Exhibit 10.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March 11,
2004, among WIRELESS FRONTIER INTERNET, INC., a Delaware corporation (the
"Company") and the investors signatories hereto.
RECITALS:
---------
In consideration of the mutual covenants and agreements set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
Section 1.1 Purchase and Sale. The Company hereby agrees to issue and sell
to each signatory hereto (collectively, the "Investors", and each, individually,
an "Investor") and, subject to all of the terms and conditions hereof and in
reliance on the representations and warranties set forth or referred to herein,
each Investor severally agrees to purchase in the aggregate up to $1,315,000
principal amount of Convertible Debentures, in the form attached hereto as
Exhibit A (the "Debentures") and a warrant (the "Warrant") to purchase their
pro-rata share of up to 3,287,500 shares of Common Stock, par value $.001 per
share of the Company (the "Common Stock") in the form attached hereto as Exhibit
B. The Debentures and the Warrants shall be collectively referred to herein as
the "Securities."
Section 1.2 Closing. Upon satisfaction of the conditions to closing set
forth herein the closing of the purchase and sale of the Debentures and Warrants
(the "Closing") shall occur at the offices of counsel to the Investors, or such
other location as the parties shall mutually agree. The date of the Closing
shall be referred to herein as the "Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors as follows, which
representations and warranties are true as of the date hereof and as of the
Closing Date:
Section 2.1 Corporate Organization. The Company and each of its
subsidiaries, if any, is a corporation duly incorporated, validly existing and
subsisting under the laws of the State of Delaware. The Company and each of its
subsidiaries has all requisite power and authority to own, operate and lease its
properties and to conduct its business as currently conducted. The Company and
each of its subsidiaries is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which its ownership or leasing of property
or the conduct of its business requires such licensing or qualification, except
to the extent that the failure to be so qualified or licensed would not have a
Material Adverse Effect (as defined below). As used in this Agreement, "Material
Adverse Effect" means any event, circumstance or development which individually
or in the aggregate could have a material adverse effect on the business,
properties, operations, condition (financial or otherwise), assets, liabilities,
tradability of the Common Stock, earnings or results of operations of the
Company and its subsidiaries or on the
transactions contemplated hereby. If the Company does not have any subsidiaries,
references to "subsidiaries" in this Article II shall be disregarded.
Section 2.2 Subsidiaries. Except as set forth in Schedule 2.2, the Company
does not directly or indirectly own any equity or similar interest, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest, in any corporation, partnership, limited liability company,
joint venture or other business association, entity or person.
Section 2.3 Authorization. The Company has all requisite power and full
legal right to execute and deliver this Agreement and the Ancillary Agreements,
and to perform all of its obligations hereunder and thereunder in accordance
with the respective terms hereof and thereof. This Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby have been duly
approved and authorized by all requisite corporate action on the part of the
Company, and this Agreement has been duly executed and delivered by the Company
and constitutes, and each of the Ancillary Agreements, when executed and
delivered by the Company at the Closings, will constitute, a legal, valid, and
binding obligation of the Company, enforceable against it in accordance with its
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to the enforcement of creditors' rights and remedies or by other
equitable principles of general application. The execution, delivery, and
performance by the Company of this Agreement and the Ancillary Agreements in
accordance with their respective terms, and the consummation by the Company of
the transactions contemplated hereby or thereby, will not result (with or
without the giving of notice or the lapse of time or both) in any conflict,
violation, breach, or default, or the creation of any Lien, or the termination,
acceleration, vesting, or modification of any right or obligation, under or in
respect of (x) the Certificate of Incorporation or By-laws of the Company and
its subsidiaries, (y) any judgment, decree, order, statute, rule or regulation
binding on or applicable to the Company or its subsidiaries, or (z) any
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of its assets is or are bound.
Section 2.4 Capitalization. (a) Immediately prior to the Closing, not
giving effect to the sale and purchase of the Securities, the authorized and the
outstanding capital stock of the Company (on a Fully Diluted Basis including all
Derivative Securities) will be as set forth in Schedule 2.4. All such
outstanding shares of capital stock will be duly authorized, validly issued,
fully paid, and nonassessable, and will have been issued free and clear of
Liens. Except as set forth in Schedule 2.4, no adjustment has previously been
made (or should have been made) nor will any adjustment be required to be made
as a result of the Company's issuance of the Securities to the rate at which any
shares of any class of the equity securities of the Company, subscriptions,
options, warrants, calls, commitments or agreements or Derivative Securities of
the Company are convertible into or exercisable for shares of Common Stock,
Derivative Securities or shares of other equity securities of the Company (by
reason of any "anti-dilution" provisions or agreements or otherwise).
(b) Except as set forth on Schedule 2.4, the Company does not have,
is not bound by, and has no obligation to grant or enter into, any outstanding
subscriptions, options, warrants, calls, commitments, or agreements of any
character calling for it to issue, deliver, or sell, or cause to be issued,
delivered, or sold, any shares of its capital stock, any other equity
2
security, or any securities convertible into, exchangeable for, or representing
the right to subscribe for, purchase, or otherwise acquire any shares of its
capital stock or any other equity security.
(c) Except as set forth in Schedule 2.4, the Company (i) has no
outstanding obligations, contractual or otherwise, to repurchase, redeem, or
otherwise acquire any shares of capital stock or other equity securities of the
Company, (ii) is not a party to or bound by any agreement or instrument relating
to the voting of any of its securities, and (iii) is not a party to or bound by
any agreement or instrument under which any person has the right to require it
to effect, or to include any securities held by such person in, any registration
under the Securities Act (as defined in Section 2.5).
(d) All of the Securities have been offered and at the Closings
will be issued and sold, in compliance with (i) all applicable preemptive or
similar rights of all persons, and (ii) assuming the truthfulness and accuracy
of the representations made by the Investors in Section 3 hereof, all applicable
provisions of the Securities Act and the rules and regulations thereunder, and
all applicable state securities laws and the rules and regulations thereunder
and other applicable securities laws and regulations.
(e) The Securities (which, for purposes of this Section 2.4(e)
shall be deemed to include all shares of Common Stock issuable upon conversion
of the Debentures and all shares of Common Stock issuable upon exercise of the
Warrants) shall, upon issuance pursuant to the terms hereof and/or the terms of
the Debentures, as the case may be, be duly authorized and validly issued, fully
paid and non-assessable and free and clear of any Lien, security interest,
option or other charge or encumbrance and free of all preemptive and other third
party rights.
Section 2.5 Financial Statements/SEC Reports. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof for the two years preceding the date hereof (or
such shorter period as the Company was required by law to file such material)
(the foregoing materials being collectively referred to herein as the "SEC
Reports") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension). The SEC Reports comply in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act") or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the
case may be, and rules and regulations of the SEC promulgated thereunder. The
Company has identified and made available to the Investors a copy of all SEC
Reports filed within the 10 days preceding the date hereof. As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of
3
the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.
Section 2.6 No Undisclosed or Contingent Liabilities. Except as set forth
in Schedule 2.6, neither the Company nor its subsidiaries has any liabilities or
obligations of any nature (whether absolute, accrued, contingent of otherwise
and whether due or to become due) which are not fully reflected or reserved
against on the balance sheet as of September 30, 2003 (including the footnotes
and schedules thereto, the "Balance Sheet") in accordance with GAAP, except for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date thereof.
Section 2.7 [INTENTIONALLY OMITTED]
Section 2.8 Absence of Certain Changes. Except as set forth on Schedule
2.8 or otherwise disclosed in the SEC Reports, since the date of the Balance
Sheet, the Company has conducted its business only in the ordinary course and
consistent with past practice, and has not:
(a) suffered any Material Adverse Effect;
(b) materially increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad debt, contingency or
other reserves;
(c) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities and obligations reflected or reserved against in
the Balance Sheet or incurred in the ordinary course of business and consistent
with past practice since the date of the Balance Sheet;
(d) permitted or allowed any of its assets to be subjected to any
Lien of any kind;
(e) incurred any indebtedness not in the ordinary course of
business or executed any guarantees on behalf of any person;
(f) canceled any material debts or waived any claims or rights of
substantial value;
(g) sold, transferred or otherwise disposed of any of its
properties or assets, except in the ordinary course of business and consistent
with past practice;
(h) granted any general increase in the compensation of employees
(including any such increase pursuant to any bonus, pension, profit sharing or
other plan or commitment), other than such increases as are consistent with the
Company's past practice or required by agreement or understanding disclosed to
the Investors; or experienced any material loss of personnel of the Company,
material change in the terms and conditions of the employment of the Company's
key personnel, loss of any of the five most highly compensated employees of the
Company or entered into any written employment agreement with any Company
employee;
4
(i) made any capital expenditure or commitment for additions to its
property, equipment or intangible capital assets other than in the ordinary
course of business and consistent with past practice;
(j) made any change in any method of accounting or accounting
practice, changed accountants or auditors or failed to maintain its books,
accounts and records in the ordinary course of business and consistent with past
practice;
(k) failed to maintain any material properties or equipment in good
operating condition and repair, ordinary wear and tear excepted;
(l) entered into any transaction or made or entered into any
material contract or commitment, except in the ordinary course of business and
consistent with past practice, or terminated or amended any material contract or
commitment;
(m) declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of its capital stock or other
securities;
(n) amended its Certificate of Incorporation or By-laws;
(o) taken, suffered, or permitted any action which would render
untrue any of the representations or warranties of the Company herein contained,
and not omitted to take any action, the omission of which would render untrue
any such representation or warranty; or
(p) agreed in writing or otherwise committed to take actions in
furtherance of, or otherwise taken, any action with respect to any of the
matters described in this Section 2.8.
Section 2.9 No Violation. Neither the execution and delivery of this
Agreement or any of the Ancillary Agreements by the Company nor the performance
by the Company of its obligations hereunder or thereunder will: (i) conflict
with or result in any breach of any provision of its or its subsidiaries
Certificate of Incorporation or By-laws, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default or give rise to any Lien on the Company's or its subsidiaries properties
or assets or any right of termination, cancellation or acceleration under any of
the terms or conditions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which it or any of their respective material
properties or assets may be bound, or require the consent of any person, (iii)
violate any statute, law, rule, regulation, writ, injunction, judgment, order or
decree of any court, administrative agency or governmental authority binding on
the Company, its subsidiaries or any of their respective properties or assets,
or (iv) violate any provision (including those requiring the furnishing of
notice prior to the taking of specific actions) of the rules of any marketplace
on which the Common Stock of the Company is listed or quoted.
Section 2.10 Compliance with Applicable Law. The Company and each of its
subsidiaries is currently in compliance with all applicable laws (whether
statutory or otherwise), rules, regulations, orders, ordinances, judgments,
decrees, writs, requirements and injunctions of all governmental authorities,
agencies, courts, and administrative tribunals, except for such
5
noncompliance that, individually and in the aggregate, would not have a Material
Adverse Effect. Neither the Company nor any of its subsidiaries has received any
notice or request for information from any federal, state, or local governmental
authority (i) that the Company (or any of its subsidiaries) has been identified
by the Environmental Protection Agency or any state environmental regulatory
authority as a potentially responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B, or under
any equivalent state law; or (ii) that it or any of its subsidiaries is or may
be in violation of any Environmental Laws or is or will or may be a named party
to any claim, action, cause of action, complaint or legal or administrative
proceeding arising out of any third party's incurrence of Damages in connection
with any environmental matters.
Section 2.11 Licenses and Permits. The Company and its subsidiaries have
and maintain all licenses, permits and other authorizations from all
governmental authorities as are necessary for the conduct of their business as
presently conducted or in connection with the ownership or use of its
properties, except for licenses, permits and other authorizations that the
failure to obtain or maintain in effect, either singly or in the aggregate, has
not had and could not reasonably be expected to have a Material Adverse Effect.
Section 2.12 Governmental Consents. Except for the filing of any forms
required under the federal securities laws (including any registration statement
under the Securities Act by the Company under the Registration Rights Agreement)
and any filings required under state "blue sky" laws, no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required to be made or obtained by the Company in
connection with the execution and delivery of this Agreement or any of the
Ancillary Agreements by the Company or the performance by the Company of its
obligations hereunder and thereunder, or the continued conduct by the Company of
its present business after the Closing.
Section 2.13 Taxes. Except as set forth in Schedule 2.13, the Company and
each of its subsidiaries have filed all Tax (as hereinafter defined). reports
and returns that they were required to file. All such reports and returns were
correct and complete in all material respects. All Taxes owed by the Company or
its subsidiaries (whether or not shown on any report or return) have been paid
or, if not yet due, appropriate accruals therefor as required under GAAP have
been made on the Company's financial records and on the financial statements
described in Section 2.5. No claim has been made by a taxing authority in a
jurisdiction where the Company or any subsidiaries does not pay Tax or file tax
returns that the Company or any subsidiary is or may be subject to Taxes
assessed by such jurisdiction. There are no Liens for Taxes (other than current
Taxes not yet due and payable) on the assets of the Company or any subsidiary.
There is no action, suit, investigation, liability, taxing authority proceeding,
or audit with respect to any Tax now in progress, pending or, to the Company's
knowledge, threatened, against or with respect to the Company or any subsidiary,
whether in respect of any Tax reports and returns that were not filed in a
timely manner or for any other reason. No deficiency or proposed adjustment in
respect of Taxes that has not been settled or otherwise resolved has been
asserted or assessed by any taxing authority against the Company or any
subsidiary which is not accrued on the Balance Sheet. Neither the Company nor
any of its subsidiaries has consented to extend the time in which any Tax may be
assessed or collected by any taxing authority. As used in this Section 2.13, the
terms "Taxes" and "Tax" mean all federal, state, local and foreign taxes,
including,
6
without limitation, income, unemployment, withholding, payroll, social security,
teal property, personal property, excise, sales, use and franchise taxes,
levies, assessments, duties, licenses and registration fees and charges of any
nature whatsoever, including interest, penalties and additions with respect
thereto and any interest in respect of such additions and penalties.
Section 2.14 Litigation. Except as set forth in Schedule 2.14, in the
Company's annual report on Form 10-KSB for the fiscal year ended December 31,
2002, or the Company's quarterly report on Form 10-QSB for the quarter ended
September 30, 2003, there is no action, suit or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries, before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable likelihood of a decision which could
have a Material Adverse Effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Company or
which challenges the validity of this Agreement or any Ancillary Agreement
Section 2.15 Title to Properties. Neither the Company nor any of its
subsidiaries owns any real property. Except as set forth on Schedule 2.15, the
Company has title to all of its properties and assets free and clear of all
Liens, charges and encumbrances, except Liens for taxes not yet due and payable
and such Liens or other imperfections of title, if any, that do not materially
detract from the value of or interfere with the present use of the property
affected thereby. There is no existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default) by the
Company or any subsidiary under any lease pursuant to which the Company or any
subsidiary leases real or personal property.
Section 2.16 Contracts and Commitments. Except as set forth in Schedule
2.16, neither the Company nor any subsidiary is a party or subject to or bound
by (whether written or oral), nor has the Company or any subsidiary committed to
enter into in the future:
(a) any agreement, which, in the future, would lead to (i) an
acquisition, merger or similar transaction with respect to the Company, or (ii)
a debt or equity financing for the Company (other than this Agreement and the
Ancillary Agreements);
(b) any agreement requiring it to purchase all or substantially all
of its requirements for a particular product or service from a particular
supplier or suppliers, or requiring it to supply all of a particular customer's
or customers' requirements for a certain service or product;
(c) any agreement with any current or former Affiliate, officer or
director of the Company, or with any person in which any such Affiliate has an
interest; and
(d) any agreement with any domestic or foreign government or agency
or executive office thereof or any subcontract between it and any third party
relating to a contract between such third party and any domestic or foreign
government or agency or executive office thereof.
Section 2.17 Intellectual Property. (a) Except as set forth on Schedule
2.17, all patents, patent applications, trademarks, trade names, service marks,
logos and copyrights and other intellectual property used in or material to the
Company's and its subsidiaries' business as now
7
being conducted or as proposed to be conducted (collectively, and together with
any technology, know-how, trade secrets, processes, formulas, and techniques
used in or material to the Company's business, "Proprietary Information") are
either owned or licensed by the Company or its subsidiaries.
(b) Except as set forth on Schedule 2.17, to the Company's
knowledge, none of the Proprietary Information is being infringed by others, or
is subject to any outstanding order, decree, judgment, or stipulation. No
litigation (or other proceedings in or before any court or other governmental,
adjudicatory, arbitral, or administrative body) relating to the Proprietary
Information is pending or, to the Company's knowledge, threatened, nor, to the
Company's knowledge, is there any basis for any such litigation or proceeding.
(c) Except as set forth on Schedule 2.17, to the Company's
knowledge, it is not infringing on or making unlawful use of any intellectual
property or any proprietary or confidential information of any Person. No
litigation (or other proceedings in or before any court or other governmental,
adjudicatory, arbitral, or administrative body) charging the Company with
infringement or unlawful use of any patent, trademark, copyright, or other
proprietary right is pending or, to the Company's knowledge, threatened; nor, to
the Company's knowledge, is there any basis for any such litigation or
proceeding.
Section 2.18 Insurance. Except as set forth on Schedule 2.18, the Company
and its subsidiaries maintain policies of insurance with, to the knowledge of
the Company, financially sound and reputable insurance companies, funds, or
underwriters, which are of the kinds and which cover such risks, and are in such
amounts and with such deductibles and exclusions, as are consistent with prudent
business practice for similarly situated businesses in the Company's business.
Except as set forth on Schedule 2.18, all such policies are in full force and
effect, are sufficient for compliance in all respects by the Company with all
requirements of law and of all agreements to which it is a party and will not
terminate or lapse or otherwise be affected in any way by reason of the
transactions contemplated hereby.
Section 2.19 Investment Company. The Company is not an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended, and will not be an investment company under such Act upon consummation
of the transactions contemplated hereby or after giving effect to the use of
proceeds from the purchase of the Securities.
Section 2.20 Securities Laws. The offer, sale and issuance of the
Securities without registration (assuming the accuracy of the representations
and warranties made by the Investors in Section 3.1 hereof) will not violate the
Securities Act, or any applicable state securities or "blue sky" laws or other
applicable laws. None of the Company, its affiliates or any person acting on its
behalf has engaged in any form of general solicitation or advertising (as
defined in Rule 502(c) of the Securities Act) or engaged in any action that
would require the registration under the Securities Act of the offering and sale
of the Securities pursuant to this Agreement.
Section 2.21 Investment Banking; Brokerage. Except as set forth on
Schedule 2.21, there are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation (exclusive of professional
fees to attorneys and accountants) in connection with
8
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company or any of its Affiliates.
Section 2.22 Labor Relations. There is no charge pending or, to the
Company's knowledge, threatened, against or with respect to the Company or any
subsidiary before any court or agency and alleging unlawful discrimination in
employment practices, and there is no charge of or proceeding with regard to any
unfair labor practice against the Company or any subsidiary pending before the
National Labor Relations Board. There is no labor strike, dispute, slow-down, or
work stoppage pending or, to the Company's knowledge, threatened against or
involving the Company or any subsidiary. None of the employees of the Company or
any subsidiary is covered by any collective bargaining agreement, and no such
collective bargaining agreement is currently being negotiated. No one has
petitioned and, to the Company's knowledge, no one is now petitioning, for union
representation of any employees of the Company or any subsidiary. The Company
believes its relationships with its employees is satisfactory.
Section 2.23 Disclosure. The Company confirms that neither it nor, to its
knowledge, any other person acting on its behalf has provided any of the
Investors or their agents or counsel with any information that constitutes or
might constitute material, nonpublic information. The Company understands and
confirms that the Investors may rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Investors regarding the Company, its business and the transactions
contemplated hereby, including the schedules to this Agreement, furnished by or
on behalf of the Company with respect to the representations and warranties made
herein are true and correct with respect to such representations and warranties
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Investor makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.
Section 2.24 Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is
in material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of the Closing Date. The Company and it
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company's most recently filed
periodic report under the Exchange Act, as the case may be, is being prepared.
The Company's certifying officers have evaluated the effectiveness of the
Company's controls and procedures as of the date prior to the filing date of the
most recently filed periodic report under the Exchange Act (such date, the
9
"Evaluation Date"). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the
Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
Section 2.25 No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or which could violate any applicable shareholder approval
provisions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Section 3.1 Representations and Warranties. Each Investor represents
severally as to himself only that (each of which representations and warranties
are true as of the date hereof and as of the Closing in which such Investor
participates):
(a) He has all requisite power and full legal right to execute and
deliver this Agreement and the Ancillary Agreements to which he is a party and
to carry out his obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Ancillary Agreements to which he is a party
and the performance by him of his obligations hereunder and thereunder, have
been duly authorized by him, and no other proceeding therefor on his part is
required. This Agreement and each of the Ancillary Agreements to which he is a
party have been duly executed and delivered by him and constitute his valid and
binding obligations, enforceable against him in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to
the enforcement of creditors' rights and remedies or by other equitable
principles of general application.
(b) He is purchasing the securities hereunder for his own account
for investment only and not with a present view to the distribution thereof.
(c) He has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the investment
contemplated by this Agreement and making an informed investment decision with
respect thereto.
(d) He has had the opportunity to ask questions and receive answers
concerning the terms and conditions of the offering of securities purchased
hereunder, as well as the opportunity to obtain additional information necessary
to verify the accuracy of information furnished in connection with such offering
that the Company possesses or can acquire without unreasonable effort or
expense.
(e) He understands that the Debentures and Warrants have not been
registered under the Securities Act or any state securities laws, and may not be
transferred unless
10
subsequently registered thereunder or pursuant to an exemption from
registration, and that a legend indicating such restrictions will be placed on
the certificates representing the Warrants and the Debentures.
(f) There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation (other than professional fees
to attorneys and accountants) in connection with the transactions contemplated
by this Agreement or any of the Ancillary Agreements based on any arrangement or
agreement made by or on behalf of him.
(g) He has adequate means of providing for his current financial
needs and foreseeable contingencies and has no need for liquidity of the
investment in the Debentures and Warrants for an indefinite period of time.
(h) He is aware that an investment in the Debentures and Warrants
involves a number of very significant risks and has carefully read and
considered the information set forth herein and in the Company's disclosure
schedules annexed hereto.
ARTICLE IV
COVENANTS OF THE COMPANY AND THE INVESTORS
Section 4.1 Further Assurances. The Company and each investor shall
execute and deliver, or cause to be executed and delivered each Ancillary
Agreement to be executed and delivered by it or him. The Company shall execute
and deliver, or cause to be executed and delivered, all such additional
instruments and other documents and shall take such further actions as the
Investors may reasonably require to effectuate, carry out and comply with all of
the terms of this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby.
Section 4.2 Reservation of Shares; Compliance with Laws. The Company will
at all times reserve the appropriate number of shares of Common Stock solely for
the purpose of issuance upon exercise of the Warrants and conversion of the
Debentures. The Company will file within the required time periods all filings,
notices and other documents required by applicable federal and state securities
laws in connection with the transactions contemplated by this Agreement. The
Company will comply, and cause each of its subsidiaries to 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 except to the extent contested in good faith.
Section 4.3 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Investor
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each investor shall
be relying on the foregoing covenant in effecting transactions in securities of
the Company.
Section 4.4 Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities hereunder as set forth on Schedule 4.4 hereto and not
for the satisfaction of any
11
portion of the Company's debt, to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.
Section 4.5 Conversion and Exercise Procedures. The form of Notice of
Exercise included in the Warrants and the form of Notice of Conversion included
in the Debentures set forth the totality of the procedures required of the
Investors in order to exercise the Warrants or convert the Debentures. No
additional legal opinion or other information or instructions shall be required
of the Investors to exercise their Warrants or convert their Debentures. The
Company shall honor exercises of the Warrants and conversions of the Debentures
and shall deliver shares of Common Stock in accordance with the terms,
conditions and time periods set forth in the Ancillary Agreements.
Section 4.6 Sales, Liens, Etc. So long as the Debentures remain
outstanding, except as or otherwise provided herein or to the extent
pre-existing the date hereof, the Company shall not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Lien upon or with respect to, any of the Company's assets other than
in the ordinary course of business, or assign any right to receive income in
respect thereof or (ii) create or suffer to exist any Lien upon or with respect
to any of its properties, whether now owned or hereafter acquired if such Lien
is not discharged within thirty (30) days of its imposition, or assign any right
to receive income or to secure or provide for the payment of any debt of any
Person.
Section 4.7 Debt. So long as the Debentures remain outstanding, the
Company shall not create or suffer to exist any debt, other than (i) the debt
incurred pursuant to this Agreement, (ii) purchase money financing for
equipment, (iii) trade payables incurred in the ordinary course of business
consistent with past practice and (iv) debt which predates the date hereof and
is disclosed on Schedule 4.7 attached hereto.
Section 4.8 Dividends, Etc. So long as the Debentures remain outstanding,
the Company shall not declare or make any dividend payment or other distribution
of assets, properties, cash, rights, obligations or securities on account of any
equity interest in the Company, or purchase, redeem or otherwise acquire for
value any equity interest in the Company or any rights or options to acquire any
such interests other than intra-company transactions and as may be required
pursuant to any Investor's exercise of the Debentures, or as may otherwise be
provided in this Agreement and/or the Ancillary Agreements.
Section 4.9 Payment of Debentures. To the extent the Debentures have not
been paid in full or converted, the Company agrees to use the proceeds from all
future financing transactions to pay the then outstanding principal balance of
the Debentures plus accrued but unpaid interest. thereon, until such Debentures
have been paid in full or have been converted.
ARTICLE V
CLOSING CONDITIONS
Section 5.1 Investor Closing Conditions. The obligation of the Investors
to consummate the transactions contemplated hereby is subject to satisfaction or
waiver of each of the following conditions at or prior to the Closing:
12
(a) Secretary's Certificate. The Company shall have delivered to
the Investors a certificate of the Secretary of the Company, dated as of the
Closing Date, certifying: (i) the adoption by the Company's Board of Directors
of attached resolutions authorizing, among other things, the execution and
delivery of this Agreement and the Ancillary Agreements and the consummation of
the transactions contemplated herein, and (ii) the incumbency and signatures of
the officers of the Company executing this Agreement, the Ancillary Agreements
and the other agreements and instruments contemplated herein.
(b) Certificates. The Company shall have delivered to each Investor
certificates evidencing the Debenture and Warrants acquired by such Investor
pursuant to the terms hereof each duly executed by the appropriate Company
officers.
(c) Closing Certificate. The Company shall have delivered to the
Investors a certificate of an authorized officer of the Company certifying that
the representations and warranties of the Company contained in this Agreement
and in each certificate or document delivered by the Company to the Investors in
connection with the transactions contemplated hereby and thereby are true and
correct when made on the date hereof and shall be true and correct in all
material respects on and as of the Closing Date, as though made on and as of
such date and the Company shall have performed all obligations and complied in
all material respects with all agreements, undertakings, covenants and
conditions required hereunder or thereunder to be performed by it prior to the
Closing.
(d) Opinion of Counsel. The Investors shall have received at the
Closing from _______________, counsel to the Company, a favorable written
opinion dated as of the Closing Date which shall be in the form attached hereto
as Exhibit C hereto.
Section 5.2 Mutual Closing Condition for the Closing. The obligation of
the Company and the Investors to consummate the transactions contemplated hereby
at the Closing is subject to the satisfaction or waiver of each of the following
condition at or prior to the Closing:
(a) Injunctions. There not being in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby.
ARTICLE VI
DEFINITIONS
Section 6.1 Certain Defined Terms. For purposes of this Agreement, the
following teams shall have the meanings set forth in this Section 6:
"Affiliate" means any other person directly or indirectly controlling,
controlled by, or under direct or indirect common control with any referenced
Person and includes without limitation, (a) any Person who is an officer,
director, or direct or indirect beneficial holder of at least 5% of the then
outstanding capital stock of any referenced Person, and any of the Family
Members of any such Person, (b) any Person of which a referenced Person and/or
its Affiliates (as defined in clause (a) above), directly or indirectly, either
beneficially own(s) at least 5% of the then outstanding equity securities or
constitute(s) at least a 5% equity participant, (c) in the
13
case of a specified Person who is an individual, Family Members of such Person,
and (d) in the case of the Investors, any entities for which an Investor or any
of its Affiliates serve as general partner and/or investment adviser or in a
similar capacity, and all mutual funds or other pooled investment vehicles or
entities under the control or management of such Investor or the general partner
or investment adviser thereof, or any Affiliate of any of them, or any
Affiliates of any of the foregoing.
"Affiliated Group" has the meaning given to it in Section 1504 of the
Code, and in addition includes any analogous combined, consolidated, or unitary
group, as defined under any applicable state, local, or foreign income Tax law.
"Ancillary Agreements" means the Warrants, Debentures, the Registration
Rights Agreement and any other agreement or document delivered or executed in
connection with this Agreement or the transactions contemplated hereby.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Damages" means all damages, losses, claims, demands, actions, causes of
action, suits, litigations, arbitration, liabilities, costs, and expenses,
including without limitation court costs and the fees and expenses of counsel
and experts.
"Derivative Securities" means (i) all shares of stock and other securities
that are convertible into or exchangeable for shares of Common Stock, and (ii)
all options, warrants, and other rights to acquire shares of Common Stock or any
class of stock or other security or securities convertible into or exchangeable
for shares of Common Stock or any class of stock or other security.
"Environmental Laws" means, collectively, the Resource Conservation and
Recovery Act, CERCLA, the Superfund Amendments and Reauthorization Act of 1986,
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, and any and all state or local statutes, regulations, ordinances,
orders, and decrees relating to health, safety, or the environment, each, as the
case may be, as amended.
"Family Members" means, as applied to any individual, any parent, spouse,
child, spouse of a child, brother or sister of the individual, and each trust,
limited partnership or limited liability company created primarily for the
benefit of one or more of such persons and each custodian of a. property of one
or more such persons and the personal representative or estate of any such
persons.
"Fully Diluted Basis" means that the relevant calculation of the ownership
or percentage ownership (as applicable) of any Person of the equity securities
of the Company shall be performed as if (i) all Derivative Securities have been
exercised or converted, as the case may be, into shares of Common Stock of the
Company, and (ii) all shares of preferred stock or any other series of equity
securities of the Company shall have been converted into shares of Common Stock
of the Company.
14
"GAAP" means generally accepted accounting principles in the United States
that are (i) consistent with the principles promulgated or adopted by the
Financial Accounting Standards Board and its predecessors, (ii) applied on a
basis consistent with prior periods, and (iii) such that, insofar as the use of
accounting principles is pertinent, a certified public accountant could deliver
an unqualified opinion with respect to financial statements in which such
principles have been properly applied.
"Liens" means any and all liens, claims, mortgages, security interests,
charges, encumbrances, and restrictions on transfer of any kind, except: (i) in
the case of references to securities, any of the same arising under applicable
securities laws solely by reason of the fact that such securities were issued
pursuant to exemptions from registration under such securities laws, (ii) real
estate taxes not yet due and payable, and (iii) any lien in favor of any
landlord for unpaid rent, additional rent, or other charges, which lien is
created by statute or under any lease under which the Company or any of its
Subsidiaries is lessee, unless the Company is given written notice of the
imposition of any such lien described in this clause (iii).
"Person" or "person" (regardless of whether capitalized) means any natural
person, entity, or association, including without limitation any corporation,
partnership, limited liability company, government (or agency or subdivision
thereof), trust, joint venture or proprietorship.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date by and among the Company and the Investors
participating in such closings in the form attached hereto as Exhibit D and
incorporated herein by reference.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" or "Subsidiaries" means, with respect to any person, any
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of which are at the time owned by such person or by a
Subsidiary of such person, if the holders of the shares of such class or classes
(a) are ordinarily, in the absence of contingencies, entitled to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, even though the right so to vote has been
suspended by the happening of such a contingency, or (b) are at the time
entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"Trading Day" means a day on which the principal trading market or
exchange for the Company's Common Stock is open for business.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Independent Nature of Investors' Obligations and Rights. The
Company acknowledges each of the following: The obligations of each Investor
participating in this transaction are several and not joint with the obligations
of any other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor. Nothing contained herein
or in any other agreement, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
15
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a "group" (within the meaning
of Sections 13 and 16 of the Exchange Act and any rules promulgated thereunder),
in each case with respect to such obligations or the transactions contemplated
hereunder. Each Investor shall be entitled to Independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other agreements relating to this transaction, and it
shall not be necessary for any other Investor to be joined as an additional
party in any proceeding for such purpose. Each Investor has been represented by
its own separate legal counsel (or has chosen not to be represented by legal
counsel) in its review and negotiation of this Agreement and the related
transaction documents. The Company has elected to provide various Investors with
the same terms and agreements for the convenience of the Company and not because
it was required or requested to do so by the Investors.
Section 7.2 Waivers and Consents. For the purposes of this Agreement and
all agreements executed pursuant hereto, no course of dealing between the
Company and the Investors and no delay on the part of any party hereto in
exercising any rights hereunder or thereunder shall operate as a waiver of the
rights hereof or thereof. No provision hereof may be waived except by a written
instrument signed by the party so waiving such provision.
Section 7.3 Governing Law; Jurisdiction; Venue etc. This Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of New York, without giving effect to the principles of conflicts of law
thereof. The state and federal courts of the State of New York located in New
York County shall have exclusive jurisdiction to hear and determine any claims
or disputes between the Investors and the other party or parties hereto
pertaining directly or indirectly to this Agreement and all documents,
instruments and agreements executed pursuant hereto, or to any matter arising
therefrom (unless otherwise expressly provided for therein); the exclusive
choice of forum set forth in this Section 7.3 shall not be deemed to preclude
the enforcement of any judgment obtained in such forum or the taking of any
action to enforce the same in any other appropriate jurisdiction. All of the
parties hereto waive all rights to trial by jury in any action or proceeding
instituted by any party against any other party arising out of, on or by reason
of this Agreement or the documents and transactions contemplated herein.
Section 7.4 Headings. The descriptive headings in this Agreement have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction or interpretation of any provision thereof or hereof.
Section 7.5 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which when so executed and delivered shall
be taken to be an original; but such counterparts shall together constitute but
one and the same document.
Section 7.6 Notices and Demands. Any notice or demand which is required or
provided to be given under this Agreement shall be deemed to have been
sufficiently given and received for all purposes when delivered by hand or by
telecopy that has been confirmed as received by 5:00 P.M. on a business day, one
(1) business day after being sent by nationally recognized overnight courier or
received by telecopy after 5:00 P.M. on any day, or five (5)
16
business days after being sent by certified or registered mail, postage and
charges prepaid, return receipt requested, to the following addresses:
If to the Company:
Wireless Frontier Internet, Inc.
000 Xxxx Xxxxxxxxx
Xxxx Xxxxxxxx, XX 00000
Attn: Xxx Xxxxx
Facsimile: 000-000-0000
With a copy to:
Xxxxxxx Xxxxxxx
000-000-0000
If to the Investors:
To their respective addresses set forth below their
respective names on the signature pages hereto.
Section 7.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement, provided, however, that no such
severability shall be effective if it materially changes the economic benefit of
this Agreement to any party.
Section 7.8 Integration. This Agreement, including the exhibits, documents
and instruments referred to herein or therein, constitutes the entire agreement,
and supersedes any other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof.
Section 7.9 Publicity. The Company and the Investors shall have the right
to approve before issuance of any press releases or any other public statements
is sought to be made by the other with respect to the transactions contemplated
hereby, except for any disclosures required in connection with obtaining any
consents to the transactions contemplated by this Agreement. The Company shall
have the right to issue any press release or other public statement in
connection with the transaction contemplated hereby, excluding the identity of
the Investors, without the prior consent of the Investors, but may disclose the
identity of the Investors upon prior written consent of the Investors, which
shall not be unreasonably withheld. The Company shall also have the right to
file this Agreement and the Ancillary Agreements with the SEC under the
Securities Act or the Exchange Act if required by such acts or regulations
thereunder.
17
Section 7.10 Expenses. The Company and the Investors will each bear their
own costs and expenses and those of their respective advisors related to the
transactions herein contemplated, except that upon Closing the Company hereby
agrees to reimburse the Investors $15,000 for their legal fees and related
expenses. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any Securities.
Section 7.11 Assignment. (a) The Company may not assign this Agreement or
its rights and obligations hereunder.
(b) The rights and obligations hereunder and the Securities may be
transferred by each of the Investors in its sole discretion at any time, in
whole or in part, to any Person to whom such Investor transfers Securities.
(c) Notwithstanding the other provisions of this Section 7.11, no
Person acquiring any Common Stock in a public trade shall receive the benefit of
any of the covenants set forth in this Agreement as an assignee thereof.
(d) Subject to clause (c) immediately above, any Person acquiring,
in a manner permitted by this Agreement, any Securities and/or rights of an
Investor under this Agreement shall constitute an Investor for purposes of this
Agreement and any reference to an Investor in this Agreement shall also refer to
any such Person.
Section 7.12 Equitable Relief. Each of the parties acknowledges that any
breach by such party of his obligations under this Agreement would cause
substantial and irreparable damage to one or more of the other parties and that
money damages would be an inadequate remedy therefor. Accordingly, each party
agrees that the other parties or any of them will be entitled to an injunction,
specific performance and/or other equitable relief to prevent the breach of such
obligations.
Section 7.13 Usage. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings when used herein in their plural or singular forms,
respectively.
Section 7.14 Facsimile Signatures. A facsimile signature on this Agreement
or an original signature delivered by facsimile shall be considered the same as
an original.
[Remainder of page intentionally left blank]
18
IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be duly executed and delivered as of the day and year first above
written. EXECUTION OF THIS AGREEMENT BY ANY INVESTOR SHALL BE DEEMED TO
CONSTITUTE EXECUTION OF THE REGISTRATION RIGHTS AGREEMENT BY SUCH INVESTOR.
WIRELESS FRONTIER INTERNET, INC.
By:
--------------------------------
Name: Xxx Xxxxx
Title: President
INVESTORS:
If an individual:
---------------------------------
Name:
If an entity:
Name of Entity:
---------------------
By:
--------------------------------
Name:
Title:
Amount of Investment:
--------------------
Number of Warrants:
----------------------
Address of Investor:
------------------------------------------
------------------------------------------
------------------------------------------
19
