividends on the Shares is allowable for Federal income tax purposes, or
(ii) in the absence of such an amendment, issuance or modification and after a
submission of a request for ruling or technical advice, the service shall rule
or advise that dividends on the shares should not be treated as dividends for
Federal income tax purposes. If the Service determines that the Preferred Shares
or Conversion Shares constitute debt, the Company may file protective claims for
refund.
Section 13.11 Reservation of Shares. Beginning at 120 days after the
date hereof, so long as any of the Preferred Shares remain outstanding, the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than the aggregate number of
shares of Common Stock needed to provide for the issuance of the Warrant Shares,
plus two hundred percent (200%) of the aggregate number of shares of Common
Stock needed to provide for the issuance of the Conversion Shares.
Section 13.12 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each Purchaser or its
respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in the form of
Exhibit E attached hereto (the "Irrevocable Transfer Agent Instructions"). Prior
to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.12 will be given by the Company to its transfer agent and that
the Shares shall otherwise be freely transferable on the books and records of
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the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 3.12 shall affect in any way each
Purchaser's obligations and agreements set forth in Section 5.1 to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Shares. If a Purchaser provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of the Shares may be made without registration under the Securities Act
or the Purchaser provides the Company with reasonable assurances that the Shares
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Conversion Shares
and the Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations under this Section 3.12 will cause irreparable
harm to the Purchasers by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 3.12 will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 3.12, that the Purchasers shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
Section 13.13 Redemption of the Preferred Shares. After the Company
has actually drawn down not less than $300,000 under the Common Stock Purchase
Agreement by and between the Company and Torneaux Fund Ltd., dated as of October
6, 2000, as amended through the date hereof (the "Equity Line"), the Company
shall apply at least one-half (1/2) of the proceeds of amounts subsequently
drawn down by it under the Equity Line toward the redemption of the Preferred
Shares on a pro rata basis until all of the Preferred Shares have been redeemed.
Section 13.14 Other Financings. Until 120 days after the date that the
Registration Statement had been declared effective by the Commission (the
"Actual Effective Date"), the Company shall not, without the prior written
consent of the Purchasers, engage in any sale by the Company of its Common Stock
or other securities or debt obligations convertible, exercisable or exchangeable
into Common Stock (an "Other Financing"), except (i) Common Stock issued in
connection with the Equity Line, (ii) Common Stock issued in connection with
stock or stock options granted to employees or directors of the Company, (iii)
Common Stock and other securities (other than for cash) issued in connection
with a merger and/or acquisition or consolidation of the Company with or into
another company or sale or disposition of assets by or to the Company, or (iv) a
public offering of Common Stock or other securities of the Company at a price
per share equal to or greater than the closing bid price on the date preceding
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the public offering. Until the date which is one (1) year following the Actual
Effective Date, if the Purchaser consents to the Company entering into an Other
Financing, the Purchaser shall have the option (the "Purchase Option"), which
option shall be exercised within five (5) calendar days of the date the
Purchaser gives such consent, to purchase up to the same number of shares of
Common Stock or securities convertible, exercisable or exchangeable into Common
Stock issued or to be issued in the Other Financing at the price and on such
terms of the Other Financing. If the Purchaser does not exercise its Purchase
Option in writing before 5 p.m., Pacific time, on such fifth (5th) calendar day
following the Purchaser's consent to the applicable Other Financing, the Company
shall have the right to close such Other Financing on the scheduled closing date
with a third party; provided that all of the financial terms and conditions of
such closing are the same as those provided to the Purchaser prior to the
Purchaser giving its consent to such Other Financing.
ARTICLE XIV
Conditions
Section 14.1 Conditions Precedent to the Obligation of the Company to
Sell the Shares. The obligation hereunder of the Company to issue and sell the
Preferred Shares and the Warrants to the Purchasers is subject to the
satisfaction or waiver, at or before the Closing, each of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of Each Purchaser's Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section 14.2 Conditions Precedent to the Obligation of the Purchasers
to Purchase the Shares. The obligation hereunder of each Purchaser to acquire
and pay for the Preferred Shares and the Warrants is subject to the satisfaction
-24-
or waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a particular date), which shall be true and correct in all material
respects as of such date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) No Suspension, Etc. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the
Commission (except for any suspension of trading of limited duration agreed to
by the Company, which suspension shall be terminated prior to the Closing), and,
at any time prior to the Closing, trading in securities generally as reported by
Bloomberg Financial Markets ("Bloomberg") shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by Bloomberg, or on the New York Stock Exchange, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the judgment of such Purchaser, makes
it impracticable or inadvisable to purchase the Preferred Shares.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(f) Certificate of Designation of Rights and Preferences. Prior to the
Closing, the Certificate of Designation in the form of Exhibit C attached hereto
shall have been filed with the Secretary of State of Nevada.
-25-
(g) Opinion of Counsel, Etc. At the Closing, the Purchasers shall have
received an opinion of counsel to the Company, dated the date of such Closing,
in the form of Exhibit F hereto, and such other certificates and documents as
the Purchasers or its counsel shall reasonably require incident to such Closing.
(h) Registration Rights Agreement. At the Closing, the Company shall
have executed and delivered the Registration Rights Agreement to each Purchaser.
(i) Certificates. The Company shall have executed and delivered to the
counsel to the Purchasers the certificates (in such denominations as such
Purchaser shall request) for the Preferred Shares and Warrants being acquired by
such Purchaser at the Closing.
(j) Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) above (the "Resolutions").
(k) Reservation of Shares. Beginning on the date which is 120 days
after the date hereof, so long as any of the Preferred Shares remain
outstanding, the Company shall have reserved out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the
Preferred Shares and the exercise of the Warrants, a number of shares of Common
Stock equal to the aggregate number of Warrant Shares issuable upon exercise of
the Warrants, plus at least two hundred percent (200%) of the aggregate number
of Conversion Shares issuable upon conversion of the Preferred Shares
outstanding on the Closing Date (after giving effect to the Preferred Shares and
the Warrants to be issued on the Closing Date and assuming all such Preferred
Shares and Warrants were fully convertible or exercisable on such date
regardless of any limitation on the timing or amount of such conversions or
exercises).
(l) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(m) Secretary's Certificate. The Company shall have delivered to such
Purchaser a secretary's certificate, dated as of the Closing Date, as to (i) the
Resolutions, (ii) the Charter, (iii) the Bylaws, (iv) the Certificate of
Designation, each as in effect at such Closing, and (iv) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
(n) Officer's Certificate. The Company shall have delivered to the
Purchasers a certificate of an executive officer of the Company, dated as of the
Closing Date, confirming the accuracy of the Company's representations,
warranties and covenants as of such Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section 4.2 as of
such Closing Date.
-26-
ARTICLE XV
Stock Certificate Legend
Section 15.1 Legend. Each certificate representing the Preferred
Shares and the Warrants, and, if appropriate, securities issued upon conversion
thereof, shall be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend required by applicable state
securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR GLOBUS
WIRELESS, LTD. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing the Shares without
the legend set forth above if at such time, prior to making any transfer of any
Shares or Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company may
reasonably request subject to state and Federal securities laws. Such proposed
transfer will not be effected until: (a) the Company has notified such holder
that either (i) in the opinion of Company counsel, the registration of such
Shares under the Securities Act is not required in connection with such proposed
transfer; or (ii) a registration statement under the Securities Act covering
such proposed disposition has been filed by the Company with the Commission and
has become effective under the Securities Act; and (b) the Company has notified
such holder that either: (i) in the opinion of Company counsel, the registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected. The Company
will use its best efforts to respond to any such notice from a holder within ten
(10) days. In the case of any proposed transfer under this Section 5, the
Company will use reasonable efforts to comply with any such applicable state
securities or "blue sky" laws, but shall in no event be required, in connection
therewith, to qualify to do business in any state where it is not then qualified
or to take any action that would subject it to tax or to the general service of
process in any state where it is not then subject. The restrictions on transfer
contained in Section 5.1 shall be in addition to, and not by way of limitation
of, any other restrictions on transfer contained in any other section of this
Agreement or pursuant to state or Federal securities laws.
-27-
ARTICLE XVI
Indemnification
Section 16.1 General Indemnity. The Company agrees to indemnify and
hold harmless the Purchasers (and their respective directors, officers,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. Each
Purchaser severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Company as result of any inaccuracy in or
breach of the representations, warranties or covenants made by such Purchaser
herein.
Section 16.2 Indemnification Procedure. Any party entitled to
indemnification under this ARTICLE VI (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this ARTICLE VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
-28-
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this ARTICLE VI to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
required by this ARTICLE VI shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
indemnified party irrevocably agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction that such party was not entitled
to indemnification. The indemnity agreements contained herein shall be in
addition to (a) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
ARTICLE XVII
Miscellaneous
Section 17.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided
that the Company shall pay, at the Closing, all reasonable attorneys fees and
expenses (exclusive of disbursements and out-of-pocket expenses) incurred by the
Purchasers of up to $25,000 in connection with the preparation, negotiation,
execution and delivery of this Agreement. In addition, the Company shall pay all
reasonable fees and expenses incurred by the Purchasers in connection with the
filing and declaration of effectiveness by the Commission of the Registration
Statement (as defined in the Registration Rights Agreement) any amendments,
modifications or waivers of this Agreement or any of the other Transaction
Documents, or incurred in connection with the enforcement of this Agreement or
any of the other Transaction Documents, including, without limitation, all of
the Company's reasonable attorneys' fees and expenses.
Section 17.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement, the Certificate of Designation or the Registration Rights Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
-29-
Agreement or the Registration Rights Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
(b) Each of the Company and the Purchasers (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the
Southern District of New York and the courts of the State of New York located in
New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchasers consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 7.2 shall affect or limit any right to serve process in any other manner
permitted by law.
Section 17.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein or in the Transaction Documents or
the Certificate of Designation, neither the Company nor any of the Purchasers
makes any representations, warranty, covenant or undertaking with respect to
such matters and they supersede all prior understandings and agreements with
respect to said subject matter, all of which are merged herein. No provision of
this Agreement may be waived or amended other than by a written instrument
signed by the Company and the holders of at least two-thirds (2/3) of the
Preferred Shares then outstanding, and no provision hereof may be waived other
than by an a written instrument signed by the party against whom enforcement of
any such amendment or waiver is sought. No such amendment shall be effective to
the extent that it applies to less than all of the holders of the Preferred
Shares then outstanding. No consideration shall be offered or paid to any person
to amend or consent to a waiver or modification of any provision of any of the
Transaction Documents or the Certificate of Designation unless the same
consideration is also offered to all of the parties to the Transaction Documents
or holders of Preferred Shares, as the case may be.
Section 17.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
-30-
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Globus Wireless, Ltd.
0000 Xxxx Xxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx,
Chief Financial Officer
with copies to: Sichenzia, Ross & Xxxxxxxx LLP
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq
If to any Purchaser: At the address of such Purchaser
set forth on Exhibit A to this
Agreement, with copies to
Purchaser's counsel as set forth
on Exhibit A or as specified in
writing by such Purchaser with
copies to:
Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx,
Esq.
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 17.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
-31-
Section 17.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 17.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After any Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
Section 17.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 17.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions. This Agreement shall not
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 17.10 Survival. The representations and warranties of the
Company and the Purchasers contained in Section 2.1(o) and Section 2.1(r) should
survive indefinitely and those contained in ARTICLE II, with the exception of
Section 2.1(o) and Section 2.1(r), shall survive the execution and delivery
hereof and the Closings until the date three (3) years from the Final Closing
Date, and the agreements and covenants set forth in ARTICLE I, ARTICLE III,
ARTICLE VI and ARTICLE VII of this Agreement shall survive the execution and
delivery hereof and the Closings hereunder until the Purchasers in the aggregate
beneficially own (determined in accordance with Rule 13d-3 under the Exchange
Act) less than two percent (2%) of the total combined voting power of all voting
securities then outstanding, provided, that Section 3.1, Section 3.2, Section
3.4, Section 3.5, Section 3.7, Section 3.8, Section 3.9, Section 3.10, Section
3.11, Section 3.11, and Section 3.13 shall not expire until the Registration
Statement required by Section 2 of the Registration Rights Agreement is no
longer required to be effective under the terms and conditions of Registration
Rights Agreement.
Section 17.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 17.12 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of the Purchasers
without the consent of the Purchasers unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
Section 17.13 Severability. The provisions of this Agreement, the
Certificate of Designation and the Registration Rights Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement, the Certificate of Designation or the Registration Rights Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement, the Certificate of
Designation or the Registration Rights Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
Section 17.14 Further Assurances. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instrument, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement, the
Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the
Certificate of Designation, and the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-33-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
GLOBUS WIRELESS, LTD.
By: /s/
--------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Financial Officer
THE KESHET FUND L.P.
By: /s/
--------------------------------
Name:
KESHET L.P.
By: /s/
--------------------------------
Name:
CANDID INVESTMENTS LTD.
By: /s/
--------------------------------
Name:
Title:
-34-
XXXXXXXXXXX LIMITED PARTNERSHIP,
an Ontario limited partnership
By: /s/
--------------------------------
Name:
MAGELLAN INTERNATIONAL, LTD.
By: /s/
--------------------------------
Name:
ASPEN INTERNATIONAL, LTD.
By: /s/
--------------------------------
Name:
WARWICK CORPORATION, LTD.
By: /s/
--------------------------------
Name:
Title:
-35-
EXHIBIT A to the
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
FOR GLOBUS WIRELESS, LTD.
Names and Address of Purchasers
Names, Addresses and
Facsimile Numbers Number of Preferred Shares Dollar Amount
of Purchaser & Warrants Purchased of Investment
--------------------------- ----------------------- -------------
The Keshet Fund L.P. Preferred Shares: 40 $ 40,000
000 X. 00xx Xxxxxx Warrants: 11,073
Xxx Xxxx, XX 00000 Fixed Conversion Price: $1.8062
Attn: Xxxxx Grin Warrant Exercise Price: $1.9862
Facsimile no.: 212-541-4410
Keshet L.P. Preferred Shares: 210 $ 210,000
Ragnall House Warrants: 58,133
00 Xxxx Xxxx Fixed Conversion Price: $1.8062
Douglas, Isle of Man Warrant Exercise Price: $1.9862
1 M14LZ
Attn: Xxxxx Grin
Facsimile no.: 212-541-4410
Candid Investments Ltd. Preferred Shares: 250 $ 250,000
X.X. Xxx 00 Warrants: 69,206
Gretton House Fixed Conversion Price: $1.8062
Duke Street Warrant Exercise Price: $1.9862
Grand Turk
Turks and Caicos Island
British West Indies
Attn: X.X. Xxxxxxxx
Facsimile no.: 000-000-0000
-36-
Xxxxxxxxxxx Limited Partnership, Preferred Shares: 250 $ 250,000
an Ontario Limited Partnership Warrants: 69,206
c/o Canaccord Capital Fixed Conversion Price: $1.8062
000 Xxx Xxxxxx, Xxxxx 0000 Warrant Exercise Price: $1.9862
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
Attn: Xxxxxxx Xxxxxxxxxxx
Facsimile no.:
Magellan International, Ltd. Preferred Shares: 250 $ 250,000
Charlotte House Warrants: 69,206
Charlotte Street Fixed Conversion Price: $1.8062
X.X. Xxx X0000 Warrant Exercise Price: $1.9862
Nassau, Bahamas
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Director
Aspen International, Ltd. Preferred Shares: 250 $ 250,000
Charlotte House Warrants: 69,206
Charlotte Street Fixed Conversion Price: $1.8062
X.X. Xxx X0000 Warrant Exercise Price: $1.9862
Nassau, Bahamas
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Director
Warwick Corporation, Ltd. Preferred Shares: 250 $ 250,000
Charlotte House Warrants: 69,206
Charlotte Street Fixed Conversion Price: $1.8062
X.X. Xxx X0000 Warrant Exercise Price: $1.9862
Nassau, Bahamas
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Director
-37-
EXHIBIT B
FORM OF WARRANT
-38-
EXHIBIT C
CERTIFICATE OF DESIGNATION
-39-
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
-40-
EXHIBIT E
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
-41-
EXHIBIT F
OPINION OF COUNSEL
-42-
SCHEDULE 2.1(C)
GLOBUS WIRELESS, LTD.
STATUS OF OUTSTANDING STOCK & PURCHASE RIGHTS
AS OF DECEMBER 29, 2000
Authorized and Issued Capital Stock
Shares of Outstanding Stock:
Common Stock, par value $.001 - 100,000,000 shares authorized
12,697,621 shares issued and
outstanding
Preferred Stock, par value $.001- 20,000,000 shares authorized
No shares issued and outstanding
Outstanding Stock Options/Warrants/Other:
Position/ Number of Exercise Date Date Date Granted/
Name Capacity Options Price Reserved Allotted Vested
---- -------- ------- ----- -------- -------- ------
Xxxxxxx X. Xxxxxx President/CEO
Chairman 50,000 $0.85 06/08/99 08/30/99 08/30/99
50,000 $0.85 06/08/99 08/30/99
50,000 $0.85 06/08/99 08/30/99
50,000 $0.85 06/08/99 08/30/99 03/29/00
200,000 $3.00 08/30/99 08/30/99
A. Xxxx Xxxxxxxx Vice President
Corp. Marketing 33,333 $0.85 06/08/99 08/30/99
33,333 $0.85 06/08/99 08/30/99 03/29/00
75,000 $3.00 08/30/99 08/30/99
75,000 $3.00 08/30/99 08/30/99
75,000 $3.00 08/30/99 08/30/99
-43-
Position/ Number of Exercise Date Date Date Granted/
Name Capacity Options Price Reserved Allotted Vested
---- -------- ------- ----- -------- -------- ------
Xxxx X. Xxxxxxxx C.O.O. & Secretary
Treasurer 10,000 $1.60 02/02/00 03/29/00 03/29/00
30,000 $3.00 02/02/00 03/29/00
30,000 $5.00 02/02/00 03/29/00
30,000 $6.00 02/02/00 03/29/00
GM Celltech
Xxxxx XxXxxxxx Research Inc. 50,000 $1.60 08/05/99 08/30/99 09/02/00
50,000 $1.40 02/02/00 03/29/00
50,000 $3.00 02/02/00 03/29/00
50,000 $5.00 02/02/00 03/29/00
Vice President
Xxxx Xxxxx Sales Wireless 20,000 $4.00 03/29/00 03/29/00 04/17/00
Devices
10,000 $5.00 03/29/00 03/29/00
10,000 $6.00 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
20,000 TBA 03/29/00 03/29/00
Xxxxx Xxxxxx Investor Relations 6,500 $1.327 12/22/99 03/08/00 03/08/00
Xxxx Xxxxxxxxx Marketing Admin 7,500 $1.327 12/22/99 03/08/00 03/08/00
Xxx x'Xxxxx Exec. Asst. 6,000 $1.327 12/22/99 03/08/00 03/08/00
Xxxxx XxXxxxxx Inventory Manager 2,000 $1.327 12/22/99 03/08/00 03/08/00
Xxxxxxx Xxxxxxxx Secretary 1,000 $1.327 12/22/99 03/08/00 03/08/00
Xxx Xxxxxx Controller 7,500 4.00 7/8/00 7/8/00 08/16/00
7,500 5.50 7/8/00 7/8/00
10,000 85%mkt 7/8/00 7/8/00
10,000 85%mkt 7/8/00 7/8/00
Employees Various 500,000 1.8598 8/17/00 8/17/00
(85%)
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Position/ Number of Exercise Date Date Date Granted/
Name Capacity Options Price Reserved Allotted Vested
---- -------- ------- ------ -------- -------- ------
Xxxxxx Xxxxxxxxx Director 24,000 1.8598 8/17/00 8/17/00 08/17/00
36,000 1.8598 8/17/00 8/17/00 08/17/00
Xxxxxxx Xxxx Director 24,000 1.8598 8/17/00 8/17/00 08/17/00
36,000 1.8598 8/17/00 8/17/00 08/17/00
Xxxx Xxxxxxx Director 24,000 1.8598 8/17/00 8/17/00 08/17/00
36,000 1.8598 8/17/00 8/17/00 08/17/00
Xxxxxx X. Xxxxxx, Xx. Investment Banker 17,500 4.00 9/12/00 9/12/00
17,500 5.00 9/12/00 9/12/00
Xxxxxxxxxxx X. Xxxxx Investment Banker 17,500 4.00 9/12/00 9/12/00
17,500 5.00 9/12/00 9/12/00
Sichenzia, Ross & Legal Counsel 30,000
Xxxxxxxx LLP
Notes:
3. All options above without confirmed grant/vest date are subject to the
achievement of certain performance criteria.
4. Up to 60,000 stock options reserved for Xxxx Xxxxx, Vice President
Marketing & Sales Wireless Devices, will have their exercise price
determined by the following formula: 85% of Fair Market Value of 10
day closing average price from the date certain sales milestone(s)
achieved.
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SCHEDULE 2.1(G)
Subsidiaries
State of Incorporation
Subsidiary or Organization Ownership
--------------------------- ------------------------ --------------
Celltech Research, Inc. British Columbia, Canada wholly-owned
Globus Wireless Canada, Ltd. British Columbia, Canada wholly-owned
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SCHEDULE 2.1(T)
Material Agreements
Agency Agreement for the Supply of Products, between the Company as Seller and
Bullet Distribution, located in Garden Grove, California, as Agent, dated
October 18, 2000. The term is for one year ending October 17, 2001. The
agreement is for the marketing of analog wireless phones worldwide. The proceeds
are divided between both parties equally.
Agreement for Sale of Manufactured Goods, between the Company as Buyer and Aztec
Components, Inc., a California corporation ("Aztec"), as Seller, dated October
18, 2000. The term begins at signing and continues through October 31, 2001. The
agreement is for the sale of analog phone devices. The Company signed a
Corporate Acknowledgment & Guaranty dated October 18, 2000, in respect of
$3,000,000 credit received by the Company from Aztec and the $5,000,000
promissory note referred to below.
Security Agreement, between the Company as Debtor and Aztec as Secured Party,
dated October 18, 2000, relating to the promissory note referred to below.
Secured Convertible Promissory Note, issued by the Company to Aztec, in the
amount of $5,000,000, dated October 18, 2000. The promissory note becomes due if
the Company fails to pay sums owed under the Agreement for Sale of Manufactured
Goods referred to above. If the promissory note becomes due and payable, it may
be converted into common stock of the Company at a conversion rate equal to 75%
of the average trading price of the Company's common stock for the ten day
period prior to the holder's election to convert the note.
Escrow Agreement, between Aztec as Seller, the Company as Buyer, and Xxxxx
Xxxxxx, Barristers & Solicitors, of Vancouver, British Columbia, Canada, as
Escrow Agent, dated October 18, 2000. The Escrow Agreement facilitates the
exchange of money and property in connection with the Agreement for Sale of
Manufactured Goods referred to above.
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