EXHIBIT 4.1
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. 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.
Date of Issuance: July __, 2003
$---------------
CONVERTIBLE DEBENTURE
DUE JULY 13, 2006
THIS DEBENTURE is one of a series of duly authorized and issued
Debentures of WaveRider Communications Inc., a Nevada corporation, having a
principal place of business at 000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx
X0X 0X0 (the "Company"), designated as its Convertible Debenture, due July 13,
2006 (the "Debentures").
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FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ on July 13, 2006 or such earlier date as the Debentures
are required or permitted to be repaid as provided hereunder (the "Maturity
Date"). Except as set forth in Section 5, the Company may not prepay any portion
of the principal amount of this Debenture without the prior written consent of
the Holder.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement and
may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations. Prior to due
presentment to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section 3. Events of Default.
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(a)"Event of Default", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
(i) any default in the payment of the principal of,
or liquidated damages in respect of, any Debentures, free of
any claim of subordination, as and when the same shall become
due and payable (whether on a Conversion Date or the Maturity
Date or by acceleration or otherwise) which default is not
cured, if possible to cure, within 3 days of notice of such
default sent by the Holder;
(ii) the Company shall materially fail to observe or
perform any other covenant, agreement or warranty contained
in, or otherwise commit any material breach of any of the
Transaction Documents (other than a breach by the Company of
its obligations to deliver shares of Common Stock to the
Holder upon conversion which breach is addressed in clause (x)
below) which is not cured, if possible to cure, within 5 days
of notice of such default sent by the Holder;
(iii) the Company or any of its subsidiaries shall
commence, or there shall be commenced against the Company or
any such subsidiary a case under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor
thereto, or the Company commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary thereof or there is
commenced against the Company or any subsidiary thereof any
such bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 60 days; or the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or
proceeding is entered; or the Company or any subsidiary
thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the
Company or any subsidiary thereof makes a general assignment
for the benefit of creditors; or the Company shall fail to
pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or the
Company or any subsidiary thereof shall call a meeting of its
creditors with a view to arranging a composition, adjustment
or restructuring of its debts; or the Company or any
subsidiary thereof shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence
in any of the foregoing; or any corporate or other action is
taken by the Company or any subsidiary thereof for the purpose
of effecting any of the foregoing;
(iv) the Company shall default in any of its
obligations under any other Debenture or any mortgage, credit
agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued,
or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or
factoring arrangement of the Company in an amount exceeding
$150,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise become due and
payable;
(v) the Common Stock shall not be eligible for
quotation on or quoted for trading on a Principal Market and
shall not again be eligible for and quoted or listed for
trading thereon within five Trading Days;
(vi) the Company shall be a party to any Change of
Control Transaction , shall agree to sell or dispose of all or
in excess of 40% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction) or shall redeem or repurchase more than a de
minimis number of its outstanding shares of Common Stock or
other equity securities of the Company (other than redemptions
of Underlying Shares and repurchases of shares of Common Stock
or other equity securities of departing officers and directors
of the Company; provided no repurchase shall exceed $100,000
for any officer or director);
(vii) an Underlying Shares Registration Statement
shall not have been declared effective by the Commission on or
prior to the 180th calendar day after the Original Issue Date
(210th calendar day in the event of a "full review" by the
Commission);
(viii) if, during the Effectiveness Period (as
defined in the Registration Rights Agreement), the
effectiveness of the Underlying Shares Registration Statement
lapses for any reason or the Holder shall not be permitted to
resell Registrable Securities (as defined in the Registration
Rights Agreement) under the Underlying Shares Registration
Statement, in either case, for more than 15 consecutive
Trading Days or 25 non-consecutive Trading Days during any 12
month period;
(ix) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the reasonable
satisfaction of the Holder prior to the expiration of thirty
days from the Event Date (as defined in the Registration
Rights Agreement) relating thereto (other than an Event
resulting from a failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or
prior to the Effectiveness Date (as defined in the
Registration Rights Agreement), which shall be covered by
Section 3(a)(vii));
(x) the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after
a Conversion Date pursuant to and in accordance with Section
4(b) or the Company shall provide notice to the Holder,
including by way of public announcement, at any time, of its
intention not to comply with requests for conversions of any
Debentures in accordance with the terms hereof; or
(xi) the Company shall fail for any reason to deliver
the payment in cash pursuant to a Buy-In (as defined herein)
within five days after notice thereof is delivered hereunder.
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture, together with other amounts owing in respect
thereof, to the date of acceleration shall become at the Holder's election,
immediately due and payable in cash. The aggregate amount payable upon an Event
of Default shall be equal to the Mandatory Prepayment Amount. All Debentures for
which the full prepayment price hereunder shall have been paid in accordance
herewith shall promptly be surrendered to or as directed by the Company. The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Xxxxxx at any time prior to payment
hereunder and the Holder shall have all rights as a Debenture holder until such
time, if any, as the full payment under this Section shall have been received by
it. No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon.
Section 4. Conversion.
(a) (i) At any time after the Closing Date, this Debenture
shall be convertible into shares of Common Stock at the option
of the Holder, in whole or in part at any time and from time
to time (subject to the limitations on conversion set forth in
Section 4(a)(ii) hereof). The Holder shall effect conversions
by delivering to the Company the form of Notice of Conversion
attached hereto as Annex A (a "Notice of Conversion"),
specifying therein the principal amount of Debentures to be
converted and the date on which such conversion is to be
effected (a "Conversion Date"). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall
be the date that such Notice of Conversion is provided
hereunder. To effect conversions hereunder, the Holder shall
not be required to physically surrender Debentures to the
Company unless the entire principal amount of this Debenture
has been so converted. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this
Debenture in an amount equal to the applicable conversion. The
Holder and the Company shall maintain records showing the
principal amount converted and the date of such conversions.
The Company shall deliver any objection to the figures
represented in the Conversion Schedules within 1 Business Day
of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder
and any assignee, by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the
unpaid and unconverted principal amount of this Debenture may
be less than the amount stated on the face hereof.
(ii) The Company shall not effect any conversion of
this Debenture, and the Holder shall not have the right to
convert any portion of this Debenture, pursuant to Section
4(a)(i), Section 5(b) or otherwise, to the extent that after
giving effect to such conversion, the Holder (together with
the Holder's affiliates), as set forth on the applicable
Notice of Conversion, would beneficially own in excess of
4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to such conversion. For
purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Debenture with respect to
which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would
be issuable upon (A) conversion of the remaining, nonconverted
portion of this Debenture beneficially owned by the Holder or
any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other
Debentures or the Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 4(a)(ii), beneficial ownership shall
be calculated in accordance with Section 13(d) of the Exchange
Act. To the extent that the limitation contained in this
section applies, the determination of whether this Debenture
is convertible (in relation to other securities owned by the
Holder) and of which a portion of this Debenture is
convertible shall be in the sole discretion of such Holder. To
ensure compliance with this restriction, the Holder will be
deemed to represent to the Company each time it delivers a
Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the
accuracy of such determination. For purposes of this Section
4(a)(ii), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as reflected in (x) the Company's most
recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other
notice by the Company or the Company's Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon
the written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this
Debenture, by the Holder or its affiliates since the date as
of which such number of outstanding shares of Common Stock was
reported. The provisions of this Section 4(a)(ii) may be
waived by the Holder upon, at the election of the Holder, not
less than 61 days' prior notice to the Company, and the
provisions of this Section 4(a)(i) shall continue to apply
until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver).
(ii) Underlying Shares Issuable Upon Conversion and
Pursuant to the Conversion of Principal Amount. The number of
shares of Common Stock issuable upon a conversion shall be
determined by the quotient obtained by dividing (x) the
outstanding principal amount of this Debenture to be converted
by (y) the Set Price.
(b) (i) Not later than three Trading Days after any Conversion
Date, the Company will deliver to the Holder certificate or
certificates representing the Underlying Shares which shall be
free of restrictive legends and trading restrictions (other
than those required by the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the
conversion of Debentures. The Company shall, if available and
if allowed under applicable securities laws, use its best
efforts to deliver any certificate or certificates required to
be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another
established clearing corporation performing similar functions.
If in the case of any Notice of Conversion such certificate or
certificates are not delivered to or as directed by the
applicable Holder by the fifth Trading Day after a Conversion
Date, the Holder shall be entitled by written notice to the
Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately
return the certificates representing the principal amount of
Debentures tendered for conversion.
(ii) If the Company fails for any reason to deliver
to the Holder such certificate or certificates pursuant to
Section 4(b)(i) by the third Trading Day after the Conversion
Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of
principal amount being converted, $50 per Trading Day
(increasing to $100 per Trading Day after 3 Trading Days after
such damages begin to accrue) for each Trading Day after such
third Trading Day until such certificates are delivered.
Nothing herein shall limit a Xxxxxx's right to pursue actual
damages or declare an Event of Default pursuant to Section 3
herein for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the
period specified herein and such Holder shall have the right
to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit the Holders from seeking to enforce
damages pursuant to any other Section hereof or under
applicable law.
(iii) In addition to any other rights available to
the Holder, if the Company fails for any reason to deliver to
the Holder such certificate or certificates pursuant to
Section 4(b)(i) by the third Trading Day after the Conversion
Date, and if after such third Trading Day the Holder is
required by its brokerage firm to purchase (in an open market
transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares
which the Holder anticipated receiving upon such conversion (a
"Buy-In"), then the Company shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by
the Holder) the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for
the Common Stock so purchased exceeds (y) the product of (1)
the aggregate number of shares of Common Stock that such
Holder anticipated receiving from the conversion at issue
multiplied by (2) the actual sale price of the Common Stock at
the time of the sale (including brokerage commissions, if any)
giving rise to such purchase obligation and (B) at the option
of the Holder, either reissue Debentures in principal amount
equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock
that would have been issued had the Company timely complied
with its delivery requirements under Section 4(b)(i). For
example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of Debentures with respect to which the
actual sale price of the Underlying Shares at the time of the
sale (including brokerage commissions, if any) giving rise to
such purchase obligation was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall
be required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure
to timely deliver certificates hereunder and the Company
timely pays in full such payment, the Company shall not be
required to pay such Holder liquidated damages under Section
4(b)(ii) in respect of the certificates resulting in such
Buy-In.
(c) (i) The conversion price in effect on any Conversion Date
shall be equal to $0.4318(1) (subject to adjustment herein)
(the "Set Price").
(ii) If the Company, at any time while the Debentures
are outstanding: (A) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by
the Company pursuant to this Debenture), (B) subdivide
outstanding shares of Common Stock into a larger number of
shares, (C) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then
the Set Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such
event and of which the denominator shall be the number of
shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become
effective immediately after the record date for the
determination of stockholders entitled to receive such
dividend or distribution and shall become effective
immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while Debentures
are outstanding, shall issue rights, options or warrants to
all holders of Common Stock (and not to Holders) entitling
them to subscribe for or purchase shares of Common Stock or
other securities exercisable, convertible into or exchangeable
for Common Stock (the "Common Stock Equivalents") at a price
per share less than the Closing Price at the record date
mentioned below, then the Set Price shall be adjusted by
multiplying the Set Price in effect immediately prior to such
record date by a fraction, of which the denominator shall be
the number of shares of the Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and of
which the numerator shall be the number of shares of the
Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the
total number of shares so offered would purchase at the
Closing Price on the record date. For purposes of this clause
(iii), the purchase price for the rights, options or warrants
includes the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of
all such rights, options or warrants, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such rights, options
or warrants, plus in the case of Common Stock Equivalents
issuable upon the exercise of such rights, options or
warrants, the minimum aggregate additional consideration
payable upon the exercise, conversion or exchange thereof at
the time such Common Stock Equivalents first become
exercisable, convertible or exchangeable. Such adjustment
shall be made whenever such rights, options or warrants are
issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such rights, options or warrants.
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1 110% of the average of the 10 Closing Prices immediately prior to
the date of the Purchase Agreement.
(iv) If the Company or any subsidiary thereof, as
applicable, at any time while Debentures are outstanding,
shall offer, sell, grant any option to purchase or offer, sell
or grant any right to reprice its securities, or otherwise
dispose of or issue (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or
Common Stock Equivalent entitling any Person to acquire shares
of Common Stock, at an effective price per share less than the
then Set Price ("Dilutive Issuance"), as adjusted hereunder
(if the holder of the Common Stock or Common Stock Equivalent
so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which is issued in connection with
such issuance, be entitled to receive shares of Common Stock
at an effective price per share which is less than the Set
Price, such issuance shall be deemed to have occurred for less
than the Set Price), then the Set Price shall be reduced to
equal the effective conversion, exchange or purchase price for
such Common Stock or Common Stock Equivalents (including any
reset provisions thereof) at issue. Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents
are issued. The Company shall notify the Holder in writing, no
later than the business day following the issuance of any
Common Stock or Common Stock Equivalent subject to this
section, indicating therein the applicable issuance price, or
of applicable reset price, exchange price, conversion price
and other pricing terms.
(v) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock
(and not to Holders) evidences of its indebtedness or assets
or rights or warrants to subscribe for or purchase any
security, then in each such case the Set Price shall be
determined by multiplying such price in effect immediately
prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Closing Price
determined as of the record date mentioned above, and of which
the numerator shall be such Closing Price on such record date
less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith.
In either case the adjustments shall be described in a
statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record
date mentioned above.
(vi) All calculations under this Section 4 shall be
made to the nearest cent or the nearest 1/100th of a share, as
the case may be. For purposes of this Section 4, the number of
shares of Common Stock deemed to be outstanding as of a given
date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) outstanding.
(vii) Whenever the Set Price is adjusted pursuant to
any of Section 4(c)(ii) - (v), the Company shall promptly mail
to each Holder a notice setting forth the Set Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(viii) If (A) the Company shall declare a dividend
(or any other distribution) on the Common Stock; (B) the
Company shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval
of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of
the Company, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or
property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the
purpose of conversion of the Debentures, and shall cause to be
mailed to the Holders at their last addresses as they shall
appear upon the stock books of the Company, at least 20
calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record
is not to be taken, the date as of which the holders of the
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that the failure
to mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action
required to be specified in such notice. Holders are entitled
to convert Debentures during the 20-day period commencing the
date of such notice to the effective date of the event
triggering such notice.
(ix) If, at any time while this Debenture is
outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B)
the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (C) any
tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares
for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other
securities, cash or property (in any such case, a "Fundamental
Transaction"), then upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for
each Underlying Share that would have been issuable upon such
conversion absent such Fundamental Transaction, the same kind
and amount of securities, cash or property as it would have
been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of one share of
Common Stock (the "Alternate Consideration"). For purposes of
any such conversion, the determination of the Set Price shall
be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the
Set Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this
Debenture following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new
Debenture consistent with the foregoing provisions and
evidencing the Holder's right to convert such Debenture into
Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to
comply with the provisions of this paragraph (c) and insuring
that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
(x) Notwithstanding the foregoing, no adjustment will
be made under this paragraph (c) in respect of (A) the
granting or issuance of shares of capital stock or of options
to employees, officers, directors and consultants of the
Company pursuant to any stock option plan agreement or
arrangement 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) upon the exercise
of this Debenture or any other Debenture of this series or of
any other series or security issued by the Company in
connection with the offer and sale of this Company's
securities pursuant to the Purchase Agreement, or (C) upon the
exercise of or conversion of any Common Stock Equivalents,
rights, options or warrants issued and outstanding on the
Original Issue Date, provided such securities have not been
amended since the date of the Purchase Agreement except as a
result of the Purchase Agreement, or (D) issuance of
securities in connection with acquisitions, strategic
investments, or strategic partnering arrangements, the primary
purpose of which is not to raise capital.
(xi) If the Set Price has been adjusted based on the
issuance of a right, option, warrant and/or Common Stock
Equivalent and all of such right, option, warrant and/or
Common Stock Equivalent expires pursuant to its own terms
before it is exercised, exchanged and/or converted, an upward
adjustment will be made such that the Set Price will no longer
reflect the issuance of such right, option, warrant and/or
Common Stock Equivalent.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of the
Debentures, each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as
shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of
Section 4(b)) upon the conversion of the outstanding principal amount
of the Debentures hereunder. The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid, nonassessable and, if the
Underlying Shares Registration Statement has been declared effective
under the Securities Act, registered for public sale in accordance with
such Underlying Shares Registration Statement.
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares
of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the
Closing Price at such time. If the Company elects not, or is unable, to
make such a cash payment, the Holder shall be entitled to receive, in
lieu of the final fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to
the Holders thereof for any documentary stamp or similar taxes that may
be payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than
that of the Holder of such Debentures so converted and the Company
shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries
to be provided by the Holders hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier
service, addressed to the Company, at the address set forth above,
facsimile number (000) 000-0000, Attn: X. Xxxxx Xxxxxxxxxxx or such
other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this
Section. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile telephone
number or address of such Xxxxxx appearing on the books of the Company,
or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (New York
City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required
to be given.
Section 5. Redemption.
(a) Optional Redemption by the Company. The Company shall have
the right, at any time after the Effective Date if the Closing Price on
each of the 20 Trading Days immediately prior to the Notice Date (as
defined below) is greater than 200% of the then Set Price, upon 10
Trading Days' prior written notice to the Holder (an "Optional
Redemption Notice" (the date such notice is received by the Holder is
the "Notice Date"), to redeem no less than the entire principal amount
of this Debenture then held by the Holder, at a cash price equal to the
120% of the principal amount outstanding plus any fees owing thereon
(the "Optional Redemption Price"). The Company may only effect an
Optional Redemption Notice if each of the following shall be true: (i)
the Company shall have duly honored all conversions occurring by virtue
of one or more Notice of Conversions prior to the Optional Redemption
Notice, (ii) there is an effective Underlying Shares Registration
Statement pursuant to which the Holder is permitted to utilize the
prospectus thereunder to resell all of the Underlying Shares issued to
the Holder and all of the Underlying Shares as are issuable to the
Holder upon conversion in full of the principal amount of this
Debenture subject to the Optional Redemption Notice at the Set Price
(and the Company believes, in good faith, that such effectiveness will
continue uninterrupted for the foreseeable future), (iii) the Common
Stock is listed for trading on a Principal Market (and the Company
believes, in good faith, that trading of the Common Stock on a
Principal Market will continue uninterrupted for the foreseeable
future), (iv) all liquidated damages and other amounts owing in respect
of the Debentures and Underlying Shares shall have been paid or will,
concurrently with the issuance of the Underlying Shares, be paid in
cash; (v) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all the
Underlying Shares as are issuable to the Holder upon conversion in full
of the Debentures subject to the Optional Redemption Notice; and (vi)
no Event of Default nor any event that with the passage of time would
constitute an Event of Default has occurred and is continuing. If any
of the foregoing conditions shall cease to be in effect during the
period between the Notice Date and the date the Optional Redemption
Price is paid in full, then the Holders subject to such redemption may
elect, by written notice to the Company given at any time after any of
the foregoing conditions shall cease to be in effect, to invalidate ab
initio such redemption, notwithstanding anything herein contained to
the contrary. In any case, the Holders may convert any portion of the
outstanding principal amount of the Debentures subject to an Optional
Redemption Notice prior to the date that the Optional Redemption Price
is due and paid in full.
(b) Conditional Redemption at Election of Holder. On any
Conversion Date after the earlier of the Effective Date or the 150th
day after the Closing Date, if the Closing Price for each of the 20
consecutive Trading Day period prior to such date is less than 120% of
the Set Price then in effect, the Holder shall have the right
("Conditional Redemption Right") to cause the Company to, at the
election of the Company, either (i) redeem the portion of this
Debenture then subject to the Notice of Conversion applicable to such
Conversion Date based on a redemption price equal to 120% of the
principal amount of such principal amount (the "Conditional Redemption
Price") or (ii) in lieu of a cash redemption payment, issue Conversion
Shares based on a conversion price equal to 95% of the average of the
lowest 3 Closing Prices during such 20 day period; provided, however,
at anytime the Holder may request from the Company the Company's
irrevocable decision to pay cash, shares or a combination thereof,
during the following 10 Trading Days upon the Holder's exercise of a
Conditional Redemption Right during such period ("Notice of Decision");
provided, further, the Notice of Decision must include the amount of
the Conditional Redemption Price the Company will pay in cash.
Notwithstanding anything herein to the contrary, failure to deliver the
Notice of Decision within 1 Trading Day of such request by the Holder
shall obligate the Company to issue only shares of Common Stock upon a
Conditional Redemption Right during such 10 Trading Day period. The
Company must notify the Holder of its election to pay the Conditional
Redemption Price in cash or shares of Common Stock within 24 hours
after notification from the Holder that the Holder elects to exercise
its right to a redemption hereunder. All conversions hereunder shall be
made as if pursuant to Section 4 and the other sub-sections relating
thereto, including but not limited to, liquidated damages and fees for
late delivery of Conversion Shares. Nothing herein shall preclude the
Holder from converting this Debenture to the extent this Debenture
remains unpaid and unconverted after the redemption date as set forth
in sub-section (c) below.
(c) Redemption Procedure. The Optional Redemption Price is due
on the 20th Trading Day following the Notice Date and the Conditional
Redemption Price is due on the 5th Trading Day following the applicable
Conversion Date unless otherwise paid in shares of Common Stock, in
which case the delivery of such shares shall be otherwise subject to
Section 4. If any portion of the Optional Redemption Price or
Conditional Redemption Price shall not be paid by the Company by the
date such payment is due, interest shall accrue thereon at the rate of
18% per annum (or the maximum rate permitted by applicable law,
whichever is less) until such redemption price plus all such interest
is paid in full. In addition, if any portion of the Optional Redemption
Price or Conditional Redemption Price remains unpaid after such date,
the Holders subject to such redemption may elect, by written notice to
the Company given at any time thereafter, to invalidate ab initio such
redemption, notwithstanding anything herein contained to the contrary.
If a Holder elects to invalidate such redemption the Company shall
promptly, and, in any event, not later than 3 Trading Days from receipt
of such Xxxxxx's notice of such election, return to such Holder all of
the Debentures for which the Optional Redemption Price or Conditional
Redemption Price shall not have been paid in full.
Section 6. Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Debenture: (a) capitalized terms not
otherwise defined herein have the meanings given to such terms in the
Purchase Agreement, and (b) the following terms shall have the
following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence after the
date hereof of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 33% of the voting securities
of the Company, or (ii) a replacement at one time or within a three
year period of more than one-half of the members of the Company's board
of directors which is not approved by a majority of those individuals
who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors
on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on
the date hereof), or (iii) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i) or (ii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.001 par value per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Conditional Redemption Price" shall have the meaning set
forth in Section 5(b).
"Conditional Redemption Right" shall have the meaning set
forth in Section 5(b).
"Conversion Date" shall have the meaning set forth in Section
4(a)(i) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Mandatory Prepayment Amount" for any Debentures shall equal
the sum of (i) the greater of: (A) 120% of the principal amount of
Debentures to be prepaid, plus all other accrued and unpaid amounts due
hereunder, or (B) the principal amount of Debentures to be prepaid,
plus all other accrued and unpaid amounts due hereunder, divided by the
Set Price on (x) the date the Mandatory Prepayment Amount is demanded
or otherwise due or (y) the date the Mandatory Prepayment Amount is
paid in full, whichever is less, multiplied by the Closing Price on (x)
the date the Mandatory Prepayment Amount is demanded or otherwise due
or (y) the date the Mandatory Prepayment Amount is paid in full,
whichever is greater, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"Notice Date" shall have the meaning set forth in Section
5(a).
"Optional Redemption Notice" shall have the meaning set forth
in Section 5(a).
"Optional Redemption Price" shall have the meaning set forth
in Section 5(a).
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of July 14, 2003, to which the Company and the original Holder
are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Set Price" shall have the meaning set forth in Section
4(c)(i).
"Trading Day" means (a) a day on which the shares of Common
Stock are traded on a Principal Market on which the shares of Common
Stock are then listed or quoted, or (b) if the shares of Common Stock
are not quoted on a Principal Market, a day on which the shares of
Common Stock are quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization
or agency succeeding its functions of reporting prices); provided, that
in the event that the shares of Common Stock are not listed or quoted
as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a
Business Day.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of Debentures in accordance with the terms hereof.
"Underlying Shares Registration Statement" means a
registration statement meeting the requirements set forth in the
Registration Rights Agreement, covering among other things the resale
of the Underlying Shares and naming the Holder as a "selling
stockholder" thereunder.
Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and liquidated damages (if any) on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct debt obligation of the Company and was
issued at an original issue discount to the principal amount. This Debenture
ranks pari passu with all other Debentures now or hereafter issued under the
terms set forth herein. As long as there are Debentures outstanding, the Company
shall not and shall cause it subsidiaries not to, without the consent of the
Holders, (a) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holders; (b) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock or other equity securities other than as to the Underlying Shares
to the extent permitted or required under the Transaction Documents or as
otherwise permitted by the Transaction Documents; or (c) enter into any
agreement with respect to any of the foregoing.
Section 8. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 9. So long as any portion of the Debentures are outstanding,
the Company will not and will not permit any of its subsidiaries to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom that is senior in any respect to the Company's obligations under the
Debentures without the prior consent of the Holder, which consent shall not be
unreasonably withheld.
Section 10. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture 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
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts 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, or such New York Courts are 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 Debenture 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. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
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.
Section 11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any amount deemed interest due hereunder violates applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Company covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal or deemed
interest on the Debentures as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been enacted.
Section 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
*********************
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
WAVERIDER COMMUNICATIONS INC.
By:_________________________________________
Name: X. Xxxxx Xxxxxxxxxxx
Title: Vice President and Chief Financial Officer
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the Convertible
Debenture of WaveRider Communications Inc. (the "Company"), due on July 13,
2006, into shares of common stock, $0.001 par value per share (the "Common
Stock"), of the Company according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Company's Common Stock does
not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted:
[__] Check here if undersigned elects to exercise its Conditional
Redemption Right as to this conversion pursuant to Section 5(b) of the
Debenture.
Number of shares of Common Stock to
be issued:
Applicable Conversion Price:
If applicable, Redemption to be paid
in cash: $
Signature:
Name:
Address:
The Company confirms acceptance of this Notice of Conversion (to be faxed to the
Holder within 1 Trading Day of receipt by the Company).
Signature: _________________________ Date: _____________________________
Name:
Title: Tel: _______________________________
Schedule 1
CONVERSION SCHEDULE
Convertible Debentures due on July ___, 2006, in the aggregate principal amount
of $____________ issued by WaveRider Communications Inc. This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.
Dated:
Aggregate Principal
Amount Remaining
Date of Conversion Subsequent to
(or for first entry, Original Conversion
Issue Date) Amount of Conversion (or original Company Attest
Principal Amount)
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