<PAGE>
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 8-K
CURRENT REPORT
___________________
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
___________________
Date of Report (Date of earliest event reported): April 15, 1998
___________________
WAVERIDER COMMUNICATIONS INC.
_______________________________
(Exact name of registrant as specified in its charter)
NEVADA 0-25680 33-0264030
____________________________ _____________________ ___________________
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
604 EDWARD AVENUE, UNIT NO. 3
RICHMOND HILL, ONTARIO, CANADA L4C 9Y7
FORMER ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:
595 HOWE STREET, SUITE 204
VANCOUVER, BRITISH COLUMBIA, V6C 2T5, CANADA
____________________________________________________________
(Address of principal executive offices, including zip code)
(416) 410-4843
____________________________________________________
(Registrant's telephone number, including area code)
______________________________________________________________________________
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TABLE OF CONTENTS
ITEM 5. OTHER EVENTS.................................................. 1
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS............................. 1
---------------------------------
Exhibits...................................................... 1
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ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S........... 1
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SIGNATURE.................................................................. 2
i
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ITEM 5. OTHER EVENTS.
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On March 4, 1998, the Company's Board of Directors (the "Board")
adopted a resolution providing for the amendment (the "Amendment") of the
Company's Series B Voting Convertible Preferred Stock, par value $.001 per share
(the "Series B Preferred Stock"), subject to approval of the holders of the
Series B Preferred Stock (the "Series B Preferred Stockholders"). An Information
Statement dated March 16, 1998, describing the proposed amendment to the Series
B Preferred Stock, was sent to each of the Series B Preferred Stockholders. On
April 15, 1998, the last of the consents to the Amendment was received from the
Series B Preferred Stockholders and the Company filed a Certificate of Amendment
to Certificate of Designation containing the Amendment (the "Certificate") with
the Secretary of State of Nevada.
The Amendment (i) reduces the number of shares of common stock of the
Company (the "Common Stock") to be received by a Series B Preferred Stockholder
upon conversion of such shares of the Series B Preferred Stock, from ten (10)
shares to two-and-one-half (2.5) shares; and (ii) confirms the authority of the
Board to redesignate by resolution any unissued shares of the Series B Preferred
Stock and any previously issued shares of the Series B Preferred Stock at such
time as such shares are no longer outstanding.
Copies of the Certificate, a press release relating thereto and a
revised Description of the Company's Capital Stock, are attached as exhibits to
this Current Report on Form 8-K as Exhibits 99.1, 99.2, and 99.3 respectively.
Exhibit 99.3 is incorporated into this Current Report by this reference thereto.
Each of the holders of the Series B Stock has converted its shares
into shares of the Common Stock. All of the shares of the Common Stock issued
upon conversion will be held in escrow. The shares will be released from time to
time upon satisfaction of certain performance criteria as set forth in the
Escrow Agreement which is attached hereto as Exhibit 99.4 and incorporated
herein by this reference thereto. If all of the performance criteria are not
satisfied by February 7, 2002, then the shares which have not been released may
be canceled. The Board may extend the date by which such performance criteria
must be satisfied until February 7, 2004 after which time all shares that have
not been released will be canceled.
The principal executive offices of the Company have been moved from
595 Howe Street, Suite 204, Vancouver, British Columbia, Canada V6C 2T5 to 604
Edward Avenue, Unit No. 3, Richmond Hill, Ontario, Canada L4C 9Y7.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
Exhibits.
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99.1 -- Certificate of Amendment to Certificate of
Designation, dated April 15,1998 and filed April 23,
1998
99.2 -- Press Release dated April 16, 1998
99.3 -- Description of Capital Stock
99.4 -- Escrow Agreement, dated March 16, 1998, among
WaveRider Communications Inc., each of the holders
of the Series B Preferred Stock, and William E.
Krebs, corporate secretary for the Company
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
---------------------------------------------------
As reported on the Company's Current Report on Form 8-K filed, dated
February 16, 1998 and filed on February 25, 1998, during the period beginning on
February 16, 1998 and ending on March 23, 1998, the Company
1
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issued 500,000 Units (each "Unit" consisting of one share of common stock, par
value $.001 per share, of the Company (the "Common Stock") and one Class E
Common Stock Purchase Warrant (each a "Class E Warrant")). The Units were issued
to purchasers that were not U.S. persons (as defined in the Securities Act of
1933 (the "Securities Act")). The Company claims exemption from registration of
the sale of such shares of the Common Stock pursuant to Regulations 230.901
through 230.904 to the Securities Act ("Regulation S"). The Units were not
offered or sold to any U.S. persons (as defined in the Securities Act) and were
sold only in off-shore transactions. Neither the Company, its affiliates nor any
of their respective representatives engaged in any directed selling efforts with
respect to the Units. The Company implemented the appropriate offering
restrictions with respect to the Units. The Units were not sold through an
underwriter nor did the Company enter into any agreement with any underwriter
concerning the Units.
On April 24, 1998, the Company issued 410,000 shares of the Common Stock
(the "Warrant Common Stock") to certain holders of the Class E Warrants pursuant
to the exercise and surrender of an aggregate of 410,000 Class E Warrants by
such warrant holders. The Company claims exemption from registration of the
sale of such shares of the Common Stock pursuant to Regulation S. No shares of
the Warrant Common Stock offered or sold to any U.S. persons (as defined in the
Securities Act) and were sold only in off-shore transactions. Neither the
Company, its affiliates nor any of their respective representatives engaged in
any directed selling efforts with respect to the Warrant Common Stock. The
Company implemented the appropriate offering restrictions with respect to the
Warrant Common Stock. The Warrant Common Stock was not sold through an
underwriter nor did the Company enter into any agreement with any underwriter
concerning the Warrant Common Stock.
Also on April 24, 1998, the Company issued 10,000,000 shares of the Common
Stock (the "Conversion Common Stock") to the Series B Preferred Stockholders
pursuant to the conversion and surrender of an aggregate of 4,000,000 shares of
the Series B Preferred Stock by such stockholders. The Company claims exemption
from registration of the sale of such shares of the Common Stock pursuant to
Regulation S. No shares of the Conversion Common Stock offered or sold to any
U.S. persons (as defined in the Securities Act) and were sold only in off-shore
transactions. Neither the Company, its affiliates nor any of their respective
representatives engaged in any directed selling efforts with respect to the
Conversion Common Stock. The Company implemented the appropriate offering
restrictions with respect to the Conversion Common Stock. The Conversion Common
Stock was not sold through an underwriter nor did the Company enter into any
agreement with any underwriter concerning the Conversion Common Stock.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAVERIDER COMMUNICATIONS INC.
/s/ Bruce Sinclair
--------------------------------------------
Name: Bruce Sinclair
Title: Chief Executive Officer and President
Date: April 30 , 1998
----
2
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Exhibit 99.1
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WAVERIDER COMMUNICATIONS INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATION
OF
SERIES B VOTING CONVERTIBLE PREFERRED STOCK
Nevada Revised Statutes Section 78.1955
Waverider Communications Inc., a Nevada corporation (the "corporation"),
certifies by and through its undersigned President or Vice-President and
Secretary or Assistant Secretary that the Board of Directors of the corporation,
pursuant to Nevada Revised Statutes Section 78.1955, has adopted a resolution
amending the resolution of the Board of Directors which established a series of
the corporation's authorized preferred stock designated as Series B Voting
Convertible Preferred Stock (the "Series B Voting Convertible Preferred Stock").
The voting powers, designations, preferences, limitations, restrictions and
relative rights of the of the Series B Voting Convertible Preferred Stock were
set forth in a Certificate of Amendment to Articles of Incorporation of Channel
i Inc. (now Waverider Communications Inc.) filed on May 16, 1997 (the "Original
Certificate of Designation").
1. Amendment to Designation. The designation of the Series B Voting
-------------------------
Convertible Preferred Stock shall not be amended by this Certificate of
Amendment.
2. Shareholder Approval. The amendments to the Series B Voting
--------------------
Convertible Preferred Stock set forth in this Certificate of Amendment have been
approved by the stockholders of the corporation as required by Subsection 3 of
Nevada Revised Statutes Section 78.1955.
3. Amendments. Paragraph 4.1 of the Original Certificate of Designation
----------
is hereby deleted in its entirety and the following is hereby inserted in its
place:
"4.1. Conversion Rate. Each share of Series B Preferred Stock may,
subject to the terms hereof and subject to adjustment as provided below, at
any time after issuance be converted at the option of the holder thereof
into two-and-one-half (2.5) fully paid, nonassessable shares of common
stock of the Company, US$.001 par value per share. The common shares of
the Company into which shares of Series B Preferred Stock are converted
("Conversion Shares") will not be registered, at the time of issuance,
under the Securities Act of 1933, as amended (the "Act"), but shall be
issued in reliance upon an exemption from registration under the Act.
Conversion shall be deemed to occur on the date a certificate or
certificates evidencing shares of Series B Preferred Stock being converted
is presented to the Company's transfer agent and registrar, properly
endorsed and accompanied by the proper fee payable to the transfer agent."
The following is hereby added immediately after Paragraph 4.5:
"4.6 Status of Shares. Unless otherwise provided by the articles of
incorporation of the Company:
(a) Prior to the issuance of any shares of Series B Preferred Stock,
unless the articles of incorporation of the Company provide otherwise,
the Board of Directors, by resolution thereof, may
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(i) amend the designation, number, voting powers, preferences,
limitations, restrictions and relative rights of such Series B
Preferred Stock, or
(ii) rescind, retire or otherwise cancel such Series B Preferred
Stock and the establishment thereof.
(b) In the event that shares of Series B Preferred Stock have been
issued and are outstanding, the Board of Directors, by resolution
thereof, may amend the designation, number, voting powers,
preferences, limitations, restrictions and relative rights of the
Series B Preferred Stock subject to approval by the vote of
stockholders holding shares of the Company entitling them to exercise
a majority of the voting power, or such greater proportion of the
shares as may be required by the articles of incorporation of the
Company, of Series B Preferred Stock and each class and each series of
stock which, before amendment, is senior to Series B Preferred Stock
as to the payment of distributions upon dissolution of the
corporation.
(c) Shares of Series B Preferred Stock that have been issued and
thereafter redeemed, converted, exchanged, purchased, retired or
surrendered to the Company, or otherwise reacquired by the Company,
shall have the status of authorized and unissued shares and unless the
articles of incorporation of the Company provide otherwise, the Board
of Directors, by resolution thereof, may redesignate, rescind, retire
or otherwise cancel such Series B Preferred Stock and the
establishment thereof."
2
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In witness whereof, the undersigned have executed this Certificate of
Amendment as of the 15th day of April, 1998.
------
/s/ D. Bruce Sinclair
_________________________________________,
D. Bruce Sinclair, President
/s/ T. Scott Worthington
_________________________________________,
T. Scott Worthington, Assistant Secretary
Province of Ontario )
) ss.
This instrument was acknowledged before me on April 22, 1998, by D. Bruce
Sinclair as President of Waverider Communications Inc.
_____________________________
NOTARY PUBLIC
My Commission Does Not Expire: __________________.
Province of Ontario )
) ss.
This instrument was acknowledged before me on April 22, 1998, by T. Scott
Worthington as Assistant Secretary of Waverider Communications Inc.
_____________________________
NOTARY PUBLIC
My Commission Does Not Expire: __________________.
3
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Exhibit 99.2
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April 16, 1998
WAVERIDER COMMUNICATIONS INC.
ANNOUNCES CAPITAL RESTRUCTURING
Shareholder agreement enhances common share values
(TORONTO) - WaveRider Communications Inc., announced today the completion of an
agreement reducing a source of future stock dilution. The agreement with its
Series B Preferred Shareholders, dated for reference March 16, 1998, reduces the
conversion rights for the Series B Preferred shares from 10 common shares per
preferred share to 2.5 common shares per preferred share.
"We view this agreement as an extremely strong display of support and
confidence, by the Series B Shareholders, for the company's development and
direction," said Bruce Sinclair, WaveRider's president and CEO.
"This agreement enhances WaveRider's common share values, by removing a major
source of future dilution," said Scott Worthington, WaveRider's chief financial
officer. "At the same time it increases the company's flexibility to raise
capital in the future."
As part of the agreement, the preferred shareholders agreed to immediately
convert their preferred shares to common stock at the reduced conversion rate.
The resulting 10 million new common shares were immediately placed in escrow and
will be held by the company until certain levels of performance are met.
WaveRider is a leading wireless technology company that develops, manufactures
and markets products for data communications and wireless Local Area Network
(LAN) applications. WaveRider's high performance products use frequency-hopping,
spread spectrum technology coupled with time division multiple access techniques
and operate in the license-free 900MHz and 2.4GHz ISM frequency bands.
Media Contact: Darryl Simmons at The Cohen Group (416) 756-7996 ext.6238
Investor Relations: 1-(888) 533-1910. Email: [email protected]
<PAGE>
Exhibit 99.3
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
common stock, par value $.001 per share, (the "Common Stock") and 5,000,000
shares of preferred stock, $.001 par value per share (the "Preferred Stock"),
consisting of 5,000,000 shares of undesignated preferred stock.
COMMON STOCK
As of April 24, 1998, there were 39,773,059 shares of the Common Stock
outstanding and held by approximately 813 holders of record.
Each holder of the Common Stock shall have equal ratable rights to
dividends from funds legally available therefor, if, as and when declared by the
Board of Directors of the Company. The declaration and payment of all
dividends, however, is subject to the discretion of the Board of Directors. In
the event of liquidation, dissolution or winding up of the affairs of the
Company, the holders of the Common Stock are entitled to share ratably in all
assets remaining. Holders of the Common Stock are entitled to one vote per
share on all matters which stockholders may vote on at all meetings of
stockholders. The holders of the Common Stock do not have cumulative voting
rights. The holders of the Common Stock do not have preemptive, subscription or
conversion rights and there are no redemption or sinking fund provisions
applicable thereto. All the outstanding shares of the Common Stock are fully
paid and nonassessable.
PREFERRED STOCK
The Company is authorized to issue shares of the Preferred Stock from time
to time in one or more series without stockholder approval. No shares of the
Preferred Stock are currently outstanding.
The Company's Board of Directors is authorized, without any further action
by the stockholders of the Company, to (i) divide the remaining authorized but
unissued shares of the Preferred Stock into series; (ii) designate each such
series; (iii) fix and determine dividend rights; (iv) determine the price, terms
and conditions on which shares of the Preferred Stock may be redeemed; (v)
determine the amount payable to holders of Preferred Stock in the event of
voluntary or involuntary liquidation; (vi) determine any sinking fund
provisions; and (vii) establish any conversion privileges. Thus, the Board of
Directors, without stockholder approval, could authorize the issuance of
Preferred Stock with rights which could decrease the amount of earnings and
assets available for distribution to holders of shares of Common Stock or
otherwise adversely affect the rights of the holders of Common Stock. Any
future issuance of Preferred Stock may have the effect of delaying or preventing
a change in control or management of the Company and may adversely affect the
voting and other rights of the holders of Common Stock. At present, the Company
has no plans to issue any Preferred Stock.
NEVADA ANTI-TAKEOVER PROVISIONS
Nevada's "Combination with Interested Stockholders Statute," Nevada Revised
Statutes (S)(S) 78.411-78.444, which applies to Nevada corporations having at
least 200 stockholders, prohibits an "interested stockholder" from entering into
a "combination" with the corporation, unless certain conditions are met. A
"combination" includes (a) any merger with an "interested stockholder," or any
other corporation which is or after the merger would be, an affiliate or
associate of the interested stockholder, (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets, in one transaction or
a series of transactions, to an "interested stockholder", having (i) an
aggregate market value equal to 5% or more of the aggregate market value of the
corporation's assets, (ii) an aggregate market value of all outstanding shares
of the corporation, or (iii) representing 10% or more of the earning power of
the net income of the corporation, (c) any issuance or transfer of shares of the
corporation or its subsidiaries, to the "interested stockholder," having an
aggregate market value equal to 5% or more of the aggregate market value of all
the outstanding shares of the corporation,
<PAGE>
(d) the adoption of any plan or proposal for the liquidation or dissolution of
the corporation proposed by the "interested stockholder," (e) certain
transactions which would result in increasing the proportionate share or shares
of the corporation owned by the "interested stockholder," or (f) the receipt of
benefits, except proportionately as a stockholder, of any loans, advances or
other financial benefits by, an "interested stockholder." An "interested
stockholder" is a person who (i) directly or indirectly owns 10% or more of the
voting power of the outstanding voting shares of the corporation or (ii) an
affiliate or associate of the corporation which at any time within three years
before the date in question was the beneficial owner, directly or indirectly, of
10% or more of the voting power of the then outstanding shares of the
corporation.
A corporation to which the statute applies may not engage in a
"combination" within three years after the interested stockholder acquired its
shares, unless the combination or the interested stockholder's acquisition of
shares was approved by the board of directors before the interested stockholder
acquired the shares. If this approval is not obtained, the combination may be
consummated after the three year period expires if all the requirements in the
Articles are met and either (a) (i) the board of directors of the corporation
approved, prior to such person becoming an interested stockholder, the
combination or the purchase of Shares by the interested stockholder or (ii) the
combination is approved by the affirmative vote of the holders of a majority of
voting power not beneficially owned by the interested stockholder at a meeting
called no earlier than three years after the date the interested stockholder
became such or (b) the aggregate amount of cash and the market value of
consideration other than cash to be received by holders of common shares and
holders of any other class or series of shares meets the minimum requirements
set forth in Section 78.441 through 78.443, inclusive, and prior to the
consummation of the combination, except in limited circumstances, the
"interested stockholder" would not have become the beneficial owner of
additional voting shares of the corporation.
Nevada's "Control Share Acquisition Statue," Nevada Revised Statutes (S)(S)
78.378-78.3793, prohibits an acquiror, under certain circumstances, from voting
shares of a target corporation's stock after crossing certain threshold
ownership percentages, unless the acquiror obtains the approval of the target
corporation's stockholders. The Control Share Acquisition Statute only applies
to Nevada corporations with at least 200 stockholders including at least 100
record stockholders who are Nevada residents, and which do business directly or
indirectly in Nevada. The Company does not at present believe that it "does
business" in Nevada within the meaning of the Control Share Acquisition Statute;
however, as the market for the Company's product expands, the Company may "do
business" in Ne The Statute specifies three thresholds: at least one-fifth but
less than one-third, at least one-third but less than a majority, and a majority
or more, for the outstanding voting power. Once the acquiror crosses one of the
above thresholds, shares which it acquired in the transaction taking it over the
threshold or within ninety days thereof become "Control Shares" which are
deprived of the right to vote until a majority of the disinterested stockholders
restore that right. A special stockholders' meeting may be called at the
request of the acquiror to consider the voting rights of the acquiror's shares
no more than 50 days (unless the acquiror agrees to a later date) after the
delivery by the acquiror to the corporation of an information statement which
sets forth the range of voting power that the acquiror has acquired or proposes
to acquire and certain other information concerning the acquiror and the
proposed control share acquisition. If no such request for a stockholders'
meeting is made, consideration of the voting rights of the acquiror's shares
must be taken at the next special or annual stockholders' meeting. If the
stockholders fail to restore voting rights to the acquiror, or if the acquiror
fails to timely deliver an information statement to the corporation, then the
corporation may, if so provided in its Articles or Bylaws, call certain of the
acquiror's shares for redemption. The Company's Articles and Bylaws do not
currently permit it to call an acquiror's shares for redemption under these
circumstances. The Control Share Acquisition Statute also provides that in the
event the stockholders restore full voting rights to a holder of Control Shares
which owns a majority of the voting stock, then all other stockholders who do
not vote in favor of restoring voting rights to the Control Shares may demand
payment of the "fair value" of their shares (which is generally equal to the
highest price paid in the transaction subjecting the stockholder to the
statute.)
The provisions described above, together with the ability of the Board of
Directors to issue Preferred Stock as described under "--Preferred Stock," may
have the effect of delaying or deterring a change in the control or management
of the Company.
2
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TRANSFER AGENT
The transfer agent for the Common Stock is Corporate Stock Transfer, Inc.,
Denver, Colorado.
3
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Exhibit 99.4
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ESCROW AGREEMENT
This ESCROW AGREEMENT dated effective as of March 16th, 1998 by and between
WaveRider Communications, Inc., a Nevada corporation (the "Company"), William E.
Krebs, the corporate secretary of the Company (the "Escrow Agent"), and the
holders of Common Stock issued upon conversion of the Series B Preferred Stock,
each of which has executed this agreement in counterpart, (collectively, the
"Stockholders").
WITNESSETH:
WHEREAS, pursuant to an Exchange Agreement (as defined below), the
stockholders exchanged their shares of the capital stock of Major Wireless
Communications, Inc. for shares of the Series B Preferred Stock (as defined
below).
WHEREAS, the Exchange Agreement provided that the shares of Series B
Preferred Stock issued pursuant to the Exchange Agreement would be held by the
secretary and released only upon the achievement of certain performance
criteria.
WHEREAS, the Company and the Stockholders also entered into a Collateral
Agreement pursuant to which the Stockholders agreed not to convert their shares
of Series B Preferred Stock until the required performance levels had been
satisfied.
WHEREAS, pursuant to the terms of a certain Shareholders Agreement (as
defined below), the Company and the Stockholders have agreed that it would be in
the best interests of the Company and the Stockholders to have the Stockholders
convert their shares into shares of Common Stock.
WHEREAS, in connection with such conversion, the Shareholders Agreement
requires the Stockholders to execute and deliver this Escrow Agreement;
NOW, THEREFORE, in consideration of the promises, the mutual covenants,
representations and warranties made herein and the mutual benefits to be derived
herefrom, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Escrow Agreement, the defined terms set forth below have
the respective meanings set forth below (each such meaning to be equally
applicable to both the singular and plural forms of the respective terms so
defined).
"Common Stock ": the common stock of the Company.
- ---------------
"Company": WaveRider Communications, Inc., a Nevada corporation.
- ---------
"Escrow Account": an account into which the Escrowed Shares are deposited and
- ----------------
held by the Escrow Agent pursuant to this Agreement.
"Escrow Agent": the person or entity currently serving as escrow agent hereunder
- --------------
pursuant to Section 2.1 or Section 2.2. .
"Escrowed Shares": the Common Stock of the Company issued upon conversion of the
- -----------------
Series B Preferred Stock which is delivered to the Escrow Agent pursuant to the
terms of the Shareholders Agreement, together with any
<PAGE>
additional shares of Common Stock or other securities distributed pursuant to a
stock split, stock dividend, reclassification of shares or other similar
transaction to which such shares may be subject.
"Exchange Agreement": that certain Share Exchange Agreement together with
------------------
supplemental agreement thereto, both executed on the 13th day of May, 1997,
between the Company and the shareholders of Major Wireless Communication, Inc.,
as amended.
"Series B Preferred Stock": the Series B Convertible Preferred Stock of the
------------------------
Company.
"Shareholder Agreement": the Shareholder Agreement, dated for reference the 16th
- -----------------------
day of March, 1998 among the Company and the Stockholders subject to the terms
of the said Exchange Agreement.
"Stockholders": those individuals or entities together who have executed this
- --------------
agreement in counterpart and who are subject to the said Exchange Agreement.
ARTICLE 2
APPOINTMENT OF ESCROW AGENT;
SUCCESSOR ESCROW AGENT
2.1 Appointment of Escrow Agent. William E. Krebs is hereby appointed
---------------------------
Escrow Agent hereunder, and accepts his appointment and designation as Escrow
Agent pursuant to the terms and conditions of this Escrow Agreement. In the
event William E. Krebs, or any successor to Mr. Krebs, ceases to serve as
corporate secretary of the Company at any time, he shall also cease to serve as
Escrow Agent hereunder, and the successor corporate secretary of the Company
shall be designated as the successor Escrow Agent. Any such successor Escrow
Agent shall deliver to each of the other parties hereto a written instrument
accepting such appointment hereunder, whereupon it shall succeed to all the
rights and duties of the Escrow Agent hereunder and shall be entitled to receive
the Escrowed Shares in the Escrow Account at such time.
2.2 Successors to Escrow Agreement. The Escrow Agent, or any successor
------------------------------
to it hereafter appointed, may at any time resign by giving not less than 60
days prior written notice to each of the other parties hereto, and shall be
discharged of its duties hereunder upon the appointment of a successor Escrow
Agent as hereinafter provided. In the event of any such resignation, a
successor Escrow Agent, shall be selected by the Company. Any such successor
Escrow Agent shall deliver to each of the other parties hereto a written
instrument accepting such appointment hereunder, whereupon it shall succeed to
all the rights and duties of the Escrow Agent hereunder and shall be entitled to
receive the Escrowed Shares in the Escrow Account at such time.
ARTICLE 3
ESCROW ARRANGEMENTS
3.1 Purpose of the Escrow Account. This Escrow Agreement has been
-----------------------------
executed and delivered, and the Escrow Account is hereby established, for the
purpose of holding the Common Stock issuable upon conversion of the Series B
Preferred Stock until certain performance criteria are met.
3.2 Delivery of the Escrowed Shares. As soon as practicable following the
-------------------------------
conversion of the Series B Convertible Preferred Stock of the Company, the
Company shall deliver to the Escrow Agent certificates, registered in the name
of each of the Stockholders, for the Escrowed Shares. The Escrowed Shares shall
represent shares that the Stockholders would otherwise be entitled to receive
upon conversion of the Series B Preferred Stock. The Stockholders will deliver
to the Escrow Agent stock powers duly executed in blank. The Escrow Agent shall
hold all of the Escrowed Shares in escrow for the benefit of the Stockholders
and the Company in accordance with the terms and conditions hereof.
2
<PAGE>
3.3 Distribution of Escrowed Shares. The Escrow Agent shall release the
-------------------------------
Escrowed Shares to the Stockholders only upon the occurrence of the events and
in the numbers set forth on Schedule A attached hereto, together with any
dividends being held with respect to the shares being released. In the event
that any one or more of the events described in Schedule A have not occurred
prior to February 7, 2002 (the "Expiration Date"), any Escrowed Shares which
have not been released in accordance with the provisions of this Agreement and
Schedule A on or before the Expiration Date, together with any dividends or
other distributions thereon, shall be canceled and returned to the Company;
provided, however, that the Company by its Board of Directors at their sole
discretion and from time to time, may extend such Expiration Date for such
additional time or times up to February 7, 2004, and shall give notice to the
Escrow Agent of any such extension. The Company shall notify the Escrow Agent
and the Stockholders of the occurrence of an event described in Schedule A.
The Escrowed Shares delivered to the Stockholders shall be in proportion to each
Stockholder's ownership of the Escrowed Shares.
3.4 Change in Control. In the event of a "change in control" of the
-----------------
Company (as defined below), then the Escrow Agent shall immediately upon the
occurrence of the change in control release all of the Escrowed Shares to the
Stockholders, together with any dividends being held with respect to the shares
being released. For purposes of this Section 3.4, a "change in control" shall
be deemed to have occurred if:
(a) any person or entity acquires beneficial ownership of 20% or more of
the Common Stock of the Company then outstanding, or such other voting
securities of the Company which results in such person or entity owning 20% or
more of the combined voting power of the Company's outstanding securities; or
(b) the shareholders of the Company approve a reorganization, merger,
consolidation, liquidation or dissolution of the Company, or, the sale or
disposition of all the assets of the Company (a "Capital Transaction"); or
(c) a change in the composition of the Board of Directors of the Company
(the "Board") occurs such that the individuals who constitute the Board on
February 16, 1998, become a minority of the Board, provided that such change
does not occur as a result of the sickness, health, disability, voluntary
termination of any existing Board Member.
Notwithstanding the foregoing, a recapitalization or reorganization which
results in all of the outstanding equity and voting securities of the Company
following such recapitalization or reorganization being beneficially owned by
shareholders of the Company in the same proportion as immediately prior to such
recapitalization or reorganization, shall not be deemed to be a change in
control.
3.5 Dividends. Any securities, cash or other property in respect of any
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dividend, stock splits, recapitalizations, redemptions, liquidations, mergers,
spin-offs, split-ups or exchanges or conversion of the Escrowed Shares shall be
held in the Escrow Account by the Escrow Agent subject to all of the terms of
this Escrow Agreement. The Escrow Agent shall retain as part of the Escrow
Account any and all income derived from the Escrowed Shares and/or any other
funds, investments or securities permitted by this Escrow Agreement, and such
income shall become part of the Escrow Account and shall be distributed in
accordance with the terms of this Escrow Agreement. During the term of this
Agreement the Escrowed Shares may not be assigned, sold, transferred, pledged or
otherwise transferred or encumbered.
3.6 Right to Vote the Escrowed Shares. Each of the Stockholders shall
---------------------------------
have the right to the exercise of any voting rights pertaining to the Escrowed
Shares registered in his name until such time as those shares are delivered to
the Company pursuant to Section 3.3.
ARTICLE 4
FEES OF THE ESCROW AGENT;
CERTAIN RIGHTS OF THE ESCROW AGENT
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4.1 Fees. The Escrow Agent shall not receive any fee but shall be
----
reimbursed for all of his reasonable expenses, including counsel fees, incurred
by him. All of the Escrow Agent's reasonable expenses, including counsel
fees, hereunder shall be paid by the Company.
4.2 Certain Rights of the Escrow Agent. (a) The Escrow Agent may act upon
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any instrument or other writing believed by it in good faith to be genuine and
to be signed or presented by the proper person. The Escrow Agent shall not be
liable to the Company or any of the Stockholders for any liability or losses
sustained by the Company or such Stockholders as a result of any action taken or
omitted to be taken by it in good faith unless a court of competent jurisdiction
determines that the Escrow Agent's willful misconduct or gross negligence was
the primary cause of any loss to the Company or any such Stockholder, as the
case may be. The Escrow Agent may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or omitted by it hereunder in good faith and in accordance with the opinion of
such counsel.
(b) Each of the Stockholders and the Company agree jointly and
severally, to indemnify and hold harmless the Escrow Agent from all liabilities
and losses that may be incurred by it as a result of its being named as a party
to or responding to any litigation arising from the performance of its duties
hereunder, except for such litigation that arises from any act or failure to act
by the Escrow Agent that is determined by a court of competent jurisdiction to
constitute willful misconduct or gross negligence.
(c) The Escrow Agent will not be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including, but not limited
to lost profits) even if the Escrow Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.
(d) The duties and responsibilities of the Escrow Agent hereunder
shall be determined solely by the express provisions of this Escrow Agreement,
and no other or further duties or responsibilities shall be implied. The Escrow
Agent shall not have any liability under, nor duty to inquire into the terms and
provisions of, any Escrow Agreement or instructions, other than as set forth in
this Escrow Agreement.
(e) In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands from
any party hereto which, in its opinion, conflict with any of the provisions of
this Escrow Agreement, the Escrow Agent shall be entitled to refrain from taking
any action and its sole obligation shall be to keep safely the Escrowed Shares
until it shall be directed otherwise in a written notice satisfactory to the
Escrow Agent by the other parties hereto or by a final order or judgment of a
court of competent jurisdiction.
(f) In the event of a dispute between the Company and the Stockholders
in connection herewith such that the Escrow Agent deems it necessary for its
protection to do so, the Escrow Agent may deposit the Escrowed Shares into a
court of competent jurisdiction and thereupon shall have no further duties in
connection herewith to any party.
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ARTICLE 5
TERMINATION OF ESCROW
AND RELEASE OF ESCROWED SHARES
5.1 Termination of Escrow. This Escrow Agreement shall terminate upon
---------------------
the earlier to occur of (i) the Expiration Date, as it may be extended, and (ii)
the final distribution of the Escrowed Shares and the termination of the Escrow
Account in accordance with Section 3.3 or 3.4 hereof.
ARTICLE 6
MISCELLANEOUS
6.1 Notices, All notices, requests, demands and other communications
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pursuant to this Escrow Agreement shall be in writing, addressed to the address
of the parties stated below or to such changed address as such party may have
fixed by notice and shall be deemed to have been given and received: (i) the
same day, if by hand delivery, (ii) the next day, if by overnight courier, (iii)
five days after mailed, enclosed in a registered or certified post-paid
envelope, return receipt requested, or (iv) upon telephone confirmation of
receipt by facsimile transmission provided, however, that all notices,
requests, demands and other communications to the Escrow Agent shall be deemed
to have been given and received on the date received by the Escrow Agent: (a)
If to the Stockholders, addressed to such Stockholders at their address as
recorded on the Company records; (b) If to the Company, at 595 Howe
Street, Suite 204, Vancouver, B.C., V6C 2T5; and (c) If to the Escrow
Agent, at 595 Howe Street, Suite 204, Vancouver, B.C. V6C 2T5
Any notice of change of address shall be effective only upon receipt.
6.2 Entire Escrow Agreement. This Escrow Agreement, in respect of
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the Escrow Agent, the Company and the Stockholders, together with the
Shareholder Agreement, and exhibits and schedules thereto, in respect of the
Company and the Stockholders, sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of every kind and nature
among them.
6.3 Governing Law, This Escrow Agreement and its validity, construction
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and performance shall be governed in all respects by the laws of the State of
Nevada, without giving effect to principles of conflicts of law.
6.4 Severability. If any provision of this Escrow Agreement or the
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application of any provision hereof to any person or circumstance is held
invalid, the remainder of this Escrow Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby.
6.5 Successors and Assigns. This Escrow Agreement and all action taken
-----------------------
hereunder in accordance with the terms hereof shall be binding upon and inure to
the benefit of the Company, the Stockholders and the Escrow Agent, and their
respective successors and assigns.
6.6 Counterparts: Headings. This Escrow Agreement may be executed in one
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or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The headings
contained in this Escrow Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Escrow Agreement.
6.8 Amendment: Waiver. This Escrow Agreement shall not be changed,
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modified or amended except by a writing signed by all of the parties hereto. No
failure or delay on the part of a party hereunder in the exercise of any right
hereunder in enforcing or requiring the compliance or performance by any of the
other parties hereunder of any of the terms or conditions of this Escrow
Agreement shall operate as a waiver of any such right,
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or constitute a waiver of a breach of any such terms or conditions, nor shall
any single or partial exercise of any such right preclude other or further
exercise thereof or of any other right, nor shall any of the aforementioned
failures or delays affect or impair such rights generally in any way. The waiver
by any party of a breach of any term or condition of this Escrow Agreement by
the other party shall not operate as nor be construed as a waiver of any
subsequent breach thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
WAVERIDER COMMUNICATIONS INC., BY:
_______________________ ___________________
President Date
BY:
_______________________ ___________________
(Signature) Date
_______________________
(TITLE)
____________________________________________ __________________________________
WILLIAM E. KREBS WITNESS DATE
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SCHEDULE "A" - RELEASE OF SHARES:
(EXTRACTED FROM SHARE EXCHANGE AGREEMENT; "MWCI" REFERS TO MAJOR WIRELESS
COMMUNICATIONS INC.)
MWCI is a development stage company which had developed and has certain
proprietary rights to technology allowing for the wireless transmission of both
voice and data. Its initial move to the marketplace is in the field of internet
delivery in which its wireless systems will be licensed to internet providers
for a fee. The following schedule references the various stages of such
marketing. "Prototype" refers to the complete system enabling such wireless
transmission. "License agreements" refers to the agreements between MWCI and
individual internet servers for the use of MWCI's system and "Gross Revenue"
includes all cumulative revenue generated by MWCI whether from License fees, the
lease or sale of equipment or otherwise, but does not include any taxes required
to be collected by MWCI with respect to same.
EVENT % OF SHARES RELEASED
Prototype development completed 5%
Prototype operational in one community 10%
25 Non-conditional License agreements signed
with non-refundable deposits received 15%
25 Licensees operational utilizing the system 15%
Gross revenue exceeds $10 million CDN 25%
Gross revenue exceeds $25 million CDN 30%
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