SENIOR SECURED CONVERTIBLE DEBENTURES
AND
WARRANTS PURCHASE AGREEMENT
Between
World Wide Wireless Communications, Inc.
and
the Investors Signatory Hereto
SENIOR SECURED CONVERTIBLE DEBENTURES AND WARRANTS PURCHASE AGREEMENT dated
as of March 29, 2001 (the "Agreement"), between the Investors signatory hereto
(each an "Investor" and together the "Investors"), and World Wide Wireless
Communications, Inc., a corporation organized and existing under the laws of the
State of Nevada (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase, in the aggregate, (i) $750,000 principal
amount of Convertible Debentures (as defined below) and (ii) Warrants (as
defined below); and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and/or 4(6) ("Section 4(6)") of the United States
Securities Act of 1933, as amended (the "Securities Act") and/or Regulation D
("Regulation D") and the other rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
in securities to be made hereunder.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. "Bid Price" shall mean the closing bid price (as reported by
Bloomberg Financial L.P.) of the Common Stock on the Principal Market on the
date in question (and, if no closing bid price is reported, the closing price as
so reported, and if neither the closing bid price nor the closing price is so
reported, the last reported price of the Common Stock as determined by an
independent evaluator mutually agreed to by the parties).
Section 1.2. "Capital Shares" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.3. "Capital Shares Equivalents" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
Section 1.4. "Closing" shall mean the closing of the purchase and sale of the
Convertible Debentures and Warrants pursuant to Section 2.1.
Section 1.5. "Closing Date" shall mean the date on which all conditions to the
Closing have been satisfied (as defined in Section 2.1(b) hereto) and the
Closing shall have occurred.
Section 1.6. "Common Stock" shall mean the Company's common stock, $0.001 par
value per share.
Section 1.7. "Conversion Shares" shall mean the shares of Common Stock issuable
upon conversion of the Convertible Debentures and any shares issuable as
interest upon the Convertible Debentures.
Section 1.8. "Convertible Debenture(s)" shall mean the 8% Senior Secured
Convertible Debenture(s) due 365 calendar days from their date of issuance, in
the form of Exhibit A hereto.
Section 1.9. "Damages" shall mean any loss, claim, damage, judgment, penalty,
deficiency, liability, costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements and reasonable costs and expenses
of expert witnesses and investigation).
Section 1.10. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.11. "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
Section 1.12. "Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit C hereto executed and delivered
contemporaneously with this Agreement.
Section 1.13. "Equity Line" shall have the meaning set forth in Section 6.9
herein.
Section 1.14. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
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Section 1.15. "Legend" shall mean the legend set forth in Section 9.1.
Section 1.16. "Material Adverse Effect" shall mean any effect on the business,
operations, properties, stock price or financial condition of the Company that
is material and adverse to the Company and its subsidiaries and affiliates,
and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement, the Registration Rights Agreement,
the Convertible Debentures, the Warrants or the Escrow Agreement in any material
respect.
Section 1.17. "Maturity Date" shall mean the date on which the outstanding
principle amount and any accrued but unpaid interest of the Convertible
Debentures are due and payable as set forth in the Convertible Debenture.
Section 1.18. "Outstanding" when used with reference to shares of Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.19. "Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
Section 1.20. "Principal Market" shall initially mean the OTC Bulletin Board and
shall also include the American Stock Exchange, the New York Stock Exchange, or
the NASDAQ National Market and the NASDAQ Small-Cap Market, whichever is at the
time the principal trading exchange or market for the Common Stock, based upon
share volume.
Section 1.21. "Purchase Price" shall mean the face principal amount of the
Convertible Debentures.
Section 1.22. "Registrable Securities" shall mean 200% of the Conversion Shares
and the Warrant Shares until the earlier of the date that (i) the Registration
Statement has been declared effective by the SEC, and all Conversion Shares and
Warrant Shares have been disposed of pursuant to the Registration Statement,
(ii) all Conversion Shares and Warrant Shares have been sold under circumstances
under which all of the applicable conditions of Rule 144 (or any similar
provision then in force) under the Securities Act ("Rule 144") are met, (iii)
all Conversion Shares and Warrant Shares have been otherwise transferred to
holders who may trade such shares without restriction under the Securities Act,
and the Company has delivered a new certificate or other evidence of ownership
for such securities not bearing a restrictive legend or (iv) such time as, in
the opinion of counsel to the Company, all Conversion Shares and Warrant Shares
may be sold without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.
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Section 1.23. "Registration Rights Agreement" shall mean the agreement regarding
the filing of the Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the Investors, on the date
hereof in the form annexed hereto as Exhibit B.
Section 1.24. "Registration Statement" shall mean a registration statement on
Form S-1 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale by the Investors
of the Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investors of the Registrable Securities under
the Securities Act.
Section 1.25. "Regulation D" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.26. "SEC" shall mean the Securities and Exchange Commission.
Section 1.27. "SEC Documents" shall mean the Company's latest Form 10-K or
10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, all registration statements filed as of the time in question, and
the Proxy Statement for its latest fiscal year as of the time in question until
such time as the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.28. "Section 4(2)" and "Section 4(6)" shall have the meanings set
forth in the recitals of this Agreement.
Section 1.29. "Securities Act" shall have the meaning as set forth in the
recitals of this Agreement.
Section 1.30. "Security Documents" shall mean the Security Agreement in the form
of Exhibit G hereto and receipt of filings of all UCC-1 and similar financing
statements required to perfect the Investor's security interest, each which have
been executed by the Company or any of its direct or indirect subsidiaries in
favor of the Investors in connection therewith.
Section 1.31. "Shares" shall have the meaning set forth in the definition of
"Outstanding" herein.
Section 1.32. "Side Letters" shall have the meaning set forth in Section
2.1(b)(xii) herein.
Section 1.33. "Trading Day" shall mean any day during which the Principal Market
shall be open for business.
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Section 1.34. "Warrants" shall mean the Warrants set forth in Section 2.2,
substantially in the form of Exhibit E hereto, to be issued to the Investors
pro-rata hereunder.
Section 1.35. "Warrant Shares" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to exercise of the Warrants.
ARTICLE II
Purchase and Sale of Convertible Debentures and Warrants
Section 2.1.
(a) Investment.
(i) Purchase. Upon the terms and subject to the conditions set
forth herein, the Company agrees to sell, and the Investors,
severally and not jointly, agree to purchase, in the aggregate,
$750,000 principal amount of Convertible Debentures. Each
Investor shall deliver to the Escrow Agent immediately
available funds in their proportionate amount of the Purchase
Price as set forth on the signature pages hereto, and the
Company shall deliver the Convertible Debentures evidencing
said principal sum and the Warrants to the Escrow Agent, in
each case to be held by the Escrow Agent pursuant to the Escrow
Agreement.
(ii) Closing. Upon satisfaction of the conditions set forth in
Section 2.1(b), the Closing shall occur at the offices of the
Escrow Agent at which time the Escrow Agent (x) shall release
the Convertible Debentures and the Warrants to the Investors,
and (y) shall release the Purchase Price (after all fees have
been paid as set forth in the Escrow Agreement), pursuant to
the terms of the Escrow Agreement.
(b) The Closing is subject to the satisfaction or waiver by the party to
be benefited thereby of the following conditions:
(i) acceptance and execution by the Company and by the Investors,
of this Agreement and all exhibits hereto;
(ii) delivery into escrow by each Investor of immediately available
funds in their proportionate amount of Purchase Price;
(iii) all representations and warranties of the Investors contained
herein shall remain true and correct as of the Closing Date;
(iv) all representations and warranties of the Company contained
herein shall remain true and correct as of the Closing Date;
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(v) the Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Convertible
Debentures and Warrants, or shall have the availability of
exemptions therefrom;
(vi) the sale and issuance of the Convertible Debentures and the
Warrants hereunder, and the proposed issuance by the Company to
the Investors of the Common Stock underlying the Convertible
Debentures and the Warrants upon the conversion or exercise
thereof shall be legally permitted by all laws and regulations
to which the Investors and the Company are subject and there
shall be no ruling, judgment or writ of any court prohibiting
the transactions contemplated by this Agreement;
(vii) delivery of the original fully executed Convertible Debentures
and Warrants certificates to the Escrow Agent;
(viii) delivery to the Escrow Agent of an opinion of Xxxxx & Xxxxxxx,
counsel to the Company, in the form of Exhibit D hereto;
(ix) delivery to the Escrow Agent of the Irrevocable Instructions to
Transfer Agent in the form attached hereto as Exhibit F;
(x) there shall have been no Material Adverse Effect with respect
to the Company since the date hereof;
(xi) delivery to the Escrow Agent of the Security Documents;
(xii) original executed side letters from the Company to the
Investors (A) permanently removing the conversion price floor
to the 4% Convertible Debentures of the Company issued to the
Esquire Trading & Finance, Inc., AMRO International, S.A.,
Xxxxxxx Trust Reg., The Endeavor Capital Fund, S.A., The Keshet
Fund, L.P., Keshet, L.P. and Nesher, LTD (the "Prior
Investors") pursuant to that certain Securities Purchase
Agreement (the "Securities Agreement"), dated April 14, 2000,
between the Prior Investors and the Company, and (B)
permanently lowering the exercise price of the warrants issued
to the Prior Investors and the placement agent thereto pursuant
to the Securities Agreement to 115% of the Bid Price on the
date immediately preceding the Closing Date (the "Side
Letters"); and
(xiii) delivery to the Escrow Agent of the Registration Rights
Agreement.
Section 2.2. Warrants. At the Closing, the Company shall issue to each Investor
a warrant certificate to purchase up to 50,000 shares of Common Stock (or
portion thereof) for each $100,000 principal amount of Convertible Debenture (or
portion thereof) purchased by such Investor The exercise price of the Warrants
shall be 115% of the average of the five (5) Bid Prices immediately prior to the
Closing Date. The Warrants shall be exercisable for a period of three (3) years
beginning on the Closing Date. The shares of Common Stock underlying the
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Warrants shall be registered for resale on the Registration Statement for resale
by the Investors pursuant to the Registration Rights Agreement.
Section 2.3. Liquidated Damages. The parties hereto acknowledge and agree that
the sums payable pursuant to this Agreement, the Registration Rights Agreement
and the Convertible Debentures shall constitute liquidated damages and not
penalties. The parties further acknowledge that a breach by either party of this
Agreement or exhibits hereto, (a) the amount of loss or damages likely to be
incurred is incapable or is difficult to precisely estimate, (b) the amounts
specified in such agreements bear a reasonable proportion and are not plainly or
grossly disproportionate to the probable loss likely to be incurred by the
Investors in connection with the failure of the Company to timely cause the
registration of the Registrable Securities or to deliver stock certificates upon
any conversion, and (c) the parties are sophisticated businesses and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.
ARTICLE III
Representations and Warranties of Each Investor
Each Investor, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. Organization. The Investor is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization.
Section 3.2. Intent. The Investor is entering into this Agreement for its own
account and not with a view to or for sale in connection with any distribution
of the Common Stock. The Investor has no present arrangement (whether or not
legally binding) at any time to sell the Convertible Debenture, and the Warrants
or any Conversion Shares or Warrant Shares or through any person or entity;
provided, however, that by making the representations herein, the Investor does
not agree to hold such securities for any minimum or other specific term and
reserves the right to dispose of the Conversion Shares and Warrant Shares at any
time in accordance with federal and state securities laws applicable to such
disposition.
Section 3.3. Sophisticated Investor. The Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in the Convertible Debentures, the Warrants
and the underlying Common Stock. The Investor has been represented by counsel of
its choice. The Investor acknowledges that an investment in the Convertible
Debentures and the Warrants and the underlying Common Stock is speculative and
involves a high degree of risk.
Section 3.4. Authority. This Agreement and each agreement attached as an Exhibit
hereto which is required to be executed by the Investor has been duly authorized
and validly executed
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and delivered by the Investor and is a valid and binding agreement of the
Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 3.5. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.6. Absence of Conflicts. The execution and delivery of this Agreement
and each agreement which is attached as an Exhibit hereto and executed by the
Investor in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by the Investor, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on the Investor or (a)
violate any provision of any indenture, instrument or agreement to which the
Investor is a party or is subject, or by which the Investor or any of its assets
is bound; (b) conflict with or constitute a material default thereunder; (c)
result in the creation or imposition of any lien pursuant to the terms of any
such indenture, instrument or agreement, or constitute a breach of any fiduciary
duty owed by the Investor to any third party; or (d) require the approval of any
third-party (which has not been obtained) pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which the Investor is
subject or to which any of its assets, operations or management may be subject.
Section 3.7. Disclosure; Access to Information. The Investor has received all
documents, records, books and other publicly available information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has reviewed copies of all SEC Documents deemed relevant
by Investor.
Section 3.8. Manner of Sale. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investors that, except as set forth
on the SEC Documents or on the Disclosure Schedule prepared by the Company and
attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of Nevada
and has all requisite corporate authority to own its properties and to carry on
its business as now being conducted. Except as set forth on the Disclosure
Schedules, the Company does not have any subsidiaries, and does not own more
that fifty percent (50%) of or control any other business entity. The
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Company is duly qualified and is in good standing as a foreign corporation to do
business in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, other than those in
which the failure so to qualify would not have a Material Adverse Effect.
Section 4.2. Authority. (a) The Company has the requisite corporate power and
corporate authority to conduct its business as now conducted, to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement,
the Escrow Agreement and the Warrants, and to issue the Convertible Debentures,
the Conversion Shares, the Warrants and the Warrant Shares pursuant to their
respective terms, (b) the execution, issuance and delivery of this Agreement,
the Registration Rights Agreement, the Escrow Agreement, the Convertible
Debentures and the Warrants by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (c) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Warrants and the
Convertible Debentures have been duly executed and delivered by the Company and
at the Closing shall constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application. The
Company has duly and validly authorized and reserved for issuance shares of
Common Stock sufficient in number for the conversion of the Convertible
Debentures and the exercise of the Warrants. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock of the issuance
of the Conversion Shares and Warrant Shares. The Company further acknowledges
that its obligation to issue Conversion Shares and Warrant Shares upon
conversion of the Convertible Debentures and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement and the Convertible Debentures is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company and
notwithstanding the commencement of any case under 11 U.S.C. ss. 101 et seq.
(the "Bankruptcy Code"). The Company shall not seek judicial relief from its
obligations hereunder except pursuant to the Bankruptcy Code. In the event the
Company is a debtor under the Bankruptcy Code, the Company hereby waives to the
fullest extent permitted any rights to relief it may have under 11 U.S.C. ss.
362 in respect of the conversion of the Convertible Debentures and the exercise
of the Warrants. The Company agrees, without cost or expense to the Investors,
to take or consent to any and all action necessary to effectuate relief under 11
U.S.C. ss. 362.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 300,000,000 shares of Common Stock of which 89,417,795 shares are
issued and outstanding, and no shares of preferred stock are issued and
outstanding. Except as set forth in any of the Company's SEC Documents or
Schedule 4.3, there are no outstanding Capital Shares Equivalents nor any
agreements or understandings pursuant to which any Capital Shares Equivalents
may become outstanding. 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. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable and have been issued
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pursuant to valid exemptions from registration under the Securities Act and all
applicable state "blue sky" laws.
Section 4.4. Common Stock. The Company has registered its Common Stock pursuant
to Section 12(b) or (g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company is in compliance
with all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on, the Principal
Market. As of the date hereof, the Company has not received any notice
regarding, and to its knowledge there is no threat, of the termination or
discontinuance of the eligibility of the Common Stock for on the Principal
Market.
Section 4.5. SEC Documents. The Company has made available to the Investors true
and complete copies of the SEC Documents. The Company has not provided to the
Investors any information that, according to applicable law, rule or regulation,
should have been disclosed publicly prior to the date hereof by the Company, but
which has not been so disclosed. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
rules and regulations of the SEC promulgated thereunder and the SEC Documents
did not contain any untrue statement of a material fact or omit 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 SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such financial
statements or the notes thereto or (b) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6. Exemption from Registration; Valid Issuances. Subject to the
accuracy of the Investors' representations in Article III, the sale of the
Convertible Debentures and the Conversion Shares, the Warrants and Warrant
Shares will not require registration under the Securities Act and/or any
applicable state securities law. When validly converted in accordance with the
terms of the Convertible Debentures, the Conversion Shares, the Warrants and
Warrant Shares will be duly and validly issued, fully paid, and non-assessable.
Neither the sales of the Convertible Debentures, the Conversion Shares, the
Warrants and Warrant Shares pursuant to,
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nor the Company's performance of its obligations under, this Agreement, the
Registration Rights Agreement, the Escrow Agreement or the Convertible
Debentures and the Warrants will (a) result in the creation or imposition by the
Company of any liens, charges, claims or other encumbrances upon the Convertible
Debentures, the Warrants or the Conversion Shares and Warrant Shares or, except
as contemplated herein, any of the assets of the Company, or (b) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The
Convertible Debentures, the Warrants and the Conversion Shares and Warrant
Shares, shall not subject the Investors to personal liability to the Company or
its creditors by reason of the possession thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor, to the knowledge
of the Company, any person acting on its or their behalf (a) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Convertible
Debentures or the Warrants, or (b) made any offers or sales of any security or
solicited any offers to buy any security under any circumstances that would
require registration of the Convertible Debentures or the Conversion Shares and
the Warrants and Warrant Shares, under the Securities Act.
Section 4.8. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of and payment of
interest upon the Convertible Debentures, Warrants and the Conversion Shares and
Warrant Shares, do not and will not (a) result in a violation of the Company's
Certificate of Incorporation or By-Laws or (b) conflict with, or constitute a
material default (or an event that 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 material agreement, indenture or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
federal, state or local law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or by which any material property or asset of the Company is bound or
affected, nor is the Company otherwise in violation of, conflict with or default
under any of the foregoing (except in each case for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not have, individually or in the aggregate, a Material Adverse Effect). The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate would not have a Material
Adverse Effect. The Company is not required under any 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 this
Agreement or issue and sell the Convertible Debentures or the Warrants in
accordance with the terms hereof (other than any SEC or state securities filings
that may be required to be made by the Company subsequent to the Closing, any
registration statement that may be filed pursuant hereto); 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 Investors herein.
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Section 4.9. No Material Adverse Change. Except as set forth in Schedule 4.9 or
the SEC Documents, since the date of the financial statement contained in the
Company's most recently filed Form 10-Q (or Form 10-QSB) or Form 10-K (or Form
10-KSB), no Material Adverse Effect has occurred or exists with respect to the
Company. No material supplier has given notice, oral or written, that it intends
to cease or reduce the volume of its business with the Company from historical
levels.
Section 4.10. No Undisclosed Events or Circumstances. Except as set forth in
Schedule 4.10 or the SEC Documents, since the date of the financial statement
contained in the Company's most recently filed Form 10-Q (or Form 10-QSB) or
Form 10-K (or Form 10-KSB), no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, prospects, operations or
financial condition, that, under any applicable law, rule or regulation,
requires public disclosure or announcement prior to the date hereof by the
Company but which has not been so publicly announced or disclosed in writing to
the Investors.
Section 4.11. No Integrated Offering. Except as set forth in the SEC Documents,
and other than pursuant to an effective registration statement under the
Securities Act, or pursuant to the issuance or exercise of employee stock
options or in connection with certain acquisitions, or pursuant to its
discussion with the Investors in connection with the transactions contemplated
hereby, the Company has not issued, offered or sold the Convertible Debentures,
the Warrants or any shares of Common Stock (including for this purpose any
securities of the same or a similar class as the Convertible Debentures,
Warrants or Common Stock, or any securities convertible into a exchangeable or
exercisable for the Convertible Debentures or Common Stock or any such other
securities) within the six-month period next preceding the date hereof, and the
Company shall not permit any of its directors, officers or affiliates directly
or indirectly to take, any action (including, without limitation, any offering
or sale to any Person of the Convertible Debentures or shares of Common Stock),
so as to make unavailable the exemption from Securities Act registration being
relied upon by the Company for the offer and sale to Investors of the
Convertible Debentures (and the Conversion Shares) and the Warrants (and the
Warrant Shares) as contemplated by this Agreement.
Section 4.12. Litigation and Other Proceedings. Except as set forth in SEC
Documents or Schedule 4.12, there are no lawsuits or proceedings pending or, to
the knowledge of the Company, threatened, against the Company or any subsidiary,
nor has the Company received any written or oral notice of any such action,
suit, proceeding or investigation, which could reasonably be expected to have a
Material Adverse Effect. No judgment, order, writ, injunction or decree or award
has been issued by or, to the knowledge of the Company, requested of any court,
arbitrator or governmental agency which could result in a Material Adverse
Effect.
Section 4.13. No Misleading or Untrue Communication. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Convertible Debentures or the Warrants in
connection with the transaction contemplated by this Agreement, have not made,
at any time, any oral communication in connection with the offer or sale of the
same which contained any untrue statement of a material fact or omitted to
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state any material fact necessary in order to make the statements, in the light
of the circumstances under which they were made, not misleading.
Section 4.14. Material Non-Public Information. The Company has not disclosed to
the Investors any material non-public information that (a) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock, or (b) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
Section 4.15. Insurance. The Company and each subsidiary maintains property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance, as necessary to conduct
its business, with financially sound and reputable insurers that is adequate,
consistent with industry standards and the Company's historical claims
experience. The Company has not received notice from, and has no knowledge of
any threat by, any insurer (that has issued any insurance policy to the Company)
that such insurer intends to deny coverage under or cancel, discontinue or not
renew any insurance policy presently in force.
Section 4.16. Tax Matters.
(a) The Company and each subsidiary has filed all Tax Returns, which it is
required to file under applicable laws; all such Tax Returns are true
and accurate and have been prepared in compliance with all applicable
laws; the Company has paid all Taxes due and owing by it or any
subsidiary (whether or not such Taxes are required to be shown on a
Tax Return) and have withheld and paid over to the appropriate taxing
authorities all Taxes which it is required to withhold from amounts
paid or owing to any employee, stockholder, creditor or other third
parties; and since December 31, 1999, the charges, accruals and
reserves for Taxes with respect to the Company (including any
provisions for deferred income taxes) reflected on the books of the
Company are adequate to cover any Tax liabilities of the Company if
its current tax year were treated as ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that the Company or any
subsidiary is or may be subject to taxation by that jurisdiction.
There are, to the Company's knowledge, no foreign, federal, state or
local tax audits or administrative or judicial proceedings pending or
being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign,
federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or
other review has been received by the Company or any subsidiary from
any foreign, federal, state or local taxing authority. There are no
material unresolved questions or claims concerning the Company's Tax
liability. The Company (ii) has not executed or entered into a closing
agreement pursuant toss. 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local
or foreign law; or (ii) has not agreed to or is required to make any
adjustments pursuant toss. 481 (a) of the Internal Revenue Code or any
similar provision of state, local or foreign law by reason of a change
in accounting method initiated by the Company or any of its
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subsidiaries or has any knowledge that the IRS has proposed any such
adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or
operations of the Company. The Company has not been a United States
real property holding corporation within the meaning ofss. 897(c)(2)
of the Internal Revenue Code during the applicable period specified
inss. 897(c)(1)(A)(ii) of the Internal Revenue Code.
(c) The Company has not made an election under ss. 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another
person that is not a subsidiary of the Company under (i) Treas. Reg.
ss. 1.1502-6 (or comparable provisions of state, local or foreign
law), (ii) as a transferee or successor, (iii) by contract or
indemnity or (iv) otherwise. The Company is not a party to any tax
sharing agreement. The Company has not made any payments, is not
obligated to make payments nor is it a party to an agreement that
could obligate it to make any payments that would not be deductible
under ss. 280G of the Internal Revenue Code.
(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or
use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license,
payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
Section 4.17. Property. Neither the Company nor any of its subsidiaries owns any
real property. Each of the Company and its subsidiaries has good and marketable
title to all personal property owned by it, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company; and to the Company's knowledge any real
property and buildings held under lease by the Company as tenant are held by it
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and intended to be made of such
property and buildings by the Company. The Company's present facilities are
adequate for the Company's reasonably foreseeable needs.
Section 4.18. Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or
14
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the Company's knowledge, neither the
Company nor any of its subsidiaries is infringing upon or in conflict with any
right of any other person with respect to any Intangibles. No adverse claims
have been asserted by any person to the ownership or use of any Intangibles and
the Company has no knowledge of any basis for such claim.
Section 4.19. Internal Controls and Procedures. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(a) all transactions to which the Company or any subsidiary is a party or by
which its properties are bound are executed with management's authorization; (b)
the recorded accounting of the Company's consolidated assets is compared with
existing assets at regular intervals; (c) access to the Company's consolidated
assets is permitted only in accordance with management's authorization; and (d)
all transactions to which the Company or any subsidiary is a party or by which
its properties are bound are recorded as necessary to permit preparation of the
financial statements of the Company in accordance with U.S. generally accepted
accounting principles.
Section 4.20. Payments and Contributions. Neither the Company, any subsidiary,
nor any of its directors, officers or, to its knowledge, other employees has (a)
used any Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity; (b) made
any direct or indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (c) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (d) made
any bribe, rebate, payoff, influence payment, kickback or other similar payment
to any person with respect to Company matters.
Section 4.21. Permits and Licenses. The Company holds all necessary permits and
licenses to conduct its business as presently conducted. All of such permits and
licenses are in full force and effect and the Company is not in material
violation of any thereof.
Section 4.22. No Misrepresentation. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Investors pursuant to this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 4.23. Related Party Transactions. The Company is not a party to any
agreement or transaction with any of its officers, directors, greater than 5%
shareholders or any Affiliate (as defined in SEC Rule 405) of any of said
persons that would require disclosure under Item 404 of Regulation S-B that will
not be disclosed in the next Form 10-K (or Form 10-KSB), as amended.
15
ARTICLE V
Covenants of the Investors
Each Investor, severally and not jointly, covenants with the Company that:
Section 5.1. Compliance with Law. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
ARTICLE VI
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. Reservation of Common Stock. On any date hereafter, in the event
the number of Shares reserved, as to any Investor, is less than 200% of the
Conversion Shares necessary to convert all of such Investor's Convertible
Debenture, based on the then Conversion Price, and Warrant Shares to exercise
all of such Investor's Warrant (the "Trigger Amount"), then the Company shall
have seven (7) calendar days from such date to increase the number of shares
reserved as to such Investor above the Trigger Amount, unless to do so the
Company must authorize additional shares, in which case the Company shall have
sixty (60) calendar days from such date to increase the number of shares
authorized and reserved as to such Investor above the Trigger Amount. Failure to
comply with the provisions of this Section 6.2 shall result in an immediate
default of the Convertible Debentures, notwithstanding the Company's right to
cure under the Convertible Debentures.
Section 6.3. Listing of Common Stock. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing to list the Conversion Shares and the Warrant
Shares on the Principal Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Principal Market, it will
include in such application the Conversion Shares and the Warrant Shares, and
will take such other action as is necessary or desirable in the opinion of the
Investors to cause the Conversion Shares and Warrant Shares to be listed on such
other Principal Market as promptly as possible. The Company will take all action
to continue the listing and trading of its Common Stock on a Principal Market
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market and shall provide
Investors with copies of any correspondence to or from such Principal Market
which questions or threatens delisting of the Common Stock, within three (3)
Trading Days of the Company's receipt thereof, until the Investors have disposed
of all of their Registrable Securities.
16
Section 6.4. Exchange Act Registration. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act until the Investors have
disposed of all of their Registrable Securities.
Section 6.5. Legends. The certificates evidencing the Securities shall be free
of legends, except as set forth in Article IX. If the Transfer Agent or the
Investor's broker-dealer requires an opinion of counsel from the Company's
counsel pursuant to the Instructions to Transfer Agent attached hereto to issue
new certificates free of a legend to an Investor and Company's counsel fails to
deliver such opinion to the Transfer Agent within two (2) Trading Days from
receipt by Company's counsel of such a request from the Transfer Agent or the
Investor's broker-dealer, then the Company will pay such Investor, pro rata on a
weekly basis, as liquidated damages for such failure and not as a penalty, ten
percent (10%) per week of the market value of the Common Stock which would be
issuable upon conversion of such Investor's Convertible Debenture upon on any
date of determination for each week until such opinion is provided,
notwithstanding the fact that the Company has instructed the Transfer Agent to
accept such an opinion from such Investor's counsel.
Section 6.6. Corporate Existence; Conflicting Agreements. The Company will take
all steps necessary to preserve and continue the corporate existence of the
Company. The Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto.
Section 6.7. Consolidation; Merger. The Company shall not, without the prior
written consent of the Investors, at any time after the date hereof, effect any
merger or consolidation of the Company with or into, or a transfer more than 50%
of the assets of the Company to, another entity (a "Consolidation Event").
Section 6.8. Issuance of Convertible Debentures and Warrants. The sale of the
Convertible Debentures, the Warrants and the issuance of the Conversion Shares
upon conversion and Warrant Shares upon the exercise of the Warrants of the
Convertible Debentures shall be made in accordance with the provisions and
requirements of Section 4(2), 4(6) or Regulation D and any applicable state
securities law. The Company shall make any necessary SEC and "blue sky" filings
as may be required to be made by the Company in connection with the sale of the
Securities to the Investors, and shall provide a copy thereof to the Investors
promptly after such filing.
Section 6.9. Future Financing. Until the Investors no longer hold any
Convertible Debentures, the Company agrees to (a) draw down the maximum amount
permitted under that certain Common Stock Purchase Agreement, dated January 26,
2001, by and between the Company and Grenville Finance Ltd. (the "Equity Line")
immediately after the effective date of the registration
17
statement registering for resale the Common Stock purchased pursuant to the
Equity Line until the Investors no longer holds any Convertible Debentures, (b)
not set the threshold price at more than 50% of the volume weighted average
price (as reported on Bloomberg Financial, L.P.) of the Common Stock during the
Trading Day immediately prior to the delivery of any draw down notice issued
pursuant to the Equity Line, and (c) at the election of each Investor, use all
of the net proceeds received pursuant to any equity financing (including any
proceeds received in connection with the Equity Line), to redeem all of such
Investor's Convertible Debentures pursuant to Section 5 of the Convertible
Debentures.
Section 6.10. Pro-Rata Redemption. Upon any redemption of any of the Convertible
Debentures, the Company shall offer such redemption pro-rata among all Investors
in proportion to their respective initial purchases of such securities pursuant
to this Agreement.
ARTICLE VII
Survival; Indemnification
Section 7.1. Survival. The representations, warranties and covenants made by
each of the Company and each Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement, irrespective of any investigation made by or
on behalf of such party on or prior to the Closing Date, unless such party had
actual knowledge of such breach or violation prior to the Closing Date.
Section 7.2. Indemnity.
(a) The Company hereby agrees to indemnify and hold harmless the
Investors, their respective Affiliates and their respective officers,
directors, partners and members (collectively, the "Investor
Indemnitees"), from and against any and all Damages, and agrees to
reimburse the Investor Indemnitees for all reasonable out-of-pocket
expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Investor
Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
18
(ii) any failure by the Company to perform in any material respect
any of its material covenants, agreements, undertakings or
obligations set forth in this Agreement, the annexes, schedules
or exhibits hereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to this
Agreement; or
(iii) any action instituted against the Investors, or any of them or
their respective Affiliates, by any stockholder of the Company
who is not an Affiliate of an Investor, with respect to any of
the transactions contemplated by this Agreement.
(b) Each Investor, severally and not jointly, hereby agrees to indemnify
and hold harmless the Company, its Affiliates and their respective
officers, directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Damages, and agrees to
reimburse the Company Indemnitees for all reasonable out-of-pocket
expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Company Indemnitees
and to the extent arising out of or in connection with any
misrepresentation, omission of fact, or breach of any of the
Investor's representations or warranties contained in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement
or certificate entered into or delivered by the Investor pursuant to
this Agreement. Notwithstanding anything to the contrary herein, the
Investors shall be liable under this Section 7.2(b) for only that
amount as does not exceed the net proceeds to such Investors as a
result of the sale of Registrable Securities pursuant to the
Registration Statement.
Section 7.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is actually prejudiced by such omission or
delay. In connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (a) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (b) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (c) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the
19
Indemnified Party within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses (a), (b) or (c)
above, the fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or compromise any
Claim or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with respect
to such Claim or judgment.
All fees and expenses of the Indemnified Party (including reasonable costs
of defense and investigation in a manner not inconsistent with this Section and
all reasonable attorneys' fees and expenses) shall be paid to the Indemnified
Party, as incurred, within ten (10) Trading Days of written notice thereof to
the Indemnifying Party (regardless of whether it is ultimately determined that
an indemnified party is not entitled to indemnification hereunder; provided,
that the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
Section 7.4. Direct Claims. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
Due Diligence Review
Section 8.1. Due Diligence Review. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investors pursuant to the Registration Statement, any such registration
statement or amendment or supplement thereto or any blue sky, Nasdaq or other
filing, all SEC Documents and other proposed filings with the SEC, and all other
publicly available corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such publicly available
information reasonably requested by the Investors or any such representative,
advisor or
20
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) From and after the filing of the Registration Statement, the Company
shall not disclose material non-public information to the Investors,
advisors to or representatives of the Investors unless prior to
disclosure of such information the Company identifies such information
as being non-public information and provides the Investors, such
advisors and representatives with the opportunity to accept or refuse
to accept such non-public information for review. Other than
disclosure of any comment letters received from the SEC staff with
respect to the Registration Statement, the Company may, as a condition
to disclosing any non-public information hereunder, require the
Investors' advisors and representatives to enter into a
confidentiality agreement in form and content reasonably satisfactory
to the Company and the Investors.
(b) The Company will promptly notify the advisors and representatives of
the Investors and, if any, underwriters, of any event or the existence
of any circumstance (without any obligation to disclose the specific
event or circumstance) of which it becomes aware, constituting
material non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence
by such persons or entities), which, if not disclosed in the
prospectus included in the Registration Statement, would cause such
prospectus to include a material misstatement or to omit a material
fact required to be stated therein in order to make the statements,
therein in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 8.2 shall be construed
to mean that such persons or entities other than the Investors
(without the written consent of the Investors prior to disclosure of
such information as set forth in Section 8.2(a)) may not obtain
non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall
prevent any such persons or entities from notifying the Company of
their opinion that based on such due diligence by such persons or
entities, that the Registration Statement contains an untrue statement
of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were
made, not misleading.
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ARTICLE IX
Legends; Transfer Agent Instructions
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH
REGISTRATION.
Section 9.2. Transfer Agent Instructions. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions substantially in the form of Exhibit F hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer agent,
as the case may be. After the Effective Date, in lieu of delivering physical
certificates representing the Common Stock issuable upon the conversion of, or
in lieu of interest payments on, the Convertible Debentures, the Company shall
cause its transfer agent to electronically transmit the Conversion Shares by
crediting the account of the Investor's prime broker with the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program through its Deposit
Withdrawal Agent Commission ("DWAC") system no later than the applicable date of
delivery.
Section 9.3. No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the Registrable Securities and no instructions or
"stop transfer orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article IX.
Section 9.4. Investors' Compliance. Nothing in this Article shall affect in any
way each Investor's obligations to comply with all applicable securities laws
upon resale of the Common Stock.
22
Section 9.5. Rule 144. Subject to the applicable securities laws, the Company
acknowledges and agrees that, for the purpose of calculating the holding period
of the Shares under Rule 144, the Conversion Shares shall be deemed to have been
acquired on the Closing Date.
ARTICLE X
Choice of Law
Section 10.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made in New York by persons domiciled in New York City and without regard to its
principles of conflicts of laws. The Company and each of the Investors agree to
submit themselves to the in personam jurisdiction of the state and federal
courts situated within the Southern District of the State of New York with
regard to any controversy arising out of or relating to this Agreement. The
non-prevailing party to any dispute hereunder shall pay the expenses of the
prevailing party, including reasonable attorneys' fees, in connection with any
such dispute.
Section 10.2. Specific Enforcement. The Company acknowledges and agrees that
irreparable damage would occur in the event that any of the provisions of this
Agreement or any of the exhibits hereto were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the Investors shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this 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. The prevailing
party in such injunctive action shall be entitled to its reasonable attorneys'
fees in connection with any such specific performance.
ARTICLE XI
Assignment
Section 11.1. Assignment. Neither this Agreement nor any rights of the the
Company hereunder may be assigned by the Company to any other person. The
provisions of this Agreement shall inure to the benefit of, and be enforceable
by, any permitted transferee of any of the Convertible Debentures and Warrants
purchased or acquired by any Investor hereunder with respect to the Convertible
Debentures and Warrants held by such person.
23
ARTICLE XII
Notices
Section 12.1. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (a) hand delivered, (b) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(c) delivered by reputable air courier service with charges prepaid, or (d)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, 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 first business day
following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
If to the Company: 000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Tel: (000) 000-0000
Fax:
With copies to: Xxxxx & Lardner
(which shall not constitute One Maritime Plaza, 6th Floor
notice) Xxx Xxxxxxxxx, XX 00000
Attn:
Tel: (000) 000-0000
Fax:
if to the Investors: As set forth on the signature pages hereto
with a copy to: Xxxxxx Xxxxxxx, Esq.
(shall not constitute notice) Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 12.1.
ARTICLE XIII
Miscellaneous
Section 13.1. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be
24
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. Except as otherwise
stated herein, in lieu of the original documents, a facsimile transmission or
copy of the original documents shall be as effective and enforceable as the
original. This Agreement may be amended only by a writing executed by all
parties.
Section 13.2. Entire Agreement. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Convertible
Debentures, and Warrants the Escrow Agreement, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 13.3. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 13.4. Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 13.5. Number and Gender. There may be one or more Investors parties to
this Agreement, which Investors may be natural persons or entities. All
references to plural Investors shall apply equally to a single Investor if there
is only one Investor, and all references to an Investor as "it" shall apply
equally to a natural person.
Section 13.6. Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg Financial, L.P. or any successor thereto. The written mutual consent
of the Investors and the Company shall be required to employ any other reporting
entity.
Section 13.7. Replacement of Certificates. Upon (a) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Debentures or any
Conversion Shares or Warrants or any Warrant Shares and (b) in the case of any
such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form to the Company
or as may be required by the Company's Transfer Agent or (c) in the case of any
such mutilation, on surrender and cancellation of such certificate, the Company
at its expense will execute and deliver, in lieu thereof, a new certificate of
like tenor.
Section 13.8. Fees and Expenses. Each of the Company and the Investors agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the fees, expenses and disbursements of the
Investors as set forth in the Escrow Agreement.
25
Section 13.9. Finder's and Broker's Fees. Each of the parties hereto represents
that it has had no dealings in connection with this transaction with any finder
or broker who will demand payment of any fee or commission from the other party
except as set forth in the Escrow Agreement. The Company on the one hand, and
the Investors, on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any person claiming brokerage
commissions or finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section 13.10. Publicity. The Company agrees that it will not issue any press
release or other public announcement, except as required by law, of the
transactions contemplated by this Agreement without the prior consent of the
Investors, which shall not be unreasonably withheld nor delayed by more than two
(2) Trading Days from their receipt of such proposed release. No release shall
name the Investors or any of their respective affiliates, representatives,
members, agents, associates, employees, consultants, companies, subsidiaries,
businesses and/or entities or agents without their express consent.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.]
26
[SIGNATURE PAGE OF WLGS CONVERTIBLE DEBENTURES AND WARRANTS PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement
to be executed by the undersigned, thereunto duly authorized, as this __ day of
March, 2001.
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By:
---------------------------------------
Xxxxxxx X. Xxxxxx, President & CEO
INVESTORS:
Address: SPLENDID ROCK HOLDINGS, LTD.
x/x Xxxxxx Xxxxxxx Xxxxxxxxxx
Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxxxx Drive By:
Road Town, Tortola ---------------------------------------
British Virgin Islands Xxxxx Xxxx, Authorized Signatory
Fax: (000) 000-0000
Purchase Price: $262,500
Address: ALPHA CAPITAL AG
Xxxxxxxxxxx 00
Xxxxxxxxxx 0000
Xxxxx, Xxxxxxxxxxxxx By:
Fax: 000-000 000 0000 ---------------------------------------
Purchase Price: $226,000 Xxxxxx Xxxxxxxxx, Authorized Signatory
Address: THE ENDEAVOUR CAPITAL
14/14 Divrea Xxxxx Street MANAGEMENT FUND, S.A.
Xxxxxxxxx 00000 Xxxxxx By: Endeavour Management, Inc.
Fax: 000-000-0-0000000
Purchase Price: $186,500
By:
---------------------------------------
Xxxxxx Xxxxxxxxx, President
27
[SIGNATURE PAGE OF WLGS CONVERTIBLE DEBENTURES AND WARRANTS PURCHASE AGREEMENT]
Address THE KESHET FUND, L.P.
C/o KCM, LLC
000 X. 00xx Xxxxxx
Xxxxx 0000 By:
Xxx Xxxx, Xxx Xxxx 00000 ---------------------------------------
Fax: Name:
Purchase Price: $75,000 Title:
28
