PRIVATE EQUITY LINE OF CREDIT AGREEMENT
BETWEEN
WORLDWIDE WIRELESS NETWORKS, INC.
AND
WHITSEND INVESTMENTS LIMITED
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of June __, 2000 (the
"Agreement"), between Whitsend Investments Limited, a British Virgin Islands
corporation (the "Investor") and Worldwide Wireless Networks, Inc., a
corporation organized and existing under the laws of the State of Nevada (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor from
time to time as provided herein, and Investor shall purchase, up to $20,000,000
(the "Aggregate Purchase Price") of the Common Stock (as defined below); and
WHEREAS, such investments will be made by the Investor as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Capital Shares" shall mean the Common Stock and any shares
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of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.2 "Capital Shares Equivalents" shall mean any securities,
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rights, or obligations that are convertible into or exchangeable for or give any
right to subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.3 "Closing" shall mean one of the closings of a purchase and
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sale of the Common Stock pursuant to Section 2.1.
Section 1.4 "Closing Date" shall mean, with respect to a Closing, the
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fifth Trading Day following the end of the Valuation Period related to such
Closing, provided all conditions to such Closing have been satisfied on or
before such Trading Day.
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Section 1.5 "Commitment Amount" shall mean an amount up to $20,000,000
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which the Investor has agreed to provide to the Company in order to purchase the
Put Shares pursuant to the terms and conditions of this Agreement.
Section 1.6 "Commitment Period" shall mean the period commencing on the
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Effective Date and expiring on the earliest to occur of (x) the date on which
the Investor shall have purchased $20,000,000 of Put Shares pursuant to this
Agreement, (y) the date this Agreement is terminated pursuant to Section 2.4, or
(z) the date occurring thirty-six (36) months from the date of commencement of
the Commitment Period.
Section 1.7 "Common Stock" shall mean the Company's common stock, par
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value $0.001 per share.
Section 1.8 "Condition Satisfaction Date" shall have the meaning set
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forth in Section 7.2.
Section 1.9 "Effective Date" shall mean the date on which the SEC first
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declares effective a Registration Statement registering the sale by the Company
and resale by the Investor of the Registrable Securities as set forth in Section
7.2(f).
Section 1.10 "Escrow Agent" shall mean the escrow agent designated in
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the Escrow Agreement.
Section 1.11 "Escrow Agreement" shall mean the escrow agreement in the
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form attached hereto as Exhibit A.
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Section 1.12 "Exchange Act" shall mean the Securities Exchange Act of
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1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.13 "Investment Amount" shall mean the dollar amount to be
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invested by the Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor, all in accordance with Section 2.2
hereof.
Section 1.14 "Market Price" on any given date shall mean the lowest
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closing trade price (as reported by Bloomberg L.P.) of the Common Stock on the
Principal Market during the Valuation Period applicable to such date.
Section 1.15 "Material Adverse Effect" shall mean any effect on the
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business, closing price, operations, properties, prospects, or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries and affiliates, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, the Registration Rights Agreement or the Escrow Agreement in any
material respect.
Section 1.16 "Maximum Put Amount" shall mean $500,000 per Put, subject
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to adjustments according to the following table:
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Stock Closing 25,000-50,000 50,001-100,000 100,001-150,000 150,001-Above
Price Xxx. 00 Xxx. 00 Xxx. 00 Xxx. 00
Trading Trading Trading Trading
Day Volume Day Volume Day Volume Day Volume
- ----------------- ---------------- ---------------- ---------------- -------------
1.50-4.00 $1,000,000 $1,000,000 $1,250,000 $1,250,000
4.01-5.50 $1,000,000 $1,250,000 $1,250,000 $1,500,000
5.51-7.00 $1,250,000 $1,250,000 $1,500,000 $1,500,000
7.01-8.50 $1,250,000 $1,500,000 $1,500,000 $1,750,000
8.51-10.50 $1,500,000 $1,500,000 $1,750,000 $1,750,000
10.01-Above $1,500,000 $1,750,000 $1,750,000 $2,000,000
Section 1.17 "NASD" shall mean the National Association of Securities
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Dealers, Inc.
Section 1.18 "Outstanding" when used with reference to shares of Common
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Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
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then directly or indirectly owned or held by or for the account of the Company.
Section 1.19 "Person" shall mean an individual, a corporation, a
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partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.20 "Principal Market" shall mean the NASDAQ National Market,
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the NASDAQ SmallCap Market, the American Stock Exchange, the New York Stock
Exchange or the OTC Bulletin Board, whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.21 "Purchase Price" shall mean with respect to Put Shares,
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eighty-eight percent (88%) (the "Purchase Price Percentage") of the Market Price
of the Valuation Period related to a Put (or such other date on which the
Purchase Price is calculated in accordance with the terms and conditions of this
Agreement); provided, however, that the Purchase Price Percentage shall become
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ninety percent (90%) in the event the Company's Common Stock is approved for
listing on the Nasdaq Small-Cap Market or a national securities market or
exchange.
Section 1.22 "Put" shall mean each occasion the Company elects to
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exercise its right to tender a Put Notice requiring the Investor to purchase
shares of the Company's Common Stock, subject to the terms of this Agreement.
Section 1.23 "Put Date" shall mean the Trading Day during the Commitment
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Period that a Put Notice to sell Common Stock to the Investor is deemed
delivered pursuant to Section 2.2(b) hereof.
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Section 1.24 "Put Notice" shall mean a written notice to the Investor
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setting forth the Investment Amount that the Company intends to sell to the
Investor in the form attached hereto as Exhibit B.
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Section 1.25 "Put Shares" shall mean all shares of Common Stock or other
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securities issued or issuable pursuant to a Put that has occurred or may occur
in accordance with the terms and conditions of this Agreement.
Section 1.26 "Registrable Securities" shall mean the Put Shares and the
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Warrant Shares until (i) all Put Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Put Shares and Warrant Shares
have been sold under circumstances under which all of the applicable conditions
of Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) all Put Shares and Warrant Shares have been
otherwise transferred to persons who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive legend
or (iv) such time as, in the opinion of counsel to the Company, all Put Shares
and Warrant Shares may be sold without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
Section 1.27 "Registration Rights Agreement" shall mean the agreement
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regarding the filing of the Registration Statement for the sale and resale of
the Registrable Securities annexed hereto as Exhibit C.
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Section 1.28 "Registration Statement" shall mean a registration
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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, such as Form S-1 or SB-2, for which the Company then qualifies and
which counsel for the Company shall deem appropriate, and which form shall be
available for the resale by the Investor of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement, the
Registration Rights Agreement, and in accordance with the intended method of
distribution of such securities), for the registration of the resale by the
Investor of the Registrable Securities under the Securities Act.
Section 1.29 "SEC" shall mean the Securities and Exchange Commission.
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Section 1.30 "Securities Act" shall mean the Securities Act of 1933, as
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amended.
Section 1.31 "SEC Documents" shall mean the Company's latest Form 10-K
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or 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.32 "Special Activity" shall mean any one time charge the
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Company expects to incur for any reason, including, without limitation, in
connection with the acquisition of another business.
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Section 1.33 "Threshold Price" is the lowest Market Price at which the
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Company will sell its Common Stock with respect to this Agreement.
Section 1.34 "Trading Cushion" shall mean the mandatory fifteen (15)
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Trading Days between Put Dates, unless waived by the Investor. Notwithstanding
the foregoing, in the event the Company gives the Investor twenty-one (21) days
notice of a Special Activity, the Trading Cushion shall be adjusted to eight (8)
Trading Days for a period of six (6) consecutive weeks.
Section 1.35 "Valuation Event" shall mean an event in which the Company
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at any time prior to the end of the Commitment Period takes any of the
following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend on its Capital Shares or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a) and (b)
above or (d) and (e) below, at a price per share less, or for other
consideration lower, than the closing price in effect immediately prior to such
issuance, or without consideration (other than pursuant to this Agreement);
(d) issues any warrants, options or other rights to subscribe
for or purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the closing price in
effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable
for Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the closing price in
effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Company's assets (other than under the circumstances provided for in
the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding
Capital Shares, other than an action described in any of the foregoing
Subsections (a) through (f) hereof, inclusive, which in the opinion of the
Company's Board of Directors, determined in good faith, would have a Material
Adverse Effect upon the rights of the Investor at the time of a Put.
Section 1.36 "Valuation Period" shall mean the period of five (5)
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Trading Days beginning two (2) Trading Days before the Trading Day on which a
Put Notice is deemed to be delivered and ending two (2) Trading Days after such
date; provided, however, that if a Valuation Event occurs during a Valuation
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Period, a new Valuation Period shall begin on the Trading Day immediately after
the occurrence of such Valuation Event and end on the fifth (5th) Trading Day
thereafter.
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Section 1.37 "Warrants" shall mean the 125,000 Common Stock Purchase
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Warrants in the form of Exhibit D hereto to be delivered to the Investor at the
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initial Closing. "Warrant Shares" shall mean the shares of Common Stock issuable
upon exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments.
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(a) Puts. Upon the terms and conditions set forth herein
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(including, without limitation, the provisions of Article VII hereof), on any
Put Date the Company may make a Put by the delivery of a Put Notice. The number
of Put Shares that the Investor shall receive pursuant to such Put shall be
determined by dividing the Investment Amount specified in the Put Notice by the
Purchase Price for such Valuation Period. In connection with each Valuation
Period, the Company may set the Threshold Price, if any, in the Put Notice. If
the Market Price is less than the Threshold Price, the Company shall not sell
and the Purchaser shall not be obligated to purchase the Shares otherwise to be
purchased for such Put, except that, the Investor, in its sole discretion, may
purchase such shares at the Threshold Price.
(b) Maximum Aggregate Amount of Puts. Anything in this Agreement
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to the contrary notwithstanding, the Company may not make a Put to the extent
that, after such purchase by the Investor, the sum of the number of shares of
Common Stock and Warrants beneficially owned by the Investor and its affiliates
would result in beneficial ownership by the Investor and its affiliates of more
than 9.9% of the then issued and outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities and Exchange Act
of 1934, as amended. Each Investor represents that it is not an affiliate of
any purchaser of the Company's Common Stock pursuant to that certain Common
Stock Purchase Agreement dated as of May 24, 2000.
Section 2.2 Mechanics.
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(a) PutNotice. At any time during the Commitment Period, the
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Company may deliver a Put Notice to the Investor, subject to the conditions set
forth in Section 7.2; provided, however, that the Investment Amount for each Put
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as designated by the Company in the applicable Put Notice shall be neither less
than $75,000 nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be
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deemed delivered on (i) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received prior to 12:00 noon Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered on a day that
is not a Trading Day.
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Section 2.3 Closings. On or before each Closing Date for a Put the
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Investor shall deliver the Investment Amount specified in the Put Notice by wire
transfer of immediately available funds to the Escrow Agent. In addition, on or
prior to the Closing Date, each of the Company and the Investor shall deliver to
the Escrow Agent all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this Agreement
in order to implement and effect the transactions contemplated herein. Upon
receipt of notice from the Escrow Agent that the Escrow Agent has possession of
the Investment Amount, the Company shall, if possible, deliver the Put Shares to
the Investor's account through the Depository Trust Company DWAC system, per
written account instructions delivered by the Investor to the Company, and if
the Company is not eligible to participate in the DWAC system, to deliver to the
Escrow Agent one or more certificates, as requested by the Investor,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor or, at the Investor's option,
registered in the name of such account or accounts as may be designated by the
Investor. Payment of funds to the Company and delivery of the certificates to
the Investor (unless delivered by DWAC) shall occur out of escrow in accordance
with the Escrow Agreement, provided, however, that to the extent the Company has
not paid the escrow fees, the amount of such fees shall be paid in immediately
available funds, at the direction of the Investor, to Investor's counsel with no
reduction in the number of Put Shares issuable to the Investor on such Closing
Date.
Section 2.4 Termination of Investment Obligation.
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(a) The obligation of the Investor to purchase shares of
Common Stock shall terminate permanently (including with respect to a Closing
Date that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for an
aggregate of thirty (30) Trading Days during the Commitment Period, for any
reason other than deferrals or suspensions in accordance with the Registration
Rights Agreement as a result of corporate developments subsequent to the
Effective Date that would require such Registration Statement to be amended to
reflect such event in order to maintain its compliance with the disclosure
requirements of the Securities Act or (ii) the Company shall at any time fail to
comply with the requirements of Section 6.2, 6.3 or 6.5 or (iii) the
Registration Statement shall not have become effective by December 1, 2000.
(b) The obligation of the Company to sell Put Shares to the
Investor shall terminate if the Investor fails to honor any Put Notice within
two (2) Trading Days of the Closing Date scheduled for such Put, or otherwise
becomes in breach of any material representation, warranty, covenant or other
obligation under this Agreement including, without limitation, all exhibits
attached hereto, and the Company notifies Investor of such termination. Upon
such termination, the Company shall maintain the Registration Statement in
effect for such reasonable period, not to exceed forty-five (45) days, as the
Investor may request in order to dispose of any remaining Put Shares. Such
termination shall be in addition to, and not exclusive of, any other remedy
which the Company may have against the Investor for any such default, breach or
violation of this Agreement, in law or at equity.
Section 2.5 Additional Shares. In the event that (a) within five (5)
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Trading Days of any Closing Date, the Company gives notice to the Investor of an
impending "blackout period" in accordance with Section 3(f) of the Registration
Rights Agreement and (b) the closing trade price over the five (5) Trading Days
immediately preceding such "blackout period" (the "Old Closing price") is
greater than the Closing price on the first Trading Day following such "blackout
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period" (the "New Closing price") the Company shall issue to the Investor a
number of additional shares (the "Blackout Shares") equal to the difference
between (y) the product of the number of Registrable Securities purchased by the
Investor on such most recent Closing Date and still held by the Investor during
such "blackout period" that are not otherwise freely tradable during such
"blackout period" and the Old Closing price, divided by the New Closing price
and (z) the number of Registrable Securities purchased by the Investor on such
most recent Closing Date and still held by the Investor during such "blackout
period" that are not otherwise freely tradable during such "blackout period". If
any such issuance would result in the issuance of a number of shares which
exceeds the number set forth in Section 2.1(b), then in lieu of such issuance,
the Company shall pay Investor the closing ask price of the Blackout Shares on
the first Trading Day following the end of the blackout period in cash within
five Trading Days.
Section 2.6 Liquidated Damages. The parties hereto acknowledge and
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agree that the obligation to issue Registrable Securities under Section 2.5
above shall constitute liquidated damages and not penalties. The parties further
acknowledge that (a) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (b) the amounts specified in
such Sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by the Investor in
connection with the failure by the Company to timely cause the registration of
the Registrable Securities or in connection with a "blackout period" under the
Registration Rights Agreement, and (c) the parties are sophisticated business
parties and have been represented by legal and financial counsel and negotiated
this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for
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its own account and the Investor has no present arrangement (whether or not
legally binding) at any time to sell the Common Stock to or through any person
or entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
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investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it has the capacity to protect
its own interests in connection with this transaction and is capable of
evaluating the merits and risks of an investment in Common Stock. The Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
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validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
8
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. Investor is not an officer, director or
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"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 Organization and Standing. Investor is a corporation duly
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organized, validly existing, and in good standing, and has all legal and
corporate authority to enter into and perform this Agreement in accordance with
its terms, under the laws of the British Virgin Islands.
Section 3.6 Absence of Conflicts. The execution and delivery of this
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Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree, administrative action or award
binding on Investor, or, to the Investor's knowledge, (a) violate any provision
of any indenture, instrument or agreement to which Investor is a party or is
subject, or by which Investor or any of its assets is bound; (b) conflict with
or constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor to
any third party; or (d) require the approval of any third-party (which has not
been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which Investor is subject or to which any of
its assets, operations or management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received
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and reviewed all documents, records, books and other publicly available
information pertaining to Investor's investment in the Company that have been
requested by Investor. The Company is subject to the periodic reporting
requirements of the Exchange Act, and Investor has reviewed copies of any such
reports that have been requested by it.
Section 3.8 Manner of Sale. At no time was Investor presented with or
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solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 Financial Capacity. Investor currently has the financial
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capacity to meet its obligations to the Company hereunder, and the Investor has
no present knowledge of any circumstances which could cause it to become unable
to meet such obligations in the future.
Section 3.10 Underwriter Liability. Investor understands that it is
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the position of the SEC that the Investor is an underwriter within the meaning
of Section 2(11) of the Securities Act and that the Investor will be identified
as an underwriter of the Put Shares in the Registration Statement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that, except as set forth on
the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1 Organization of the Company. The Company is a corporation
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duly incorporated and existing in good standing under the laws of the State of
Nevada and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
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power and corporate authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Put Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement, the Escrow Agreement and the Warrants have been duly executed and
delivered by the Company and at the initial Closing shall constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application. The Company has duly and validly authorized and
reserved for issuance shares of Common Stock sufficient in number for the
issuance of the Put Shares and for the exercise of the Warrants
Section 4.3 Capitalization. The authorized capital stock of the
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Company consists of 50,000,000 shares of Common Stock, $0.001 par value per
share, of which 12,262,988 shares are issued and outstanding and no preferred
stock. Except for (i) outstanding options and warrants as set forth in the SEC
Documents and (ii) as set forth in the Disclosure Schedule, there are no
outstanding Capital Share Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. The
Company is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its equity or debt securities. All
of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
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pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on, the
Principal Market. As of the date hereof, the Principal Market is the OTC
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Bulletin Board and the Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5 SEC Documents. The Company has made available to the
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Investor true and complete copies of the SEC Documents. The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (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 exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6 Valid Issuances. When issued and paid for in accordance
----------------
with the terms hereof or of the Warrants, the Put Shares and the Warrant Shares
will be duly and validly issued, fully paid, and non-assessable. Neither the
sales of the Put Shares, the Warrants or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement or the Warrants will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Put Shares, the Warrants or the Warrant Shares or, except
as contemplated herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The Put
Shares, the Warrants and the Warrant Shares shall not subject the Investor to
personal liability to the Company or its creditors by reason of the possession
thereof.
11
Section 4.7 No Conflicts. The execution, delivery and performance of
-------------
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Put Shares, the Warrants and the Warrant Shares, do not and will not (i)
result in a violation of the Company's Articles of Incorporation or By-Laws or
(ii) conflict with, or constitute a material default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument, or any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company is a
party, or (iii) result in a violation of any federal, state or local law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any material
property or asset of the Company is bound or affected, nor is the Company
otherwise in violation of, conflict with or default under any of the foregoing
(except in each case for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not have, individually or
in the aggregate, a Material Adverse Effect). The business of the Company is not
being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in the
aggregate would not have a Material Adverse Effect. The Company is not required
under any Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Put Shares or the
Warrants in accordance with the terms hereof (other than any SEC, Principal
Market or state securities filings that may be required to be made by the
Company subsequent to the initial Closing, any registration statement that may
be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
Section 4.8 No Material Adverse Change. Since December 31, 1999 no
-----------------------------
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 4.9 No Undisclosed Events or Circumstances. Since December 31,
--------------------------------------
1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.10 Litigation and Other Proceedings. Except as disclosed in
--------------------------------
the SEC Documents, there are no lawsuits or proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any subsidiary, nor
has the Company received any written or oral notice of any such action, suit,
proceeding or investigation, which could reasonably be expected to have a
Material Adverse Effect. Except as set forth in the SEC Documents, no judgment,
order, writ, injunction or decree or award has been issued by or, to the
knowledge of the Company, requested of any court, arbitrator or governmental
agency which could result in a Material Adverse Effect.
12
Section 4.11 No Misleading or Untrue Communication. The Company and,
--------------------------------------
to the knowledge of the Company, any person representing the Company, or any
other person selling or offering to sell the Put Shares or the Warrants in
connection with the transaction contemplated by this Agreement, have not made,
at any time, any oral communication in connection with the offer or sale of the
same which contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.12 Material Non-Public Information. The Company has not
---------------------------------
disclosed to the Investor any material non-public information that (i) if
disclosed publicly, would reasonably be expected to have a material effect on
the price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date
hereof but which has not been so disclosed.
Section 4.13 Insurance. The Company and each subsidiary maintains
---------
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputa-ble insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
Section 4.14 Tax Matters. The Company and each subsidiary has filed
------------
all Tax Returns which it is required to file under applicable laws; all such Tax
Returns are true and accurate and has been prepared in compliance with all
applicable laws; the Company has paid all Taxes due and owing by it or any
subsidiary (whether or not such Taxes are required to be shown on a Tax Return)
and have withheld and paid over to the appropriate taxing authorities all Taxes
which it is required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third parties; and since December 31, 1998, the
charges, accruals and reserves for Taxes with respect to the Company (including
any provisions for deferred income taxes) reflected on the books of the Company
are adequate to cover any Tax liabilities of the Company if its current tax year
were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that the Company or any subsidiary is or
may be subject to taxation by that jurisdiction. There are no foreign, federal,
state or local tax audits or administrative or judicial proceedings pending or
being conducted with respect to the Company or any subsidiary; no information
related to Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been received by the
Company or any subsidiary from any foreign, federal, state or local taxing
authority. There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into a
closing agreement pursuant to 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; and (B) has not agreed to or is required to make any adjustments
pursuant to 481 (a) of the Internal Revenue Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or any of its subsidiaries or has any knowledge that the IRS has
13
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of 897(c)(2) of the Internal Revenue Code
during the applicable period specified in 897(c)(1)(A)(ii) of the Internal
Revenue Code.
The Company has not made an election under 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another person that is
not a subsidiary of the Company under (A) Treas. Reg. 1.1502-6 (or comparable
provisions of state, local or foreign law), (B) as a transferee or successor,
(C) by contract or indemnity or (D) otherwise. The Company is not a party to
any tax sharing agreement. The Company has not made any payments, is obligated
to make payments or is a party to an agreement that could obligate it to make
any payments that would not be deductible under 280G of the Internal Revenue
Code.
For purposes of this Section 4.14:
"IRS" means the United States Internal Revenue Service.
---
Tax" or "Taxes" means federal, state, county, local, foreign, or other
--- -----
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
-----------
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
Section 4.15 Property. Neither the Company nor any of its subsidiaries
--------
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge any real property and buildings held under lease by the Company as
tenant are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
intended to be made of such property and buildings by the Company.
Section 4.16 Licensing and Permits. The Company holds all necessary
-----------------------
licenses and permits for the conduct of its business. All of such licenses and
permits are in good standing and the Company is not in material default of any
of the conditions thereof.
Section 4.17 Intellectual Property. Each of the Company and its
----------------------
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
14
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the Company's knowledge, except as
disclosed in the SEC Documents neither the Company nor any of its subsidiaries
is infringing upon or in conflict with any right of any other person with
respect to any Intangibles. Except as disclosed in the SEC Documents, no
adverse claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
Section 4.18 Internal Controls and Procedures. The Company maintains
---------------------------------
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company or any subsidiary is a
party or by which its properties are bound are executed with management's
authorization; (ii) the recorded accounting of the Company's consolidated assets
is compared with existing assets at regular intervals; (iii) access to the
Company's consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.19 Payments and Contributions. Neither the Company, any
----------------------------
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.20 No Misrepresentation. The representations and warranties
--------------------
of the Company contained in this Agreement, any schedule, annex or exhibit
hereto and any agreement, instrument or certificate furnished by the Company to
the Investor pursuant to this Agreement, do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK
15
ARTICLE V
COVENANTS OF THE INVESTOR
Investor covenants with the Company that:
Section 5.1 Compliance with Law.
---------------------
The Investor's trading activities with respect to shares of the Company's
Common Stock will be in compliance with all applicable state and federal
securities laws, rules and regulations and rules and regulations of the
Principal Market on which the Company's Common Stock is listed. Without
limiting the generality of the foregoing, the Investor agrees that it will,
whenever required by federal securities laws, deliver the prospectus included in
the Registration Statement to any purchaser of Put Shares from the Investor.
Section 5.2 SEC Information and Filings. Each Investor shall promptly
---------------------------
furnish to the Company, upon its request, such information or other items as it
may reasonably request in order to determine if such information or items, or
summary descriptions thereof, are necessary or desirable to include in any SEC
Document to be filed by the Company, and each Investor shall timely prepare and
file with the SEC (and, if applicable, any state securities agency) all such
forms, reports and other items as may be necessary in connection with such
Investor's ownership of the Shares.
Section 5.3 No Short Sales. The Investor and its affiliates shall not
--------------
engage in short sales of the Company's Common Stock (as defined in applicable
SEC and NASD rules) during the Commitment Period and for a period of 12 months
thereafter.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the
--------------------
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.
Section 6.2 Listing of Common Stock. The Company hereby agrees to
--------------------------
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the commencement of the Commitment
Period) to list the Put Shares and the Warrant Shares. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Principal Market, it will include in such application the Put Shares and the
Warrant Shares and will take such other action as is necessary or desirable in
the opinion of the investor to cause the Common Stock to be listed on such other
Principal Market as promptly as possible. The Company will take all action to
continue the listing and trading of its Common Stock on the Principal Market
(including, without limitation, maintaining sufficient net tangible assets) and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market and shall provide
Investor with copies of any correspondence to or from such Principal Market
which questions or threatens delisting of the Common Stock, within one Trading
Day of the Company's receipt thereof.
16
Section 6.3 Exchange Act Registration. The Company will cause its
---------------------------
Common Stock to continue to be registered under Section 12(g) or 12(b) of the
Exchange Act, will use its best efforts to comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Act.
Section 6.4 Legends. The certificates evidencing the Common Stock to
-------
be sold to the Investor shall be free of restrictive legends.
Section 6.5 Corporate Existence. The Company will take all steps
--------------------
necessary to preserve and continue the corporate existence of the Company.
Section 6.6 Additional SEC Documents. During the Commitment Period,
--------------------------
the Company will deliver to the Investor, as and when the originals thereof are
submitted to the SEC for filing, copies of all SEC Documents so furnished or
submitted to the SEC, or else notify the Investor that such documents are
available on the XXXXX system.
Section 6.7 Notice of Certain Events Affecting Registration; Suspension
-----------------------------------------------------------
of Right to Make a Put. The Company will immediately notify the Investor upon
- - ------------------------
the occurrence of any of the following events in respect of a registration
statement or related prospectus in respect of an offering of Registrable
Securities; (i) receipt of any request for additional information from the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement the response to which would require
any amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the happening of any event that makes any
statement made in the Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
Registration Statement, related prospectus or documents so that, in the case of
the Registration Statement, it will not contain 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 not misleading, and that in the case
of the related prospectus, it will not contain 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 the light of the circumstances
under which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate; and the Company will promptly make available to the
Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to the Investor any Put Notice during the continuation of any
of the foregoing events.
Section 6.8 Expectations Regarding Put Notices. Within ten (10) days
-----------------------------------
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate and
17
shall in no way obligate the Company to raise such amount, or any amount, or
otherwise limit its ability to deliver Put Notices. The failure by the Company
to comply with this provision can be cured by the Company's notifying the
Investor, in writing, at any time as to its reasonable expectations with respect
to the current calendar quarter.
Section 6.9 Consolidation; Merger. The Company shall not, at any time
---------------------
after the date hereof, 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) assumes by written instrument or by
operation of law 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.
Section 6.10 Limitation on Future Financing. The Company agrees that
-------------------------------
it will not enter into any sale of its securities for cash at a discount to its
then-current closing price during the Commitment Period without the prior
approval of the Investor, which will not be unreasonably withheld, or, without
first offering to the Investor the right of first refusal, to elect to
participate, in such subsequent transaction. Such right of first refusal must be
exercised in writing within seven (7) Trading Days of the Investor's receipt of
notice of the proposed terms of such financing. This limitation shall not
prohibit the Company from a) entering into any sale of securities pursuant to
any presently existing employee benefit plan which plan has been approved by the
Company's stockholders, or, b) offering securities pursuant to any compensatory
plan for a full-time employee or key consultant, but the Company shall not be
allowed to enter into any sale under any other equity-based line of credit.
Conditions Precedent to the Obligation of the Company to Issue and Sell Common
- - ----------------------------------------------------------------------------
Stock. The obligation hereunder of the Company to issue and sell the Put Shares
- - -----
to the Investor incident to each Closing is subject to the satisfaction, at or
before each such Closing, of each of the conditions set forth below.
(a) Accuracy of the Investor's Representation and Warranties.
---------------------------------------------------------
The representations and warranties of the Investor shall be true and correct in
all material respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have
------------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Investor at or prior to such Closing, and Investor shall
provide a certificate to the Company, substantially in the form of that
delivered by the Investor.
Section 6.11 Conditions Precedent to the Right of the Company to Deliver a
--------------------------------------------------------------
Put Notice and the Obligation of the Investor to Purchase Put Shares.
- - ----------------------------------------------------------------------------
The right of the Company to deliver a Put Notice and the obligation of Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on both (i) the date of delivery of such Put Notice and
(ii) the applicable Closing Date (each a "Condition Satisfaction Date"), of each
of the following conditions:
18
(a) Closing Certificate. All representations and warranties
--------------------
of the Company contained herein shall remain true and correct as of the Closing
Date as though made as of such date and the Company shall have delivered into
escrow an Officer's Certificate signed by its Chief Executive Officer certifying
that all of the Company's representations and warranties herein remain true and
correct as of the Closing Date and that the Company has performed all covenants
and satisfied all conditions to be performed or satisfied by the Company prior
to such Closing;
(b) Blue Sky. The Company shall have obtained all permits
---------
and qualifications required by at least five (5) states for the offer and sale
of the Common Stock to the Investor and by the Investor as set forth in the
Registration Rights Agreement or shall have the availability of exemptions
therefrom;
(c) Delivery of Put Shares. Delivery into escrow or to DTC
------------------------
of the Put Shares;
(d) Opinion of Counsel. Receipt by the Investor of an
--------------------
opinion of counsel to the Company, in the form of Exhibit D hereto; and
---------
(e) Transfer Agent. Delivery to the Company's transfer agent
--------------
of instructions to such transfer agent in form and substance reasonably
satisfactory to the Investor.
(f) Registration of the Common Stock with the SEC. The
----------------------------------------------------
Registration Statement shall have previously become effective and shall remain
effective and available for making resales of the Put Shares and Warrant Shares
by the Investor on each Condition Satisfaction Date and (i) neither the Company
nor the Investor shall have received notice that the SEC has issued or intends
to issue a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness of
the Registration Statement or related prospectus shall exist.
(g) Authority. The Company will satisfy all laws and
---------
regulations pertaining to the sale and issuance of the Put Shares.
(h) Performance by the Company. The Company shall have
-----------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement, the Registration Rights
Agreement and the Escrow Agreement to be performed, satisfied or complied with
by the Company at or prior to each Condition Satisfaction Date.
(i) No Injunction. No statute, rule, regulation, executive
--------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement.
19
(j) Adverse Changes. Since the date of filing of the
----------------
Company's most recent SEC Document, no event that had or is reasonably likely to
have a Material Adverse Effect has occurred.
(k) No Suspension of Trading In or Delisting of Common Stock.
--------------------------------------------------------
The trading of the Common Stock (including, without limitation, the Put Shares)
is not suspended by the SEC or the Principal Market, and the Common Stock
(including, without limitation, the Put Shares) shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market. The Company shall not have received any notice threatening to
delist the Common Stock from the Principal Market.
(l) No Knowledge. The Company has no knowledge of any event
-------------
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is reasonably likely to
occur within the thirty (30) Trading Days following the Trading Day on which
such Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed
----------------
since the next preceding Put Date.
(n) Other. On each Condition Satisfaction Date, the Investor
-----
shall have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by the Investor in order
for the Investor to confirm the Company's satisfaction of the conditions set
forth in this Section 7.2.
ARTICLE VII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 7.1 Due Diligence Review. The Company shall 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 SEC Documents and
other filings with the SEC, and all other publicly available corporate documents
and properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company's officers, directors and employees to supply
all such publicly available information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
20
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) 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, provided, however,
that notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE VIII
TRANSFER AGENT INSTRUCTIONS
Section 8.1 Transfer Agent Instructions. Upon each Closing, the
------------------------------
Company will issue to the transfer agent for its Common Stock (and to any
substitute or replacement transfer agent for its Common Stock upon the Company's
appointment of any such substitute or replacement transfer agent) instructions
to deliver the Put Shares without restrictive legends to the Escrow Agent.
21
Section 8.2 No Legend or Stock Transfer Restrictions. No legend shall
----------------------------------------
be placed on the share certificates representing the Put Shares and no
instructions or "stop transfer orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto.
Section 8.3 Investor's Compliance. Nothing in this Article shall affect
---------------------
in any way the Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Put Shares.
ARTICLE IX
CHOICE OF LAW
Section 9.1 Governing Law/Arbitration. This Agreement shall be
--------------------------
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made in New York by persons domiciled in New York City
and without regard to its principles of conflicts of laws. Any dispute under
this Agreement or any Exhibit attached hereto shall be submitted to arbitration
under the American Arbitration Association (the "AAA") in New York City, New
York, and shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter referred to as
the "Board of Arbitration") selected as according to the rules governing the
AAA. The Board of Arbitration shall meet on consecutive business days in New
York City, New York, and shall reach and render a decision in writing (concurred
in by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to
be delivered to all parties involved in the dispute. The Board of Arbitration
shall be authorized and is directed to enter a default judgment against any
party refusing to participate in the arbitration proceeding within thirty days
of any deadline for such participation. Any decision made by the Board of
Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The prevailing party shall
be awarded its costs, including attorneys' fees, from the non-prevailing party
as part of the arbitration award. Any party shall have the right to seek
injunctive relief from any court of competent jurisdiction in any case where
such relief is available. The prevailing party in such injunctive action shall
be awarded its costs, including attorney's fees, from the non-prevailing party.
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 except by operation of law. Notwithstanding the foregoing, upon the prior
written consent of the Company, which consent shall not unreasonably be withheld
or delayed in the case of an assignment to an affiliate of the Investor, the
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Investor's interest in this Agreement may be assigned at any time, in whole or
in part, to any other person or entity (including any affiliate of the Investor)
who agrees to make the representations and warranties contained in Article III
and who agrees to be bound hereby.
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:
If to Worldwide Wireless Networks, Inc.: 000 Xxx Xxxx Xxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile:
With a copy to:
(shall not constitute notice) Xxxxxxxx, August & Xxxxxxxxx
notice) to: 000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. August, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Investor: c/o Dr. Xx. Xxxxxxxx & Partner
Xxxxxxxxxxxx 00
XX-0000 Xxxxx, Xxxxxxxxxxxxx
Attention: Xxxx Xxxxxxx
Telephone:
Facsimile: 000-000-000-0000
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with a copy to: Xxxxxx X. Xxxxxxx, Esq.
(shall not constitute notice) Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
ARTICLE XII
MISCELLANEOUS
Section 12.1 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 12.2 Entire Agreement. This Agreement, the Exhibits hereto,
-----------------
which include, but are not limited to the Escrow Agreement, the Registration
Rights Agreement and the Warrants, set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as is fully set forth herein.
Section 12.3 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.
Section 12.4 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 12.5 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.
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Section 12.6 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 Put 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 (which shall not exceed that required by the Company's transfer
agent in the ordinary course) 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 12.7 Fees and Expenses. Each of the Company and the Investors
-----------------
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of Investors' counsel in the amount of $1,500 per Closing of a
Put.
Section 12.8 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
other than Triton West Group, Inc. whose fee shall be paid by the Company. 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 indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 12.9 Publicity. The Company agrees that it will not issue any
---------
press release or other public announcement of the transactions contemplated by
this Agreement without the prior consent of the Investor, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from its
receipt of such proposed release; provided, however, that if the Company is
advised by its outside counsel that it is required by law or the applicable
rules of any Principal Market to issue any such press release or public
announcement, then, it may do so without the prior consent of the Investor,
although it shall be required to provide prior notice (which may be by
telephone) to the Investor that it intends to issue such press release or public
announcement. No release shall name the Investor without its express consent.
Section 12.10 Effectiveness of Agreement. This Agreement shall become
--------------------------
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
25
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line of
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
Dated: June ___, 2000
WORLDWIDE WIRELESS NETWORKS, INC.
By: /s/ Xxxx Xxxxxxxxx
---------------------
Xxxx Xxxxxxxxx
Chairman & CEO
WHITSEND INVESTMENTS LIMITED
By: /s/ Xxxx Xxxxxxx
---------------------
Xxxx Xxxxxxx
Authorized Signatory
