SECURITIES PURCHASE AGREEMENT
BETWEEN
CEDAR AVENUE LLC
And
Wavetech International, Inc.
Dated as of May 1, 2000
This SECURITIES PURCHASE AGREEMENT, dated as of May 1, 2000 (the
"Agreement"), is made and entered into between CEDAR AVENUE LLC (the
"Investor"), a limited liability company organized and existing under the laws
of the Cayman Islands, and WAVETECH INTERNATIONAL, INC., a corporation organized
and existing under the laws of the State of Nevada (the "Company").
This Agreement is made with reference to the following facts and
circumstances:
A. The Company proposes that, upon the terms and subject to the conditions
contained herein, the Company shall sell to the Investor 1,000 shares of the
Company's Series B Convertible Preferred Stock (the "Preferred Shares") for the
aggregate purchase price of $5,000,000.
B. The Company proposes to issue to the Investor a warrant to purchase
160,000 shares of Common Stock (the "Investor's Warrant").
C. The Company proposes to issue to Thomson Kernaghan & Co. Limited (the
"Placement Agent"), for services rendered, a Warrant to purchase $350,000 of
Common Stock (the "Placement Agent's Warrant").
D. The proposed investments will be made in reliance upon the provisions of
Section 4(2) of the United States Securities Act of 1933, as amended, Regulation
D promulgated by the Securities and Exchange Commission thereunder, and upon
such other exemption from the registration requirements of the Securities Act as
may be available with respect to any or all of the investments in Common Stock
to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "BID PRICE" shall mean the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2. "BUSINESS DAY" shall mean a day other than a Saturday or
Sunday that national banks in Phoenix, Arizona are open for business..
Section 1.3 "CERTIFICATE OF DESIGNATION" shall mean the Company's
certificate of designation of the rights and preferences of the Series B
Convertible Preferred Stock, substantially in the form set forth in Exhibit A to
this Agreement.
Section 1.4 "CLOSING" shall mean the closing of the sale of the Preferred
Shares and the Warrants.
Section 1.5 "CLOSING DATE" shall mean May 1, 2000, or such other day as the
Investor and the Company shall agree in writing to the Closing Day.
1
Section 1.6 "COMMON STOCK" shall mean the Company's common stock, par value
$.001 per share.
Section 1.7 "CONVERSION SHARES" shall mean the shares of Common Stock into
which the Preferred Shares are convertible.
Section 1.8 "DAMAGES" shall mean any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorney's fees and
disbursements and costs and expenses of expert witnesses and investigation).
Section 1.9 "DISCLOSURE SCHEDULE" shall mean the disclosure schedule
attached as Exhibit B to this Agreement.
Section 1.10 "EFFECTIVE DATE" shall mean the date on which the SEC declares
the Registration Statement to be effective.
Section 1.11 "ESCROW AGENT" shall mean Xxxx X. Xxxx, Esq., or such
successor escrow agent as the Investor and the Company may appoint pursuant to
the Escrow Agreement.
Section 1.12 "ESCROW AGREEMENT" shall me the Escrow Agreement between the
Investor and the Company in the form of Exhibit F to this Agreement.
Section 1.13 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
Section 1.14 "EXERCISE PRICE" shall mean the purchase price per share of
Common Stock for which a Warrant may be exercised.
Section 1.15 "LEGEND" shall mean the legend specified in Section 8.1.
Section 1.16 "MARKET PRICE" on any given date shall mean the average of the
three lowest closing Bid Prices (as reported by Bloomberg L.P.) of the Common
Stock preceding that date.
Section 1.17 "MATERIAL ADVERSE EFFECT" shall mean any effect on the
business, operations, properties, prospects or financial condition of the
Company that is material and adverse to the Company ,its subsidiaries and
affiliates, taken as a whole, or that would prohibit or materially interfere
with the ability of the Company to enter into and perform any of its obligations
under the Transaction Documents.
Section 1.18 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.19 "OUTSTANDING" when used with reference to shares of Common
Stock or other equity securities (collectively the "Shares"), shall mean, at any
date as of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; PROVIDED, HOWEVER, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.20 "PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision, agency or instrumentality thereof.
2
Section 1.21 "PREFERRED SHARES" shall mean the Series B Convertible
Preferred Stock, $0.001 par value, of the Company, which shall have the rights
and preferences set forth in the Certificate of Designation.
Section 1.22 "PREFERRED SHARES INVESTMENT AMOUNT" shall mean Five Million
($5,000,000) Dollars.
Section 1.23 "PRINCIPAL MARKET" shall mean the OTC Bulletin Board, the
Nasdaq Small Cap Market, the Nasdaq National Market, the American Stock Exchange
or the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.
Section 1.24 "PURCHASE PRICE" shall mean, with respect to the Preferred
Shares, an amount equal to the "Liquidation Value" of each share set forth in
the Certificate of Designation attached hereto as Exhibit A.
Section 1.25 "REGISTRABLE SECURITIES" shall mean the Conversion Shares, the
Warrant Shares, and additional shares of Common Stock issued pursuant to Section
2.3, (i) in respect of which the Registration Statement has not been declared
effective by the SEC, (ii) which have not been sold under circumstances under
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act ("Rule 144") are met, (iii) which have
not been otherwise transferred to holders who may trade such shares without
restriction under the Securities Act as evidenced by unrestricted and unlegended
evidence of ownership, or (iv) the sales of which, in the opinion of counsel to
the Company, are not eligible for sale pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act.
Section 1.26 "REGISTRATION RIGHTS AGREEMENT" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor on the
Subscription Date annexed hereto as Exhibit E.
Section 1.27 "REGISTRATION STATEMENT" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement, and the Warrants and in accordance
with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.28 "REGULATION D" means Regulation D of the SEC promulgated under
the Securities Act.
Section 1.29 "SEC" shall mean the U.S. Securities and Exchange Commission.
Section 1.30 "SEC FILINGS" shall mean the Form's 10-KSB, Form's 10-QSB,
Form's 8-K, Proxy Statements, and any other statements, reports and materials,
as supplemented to the date hereof, filed by the Company with the SEC during the
twelve (12) months immediately preceding the date hereof, and hereafter until
such time the Company no longer has an obligation to maintain the effectiveness
of a Registration Statement as set forth in the Registration Rights Agreement.
Section 1.31 "SECTION 4(2)" shall mean Section 4(2) of the Securities Act.
3
Section 1.32 "SECURITIES ACT" shall mean the United States Securities Act
of 1933, as amended, and the regulations of the SEC promulgated thereunder.
Section 1.33 "SUBSCRIPTION DATE" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.34 "TRADING DAY" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.35 "TRANSFER AGENT" shall mean the Company's Transfer Agent for
the Common Stock.
Section 1.36 "TRANSFER AGENT INSTRUCTIONS" shall me the Instructions to the
Transfer Agent in the form of Exhibit G to this Agreement.
Section 1.37 "TRANSACTIONS DOCUMENTS" shall mean this Agreement, the
Certificate of Designation, the Warrants, the Registration Rights Agreement, the
Escrow Agreement, the Notices of Conversion, and the Transfer Agent
Instructions.
Section 1.38 "WARRANT" shall mean each of the Investor's Warrant, which
shall be substantially in the form of Exhibit C, and the Placement Agent's
Warrant, which shall be substantially in the form of Exhibit D; and "WARRANTS"
shall mean both of such warrants, collectively.
Section 1.39 "WARRANT SHARES" shall mean shares of Common Stock issued or
issuable pursuant to exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
Section 2.1 PREFERRED SHARES PURCHASE.
(a) On the Subscription Date, the Company agrees to sell and the Investor
agrees to purchase $5,000,000 in aggregate principal amount of Preferred Shares,
at a price per share equal to the Initial Stated Value thereof set forth in the
Certificate of Designation. The number of shares of Common Stock issuable upon
conversion of the Preferred Shares shall be determined by dividing $5,000,000 by
the conversion formula contained in the Certificate of Designation.
(b) CONVERSION. The Investor may, subject to the limitations set forth in
paragraphs (a) and (b) of Article 11 of the Certificate of Designation, convert
the Preferred Shares to Conversion Shares at any time in whole or from time to
time in part at any time prior to their redemption. Provided that the
Registration Statement shall then be in effect for the sale of the Conversion
Shares, if the Preferred Shares have not been redeemed or converted two (2)
years from the date of issuance, the Preferred Shares shall automatically be
converted as if the Investor voluntarily elected such conversion in accordance
with the procedure, terms and conditions set forth in this Agreement. The
Preferred Shares shall be convertible into Conversion Shares at a conversion
price per share equal to the lesser of (x) one hundred ten percent (110%) of the
average of the Bid Price for the Common Stock for the five (5) Trading Days
prior to the Closing Date, or (y) eighty percent (80%) of the average of the
closing bid prices for the Common Stock for the three (3) lowest Trading Days
out of the ten (10) consecutive Trading Days immediately preceding the
Conversion Date (as defined in paragraph 2.1(d).
4
(c) GATING. As used in this paragraph, the "Gating Date" shall mean the
earlier of (i) the Effective Date, and (ii) the 120th day following the
Subscription Date. The Purchaser agrees not to sell, pursuant to the
Registration Statement, (i) more than one-third of the Conversion Shares during
the 30-day period beginning on the Gating Date, and (ii) more than one-third of
the Conversion Shares during the 31st through 61th days following the Gating
Date. Thereafter, there shall be no limitation on the amount of Conversion
Shares that the Investor may sell pursuant to the Registration Statement.
(d) CONVERSION PROCEDURE. The Company shall permit the Investor to exercise
its right to convert the Preferred Shares by sending an executed Notice of
Conversion to the Company by facsimile transmission, and delivering the original
Notice of Conversion and the certificate representing the Preferred Shares to
the Company by express courier. Each Business Day on which a Notice of
Conversion is sent by facsimile transmission to the Company in accordance with
the provisions hereof shall be deemed a conversion date (the "Conversion Date").
The Company shall deliver the certificates representing shares of Common Stock
issuable upon conversion of any Preferred Shares (together with the certificates
representing the Preferred Shares not so converted) to the Investor via express
courier, by electronic transfer or otherwise within five Business Days after the
conversion date if the Company has received the original Notice of Conversion
and Preferred Shares certificate being so converted by such date. In addition to
any other remedies which may be available to the Investors, in the event that
the Company fails for any reason to effect delivery of such shares of Common
Stock within such five Business Day period, the Investors will be entitled to
revoke the relevant Notice of Conversion by delivering a notice to such effect
to the Company whereupon the Company and the Investors shall each be restored to
their respective positions immediately prior to delivery of such Notice of
Conversion. The Notice of Conversion and Preferred Shares representing the
portion of the shares converted shall be delivered to the Company at its address
to its facsimile number set forth in Article XI.
(e) LIQUIDATED DAMAGES. In the event that the Common Stock issuable upon
conversion of the Preferred Shares is not delivered within five (5) Business
Days of receipt by the Company of a valid Conversion Notice and the Preferred
Shares to be converted, the Company shall pay to the Investor, on demand and in
immediately available funds, as liquidated damages for such failure and not as a
penalty, for each $100,000 of Preferred Shares sought to be converted, $500 for
each of the first ten (10) days and $1,000 per day thereafter that the
Conversion Shares are not delivered, which liquidated damages shall run from the
sixth (6th) Business Day after the Conversion Date up until the time that either
the Notice of Conversion is revoked or the Common Stock has been delivered, at
which time liquidated damages shall cease.
(f) REDEMPTION. The Company shall have the right to redeem the Preferred
Shares on any Business Day before their conversion by giving the Investor
written notice of its election to do so (the "Redemption Notice") specifying the
date on which the Company shall redeem the shares (the Redemption Date), and by
depositing the Redemption Price (as hereafter defined) with the Escrow Agent not
later than three Business Days before the Redemption Date. The Redemption Date
shall not be later than the fifth Business Day after the date on which the
Company gives the Redemption Notice. The Investor may not send a Notice of
Conversion after receipt of Redemption Notice, unless the Company does not
redeem the Preferred Shares on the Redemption Date. On or before the Redemption
Date, the Investor shall deliver any Preferred Shares that it elects not to
convert to the Escrow Agent, against payment of the Redemption Price. The
Redemption Price shall be 125% of the Purchase Price of the Preferred Shares,
plus any accrued and unpaid dividends thereon. If the Company does not deposit
the Redemption Price with the Escrow Agent within the time proscribed by this
paragraph, the Redemption Notice shall be voidable at the election of the
Investor.
(g) LIMITATION ON INVESTOR'S RIGHT TO CONVERT. Any provision contained in
the Certificate of Designation or the Investor's Warrant to the contrary
notwithstanding, the Investor shall have the right and power to convert
5
Preferred Shares so long as after giving effect to such conversion, the Investor
shall not be deemed to be the beneficial owner of more than 9.99% of the
outstanding Common Stock, calculated in accordance with Section 13(d) of
Exchange Act.
Section 2.2 THE WARRANTS.
(a) THE INVESTOR'S WARRANT. On the Subscription Date, the Company shall
issue the Investor's Warrant to the Investor, substantially in the form of
Exhibit C, with appropriate insertions, to purchase 160,000 Warrant Shares at
the aggregate Exercise Price of $.01 for all 160,000 shares, exercisable in at
any time in whole or from time to time in part over the five-year period
beginning on the Subscription Date. The Investor's Warrant shall be delivered by
the Company to the Escrow Agent, and delivered to the Investor pursuant to the
terms of this Agreement and the Escrow Agreement. The Warrant Shares covered by
the Investor's Warrant shall be registered for resale pursuant to the
Registration Rights Agreement.
(b) THE PLACEMENT AGENT'S WARRANT. On the Subscription Date, the Company
shall issue the Placement Agent's Warrant to the Placement Agent, substantially
in the form of Exhibit D, with appropriate insertions, to purchase the number of
Warrant Shares (rounded to the nearest whole number) determined by dividing
$350,000 by the Exercise Price. The Exercise Price shall be 110% of the average
Bid Price for the five (5) Trading Days preceding the Subscription Date. The
Placement Agent's Warrant shall be exercisable at any time in whole or from time
to time in part over the five year period beginning on the Subscription Date.
The Placement Agent's Warrant shall be delivered by the Company to the Escrow
Agent, and delivered to the Placement Agent pursuant to the Terms of this
Agreement and the Escrow Agreement. The Warrant Shares covered by the Placement
Agent's Warrant shall be registered for resale pursuant to the Registration
Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1 ORGANIZATION AND AUTHORIZATION. Investor is duly incorporated
or organized and validly existing in the country of its incorporation or
organization, and has all requisite power and authority to purchase and hold the
securities issuable hereunder. The decision to invest and the execution and
delivery of the Transaction Documents to be executed and delivered by the
Investor, the performance by the Investor of its obligations under the
Transaction Documents and the consummation by the Investor of the transactions
contemplated hereby have been duly authorized and require no other proceedings
on the part of the Investor. The undersigned executing this Agreement on behalf
of the Investor has all right, power and authority to execute and deliver this
Agreement on behalf of the Investor. Each of this Agreement, the Registration
Rights Agreement and the Escrow Agreement has been duly executed and delivered
by the Investor and, assuming the execution, delivery and acceptance thereof by
the Company, will constitute the legal, valid and binding obligations of the
Investor, enforceable against the Investor in accordance with their respective
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy as they may apply to the indemnification provisions set forth in any of
the Transaction Documents.
Section 3.2 ACCREDITED AND SOPHISTICATED INVESTOR. The Investor is an
accredited investor as defined in SEC Rule 501(a), and a sophisticated investor
as described in SEC Rule 506(b)(2)(ii).
6
Section 3.3 EVALUATION OF RISKS. The Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of purchasing the securities issuable pursuant to this
Agreement, and of protecting its interests in connection with the transactions
contemplated hereby. The Investor understands that its investment in the Company
involves a high degree of risk.
Section 3.4 INDEPENDENT COUNSEL. The Investor acknowledges that it has been
advised to consult with its own attorney regarding legal matters concerning the
Company and to consult with its tax advisor regarding the tax consequences of
acquiring the securities issuable hereunder.
Section 3.5 NO REGISTRATION. The Investor understands that the securities
issuable hereunder have not been registered under the Securities Act or any
other securities laws but are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of federal and state
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of the securities being sold hereunder for
investment by the Investor.
Section 3.6 INVESTMENT INTENT. The Investor is acquiring the securities
issuable to it hereunder for investment purposes, and has no present arrangement
to sell any of them to or through any Person. The Investor is not, however,
agreeing or obligated by this Agreement to hold any of those securities for any
specific period of time, except as may otherwise specifically provided in this
Agreement. The Investor understands and agrees that it may bear the economic
risk of its investment in those securities for an indefinite period of time.
Section 3.7 NO ADVERTISEMENTS. The Investor is not entering into this
Agreement as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor that except as
set forth in the SEC Filings or on the Disclosure Schedule:
Section 4.1 ORGANIZATION; QUALIFICATION. The Company is a corporation duly
organized and validly existing and is in good standing under the laws of the
State of Nevada. The Company has all requisite corporate power and authority to
own, lease and operate its properties and assets, and to carry on its business
as presently conducted. The Company is qualified to do business as a foreign
corporation in each jurisdiction in which the ownership of its property or the
nature of its business requires such qualification, except where failure to so
qualify would not have a material adverse effect on the Company.
Section 4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 50,000,000 shares of Common Stock, $.001 par value per share, of
which 3,202,519 are issued and outstanding;; (ii) 650 shares of Series A
Preferred Stock, par value $.001 per share, of which 485 shares are issued and
outstanding; and (iii) 1,000 shares of Series B Convertible Preferred Stock, par
value $.001 per share, all of which are reserved for issuance pursuant to
Section 2.1 of this Agreement. All issued and outstanding shares of Common Stock
and Series A Preferred Stock have been duly authorized and validly issued and
are fully paid and nonassessable.
7
Section 4.3 AUTHORIZATION. The Company has all requisite corporate right,
power and authority to execute and deliver this Agreement and the other
Transaction Documents to be executed and delivered by it, and to consummate the
transactions contemplated hereby and thereby. All corporate action on the part
of the Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company, the authorization, sale, issuance and delivery of the
securities issuable hereunder and the performance of the Company's obligations
hereunder and thereunder have been taken. This Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered by the Company and constitute legal, valid and binding obligations of
the Company enforceable in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in any of the Transaction Documents.
Upon their issuance and delivery pursuant to this Agreement, the securities
issueable hereunder will be validly issued, fully paid and nonassessable and
will be free of any liens or encumbrances; PROVIDED, HOWEVER, that the
securities are subject to restrictions on transfer under state and federal
securities laws. The issuance and sale of the securities hereunder will not give
rise to any preemptive right or right of first refusal or right of participation
on behalf of any person.
Section 4.4 NO CONFLICT. The execution and delivery of this Agreement and
the other Transaction Documents do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default, or give rise to a right of termination, cancellation
or acceleration of any material obligation or to a loss of a material benefit,
under, any provision of the Articles of Incorporation, and any amendments
thereto, Bylaws, Stockholders Agreements and any amendments thereto of the
Company or any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Company, its
properties or assets and which would have a material adverse effect on the
Company's business and financial condition.
Section 4.5 NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
liabilities or obligations other than those incurred in the ordinary course of
the Company's business since November 30, 1999, and which individually or in the
aggregate do not or would not have a Material Adverse Effect .
Section 4.6 NO DEFAULT. The Company is not materially in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound, and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or any of the
other Transaction Documents will conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage, deed of trust
or other material agreement applicable to the Company or instrument to which the
Company is a party or by which it is bound or any statute or the Articles of
Incorporation or Bylaws of the Company, or any decree, judgment, order, rule or
regulation of any court or governmental agency having jurisdiction over the
Company or its properties, in each case which default, lien or charge is likely
to cause a Material Adverse Effect.
Section 4.7 GOVERNMENTAL CONSENT, ETC. Except for the filing of any
required Form D, no consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the securities hereunder, or the
consummation of any other transaction contemplated hereby.
8
Section 4.8 INTELLECTUAL PROPERTY RIGHTS. The Company has sufficient
trademarks, trade names, patent rights, copyrights and licenses to conduct its
business as presently conducted in the Reports, except where failure to have any
such intellectual property would not cause a Material Adverse Effect. To the
Company's knowledge, neither the Company nor its products is infringing or will
infringe any trademark, trade name, patent right, copyright, license, trade
secret or other similar right of others currently in existence; and there is no
claim being made against the Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual property right
which could have a Material Adverse Effect.
Section 4.9 MATERIAL CONTRACTS. The Company is not part to any agreements,
the performance, breach or termination of which would have a Material Adverse
Effect. The agreements to which the Company is a party described in the SEC
Filings or the Disclosure Schedule are valid agreements, in full force and
effect. The Company is not in material breach or material default under any of
such agreements, except where such breach or default would not cause a Material
Adverse Effect .
Section 4.10 LITIGATION. There is no action, proceeding or investigation
pending or to the Company's knowledge threatened against the Company, and the
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality, is any such case that could have a Material Adverse Effect.
Section 4.11 TITLE TO ASSETS. The Company has good and marketable title to
all properties and material assets owned by it all of which are disclosed in the
SEC Filings, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest other than such as are not material to the business
of the Company.
Section 4.12 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, partnership,
association or other business entity.
Section 4.13 REQUIRED GOVERNMENTAL PERMITS. The Company is in possession of
and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities which are material to the conduct of its business, all of which are
valid and in full force and effect.
Section 4.14 LISTING. The Common Stock is listed on the NASDAQ OTC Bulletin
Board, and the Company has not received any notice of, and has no knowledge of,
any facts or circumstances that could cause the Company or the Common Stock to
loose its eligibility for such listing.
Section 4.15 OTHER OUTSTANDING SECURITIES/FINANCING RESTRICTIONS. The
Company has no outstanding shares of Common Stock or securities that are
convertible into or exchangeable for restricted shares of Common Stock, that are
eligible for resale under SEC Rule 144(k). Set forth as item 4.16 on the
Disclosure Schedule is a list of all restricted shares of Common Stock, whether
issued or unissued, that are now or within two years of the Subscription Date
will be eligible for resale under SEC Rule 144(k).
Section 4.16 SEC FILINGS. For a period of at least twelve (12) months
immediately preceding this offer and sale, (i) the Company has filed in a timely
manner with the SEC all reports, statements, forms and other information
(including exhibits) required of it under the Exchange Act; and (ii) none of the
SEC Filings (as they may have been amended or supplemented as provided in the
reports) contains any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not misleading
as of the date of such filing.
9
Section 4.17 DILUTION. The Company is aware and acknowledges that
conversion of the Preferred Shares and the exercise of the Warrants could cause
dilution to existing shareholders and could significantly increase the
outstanding number of shares of Common Stock.
Section 4.18 FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally) that it has not
disclosed in writing to the Investor that could reasonably be expected to have a
Material Adverse Effect.
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 During the Commitment Period, and for so long thereafter as any
of the Preferred Shares are outstanding or any of the Warrants are not fully
exercised or expired, the Company will:
(a) CORPORATE EXISTENCE. Preserve and maintain its corporate existence and
good standing in the jurisdiction of its incorporation, and qualify and remain
qualified as a foreign corporation in each jurisdiction in which such
qualification is required.
(b) BUSINESS. Continue to engage in a business of the same general type as
proposed by it on the date of this Agreement.
(c) COMPLY WITH LAWS. Comply in all material respects with all applicable
laws, rules, regulations, and orders, such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments, and
governmental charges imposed upon it or upon its property.
(d) REPORTING COMPANY; TIMELY FILINGS. Remain a reporting company under the
Exchange Act, cause its Common Stock to continue to be registered under Section
12(b) of the Exchange Act, and make all SEC Filings required under the Exchange
Act in a timely manner.
(e) LISTING OF COMMON STOCK. Maintain the listing of the Common Stock
(including the Warrant Shares and the Conversion Shares) on a Principal Market.
(f) NASDAQ. Cause the Common Stock to be listed on the Nasdaq Small Cap
Market as soon as the Company is eligible for such listing.
(g) CONSOLIDATION; MERGER. Not effect any merger or consolidation of the
Company with or into, or a transfer of all or substantially all of the assets of
the Company to, another entity (a "Consolidation Event") unless the resulting
successor or acquiring entity (if not the Company) (i) is a reporting company
under the Exchange Act with its Common Stock listed on the Nasdaq OTC Bulletin
Board, the Nasdaq Small Cap or National Market, the American Stock Exchange or
the New York Stock Exchange, and (ii) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
(h) OPINION OF COUNSEL. Obtain for the Investor, at the Company's expense,
any and all opinions of counsel which may be required in order to convert,
exercise or sell the securities issuable hereunder, including, but not limited
to, obtaining for the Investor, at the Company's expense an opinion of counsel
with respect to the sale and transfer of the securities.
10
Section 5.2. SOFTALK LOCKUP. The Company agrees to obtain a lockup
agreement (the "Lockup Agreement") from Softalk, Inc. ("Softalk"), reasonably
satisfactory to the Investor, with respect to those 4,329,004 shares of Class A
non-voting preferred stock of Interpretel (Canada) (the "Class A Shares") held
by Softalk. The Lockup Agreement shall provide that the Class A Shares may not
be exchanged for shares of Wavetech Common Stock for a period of one year
following the Closing Date; provided, however, that such restriction shall
terminate at such time as any person seeks to acquire, or offers or proposes to
acquire, or agrees to acquire directly or indirectly, whether by purchase,
tender or exchange offer, through the acquisition of control of another person,
by joining a partnership, limited partnership, syndicate or other "group"
(within the meaning of Section 13(d)(3) of the Exchange Act, or otherwise,
beneficial ownership of any voting securities of the Company if such acquisition
would result in the purchaser's aggregate percentage ownership of the Company's
voting securities exceeding 35% of the Company's issued and outstanding voting
securities (on a fully-diluted basis). The Lockup Agreement shall also provide
that the shares of Common Stock underlying the warrants previously issued by the
Company to Softalk shall be sold in accordance with the "leak out" provisions of
Rule 144 under the Securities Act, including any warrants transferred by Softalk
to any affiliate or employee of Softalk."
Section 5.3. LIMITATION ON PIK DIVIDENDS. Notwithstanding the provisions of
paragraph 3(b) of the Certificate of Designation, the Company shall not elect to
pay dividends on the Preferred Shares in shares of Common Stock, and shall pay
such dividends only in cash, unless at the time of payment, (i) the Registration
Statement with respect to such shares of Common Stock shall be effective, and
(ii) and the payment of such dividend in shares of Common Stock would not cause
the aggregate number of shares of Common Stock beneficially owned by the
Investor, calculated in accordance with Section 13(d) of the Exchange Act, to
exceed 4.99% of the outstanding shares of the Common Stock.
Section 5.4. RIGHT OF FIRST REFUSAL ON FINANCINGS. As used in this
paragraph, "Capital Financing Transaction" means (a) the sale of any of the
Company's (i) equity securities, or (ii) securities that are convertible into or
exchangeable for equity securities, or (iii) debt securities having a maturity
of more than 270 days; or (b) loans to the Company having a maturity of more
than one year; PROVIDED, HOWEVER, that a Capital Financing Transaction does not
include the sale of Common Stock or the issuance of options to purchase Common
Stock made to directors, officers, employees or consultants to the Company
pursuant to bona fide employment, benefit or compensation plans, or loans
incurred by the Company in the ordinary course of business that are primarily
for operating purposes and not for capital financing purposes. For a period of
one year from the Effective Date, the Company shall not engage in, or commit to
engage in, any Capital Financing Transaction, other than in a firmly
underwritten public offering, without having given the Investor, 30 days' prior
written notice of its intention to engage in such Capital Financing Transaction,
which notice shall set forth all of the material terms of the proposed
transaction, and offering the Investor and its financial advisors, Thomson
Kernaghan & Co. Limited and Southridge Capital Management LLC, the right of
first refusal during that 30-day notice period to agree to provide the Company
with substantially the same financing as that set forth in the notice.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1. CONDITIONS TO CLOSING. The Investor's obligation to purchase
the Preferred Shares and to perform its other obligations under the Transaction
Documents is subject to the following conditions precedent:
(a) The Company shall have executed and delivered this Agreement and the
other Transaction Documents to be executed by it.
11
(b) The Company shall have delivered the Preferred Shares, the Investor's
Warrant and the Placement Agent's Warrant to the Escrow Holder.
(c) The Investor shall have received the opinion of the Company's legal
counsel, substantially in the form of Exhibit H.
(d) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on and as of the
Subscription Date.
(e) The Company and Softalk shall have executed the Lockup Agreement.
ARTICLE VII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 7.1 DUE DILIGENCE REVIEW. The Company shall from time to time as
the Investor may reasonably request make available for inspection and review by
the Investor, advisors to and representatives of the Investor (who may or may
not be affiliated with the Investor and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of the Registrable
Securities on behalf of the Investor pursuant to the Registration Statement, any
such registration statement or amendment or supplement thereto or any blue sky,
NASD or other filing, all financial and other records, all SEC Documents and
other filings with the SEC, and all other corporate documents and properties of
the Company as may be reasonably necessary for the purpose of such review, and
cause the Company's officers, directors and employees to supply all such
information reasonably requested by the Investor or any such representative,
advisor or underwriter in connection with such Registration Statement
(including, without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time to time
after the filing and effectiveness of the Registration Statement for the sole
purpose of enabling the Investor and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct initial
and ongoing due diligence with respect to the Company and the accuracy of the
Registration Statement.
Section 7.2 NON-DISCLOSURE OF NON-PUBLIC INFORMATION
(a) The Company shall not disclose non-public information to the Investor,
advisors to or representatives of the Investor unless prior to disclosure of
such information the Company identifies such information as being non-public
information and provides the Investor, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public information
hereunder, require the Investor's advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts. The Company will immediately notify the Investor and, if
any, underwriters of any Registrable Securities, of any event or the existence
of any circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
12
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading.
ARTICLE VIII
LEGENDS
Section 8.1 LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear a legend (the "Legend"),
substantially in the following form or such other form as may be required by
applicable law:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
Upon the execution and delivery of this Agreement, the Company shall issue to
the Transfer Agent instructions in substantially the form of Exhibit G hereto
(the "Transfer Agent Instructions"). The Company shall not revoke the Transfer
Agent Instructions during the time that the Investor is the holder of
Registrable Securities. The Company shall use its best efforts to cause the
Transfer Agent to transfer and issue unlegended certificates for Registrable
Securities in accordance with the Transfer Agent Instructions.
Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 8.1 shall be placed on certificates
representing Registrable Securities and no instructions, stop transfer orders,
stock transfer restrictions, or other restrictions shall be given to the
Transfer Agent with respect to Registrable Securities.
Section 8.3 LIQUIDATED DAMAGES.(a) In the event the Company does not
deliver, or cause the Transfer Agent to deliver unlegended Common Stock in
compliance with the Transfer Agent Instructions within five (5) calendar days
after the Transfer Agent's receipt (the "Receipt Date") of a Transfer Notice and
applicable share certificate, the Company shall pay to the Investor, in
immediately available funds, upon demand, as liquidated damages for such failure
and not as a penalty, for each 500 shares of Common Stock to be so delivered by
the Investor as set forth above, $500 for each of the first ten (10) days and
$1,000 per day thereafter that the unlegended shares of Common Stock are not
delivered, which liquidated damages shall run from the sixth calendar day after
the Receipt Date.
ARTICLE IX
CHOICE OF LAW / JURISDICTION
Section 9.1 CHOICE OF LAW; VENUE; JURISDICTION. This Agreement and the
other Transaction Documents shall be construed and enforced in accordance with
the laws of the State of Arizona, except for (i) matters arising under the
federal securities laws, which shall be construed and enforced in accordance
13
with those laws, (ii) matters relating to the Company's organization, which
shall be governed by the laws of the jurisdictions of its incorporation, and
(iii) if any provision of this Agreement or any other Transaction Document is
unenforceable under Arizona law but is enforceable under the laws of the State
of New York, then New York law shall govern the construction and enforcement of
that provision. Any controversy or claim arising out of or relating to this
Agreement or any other Transaction Document (whether in contract or tort, or
both, or at law or in equity) shall be determined by binding arbitration in the
Borrow of Manhattan, City of New York, in accordance with the Commercial
Arbitration Rules (the "Rules") of the American Bar Association, before a panel
of three arbitrators, one appointed by each of the Investor and the Company, and
the third chosen by the two so appointed. If the two arbitrators chosen by the
parties cannot agree on a third, then the third shall be selected in accordance
with the Rules. The prevailing party in any arbitration proceeding shall be
awarded reasonable attorneys fees and costs of the proceeding. The arbitration
award shall be final, and may be entered in any court having jurisdiction.
Nothing in this paragraph shall preclude either party from applying to a court
for temporary equitable relief, when appropriate, pending and subject to such
temporary orders and permanent award as the arbitrator or arbitrators may make.
The parties hereby consent to the exclusive jurisdiction of the United States
District Court for the Southern District of New York for that purpose.
ARTICLE X
ASSIGNMENT
Section 10.1 ASSIGNMENT. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
Person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any
Preferred Shares, Warrants or Registrable Securities, (b) the Investor's
interest in this Agreement may be assigned at any time, in whole or in part, to
any other Person with the prior written consent of the Company, which consent
shall not unreasonably be withheld.
ARTICLE XI
NOTICES
Section 11.1 NOTICES. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received), or the first Business Day following such delivery (if delivered
`other than on a Business Day during normal business hours where such notice is
to be received) or (b) on the second Business Day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
14
IF TO THE INVESTOR: IF TO THE COMPANY:
Cedar Avenue LLC Wavetech International, Inc.
Corporate Center 0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx One, Xxxx Xxx Xxxx Xxxxxx, Xxxxxxx 00000
XX Xxx 00000 SMB Attention: Xxxxxx X. Xxxxx, President
Grand Cayman, Cayman Islands Facsimile No. (520) 750- 9194
Attention: Xxxxx Xxxx
Facsimile No. (000) 000-0000
WITH A COPY (THAT DOES NOT WITH A COPY (THAT DOES NOT
CONSTITUTE NOTICE) TO: CONSTITUTE NOTICE) TO:
Xxxx X. Xxxx Squire, Xxxxxxx & Xxxxxxx L.L.P.
Attorney at Law 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000 Xxxxxxx, Xxxxxxx 00000
Xxxxxxx, Xxxxx 00000-0000 Attn: Xxxxxxx X. Xxxx
Facsimile No. (000) 000-0000 Facsimile No. (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 11.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
ARTICLE XII
INDEMNIFICATION
Section 12. 1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement shall survive it
termination.
Section 12.2. INDEMNIFICATION BY THE COMPANY. The Company shall indemnify
and hold the Investor, the Placement Agent, and each of their respective,
directors, officers, employees, agents and attorneys (each an "Indemnified
Party" and collectively, the "Indemnified Parties") harmless from and against,
and agree promptly to defend any such Indemnified Party from and reimburse any
such Indemnified Party for, any and all means any losses, costs, expenses,
damages, taxes, penalties, fines, charges, demands, liabilities, obligations and
claims of any kind (including interest, penalties and reasonable attorneys'
fees, expenses and disbursements) ("Losses") which any such Indemnified Party
may suffer or incur, or become subject to, arising out of or resulting from,
without duplication:
(a) any breach or inaccuracy as of the date of this Agreement of any of the
representations and warranties made by the Company in this Agreement; and
(b) any failure by the Company to carry out, perform, satisfy and discharge
any of its respective covenants, agreements, undertakings, liabilities or
obligations under this Agreement.
Section 12.3. INDEMNIFICATION PROCEDURES. Any party asserting a right to
indemnification under Sections 12.2 shall so notify the Company in writing as
promptly as practicable. The Indemnified Party's failure to so notify the
Company of any such matter shall not release the Company, in whole or in part,
from its obligations to indemnify under this Article XII, except to the extent
the Indemnified Party's failure to so notify actually prejudices Company. If the
facts giving rise to such indemnification shall involve any actual or threatened
claim or demand by or against a third party, the Company shall be entitled to
control the defense or prosecution of such claim or demand in the name of the
Indemnified Party, with counsel reasonably satisfactory to the Indemnified
Party, if (i) it notifies the Indemnified Party in writing of its intention to
do so within 20 days of its receipt of such notice, without prejudice, however,
to the right of the Indemnified Party to participate therein through counsel of
its own choosing, which participation shall be at the Indemnified Party's
expense unless (x) the Indemnified Party shall have been advised by its counsel
15
that use of the same counsel to represent both the Company and the Indemnified
Party would present a conflict of interest (which shall be deemed to include any
case where there may be a legal defense or claim available to the Indemnified
Party which is different from or additional to those available to the Company)
or (y) the Company shall fail to defend or prosecute in good faith such claim or
demand within a reasonable time, in which case the reasonable fees of counsel
for the Indemnified Party shall be for the account of the Company and the
Company shall not have the right to direct the defense of such action on behalf
of the Indemnified Party, and (ii) it agrees to accept full responsibility,
indemnify and hold harmless the Indemnified Party in accordance herewith in
respect of the claim or demand. Whether or not the Company chooses to defend or
prosecute such claim, the parties hereto shall cooperate in the prosecution or
defense of such claim and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may reasonably be requested in connection therewith. The Company shall not
settle or permit the settlement of any such third party claim or action in which
any relief other than the payment of money damages is sought against the
Indemnified Party without the prior written consent of the Indemnified Party.
The Indemnified Party shall not settle or permit the settlement of any claim or
action for which it is entitled to indemnification without the prior written
consent of the Company, unless the Company shall have failed to assume the
defense thereof after the notice referred to in the first sentence of this
Section 12.3, and in the manner provided above.
Section 12.3. SUBROGATION. In the event of any indemnification made
pursuant to a third party claim, the Company shall be subrogated to the extent
of such payment to all of the rights of recovery of the Indemnified Party, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 COUNTERPARTS/FACSIMILE/AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 ENTIRE AGREEMENT. This Agreement, the Exhibits or Attachments
hereto, which include, but are not limited to the Warrant, the Escrow Agreement,
and the Registration Rights Agreement set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits and Attachments
to this Agreement are incorporated herein by this reference and shall
constitute-part of this Agreement as is fully set forth herein.
Section 13.3 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
16
Section 13.4 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 13.6 REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Preferred Shares, the Conversion
Shares or the Warrant Shares and (ii) in the case of any such loss, theft or
destruction of such certificate, upon delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company or (iii) in
the case of any such mutilation, on surrender and cancellation of such
certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new certificate of like tenor.
Section 13.7 FEES AND EXPENSES. The Company shall pay the following fees
and expenses:
(a) Placement Agent's Fee. The Company shall pay the Placement Agent a fee
equal to 6.25% of the purchase price of the Preferred Shares, and shall pay Xxxx
Capital Partners, Inc., a fee equal to 3.75% of the purchase price of the
Preferred Shares, payable on the Subscription Date.
(b) Legal and Escrow Fees. On the Subscription Date, the Company shall pay
the Investor's counsel, Xxxx X. Xxxx, Esq., $30,000 for legal, administrative
and escrow fees incurred through the Subscription Date. Except as so provided,
each of the parties shall pay its own fees and expenses (including those of any
attorneys, accountants and others engaged by it) in connection with the
negotiation and preparation of this Agreement.
Section 13.8 BROKERAGE. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other harmless from any and all liabilities to
any person claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the Company in connection
with this Agreement or the transactions contemplated hereby.
Section 13.9 CONFIDENTIALITY. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information, without retaining copies thereof, previously furnished by
it as a result of this Agreement or in connection herewith.
[signature page follows]
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
WAVETECH INTERNATIONAL, INC.
By /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, President
Date Signed May 1, 2000
----------------------
CEDAR AVENUE LLC
By Navigator Management Ltd., Director
By /s/ Xxxxx Xxxx
-------------------------------
Xxxxx Xxxx, Director
Date Signed April 28, 2000
----------------------
18
EXHIBIT A
CERTIFICATE OF DESIGNATION
EXHIBIT B
DISCLOSURE SCHEDULE
EXHIBIT C
INVESTOR'S WARRANT
EXHIBIT D
PLACEMENT AGENT'S WARRANT
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
EXHIBIT F
ESCROW AGREEMENT
EXHIBIT G
TRANSFER AGENT INSTRUCTIONS
EXHIBIT H
LEGAL OPINION OF COMPANY'S COUNSEL
19
