EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
July 14, 2003, among WaveRider Communications Inc., a Nevada corporation (the
"Company"), and the purchasers identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement:
(a) capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Debenture (as defined herein), and (b) the following
terms have the meanings indicated in this Section 1.1:
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144 under the
Securities Act.
"Capital Shares" means 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.
"Capital Shares Equivalents" means any securities, rights or
obligations that are convertible into or exchangeable for or give any right to
subscribe for or purchase, directly or indirectly, any Capital Shares of the
Company or any warrants, options or other rights to subscribe for or purchase,
directly or indirectly, Capital Shares or any such convertible or exchangeable
securities.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to Section 2.1.
"Closing Date" means the date of the Closing, which shall occur within
5 Trading Days from the Date hereof.
"Closing Price" means on any particular date (a) the last reported
closing bid price per share of Common Stock on such date on the Principal Market
(as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if there is no
such price on such date, then the closing bid price on the Principal Market on
the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 PM
(New York time) for the closing bid price for regular session trading on such
day), or (c) if the Common Stock is not then listed or quoted on the Principal
Market and if prices for the Common Stock are then reported in the "pink sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) if the
shares of Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.001
per share, and any securities into which such common stock shall hereinafter
have been reclassified into.
"Company Counsel" means Xxxxx Xxxx LLP.
"Debentures" means, the Convertible Debentures due 36 months from their
date of issuance, issued by the Company to the Purchasers hereunder, in the form
of Exhibit A.
"Disclosure Schedules" shall have the meaning ascribed to such term in
Section 3.1 hereof.
"Effective Date" means the date that the initial Registration Statement
filed by the Company pursuant to the Registration Rights Agreement is first
declared effective by the Commission.
"Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement in substantially the
form of Exhibit F hereto executed and delivered contemporaneously with this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices at 000 Xxxxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h)
hereof.
"Liens" shall have the meaning ascribed to such term in Section 3.1(a)
hereof.
"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of preparation
and reasonable attorneys' fees.
"Material Adverse Effect" shall have the meaning assigned to such term
in Section 3.1(b) hereof.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Principal Amount" means, as to each Purchaser, the amount set forth
below such Purchaser's signature block on the signature pages hereto and next to
the heading "Principal Amount" in United States dollars.
"Principal Market" means initially the OTC Bulletin Board and shall
also include the American Stock Exchange, New York Stock Exchange, the NASDAQ
Small-Cap Market or the NASDAQ National Market, whichever is at the time the
principal trading exchange or market for the Common Stock, based upon share
volume.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the Closing Date, among the Company and the Purchasers, in the
form of Exhibit B.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e) hereof.
"Required Minimum" means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying Shares issuable
upon exercise or conversion in full of all Warrants and Debentures, ignoring any
conversion or exercise limits set forth therein, and assuming that the Set Price
is at all times on and after the date of determination 75% of the Closing Price
on the Trading Day immediately prior to the date of determination.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(h) hereof.
"Securities" means the Debentures, Warrants and the Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Set Price" shall have the meaning ascribed to such term in the
Debentures.
"Subscription Amount" means, as to each Purchaser, the amount to be
paid for Debentures purchased hereunder as specified below such Purchaser's name
on the signature page of this Agreement and next to the heading "Subscription
Amount", in United States Dollars and in immediately available funds.
"Subsidiary" means Avendo Wireless Inc. and any subsidiary of the
Company as set forth in the SEC Reports.
"Trading Day" means any day during which the Principal Market shall be
open for business.
"Transaction Documents" means this Agreement, the Debentures, the
Warrants, the Registration Rights Agreement, the Instructions to Transfer Agent,
the Escrow Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Debentures and upon exercise of the Warrants.
"Underlying Shares Registration Statement" or "Registration Statement"
means a registration statement meeting the requirements set forth in the
Registration Rights Agreement and covering the resale of the Underlying Shares
by each Purchaser as provided for in the Registration Rights Agreement.
"Warrants" means collectively the Common Stock purchase warrants, in
the form of Exhibit C delivered to the Purchasers at the Closing in accordance
with Section 2.2 hereof.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Within 5 Trading Days of the date hereof, upon the terms and
subject to the conditions set forth herein, the Company agrees to sell, and the
Purchasers agree to purchase in the aggregate, severally and not jointly,
$1,600,000 principal amount of the Debentures for an aggregate Subscription
Amount among all of the Purchasers of $1,504,000. Each Purchaser shall deliver
to the Escrow Agent via wire transfer or a certified check immediately available
funds equal to their Subscription Amount and the Company shall deliver to the
Escrow Agent the Debentures evidencing a principal amount equal to such
Purchaser's Principal Amount and the other items set forth in Section 2.2
issuable at the Closing. Upon satisfaction of the conditions set forth in
Section 2.2, the Closing shall occur at the offices of the Escrow Agent, or such
other location as the parties shall mutually agree.
2.2 Conditions to Closing.
(a) At or prior to the Closing, the Company shall deliver or cause to
be delivered to the Escrow Agent the following:
(i) a Debenture with a principal amount equal to such
Purchaser's Principal Amount, registered in the name of each Purchaser;
(ii) a Warrant registered in the name of each Purchaser to purchase up to a
number of shares of Common Stock equal to 25% of such Purchaser's
Principal Amount divided by the average of the 10 Closing Bid Prices
immediately prior to the date hereof, with a term of 5 years and an
exercise price equal to 105% of the average of the 10 Closing Bid
Prices immediately prior to the date hereof, subject to adjustment
therein;
(iii) the legal opinion of Company Counsel, in the form of
Exhibit D attached hereto, addressed to the Purchasers;
(iv) the Escrow Agreement duly executed by the Company, in the form of
Exhibit F attached hereto;
(v) the Registration Rights Agreement duly executed by the Company in the
form of Exhibit B attached hereto;
(vi) this Agreement, duly executed by the Company; and
(vii) the Transfer Agent Instructions executed by the Company and delivered
to and acknowledged by the Company's transfer agent in the form annexed
hereto as Exhibit E.
(b) At or prior to the Closing, each Purchaser shall deliver or cause
to be delivered to the Escrow Agent the following:
(i) such Purchaser's Subscription Amount by wire
transfer;
(ii) the Escrow Agreement duly executed by such Purchaser;
(iii) this Agreement, duly executed by such Purchaser; and
(iv) the Registration Rights Agreement duly executed by
such Purchaser.
(c) All representations and warranties of the other party contained
herein shall remain true and correct as of the Closing Date and all covenants of
the other party shall have been performed if due prior to such date.
(d) There shall have been no Material Adverse Effect (as defined in
Section 3.1(b)) with respect to the Company since the date hereof.
(e) From the date hereof to the Closing Date, trading in the 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 Date,
trading in securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on the
Principal Market, 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 of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of the Purchasers, makes it impracticable or inadvisable to purchase
the Debentures at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Purchasers
concurrently herewith (the "Disclosure Schedules") which Disclosure Schedules
shall be deemed a part hereof, the Company hereby makes the representations and
warranties set forth below to each Purchaser.
(a) Subsidiaries. The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
lien, charge, security interest, encumbrance, right of first refusal or other
restriction (collectively, "Liens"), and all the issued and outstanding shares
of capital stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate: (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in or be reasonably likely to have or result in a
material adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) adversely impair the Company's ability
to perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a "Material Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder or thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than Required Approvals. Each of the Transaction
Documents has been (or upon delivery will be) duly executed by the Company and,
when delivered in accordance with the terms hereof, will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and general principles of equity.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, by-laws or other
organizational or charter documents.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not: (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) subject to obtaining the Required Approvals, conflict with, or
constitute a 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 (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) result, in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not, individually or in the aggregate, have or result in a Material
Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required under Section 4.7,
(ii) the filing with the Commission of the Underlying Shares Registration
Statement, (iii) the notice and/or application(s) to each applicable Principal
Market for the issuance and sale of the Debentures and Warrants and the listing
of the Underlying Shares for trading thereon in the time and manner required
thereby, and (iv) the filing of Form D with the Commission and applicable Blue
Sky filings (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly authorized and,
when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and non-assessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of the Underlying
Shares at least equal to the Required Minimum on the date hereof. The Company
has not, and to the knowledge of the Company, no Affiliate of the Company has
sold, offered for sale or solicited offers to buy or otherwise negotiated in
respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the
Securities to the Purchasers, or that would be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of any Principal
Market. The Company acknowledges and agrees that the Purchasers are acquiring
the Debentures for an original issue discount to the principal amount of the
Debentures.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is set forth in the
Disclosure Schedules attached hereto. No securities of the Company are entitled
to preemptive or similar rights, and no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as set forth
in the Disclosure Schedules attached hereto and as a result of the purchase and
sale of the Securities, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as set forth in the Disclosure
Schedules attached hereto, the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Reports") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has identified and made available
to the Purchasers a copy of all SEC Reports filed within the 10 days preceding
the date hereof. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, 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 SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for 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, immaterial,
year-end audit adjustments.
(i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as set forth in the
Disclosure Schedules attached hereto or except as specifically disclosed in the
SEC Reports: (i) there has been no event, occurrence or development that has had
or that could result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option or similar plans.
(j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which: (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. The Company does not have pending before the
Commission any request for confidential treatment of information. Within the
past five years there has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) Compliance. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, except in each case as could not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens 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 the Subsidiaries. And to the Company's
knowledge, any real property and facilities held under lease by the Company and
the Subsidiaries are held under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the "Intellectual Property
Rights"). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual Property
Rights.
(p) Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are reasonably prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. To the best of Company's knowledge,
such insurance contracts and policies are accurate and complete. Neither the
Company nor any Subsidiary has any reason to believe it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as required to
be set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(r) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient 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
GAAP 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 action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed
such disclosures controls and procedures to ensure that material information
relating to the Company, including its subsidiaries, is made known to the
certifying officers by others within those entities, particularly during the
period in which the Company's Form 10-K or 10-Q, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness of
the Company's controls and procedures as of a date within 90 days prior to the
filing date of the Form 10-Q for the quarter ended March 31, 2003 (such date,
the "Evaluation Date"). The Company presented in the Form 10-Q for the quarter
ended March 31, 2003 the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Exchange Act) or, the
Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
(s) Solvency/Indebtedness. Based on the financial condition of the
Company as of the Closing Date: (i) the fair saleable value of the Company's
assets exceeds the amount that will be required to be paid on or in respect of
the Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. The SEC Reports
set forth as of the dates 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
$50,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations,
whether or not the same are or should be reflected in the Company's balance
sheet or the notes thereto, except guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business, and
(c) the present value of any lease payments in excess of $50,000 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.
(t) Certain Fees. Except as set forth in Section 5.2, no brokerage or
finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement, and the Company has not taken any action that would cause any
Purchaser to be liable for any such fees or commissions. The Company agrees that
the Purchasers shall have no obligation with respect to any fees or with respect
to any claims made by or on behalf of any Person for fees of the type
contemplated by this Section with the transactions contemplated by this
Agreement.
(u) Private Placement. Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Sections 3.2(b)-(f), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act. The issuance
and sale of the Securities hereunder does not contravene the rules and
regulations of the Principal Market and no shareholder approval is required for
the Company to fulfill its obligations under the Transaction Documents.
(v) Listing and Maintenance Requirements. The Company has not, in the
12 months preceding the date hereof, received notice from any Principal Market
on which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Principal Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
(w) Registration Rights. Except as set forth in the Disclosure
Schedules attached hereto, the Company has not granted or agreed to grant to any
Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
(x) Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the Securities.
(y) Seniority. As of the Closing Date, no indebtedness of the Company
is senior to the Debentures in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other than
indebtedness secured by purchase money security interests (which is senior only
as to underlying assets covered thereby) and capital lease obligations (which is
senior only as to the property covered thereby).
(z) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company with
respect to the representations and warranties made herein are true and correct
with respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(aa) Tax Status. The Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, statue or local tax. None of the Company's
tax returns is presently being audited by any taxing authority.
(bb) Acknowledgment Regarding Purchasers' Purchase of Securities. The
Company acknowledges and agrees that the Purchasers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchase of the Securities. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
(cc) No General Solicitation or Advertising in Regard to this
Transaction.
Neither the Company nor, to the knowledge of the Company, any of its directors
or officers (i) 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 Debentures or the Warrants, or (ii) 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 Debentures, the Underlying
Shares or the Warrants under the Securities Act or made any "directed selling
efforts" as defined in Rule 902 of Regulation S.
(dd) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers.
3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants to the Company as
follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the Securities
Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
period of time. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises any Warrants or converts any Debentures it will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Such Purchaser has
not been formed solely for the purpose of acquiring the Securities. Such
Purchaser is not a registered broker-dealer under Section 15 of the Exchange
Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement, to the Company or to an
Affiliate of a Purchaser, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement or grant a security interest in
some or all of the Securities and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. If required by the Company's transfer agent in
order to effect a pledge, the Company shall cause its counsel, at no cost to the
Purchasers, to issue an opinion of counsel to the Company's transfer agent.
Further, no notice shall be required of such pledge. At the appropriate
Purchaser's expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities, including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates evidencing Underlying Shares shall not contain any
legend (including the legend set forth in Section 4.1(b) hereof): (i) while a
registration statement (including the Underlying Shares Registration Statement)
covering the resale of such security is effective under the Securities Act, or
(ii) following any sale of such Underlying Shares pursuant to Rule 144, or (iii)
if such Underlying Shares are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission); provided, however, in connection with the issuance of the
Underlying Shares, each Purchaser, severally and not jointly with the other
Purchasers, hereby agrees to adhere to and abide by all prospectus delivery
requirements under the Securities Act and rules and regulations of the
Commission. If all or any portion of a Debenture or Warrant is converted or
exercised (as applicable) at a time when there is an effective registration
statement to cover the resale of the Underlying Shares, or if such Underlying
Shares may be sold under Rule 144(k) or if such legend is not otherwise required
under applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 4.1(c), it will, no later
than three Trading Days following the delivery by a Purchaser to the Company or
the Company's transfer agent of a certificate representing Underlying Shares
issued with a restrictive legend, deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as liquidated damages and not as a
penalty, for each $5,000 of Underlying Shares (based on the Closing Price of the
Common Stock on the date such Securities are submitted to the Company's transfer
agent) delivered for removal of the restrictive legend and subject to this
Section 4.1(c), $50 per Trading Day (increasing to $100 per Trading Day 3
Trading Days after such damages have begun to accrue) for each Trading Day after
such third Trading Day until such certificate is delivered without a legend.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of
the Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market conditions. The Company
further acknowledges that its obligations under the Transaction Documents,
including without limitation its obligation to issue the Underlying Shares
pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim the Company may have against any
Purchaser and regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the Company.
4.3 Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. Upon the request of
any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.4 Integration. The Company shall not, and shall use its best efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers, or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Principal Market.
4.5 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in
such amount as may be required to fulfill its obligations in full under the
Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than the Required Minimum
on such date, then the Board of Directors of the Company shall use commercially
reasonable efforts to amend the Company's certificate or articles of
incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time, as soon as possible and in
any event not later than the 75th day after such date.
(c) The Company shall, if applicable: (i) in the time and manner
required by the Principal Market, prepare and file with such Principal Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps reasonably necessary to cause such shares of Common Stock to
be approved for listing on the Principal Market as soon as possible thereafter,
(iii) provide to the Purchasers evidence of such listing, and (iv) use its
commercially reasonably best efforts to maintain the listing of such Common
Stock on any date at least equal to the Required Minimum on such date on such
Principal Market or another Principal Market.
4.6 Conversion and Exercise Procedures. The form of Notice of Exercise included
in the Warrants and the form of Notice of Conversion included in the Debentures
set forth the totality of the procedures required of the Purchasers in order to
exercise the Warrants or convert the Debentures. No additional legal opinion or
other information or instructions shall be required of the Purchasers to
exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.
4.7 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the Closing Date, issue a press
release or file a Current Report on Form 8-K reasonably acceptable to each
Purchaser disclosing all material terms of the transactions contemplated hereby.
The Company and the Purchasers shall consult with each other in issuing any
press releases with respect to the transactions contemplated hereby.
Notwithstanding the foregoing, other than in any registration statement filed
pursuant to the Registration Rights Agreement and filings related thereto, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Principal Market, without the prior written consent of such Purchaser, except
to the extent such disclosure is required by law or Principal Market
regulations, in which case the Company shall provide each Purchaser with prior
notice of such disclosure.
4.8 Non-Public Information. The Company covenants and agrees that it will not
and will instruct any other Person acting on its behalf to not provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and not for the satisfaction
of any portion of the Company's debt (other than payment of trade payables,
capital lease obligations, and accrued expenses in the ordinary course of the
Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
4.10 Reimbursement. If any Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company, solely
as a result of such Purchaser's acquisition of the Securities under this
Agreement and without causation by any other activity, obligation, condition or
liability on the part of, or pertaining to such Purchaser and not to the
purchase of Securities pursuant to this Agreement, the Company will reimburse
such Purchaser, to the extent such reimbursement is not provided for in Section
4.11, for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations (and limitations thereon) of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any Affiliates of the Purchasers
who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement except to the extent any covenant or warranty owing to the
Company is breached.
4.11 Indemnification of Purchasers. Subject to the provisions of this Section
4.11, each party (the "Indemnifying Party") will indemnify and hold the other
parties and their directors, officers, shareholders, partners, employees and
agents (each, an "Indemnified Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Indemnified Party may
suffer or incur as a result of or relating to any breach of any of the
representations, warranties, covenants or agreements made by the Indemnifying
Party in this Agreement or in the other Transaction Documents. If any action
shall be brought against any Indemnified Party in respect of which indemnity may
be sought pursuant to this Agreement, such Indemnified Party shall promptly
notify the Indemnifying Party in writing, and the Indemnifying Party shall have
the right to assume the defense thereof with counsel of its own choosing. Any
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party except to the extent
that (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, (ii) the Indemnifying Party has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position of the Indemnifying
Party and the position of such Indemnified Party. The Indemnifying Party will
not be liable to any Indemnified Party under this Agreement (i) for any
settlement by an Indemnified Party effected without the Indemnifying Party's
prior written consent, which shall not be unreasonably withheld or delayed; or
(ii) to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Indemnified Party's breach of any of the
representations, warranties, covenants or agreements made by the Purchasers in
this Agreement or in the other Transaction Documents. In no event shall the
liability of any Purchaser hereunder be greater in amount than the dollar amount
of the net proceeds received by such Purchaser upon the sale of the Securities.
4.12 Shareholders Rights Plan. In the event that a shareholders rights plan is
adopted by the Company, no claim will be made or enforced by the Company or any
other Person that any Purchaser is an "Acquiring Person" under the plan or in
any way could be deemed to trigger the provisions of such plan by virtue of
receiving Securities under the Transaction Documents.
4.13 Future Financings. So long as any portion of the Debentures are
outstanding, from the date hereof until 120 days after the Effective Date, other
than as contemplated by this Agreement, neither the Company nor any Subsidiary
shall issue or sell any Capital Shares or Capital Shares Equivalents.
Notwithstanding anything herein to the contrary, the 120 day period set forth in
this Section 4.13 shall be extended for the number of Trading Days during such
period in which (y) trading in the Common Stock is suspended by any Principal
Market, or (z) following the Effective Date, the Registration Statement is not
effective or the prospectus included in the Registration Statement may not be
used by the Purchasers for the resale of the Underlying Shares. Notwithstanding
anything to the contrary herein, this Section 4.13 shall not apply to the
following (a) the granting or issuance of shares of Common Stock or options to
employees, officers and directors of the Company pursuant to any stock option
plan or employee incentive plan or agreement duly adopted or approved by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose, (b) the exercise of a Debenture or any other security issued
by the Company in connection with the offer and sale of this Company's
securities pursuant to this Agreement, or (c) the exercise of or conversion of
any Capital Shares Equivalents issued and outstanding on the date hereof,
provided that such securities have not been amended since the date hereof, or
(d) the issuance of Capital Shares or Capital Shares Equivalents in connection
with acquisitions, strategic investments or strategic partnering arrangements,
the primary purpose of which is not to raise capital or subsequent exercise of
any such Capital Shares Equivalents.
4.14 Participation in Future Financing. From the date hereof until such time as
a Purchaser holds less than 25% of the Principal Amount of any Debentures
originally purchased hereunder by such Purchaser, the Company shall not effect a
financing of its Capital Shares or Capital Shares Equivalents (a "Subsequent
Financing") unless (i) the Company delivers to such Purchasers a written notice
at least 5 Trading Days prior to the closing of such Subsequent Financing (the
"Subsequent Financing Notice") of its intention to effect such Subsequent
Financing, which Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto and (ii) such Purchaser shall not have notified the
Company by 6:30 p.m. (New York City time) on the fifth (5th) Trading Day after
its receipt of the Subsequent Financing Notice of its willingness to provide (or
to cause its designee to provide), subject to completion of mutually acceptable
documentation, all or part of such financing to the Company on the same terms
set forth in the Subsequent Financing Notice. If one or more Purchasers shall
fail to so notify the Company of their willingness to participate in the
Subsequent Financing, the Company may effect the remaining portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing Notice; provided that the Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of first refusal set forth above in this Section 4.14, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial Subsequent Financing Notice with
the Person identified in the Subsequent Financing Notice. In the event the
Company receives responses to Subsequent Financing Notices from Purchasers
seeking to purchase more than the financing sought by the Company in the
Subsequent Financing such Purchasers shall have the right to purchase their Pro
Rata Portion (as defined below) of the Capital Shares or Capital Shares
Equivalents to be issued in such Subsequent Financing. "Pro Rata Portion" is the
ratio of (x) the principal amount of Debentures purchased by a Purchaser and (y)
the sum of the aggregate principal amount of Debentures issued hereunder. If any
Purchaser no longer holds any Debentures, then the Pro Rata Portions shall be
re-allocated among the remaining Purchasers. Notwithstanding anything to the
contrary herein, this Section 4.14 shall not apply to the following (a) the
granting of options to employees, officers and directors of the Company pursuant
to any stock option plan duly adopted by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, or (b) the
exercise of the Debenture or any other security issued by the Company in
connection with the offer and sale of this Company's securities pursuant to this
Agreement, or (c) the exercise of or conversion of any Capital Shares
Equivalents issued and outstanding on the Original Issue Date, provided such
securities have not been amended since the date hereof, or (d) the issuance of
Capital Shares or Capital Shares Equivalents in connection with acquisitions,
strategic investments or strategic partnering arrangements, the primary purpose
of which is not to raise capital or subsequent exercise of any such Capital
Shares Equivalents.
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, by written
notice to the other parties, if the Closing has not been consummated on or
before July 18, 2003; provided that no such termination will affect the right of
any party to xxx for any breach by the other party (or parties).
5.2 Fees and Expenses. The Company has paid Greenlight (Switzerland) S.A.
("Greenlight") $10,000 as a non-refundable expense allowance (the "Allowance")
and, at the Closing, has agreed to reimburse Crescent International Ltd.
("Crescent") up to $10,000 for its legal fees and expenses and pay Greenlight an
amount equal to 3% of the gross proceeds raised hereunder to as an arrangement
fee (less the Allowance). Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, 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. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of any Securities.
5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified on the signature page prior to 5:30 p.m. (New York City time) on a
Trading Day and an electronic confirmation of delivery is received by the
sender, (b) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (c) three Trading Days following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
5.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver 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 subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.
5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Sections 4.11 and 4.12.
5.9 Governing Law; Venue; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper or inconvenient
venue for such proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) 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
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. The parties hereby waive all rights to a trial
by jury. If either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable.
5.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, in the case of a
rescission of a conversion of a Debenture or exercise of a Warrant, the
Purchaser shall be required to return any shares of Common Stock subject to any
such rescinded conversion or exercise notice.
5.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will resist any
and all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
5.18 Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any Transaction Document,
and no action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents. For reasons of administrative
convenience only, Purchasers and their respective counsel have chosen to
communicate with the Company through FW. FW does not represent all of the
Purchasers but only Crescent International Ltd. The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers.
5.19 Liquidated Damages. The Company's obligations to pay any liquidated damages
or other amounts owing under the Transaction Documents is a continuing
obligation of the Company and shall not terminate until all unpaid liquidated
damages and other amounts have been paid notwithstanding the fact that the
instrument or security pursuant to which such liquidated damages or other
amounts are due and payable shall have been canceled.
***********************
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
WAVERIDER COMMUNICATIONS INC.
By: /s/ T. Xxxxx Xxxxxxxxxxx
------------------------
Name: T. Xxxxx Xxxxxxxxxxx
Title: Vice President and Chief Financial Officer
Address for Notice:
000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Attn: T. Xxxxx Xxxxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxxx Xxxx LLP
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
PALISADES MASTER FUND L.P. Address for Notice:
By: PEF ADVISORS, LLC, its authorized agent X/x XXX Xxxxxxxx, XXX
000 Xxxxxxx Xxxxx Xxxx
By: ____________________________________ Ste 550
Name: Xxxxxxx Xx 00000
Title: Attn: Xxxx X. Xxxxxxx, Xx.
Subscription Amount:
Principal Amount:
Warrant Shares:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
PURCHASER'S SIGNATURE PAGE
CRESCENT INTERNATIONAL LTD. Address for Notice:
x/x XxxxxXxxxx (Xxxxxxxxxxx) XX
00, Xxxxxx Xxxxx-Xxxxx
XX 0000 Cointrin, Geneva
By: ____________________________ Switzerland
Name: Attention: Xxx Xxxx / Maxi Brezzi
Title: Tel.: + 00 00 000 0000 / x00 00 000 0000
Fax : x00 00 000 0000
Subscription Amount: $
Principal Amount: $
Warrant Shares:
With a copy to:
(which shall not constitute notice) Xxxxxxx Xxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
