EXHIBIT 10.97
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of September 11,
2002, by and among Xxxxxxxxx Wireless, a Nevada corporation, with headquarters
located at 0000 Xxxxx, Xxxxx X0-000 Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the
"COMPANY"), and each of the purchasers set forth on the signature pages hereto
(the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
rules and regulations as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT");
B. Buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement (i) 12% convertible
debentures of the Company, in the form attached hereto as EXHIBIT "A", in the
aggregate principal amount of Six Hundred Thousand Dollars ($600,000) (together
with any debenture(s) issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms thereof, the
"DEBENTURES"), convertible into shares of common stock, $0.001 par value per
share, of the Company (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in such Debentures and (ii) warrants, in
the form attached hereto as EXHIBIT "B", to purchase One Million Eight Hundred
Thousand (1,800,000) shares of Common Stock (the "WARRANTS");
C. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Debentures and number of Warrants as is
set forth immediately below its name on the signature pages hereto; and
D. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
a. PURCHASE OF DEBENTURES AND WARRANTS. On the Closing Date (as
defined below), the Company shall issue and sell to each Buyer and each Buyer
severally agrees to purchase from the Company such principal amount of
Debentures and number of Warrants as is set forth immediately below such Buyer's
name on the signature pages hereto.
b. FORM OF PAYMENT. On the Closing Date (as defined below), (i)
each Buyer shall pay the purchase price for the Debentures and the Warrants to
be issued and sold to it at the Closing (as defined below) (the "PURCHASE
PRICE") by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against delivery of
the Debentures in the principal amount equal to the Purchase Price and the
number of Warrants as is set forth immediately below such Buyer's name on the
signature pages hereto, and (ii) the Company shall deliver such Debentures and
Warrants duly executed on behalf of the Company, to such Buyer, against delivery
of such Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or written waiver)
of the conditions thereto set forth in Section 6 and Section 7 below, the date
and time of the issuance and sale of the Debentures and the Warrants pursuant to
this Agreement (the "CLOSING DATE") shall be 12:00 noon, Eastern Time, on
September 11, 2002 or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "CLOSING") shall occur on the
Closing Date at such location as may be agreed to by the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and
not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. INVESTMENT PURPOSE. As of the date hereof, the Buyer is
purchasing the Debentures and the shares of Common Stock issuable (i) on account
of interest on the Debentures or (ii) upon conversion of or otherwise pursuant
to the Debentures (including, without limitation, such additional shares of
Common Stock, if any, as are issuable as a result of the events described in
Sections 1.3 and 1.4(g) of the Debentures and Section 2(c) of the Registration
Rights Agreement, such shares of Common Stock being referred to herein as the
"CONVERSION SHARES") and the Warrants and the shares of Common Stock issuable
upon exercise thereof (the "WARRANT SHARES" and, collectively with the
Debentures, Warrants and Conversion Shares, the "SECURITIES") for its own
account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act; provided, however, that by making the representations herein, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D (an "ACCREDITED
INVESTOR").
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
-2-
d. INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Notwithstanding the foregoing, the Company has not disclosed to the
Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly
following such disclosure to the Buyer. Neither such inquiries nor any other due
diligence investigation conducted by Buyer or any of its advisors or
representatives shall modify, amend or affect Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant degree
of risk.
e. GOVERNMENTAL REVIEW. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. TRANSFER OR RE-SALE. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel (that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration, (c) the Securities are sold or transferred to
an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule) ("RULE 144")) of the Buyer who agrees to sell or otherwise
transfer the Securities only in accordance with this Section 2(f) and who is an
Accredited Investor, (d) the Securities are sold pursuant to Rule 144; (ii) any
sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. LEGENDS. The Buyer understands that the Debentures and the
Warrants and, until such time as the Conversion Shares and Warrant Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be
immediately sold, the Conversion Shares and Warrant Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
-3-
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities may not be sold, transferred or assigned in the
absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form,
substance and scope customary for opinions of counsel in
comparable transactions, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, or (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the 1933 Act and such
sale or transfer is effected or (c) such holder provides the Company with
reasonable assurances that such Security can be sold pursuant to Rule 144. The
Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.
h. AUTHORIZATION; ENFORCEMENT. This Agreement and the
Registration Rights Agreement have been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Buyer, and this
Agreement constitutes, and upon execution and delivery by the Buyer of the
Registration Rights Agreement, such agreement will constitute, valid and binding
agreements of the Buyer enforceable in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
i. RESIDENCY. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. SCHEDULE 3(a) sets forth
a list of all of the Subsidiaries of the Company and the jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the
-4-
business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, operations, assets, financial condition or prospects of the Company or
its Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. "SUBSIDIARIES" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest that represents more than 50%
of the voting power of that corporation or other organization.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to enter into and (subject to the Stockholder
Approval (as defined in Section 4(m)) perform this Agreement, the Registration
Rights Agreement, the Debentures and the Warrants and to consummate the
transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement, the Debentures and the
Warrants by the Company and (subject to the Stockholder Approval (as defined in
Section 4(m)) the consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Debentures and the
Warrants and the issuance and reservation for issuance of the Conversion Shares
and Warrant Shares issuable upon conversion or exercise thereof) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its shareholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company by its authorized representative, and such authorized representative is
the true and official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the Company
accordingly, and (iv) this Agreement constitutes, and upon execution and
delivery by the Company of the Registration Rights Agreement, the Debentures and
the Warrants, each of such instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
c. CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 250,000,000 shares of Common Stock, of
which 22,885,517 shares are issued and outstanding, 438,045 shares are reserved
for issuance pursuant to the Company's stock option plans, 226,676,438 shares
are reserved for issuance pursuant to the securities (other than the Debentures
and the Warrants) exercisable for, or convertible into or exchangeable for
shares of Common Stock that are described on SCHEDULE 3(c) and (subject to the
Stockholder Approval (as defined in Section 4(m)) 123,600,000 shares are
reserved for issuance upon conversion of the Debentures and the Additional
Debentures (as defined in Section 4(l)) and exercise of the Warrants and the
Additional Warrants (as defined in Section 4(l)) (subject to adjustment pursuant
to the Company's covenant set forth in Section 4(h) below); and (ii) 5,000,000
shares of preferred stock, of which 1,000,000 shares have been designated as
Series A Convertible Preferred Stock, all of which are issued and outstanding,
and of which 900 shares have been designated as Series B Convertible Preferred
-5-
Stock, all of which are issued and outstanding. All of such outstanding shares
of capital stock are, or upon issuance will be, duly authorized, validly issued,
fully paid and nonassessable. No shares of capital stock of the Company are
subject to preemptive rights or any other similar rights of the stockholders of
the Company or any liens or encumbrances imposed through the actions or failure
to act of the Company. Except as disclosed in Schedule 3(c), as of the effective
date of this Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for any shares of capital stock of the Company or any of its Subsidiaries, or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries, (ii) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
its or their securities under the 1933 Act (except the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance of the
Debentures, the Warrants, the Conversion Shares or Warrant Shares. The Company
has furnished to the Buyer true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION"), the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"). The Company shall provide the Buyer with a written update of this
representation signed by the Company's Chief Executive or Chief Financial
Officer on behalf of the Company as of the Closing Date.
d. ISSUANCE OF SHARES. Subject to the Stockholder Approval (as
defined in Section 4(m)), the Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance and, upon conversion of the Debentures and
exercise of the Warrants in accordance with their respective terms, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of stockholders of the
Company and will not impose personal liability upon the holder thereof.
e. ACKNOWLEDGMENT OF DILUTION. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the
Debenture, or exercise of the Warrants. The Company further acknowledges that
its obligation to issue Conversion Shares and Warrant Shares upon conversion of
the Debentures or exercise of the Warrants in accordance with this Agreement,
the Debentures and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
f. NO CONFLICTS. Subject to the Stockholder Approval (as defined
in Section 4(m)) and except as set forth on SCHEDULE 3(F), The execution,
delivery and performance of this Agreement, the Registration Rights Agreement,
the Debentures and the Warrants by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance of the Conversion Shares
and Warrant Shares) will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws or (ii) violate or
-6-
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and, except as set
forth on SCHEDULE 3(f), neither the Company nor any of its Subsidiaries is in
default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party or by which any property or
assets of the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries, if
any, are not being conducted, and shall not be conducted so long as a Buyer owns
any of the Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third party in order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement, the Debentures or the Warrants in
accordance with the terms hereof or thereof or to issue and sell the Debentures
and Warrants in accordance with the terms hereof and to issue the Conversion
Shares upon conversion of the Debentures and the Warrant Shares upon exercise of
the Warrants. Except as disclosed in SCHEDULE 3(f), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing
requirements of the Over-the-Counter Bulletin Board (the "OTCBB") and does not
reasonably anticipate that the Common Stock will be delisted by the OTCBB in the
foreseeable future. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
g. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 11, 2000,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the "SEC DOCUMENTS"). The Company has delivered or made
available to each Buyer true and complete copies of the SEC Documents, except
for such exhibits and incorporated documents. As of their respective dates, the
-7-
SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, 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. Except as set forth on SCHEDULE 3(g), none of
the statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have been
amended or updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to September 30, 2001 and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
h. ABSENCE OF CERTAIN CHANGES. Since September 30, 2001, there
has been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.
i. ABSENCE OF LITIGATION. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect. SCHEDULE
3(i) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
j. PATENTS, COPYRIGHTS, ETC.
(i) The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
-8-
("INTELLECTUAL PROPERTY") necessary to enable it to conduct its business as now
operated (and, except as set forth in SCHEDULE 3(j) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or proceeding pending,
or to the Company's knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary
to enable it to conduct its business as now operated (and, except as set forth
in SCHEDULE 3(j) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); to the best of the Company's
knowledge, the Company's or its Subsidiaries' current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.
(ii) All of the Company's computer software and computer
hardware, and other similar or related items of automated, computerized or
software systems that are used or relied on by the Company in the conduct of its
business or that were, or currently are being, sold or licensed by the Company
to customers (collectively, "INFORMATION TECHNOLOGY"), are Year 2000 Compliant.
For purposes of this Agreement, the term "YEAR 2000 COMPLIANT" means, with
respect to the Company's Information Technology, that the Information Technology
is designed to be used prior to, during and after the calendar Year 2000, and
the Information Technology used during each such time period will accurately
receive, provide and process date and time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the 20th and 21st
centuries, including the years 1999 and 2000, and leap-year calculations, and
will not malfunction, cease to function, or provide invalid or incorrect results
as a result of the date or time data, to the extent that other information
technology, used in combination with the Information Technology, properly
exchanges date and time data with it. The Company has delivered to the Buyers
true and correct copies of all analyses, reports, studies and similar written
information, whether prepared by the Company or another party, relating to
whether the Information Technology is Year 2000 Compliant, if any.
k. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Except as set forth on SCHEDULE 3(K), neither the
Company nor any of its Subsidiaries is a party to any contract or agreement
which in the judgment of the Company's officers has or is expected to have a
Material Adverse Effect.
l. TAX STATUS. Except as set forth on SCHEDULE 3(l), 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
-9-
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, state or local tax. Except as set forth on SCHEDULE 3(L), none
of the Company's tax returns is presently being audited by any taxing authority.
m. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(m) and
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on SCHEDULE
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (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 corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
n. DISCLOSURE. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company's reports filed under the
1934 Act are being incorporated into an effective registration statement filed
by the Company under the 1933 Act).
o. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES. The
Company acknowledges and agrees that the Buyers 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 Buyer
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 Buyer 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 Buyers' purchase of the Securities. The Company further represents to
each Buyer that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
-10-
p. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any stockholder
approval provisions applicable to the Company or its securities.
q. NO BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
p. PERMITS; COMPLIANCE. The Company and each of its Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "COMPANY PERMITS"), and there is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. Neither the Company
nor any of its Subsidiaries is in conflict with, or in default or violation of,
any of the Company Permits, except for any such conflicts, defaults or
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Since September 30, 2001, neither
the Company nor any of its Subsidiaries has received any notification with
respect to possible conflicts, defaults or violations of applicable laws, except
for notices relating to possible conflicts, defaults or violations, which
conflicts, defaults or violations would not have a Material Adverse Effect.
s. ENVIRONMENTAL MATTERS.
(i) Except as set forth in SCHEDULE 3(s), there are, to the
Company's knowledge, with respect to the Company or any of its Subsidiaries or
any predecessor of the Company, no past or present violations of Environmental
Laws (as defined below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar federal, state, local or foreign laws and
neither the Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to the Company's
knowledge, threatened in connection with any of the foregoing. The term
"ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants contaminants, or toxic
or hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
-11-
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any of its Subsidiaries, and no Hazardous Materials were released on
or about any real property previously owned, leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its Subsidiaries, except in the normal course of the
Company's or any of its Subsidiaries' business.
(iii) Except as set forth in SCHEDULE 3(s), there are no
underground storage tanks on or under any real property owned, leased or used by
the Company or any of its Subsidiaries that are not in compliance with
applicable law.
t. TITLE TO PROPERTY. The Company and its Subsidiaries have good
and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(T) or such
as would not have a Material Adverse Effect. Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as would not have
a Material Adverse Effect.
u. INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that 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 at a cost that
would not have a Material Adverse Effect.
v. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
-12-
w. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
x. SOLVENCY. Except as set forth on SCHEDULE 3(x), the Company
(after giving effect to the transactions contemplated by this Agreement) is
solvent (i.e., its assets have a fair market value in excess of the amount
required to pay its probable liabilities on its existing debts as they become
absolute and matured) and currently the Company has no information that would
lead it to reasonably conclude that the Company would not, after giving effect
to the transaction contemplated by this Agreement, have the ability to, nor does
it intend to take any action that would impair its ability to, pay its debts
from time to time incurred in connection therewith as such debts mature. The
Company did not receive a qualified opinion from its auditors with respect to
its most recent fiscal year end and, after giving effect to the transactions
contemplated by this Agreement, does not anticipate or know of any basis upon
which its auditors might issue a qualified opinion in respect of its current
fiscal year.
y. NO INVESTMENT COMPANY. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this Agreement will not
be an "investment company" required to be registered under the Investment
Company Act of 1940 (an "INVESTMENT COMPANY"). The Company is not controlled by
an Investment Company.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to the Closing Date.
c. REPORTING STATUS; ELIGIBILITY TO USE FORM SB-2 OR FORM S-1.
The Company's Common Stock is registered under Section 12(g) of the 1934 Act.
The Company represents and warrants that it meets the requirements for the use
of Form SB-2 or Form S-1 for registration of the sale by the Buyer of the
Registrable Securities (as defined in the Registration Rights Agreement). So
long as the Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
-13-
regulations thereunder would permit such termination. The Company further agrees
to file all reports required to be filed by the Company with the SEC in a timely
manner so as to become eligible, and thereafter to maintain its eligibility, for
the use of Form S-3. The Company agrees that any press release describing the
transaction contemplated hereby shall be subject to prior review by the Buyers.
The Company agrees that any such press release shall not disclose the name of
the Buyers unless expressly consented to in writing by the Buyers or unless
required by applicable law or regulation, and then only to the extent of such
requirement.
d. USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Debentures and the Warrants in the manner set forth in SCHEDULE 4(d)
attached hereto and made a part hereof and shall not, directly or indirectly,
use such proceeds for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with its currently
existing direct or indirect Subsidiaries).
e. FUTURE OFFERINGS. Subject to the exceptions described below,
the Company will not, without the prior written consent of a
majority-in-interest of the Buyers, not to be unreasonably withheld or delayed,
negotiate or contract with any party to obtain additional equity financing
(including debt financing with an equity component) that involves (A) the
issuance of Common Stock at a discount to the market price of the Common Stock
on the date of issuance (taking into account the value of any warrants or
options to acquire Common Stock issued in connection therewith) or (B) the
issuance of convertible securities that are convertible into an indeterminate
number of shares of Common Stock or (C) the issuance of warrants during the
period (the "LOCK-UP PERIOD") beginning on the Closing Date and ending on the
later of (i) two hundred seventy (270) days from the Closing Date and (ii) one
hundred eighty (180) days from the date the Registration Statement (as defined
in the Registration Rights Agreement) is declared effective (plus any trading
days in which sales cannot be made thereunder after such Registration Statement
is declared effective). In addition, subject to the exceptions described below,
the Company will not conduct any equity financing (including debt with an equity
component) ("FUTURE OFFERINGS") during the period beginning on the Closing Date
and ending two (2) years after the end of the Lock-up Period unless it shall
have first delivered to each Buyer, at least twenty (20) business days prior to
the closing of such Future Offering, written notice describing the proposed
Future Offering, including the terms and conditions thereof and proposed
definitive documentation to be entered into in connection therewith, and
providing each Buyer an option during the fifteen (15) day period following
delivery of such notice to purchase its pro rata share (based on the ratio that
the aggregate principal amount of Debentures purchased by it hereunder bears to
the aggregate principal amount of Debentures purchased hereunder) of the
securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in this
sentence and the preceding sentence are collectively referred to as the "CAPITAL
RAISING LIMITATIONS"). In the event the terms and conditions of a proposed
Future Offering are amended in any material respect after delivery of the notice
to the Buyers concerning the proposed Future Offering, the Company shall deliver
a new notice to each Buyer describing the amended terms and conditions of the
proposed Future Offering and each Buyer thereafter shall have an option during
the fifteen (15) day period following delivery of such new notice to purchase
its pro rata share of the securities being offered on the same terms as
-14-
contemplated by such proposed Future Offering, as amended. The foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering. The Capital Raising Limitations shall not apply to any
transaction involving (i) issuances of securities in a firm commitment
underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 1933 Act), (ii) issuances of securities as consideration for a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company or (iii) issuances of securities to
Xxxxx & Xxxxxx LLP in connection with legal services provided to the Company.
The Capital Raising Limitations also shall not apply to the issuance of
securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof or to the grant
of additional options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan approved by the
Stockholders of the Company. In the event that the Company completes a Future
Offering on terms more favorable to another investor than the transaction
contemplated hereby, the terms of the Debentures and the Warrants will be
amended to reflect such more favorable terms.
f. EXPENSES. At the Closing, the Company shall reimburse Buyers
for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, attorneys'
and consultants' fees and expenses.
g. FINANCIAL INFORMATION. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB
and any Current Reports on Form 8-K; (ii) within one (1) day after release,
copies of all press releases issued by the Company or any of its Subsidiaries;
and (iii) contemporaneously with the making available or giving to the
stockholders of the Company, copies of any notices or other information the
Company makes available or gives to such stockholders.
h. RESERVATION OF SHARES. Subject to the Stockholder Approval (as
defined in Section 4(m)), the Company shall at all times have authorized, and
reserved for the purpose of issuance, a sufficient number of shares of Common
Stock to provide for the full conversion or exercise of the outstanding
Debentures and Warrants and issuance of the Conversion Shares and Warrant Shares
in connection therewith (based on the Conversion Price of the Debentures or
Exercise Price of the Warrants in effect from time to time) and as otherwise
required by the Debentures. The Company shall not reduce the number of shares of
Common Stock reserved for issuance upon conversion of Debentures and exercise of
the Warrants without the consent of each Buyer. The Company shall use its best
efforts at all times to maintain the number of shares of Common Stock so
reserved for issuance at no less than two (2) times the number that is then
actually issuable upon full conversion of the Debentures and Additional
Debentures and upon exercise of the Warrants and Additional Warrants (based on
the Conversion Price of the Debentures or the Exercise Price of the Warrants in
effect from time to time). If at any time the number of shares of Common Stock
-15-
authorized and reserved for issuance is below the number of Conversion Shares
and Warrant Shares issued and issuable upon conversion of the Debentures and
Additional Debentures and exercise of the Warrants (based on the Conversion
Price of the Debentures or the Exercise Price of the Warrants then in effect),
the Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of stockholders to authorize additional shares to meet the
Company's obligations under this Section 4(h), in the case of an insufficient
number of authorized shares, and using its best efforts to obtain stockholder
approval of an increase in such authorized number of shares.
i. LISTING. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and, so long as any Buyer owns
any of the Securities, shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares and Warrant
Shares from time to time issuable upon conversion of the Debentures or exercise
of the Warrants. The Company will obtain and, so long as any Buyer owns any of
the Securities, maintain the listing and trading of its Common Stock on the
OTCBB or any equivalent replacement exchange, the Nasdaq National Market
("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York Stock
Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and will comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers ("NASD")
and such exchanges, as applicable. The Company shall promptly provide to each
Buyer copies of any notices it receives from the OTCBB and any other exchanges
or quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems.
j. CORPORATE EXISTENCE. So long as a Buyer beneficially owns any
Debentures or Warrants, the Company shall maintain its corporate existence and
shall not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.
k. NO INTEGRATION. The Company shall not make any offers or sales
of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
l. SUBSEQUENT INVESTMENT. The Company and the Buyers agree that,
upon filing by the Company of the Registration Statement to be filed pursuant to
the Registration Rights Agreement (the "Filing Date"), the Buyers shall purchase
additional debentures ("Filing Debentures") in the aggregate principal amount of
One Hundred Seventy-Five Thousand Dollars ($175,000) and additional warrants
(the "Filing Warrants") to purchase an aggregate of 525,000 shares of Common
Stock, for an aggregate purchase price of One Hundred Seventy-Five Thousand
Dollars ($175,000), with the closing of such purchase to occur within ten (10)
-16-
days of the Filing Date; provided, however, that the obligation of each Buyer to
purchase the Filing Debentures and the Filing Warrants is subject to the
satisfaction, at or before the closing of such purchase and sale, of the
conditions set forth in Section 7. The Company and the Buyers further agree
that, upon the declaration of effectiveness of the Registration Statement to be
filed pursuant to the Registration Rights Agreement (the "Effective Date"), the
Buyers shall purchase additional debentures (the "Effectiveness Debentures" and,
collectively with the Filing Debentures, the "Additional Debentures") in the
aggregate principal amount of One Hundred Seventy-Five Thousand Dollars
($175,000) and additional warrants (the "Effectiveness Warrants" and,
collectively with the Filing Warrants, the "Additional Warrants") to purchase an
aggregate of 525,000 shares of Common Stock, for an aggregate purchase price of
One Hundred Seventy-Five Thousand Dollars ($175,000), with the closing of such
purchase to occur within ten (10) days of the Effective Date; provided, however,
that the obligation of each Buyer to purchase the Effectiveness Debentures and
the Effectiveness Warrants is subject to the satisfaction, at or before the
closing of such purchase and sale, of the conditions set forth in Section 7;
and, provided, further, that there shall not have been a Material Adverse Effect
as of such effective date. The terms of the Additional Debentures and the
Additional Warrants shall be identical to the terms of the Debentures and
Warrants, as the case may be, to be issued on the Closing Date. The Common Stock
underlying the Additional Debentures and the Additional Warrants shall be
Registrable Securities (as defined in the Registration Rights Agreement) and
shall be included in the Registration Statement to be filed pursuant to the
Registration Rights Agreement.
m. STOCKHOLDER APPROVAL. The Company shall file an information
statement with the SEC no later than September 20, 2002 and use its best efforts
to obtain, on or before October 11, 2002, such approvals of the Company's
stockholders as may be required to issue all of the shares of Common Stock
issuable upon conversion or exercise of, or otherwise with respect to, the
Debentures and the Warrants in accordance with Nevada law and any applicable
rules or regulations of the OTCBB and Nasdaq, either through a reverse stock
split of the Common Stock or an increase in authorized capital (the "STOCKHOLDER
APPROVAL"). The Company shall furnish to each Buyer and its legal counsel
promptly (but in no event less than two (2) business days) before the same is
filed with the SEC, one copy of the information statement and any amendment
thereto, and shall deliver to each Buyer promptly each letter written by or on
behalf of the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
such information statement (other than any portion thereof which contains
information for which the Company has sought confidential treatment). The
Company will promptly (but in no event more than three (3) business days)
respond to any and all comments received from the SEC (which comments shall
promptly be made available to each Buyer). The Company shall comply with the
filing and disclosure requirements of Section 14 under the 1934 Act in
connection with the Stockholder Approval. The Company represents and warrants
that its Board of Directors has approved the proposal contemplated by this
Section 4(m) and shall indicate such approval in the information statement used
in connection with the Stockholder Approval.
-17-
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Debentures or exercise of the Warrants in accordance with the
terms thereof (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to
registration of the Conversion Shares and Warrant Shares under the 1933 Act or
the date on which the Conversion Shares and Warrant Shares may be sold pursuant
to Rule 144 without any restriction as to the number of Securities as of a
particular date that can then be immediately sold, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If a
Buyer provides the Company with (i) an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions, to the effect that a
public sale or transfer of such Securities may be made without registration
under the 1933 Act and such sale or transfer is effected or (ii) the Buyer
provides reasonable assurances that the Securities can be sold pursuant to Rule
144, the Company shall permit the transfer, and, in the case of the Conversion
Shares and Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates, free from restrictive legend, in such name and in such
denominations as specified by such Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyers, by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section,
that the Buyers shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Debentures and Warrants to a Buyer
at the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:
a. The applicable Buyer shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase Price
in accordance with Section 1(b) above.
-18-
c. The representations and warranties of the applicable Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
d. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation
of each Buyer hereunder to purchase the Debentures and Warrants at the Closing
is subject to the satisfaction, at or before the Closing Date of each of the
following conditions, provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
b. The Company shall have delivered to such Buyer duly executed
Debentures (in such denominations as the Buyer shall request) and Warrants in
accordance with Section 1(b) above.
c. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
d. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Certificate of Incorporation, By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
-19-
f. The Conversion Shares and Warrant Shares shall have been
authorized for quotation on the OTCBB and trading in the Common Stock on the
OTCBB shall not have been suspended by the SEC or the OTCBB.
g. The Buyer shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "D"
attached hereto.
h. The Buyer shall have received an officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
i. No event shall have occurred which could reasonably be
expected to have a Material Adverse Effect on the Company.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
-20-
c. HEADINGS. The headings of this Agreement are for convenience
of reference only and shall not form part of, or affect the interpretation of,
this Agreement.
d. SEVERABILITY. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Xxxxxxxxx Wireless
0000 Xxxxx
Xxxxx X0-000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chairman and Chief Executive Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
With copy to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx
00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxx.xxx
-21-
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
With copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxx.xxx
Each party shall provide notice to the other party of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. The representations and warranties of the Company
and the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall
survive the closing hereunder notwithstanding any due diligence investigation
conducted by or on behalf of the Buyers. The Company agrees to indemnify and
hold harmless each of the Buyers and all their officers, directors, employees
and agents for loss or damage arising as a result of or related to any breach or
alleged breach by the Company of any of its representations, warranties and
covenants set forth in Sections 3 and 4 hereof or any of its covenants and
obligations under this Agreement or the Registration Rights Agreement, including
advancement of expenses as they are incurred.
j. PUBLICITY. The Company and each of the Buyers shall have the
right to review a reasonable period of time before issuance of any press
releases, SEC, OTCBB or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, OTCBB (or other applicable trading market) or
NASD filings with respect to such transactions as is required by applicable law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).
-22-
k. FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. NO STRICT CONSTRUCTION. 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.
m. REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the
Buyers shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Agreement
and to enforce specifically the terms and provisions hereof, without the
necessity of showing economic loss and without any bond or other security being
required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-23-
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
XXXXXXXXX WIRELESS
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------------
Xxxx X. Xxxxxxxxx
Chairman and Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: Delaware
ADDRESS:
AJW Partners, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Telephone: 000-000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Debentures: $83,334
Number of Warrants: 250,000
Aggregate Purchase Price: $83,334
-24-
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
/s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: Cayman Islands
ADDRESS: AJW Offshore, Ltd.
X.X. Xxx 00000 XXX
Xxxxx Xxxxxx, Xxxxxx Xxxxxx, B.W.I.
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Debentures: $83,333
Number of Warrants: 250,000
Aggregate Purchase Price: $83,333
-25-
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
/s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: New York
ADDRESS: AJW Qualified Partners, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Debentures: $83,333
Number of Warrants: 250,000
Aggregate Purchase Price: $83,333
-26-
