OMB APPROVAL
OMB Number 3235-0145
Expires: August 31, 1999
Estimated average burden
hours per response...............14.90
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1 )*
WaveRider Communications Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.001 1
- --------------------------------------------------------------------------------
(Title of Class of Securities)
- --------------------------------------------------------------------------------
943570101
---------------------------------------------
(CUSIP Number)
Brian G. Lloyd, Esq.
Parr, Waddoups, Brown, Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, UT 84111
(801) 532-7840
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 24, 1998
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. |_|
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Potential persons who are to respond to the collection of information contained
in this form are not required to respond unless the form displays a currently
valid OMB control number.
- -----------------
1 This statement amends a statement filed on Schedule 13D with respect to
the Series B Preferred Stock, par value $.001, of the issuer. Such prior
statement should have identified the Title of the Class of Securities as the
Common Stock, par value $.001, of the Issuer.
SEC 1746 (10-97) Page 1 of 23
<PAGE>
CUSIP No. 943570101
- ------------------- SCHEDULE 13D
- --------------------------------------------------------------------------------
1 Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Stephen Grant
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
Not applicable
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Canada
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of 1,820,500
Shares -------------------------------------------------------
Beneficially 8 Shared Voting Power
Owned by None
Each -------------------------------------------------------
Reporting 9 Sole Dispositive Power
Person 1,820,500 2
With -------------------------------------------------------
10 Shared Dispositive Power
None
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,820,000
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
4.6%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
- --------------------------------------------------------------------------------
- ----------------------
2 Notwithstanding the indication herein that the Reporting Person has sole
dispositive power with respect to the securities identified herein, such
securities are subject to that certain Escrow Agreement described in Item 6
below and as such are subject to cancellation by the issuer.
SEC 1746 (10-97) Page 2 of 23
<PAGE>
CUSIP No. 943570101
- ------------------- SCHEDULE 13D
Item 1. Security and Issuer
(a) Title of Class of Equity Securities: Common Stock, par value $.001
(the "Common Stock")
(b) Name of Issuer: WaveRider Communications Inc. (the "Issuer")
(c) Address of Issuer's Principal Executive Office: 235 Yorkland Blvd.,
Suite 1101, Toronto, Ontario, Canada M2J 4Y8
Item 2. Identity and Background
(a) Name: Stephen Grant (the "Reporting Person")
(b) Residence address/business address: 3702 Wilho Road, Sorrento, B.C.,
Canada, V9E 1W0
(c) Present principal occupation or employment and the name, principal
business and address of any corporation or other organization in which
such employment is conducted:
Vice President, Business Development of the Issuer
(d) Whether or not, during the last five years, such person has been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) and, if so, give the dates, nature of
conviction, name and location of court, and penalty imposed, or other
disposition of the case: None
(e) Whether or not, during the last five years, such person was a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws;
and, if so, identify and describe such proceedings and summarize the
terms of such judgment, decree or final order:
None
(f) Citizenship: Canada
Item 3. Source and Amount of Funds or Other Consideration Not applicable
Item 4. Purpose of Transaction Not applicable because the reduction of the
Reporting Person's beneficial ownership to below 5% was the result of a change
in the conversion ratio of the Series B Preferred Stock to shares of the Common
Stock. See Item 5(c) below.
SEC 1746 (10-97) Page 3 of 23
<PAGE>
CUSIP No. 943570101
- ------------------- SCHEDULE 13D
Item 5. Interest in Securities of the Issuer
(a) The Reporting Person beneficially owns 1,820,500 shares of the Common
Stock or 4.6% of the outstanding shares of the Common Stock.
(b) The Reporting Person has the sole power to vote and direct the
disposition of 1,820,500 shares of the Common Stock. 3
(c) On April 24, 1998, the Reporting Person effected a conversion of
600,000 shares of the Series B Voting Convertible Preferred Stock, par
value $.001, of the Issuer (the "Series B Preferred Stock") into
1,500,000 shares of the Common Stock at a rate of 2.5 shares of Common
Stock for each share of the Series B Preferred Stock. The conversion
was effected following a reduction in the conversion ratio of the
Series B Preferred Stock to the Common Stock. The change in the
conversion ratio reduced the beneficial ownership of the Reporting
Person to below 5%.
(d) Not applicable
(e) The Reporting Person ceased to be the beneficial owner of more than 5%
of the Common Stock on April 24, 1998.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer
The Reporting Person is a party to the following agreements relating to the
securities of the Issuer:
(a) That certain Escrow Agreement, dated March 16, 1998, among the Issuer,
William E. Krebs, as escrow agent, and the holders of the Common Stock
issued upon conversion of the Series B Preferred Stock (the
"Stockholders") which provides that 1,625,000 shares of the Common
Stock beneficially owned by the Reporting Person are to 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. 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.
(b) That certain Shareholders Agreement, dated March 16, 1998, among the
Issuer and the Stockholders which provides among other things that the
Stockholders would execute the Escrow Agreement identified above.
(c) That certain Share Exchange Agreement together with supplemental
agreement thereto, both executed on May 13, 1997, between the Issuer
- --------------------------
3 See Note 2 on page 2 above.
SEC 1746 (10-97) Page 4 of 23
<PAGE>
CUSIP No. 943570101
- ------------------- SCHEDULE 13D
and each of the shareholders of Major Wireless Communications Inc., as
amended which was filed with the prior filing of the Reporting Person
on Schedule 13D.
(d) That certain Amendment to Share Exchange Agreement, dated March 16,
1998, between the Issuer and each of the holders of the Series B
Convertible Preferred Stock, par value $.001 per share, of the Issuer
which provides for a change in the conversion ratio of such Series B
Convertible Preferred Stock.
Item 7. Material to Be Filed as Exhibits
(a) Amendment to Share Exchange Agreement, dated March 16, 1998.
(b) Escrow Agreement, dated March 16, 1998.
(c) Shareholders Agreement, dated March 16, 1998.
SEC 1746 (10-97) Page 5 of 23
<PAGE>
CUSIP No. 943570101
- ------------------- SCHEDULE 13D
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
August 20, 1998 /s/ Stephen Grant
- ---------------------------------- ---------------------------------------
Date Stephen Grant
SEC 1746 (10-97) Page 6 of 23
<PAGE>
List of Exhibits
----------------
Exhibit A - Amendment to Share Exchange Agreement, dated March 16, 1998.
- ---------
Exhibit B - Escrow Agreement, dated March 16, 1998.
- ---------
Exhibit C - Shareholders Agreement, dated March 16, 1998.
- ---------
SEC 1746 (10-97) Page 7 of 23
<PAGE>
Exhibit A
---------
AMENDMENT TO SHARE EXCHANGE AGREEMENT
Between:
WaveRider Communications Inc., (formerly Channel i Inc.), incorporated under the
laws of the State of Nevada, United States of America, with offices at 595 Howe
Street, Suite #204, Vancouver, B.C., Canada, V6C 2T5
(hereafter referred to as the "Purchaser")
and:
That Party identified on the Signature Page hereof, being one of the holders of
shares of Series B Voting Convertible Preferred Shares in the capital stock of
the Purchaser, (hereafter referred to as the "Vendor"),
Whereas:
A. The parties hereto are subject to the terms of an agreement entitled "Share
Exchange Agreement", together with a further agreement collateral and
supplemental to the first, both agreements having been executed the 13th day of
May, 1997;
B. Under the terms of the said agreements taken together, the Vendor, along with
certain other parties, (herein collectively referred to as the "Other Vendors"),
is entitled to certain Convertible Preferred Shares in the capital stock of the
Purchaser known as Series B Voting Convertible Preferred Shares, the conversion
of which into Common shares of the Purchaser is subject to the attainment of
certain performance criteria by Major Wireless Communications Inc.;
C. It has been determined by the Vendor, in concert with all the other Vendors
subject to the transaction, that it is in its best interests to modify the said
agreements as more particularly set forth herein;
Now Therefore, in consideration of the premises and the mutual covenants, terms
and conditions herein, the parties agree as follows:
1. Paragraph 1.01 (b) as contained in the Share Exchange Agreement is hereby
deleted and replaced with the following:
" b) As payment in full for the control shares, the Purchaser shall ratably
issue and deliver to the Vendors an aggregate of 4,000,000 shares of the
Purchaser's authorized but unissued Series B Voting Convertible Preferred Stock,
$0.001 par value per share, (hereafter referred to as the "Exchange Shares");
The Exchange Shares shall incorporate, inter alia, the right of conversion to
Common shares at a ratio of 2.5 Common shares for each Exchange Share. The
Exchange Shares shall be allocated among the Vendors and issued in proportion to
their ownership of Control Shares. The said Exchange Shares, and the Common
SEC 1746 (10-97) Page 8 of 23
<PAGE>
Shares into which the same may be converted, may be subject to a legend giving
notice of the provisions hereof and shall be held by the Corporate Secretary and
released only following the occurrence of the events and in the numbers set
forth in Schedule A thereto, or on the occurrence of a "Change in Control " of
the Purchaser. "Change of Control" of the Purchaser shall be deemed to have
occurred if:
(i) any person or entity acquires beneficial ownership of 20% or more of the
Common Stock of the Purchaser 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 Purchaser's outstanding voting securities; or,
(ii) the shareholders of the Purchaser approve a reorganization, merger,
consolidation, liquidation, or dissolution of the Purchaser, or, the sale or
disposition of all of the assets of the Purchaser; or,
(iii) a change in the composition of the Board of Directors of the Purchaser,
(the "Board"), occurs such that the individuals who constitute the Board on the
16th day of February, 1998 , become a minority of the Board, provided that such
change does not occur as a result of the sickness, health, disability, death, or
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
recapitatlization or reorganization, shall not be deemed to be a change in
control.
In the event any one or more of the events described in Schedule A have not
occurred prior to the expiration of 5 years from the date of execution of this
agreement, the remaining shares not so released, shall be cancelled by the
Purchaser; provided however, that the Purchaser, by its Board of Directors at
their sole discretion from time to time, may extend the said 5 year time frame
for such additional time or times up to a cumulative period of 2 years, as it
may deem advisable and where, in their sole discretion, the failure to do so
would be unfair to the Vendors.
So long as any of the said Exchange Shares or the Common Shares into which
the same are converted, are held by the Corporate Secretary in accordance with
the terms of this Section or any other agreement or instructions given in
relation thereto, the registered owners thereof shall have full voting rights
and the right to receive dividends declared thereon, if any, with all other
rights associated with the ownership of the same to be subject to the terms of
this Section.
The Vendor, by this Agreement, hereby requests and authorizes the Purchaser
and its Corporate Secretary to effect such conversion of the Exchange Shares for
Common Shares on its behalf."
SEC 1746 (10-97) Page 9 of 23
<PAGE>
2. The agreement collateral and supplementary to the said Share Exchange
Agreement which was also executed on the 13th day of May, 1997, is hereby
terminated and cancelled.
3. In all other respect the parties hereby confirm and ratify the contents of
the said Share Exchange Agreement.
4. This amendment to the Share Exchange Agreement shall be executed in
counterpart by all parties to or bound by the said Share Exchange Agreement and
shall be effective and binding on the parties only after each of the parties
have executed the same.
5. Wherever the neuter gender is used, the same shall be deemed to include the
masculine or feminine and the singular shall be deemed to include the plural
where the context so requires.
In Witness Whereof the parties hereto have executed this agreement effective the
16th day of March, 1998.
WaveRider Communications Inc., by:
- -------------------------------- ----------------
Secretary Date
by:
- ---------------------- ------------------- ----------------
Shareholder Witness Date
SEC 1746 (10-97) Page 10 of 23
<PAGE>
Exhibit B
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.
SEC 1746 (10-97) Page 11 of 23
<PAGE>
"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 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
SEC 1746 (10-97) Page 12 of 23
<PAGE>
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.
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
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.
SEC 1746 (10-97) Page 13 of 23
<PAGE>
ARTICLE 4
FEES OF THE ESCROW AGENT;
CERTAIN RIGHTS OF THE ESCROW AGENT
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
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.
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.
SEC 1746 (10-97) Page 14 of 23
<PAGE>
ARTICLE 6
MISCELLANEOUS
6.1 Notices, All notices, requests, demands and other communications
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 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 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
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 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, 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, 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.
SEC 1746 (10-97) Page 15 of 23
<PAGE>
WaveRider Communications Inc., by:
- --------------------------------- ---------------------
President Date
by:
- --------------------------------- ---------------------
(Signature) Date
- --------------------
(Title)
- --------------------------------- -------------------- ---------------------
William E. Krebs Witness Date
SEC 1746 (10-97) Page 16 of 23
<PAGE>
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%
SEC 1746 (10-97) Page 17 of 23
<PAGE>
Exhibit C
---------
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (the "Agreement") is entered into effective as
of the 16th day of March, 1998, by and between WaveRider Communications, Inc., a
Nevada corporation (the "Company") and each of the holders of the shares of
Series B Convertible Preferred Stock (the "Series B Preferred Stock") of the
Company identified on the signature page hereof (the "Series B Holders").
RECITALS
A. Pursuant to that certain Share Exchange Agreement together with a
supplemental agreement thereto both executed on the 13th day of May, 1997
(together referred to herein as the "Exchange Agreement"), the holders of the
Class A and Class B capital stock of Major Wireless Communications, Inc. ("Major
Wireless") exchanged the shares of Class A and Class B capital stock held by
them for shares of Series B Preferred Stock of the Company on the terms more
fully set forth in the Exchange Agreement. A total of 4 million shares of Series
B Preferred Stock were issued to the holders. The purpose of the exchange was to
facilitate the acquisition of Major Wireless by the Company.
B. The terms of the Series B Preferred Stock currently provide that each
share is convertible into 10 shares of Common Stock of the Company. The shares
of Series B Preferred Stock are being held by the corporate secretary of the
Company pursuant to the terms of the Exchange Agreement which provide that the
shares of Series B Preferred Stock will be released only upon the satisfaction
of certain performance criteria. If the performance criteria are not satisfied
within certain agreed upon time periods, the shares will be subject to
cancellation.
C. The Company needs to raise additional capital in order to finance the
growth and operations of its businesses. Based on its discussions with its
financial advisors and potential investors, the Company believes that the
potential 40 million share dilution with respect to the Series B Preferred Stock
could make it difficult for the Company to obtain financing on terms favorable
to the Company.
D. In order to facilitate the Company's ability to raise the capital that
is critical to the success and continued operations of the Company, the Company
has proposed a reduction in the conversion ratio with respect to the Series B
Preferred Stock as well as the actual conversion of such stock into shares of
Common Stock at such reduced ratio. Such proposal has been agreed to by all of
the holders of the said Series B Preferred Stock in accordance with the terms
and conditions herein contained. In addition, the parties have agreed that the
terms of the Exchange Agreement will be modified to provide for the release of
the shares of the Common Stock issuable upon conversion of the Series B
Preferred Stock in the event of a change of control. The Series B Holders and
the Company now desire to set forth their agreement with respect to such
proposal.
SEC 1746 (10-97) Page 18 of 23
<PAGE>
AGREEMENT
NOW THEREFORE, upon these premises, in consideration of the mutual
agreements contained herein, and in order to facilitate the raising of capital
which is critical to the operations and success of the Company, the parties
hereby agree as follows:
1. Approval of Reduction in Conversion Ratio. Each Series B Holder hereby
agrees to a reduction in the conversion ratio with respect to the shares of
Series B Preferred Stock held by such Series B Holder from 10 shares of Common
Stock for each share of Series B Preferred Stock to 2.5 shares of Common Stock
for each share of Series B Preferred Stock. Each Series B Holder hereby
acknowledges that it has agreed to such a reduction because it has determined
independently that such a change will benefit the Holder because it will improve
the Company's ability to raise the capital that is critical to the continued
viability and success of the Company. Each Series B Holder acknowledges,
however, that there can be no assurance that the Company will be successful in
obtaining the additional capital notwithstanding the change in the terms of the
Series B Preferred Stock.
2. Approval of Amendment. Each of the Series B Holders agrees to vote its
shares and to execute any action by written consent as may be necessary to amend
the Certificate of Designation of the Series B Preferred Stock in order to
reduce the conversion ratio.
3. Conversion. Each Series B Holder hereby acknowledges that the Company
would have more flexibility in obtaining the required capital if sufficient
shares of Preferred Stock were available for issuance to new investors. In order
to allow more shares of Preferred Stock to be available for designation and
re-issuance by the Board of Directors, each of the Series B Holders hereby
agrees to convert the shares of Series B Preferred Stock held by him/her into
such number of shares of Common Stock as shall be determined by the new
conversion ratio following the effectiveness of the amendment to the certificate
of designation. Each Series B Holder shall promptly provide the Company with an
executed, undated notice of conversion for all shares of Series B Preferred
Stock held by such holder which shall be effective the date after the effective
date of the amendment to the certificate of designation. By signing this
Agreement below, each of the undersigned Series B Holders hereby authorizes the
Company to date such notice of conversion the date after the effective date of
the amendment to the certificate of designation and to convert the Series B
Preferred Stock held by such holder on such date at the amended conversion
ratio. Notwithstanding the conversion, the shares of Common Stock issued upon
conversion of the Series B Preferred Stock shall remain subject to the terms of
the Exchange Agreement, which provides that the shares shall be subject to
cancellation if certain performance criteria are not met. The Exchange Agreement
shall be amended to provide for a release of the shares upon a change in control
of the Company. The parties shall enter into an amendment to the Exchange
Agreement in the form attached hereto as Exhibit A and an Escrow Agreement in
the form attached hereto as Exhibit B.
4. Representations and Warranties. Each of the undersigned Series B Holders
hereby represents and warrants as follows in connection with the execution of
this Agreement and the consummation of the transactions contemplated hereby
including, without limitation, the amendment of the Certificate of Designation
of the Series B Preferred Stock and the subsequent conversion of the Series B
Preferred Stock:
SEC 1746 (10-97) Page 19 of 23
<PAGE>
a. The Series B Holder has received a copy of the Information Statement
which sets forth information concerning the effect of the reduction of the
conversion ratio with respect to the Series B Preferred Stock. The Series B
Holder understands that such change will reduce its ownership interest in the
Company and that the ownership interest of the holders of the Common Stock of
the Company will correspondingly be increased by the amount of the decrease in
the ownership interest of the Series B Holders.
b. The Series B Holder acknowledges that there can be no assurance that the
Company will be successful in obtaining any required financing, even after
giving effect to the change in the conversion ratio. In addition, the Company is
not making any representation, and there can be no assurance, that the Company
could not obtain the necessary financing if the terms of the Series B Preferred
Stock remained unchanged. However, the Company believes that the proposed
changes will increase the Company's ability to obtain the needed financing.
c. The Series B Holder has had an opportunity to discuss the proposed
reduction in the conversion ratio with its legal, financial and other advisors
and has made an independent determination that such reduction is in its best
interests.
d. The Series B Holder further acknowledges and confirms it has received a
copy of (i) the Company's Annual Report on Form 10-KSB, (ii) the Current Report
on Form 8-K reporting the acquisition of Major Wireless, and (iii) the Company's
Quarterly Report on Form 10-QSB for the nine month period ended September 30,
1997. All other documents, books, records and materials requested by the Series
B Holder have been made available to it, the Series B Holder has been supplied
with all additional information concerning the Company that has been requested,
the Series B Holder has had a reasonable opportunity to ask questions of and
receive answers from the Company or its representatives concerning the business
of the Company and the transactions contemplated hereby, and all questions have
been answered to the full satisfaction of the Series B Holder.
e. The Series B Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
transactions contemplated hereby.
f. The Series B Holder understands that the shares of Common Stock issuable
upon conversion of the Series B Preferred Stock have not been and will not be
registered under the Securities Act of 1933, as amended (the "Act"), or any
applicable state securities laws, and that the distribution contemplated hereby
is being made in reliance upon one or more exemptions from the registration
requirements of the 1933 Act and any applicable state securities laws.
g. The Series B Holder is the sole and true party in interest and is not
holding or acquiring the shares of Common Stock for the benefit of any other
person. The shares of Common Stock to be issued upon conversion of the Series B
Preferred Stock are being acquired solely for the Series B Holder's own account,
for investment and not with a view to the resale, distribution or subdivision
thereof.
SEC 1746 (10-97) Page 20 of 23
<PAGE>
h. The Series B Holder acknowledges that it has had an opportunity to
review and consider the amendments to the Exchange Agreement and the Collateral
Agreement and the Escrow Agreement, and understands, that the shares of Common
Stock issuable upon conversion of the Series B Preferred Stock shall be subject
to cancellation if certain performance criteria have not be satisfied. The
Series B Holder has had the opportunity to discuss these amendments and the
Escrow Agreement with its professional advisors. The Series B Holder
acknowledges that neither the Company, nor any officer, director or
representative, has made any representation or warranty to the Series B Holder
concerning the future performance of the Company, the valuation of any of the
Company's shares, the ability of the Company to obtain financing, or any other
representation or warranty.
i. The Series B Holder hereby acknowledges that the terms of the Series B
Preferred Stock adopted by the Board of Directors which granted 10 votes per
shares to each share of Series B Preferred Stock violated the terms of the
Articles of Incorporation of the Company that provide that no share of Preferred
Stock can have more than one vote per share. Because of the proposal to change
the conversion ratio of the Series B Preferred Stock and the agreement to
immediately convert the Series B Preferred Stock following such change, the
Series B Holder understands and agrees that Board of Directors will not take any
action to provide the holders of the Series B Preferred Stock with the 10 votes
per share originally agreed upon. Accordingly, the Series B Holder acknowledges
that upon conversion of the Series B Preferred Stock that it will only have one
vote per share of Common Stock received upon conversion which will be the
equivalent of 2.5 votes per share of Series B Preferred Stock outstanding prior
to the conversion. The Series B Holder hereby acknowledges that it understands
that (i) its voting power, as originally contemplated, will be reduced by
approximately 75%, and (ii) the total voting power of the current holders of the
Series B Preferred Stock shall be reduced as result of the change in the
conversion ratio and the conversion of the Series B Preferred Stock to 25.7%
(20.98% on a fully diluted basis) of the total voting power of the Company from
58.05% (51.51% on a fully diluted basis) of the total voting power the holders
would have had if the original terms of the Series B Preferred Stock were
properly authorized.
j. The Series B Holder acknowledges that an investment in the shares of the
Company is highly speculative and subject to substantial risks. The Series B
Holder is capable of bearing the high degree of economic risk and the burden of
this venture, including, but not limited to, the possibility of the complete
loss of the investment.
k. The Series B Holder understands that it may not, and agrees that it will
not, sell, pledge or otherwise dispose of the shares, or any interest therein,
unless the shares are subsequently registered under the 1933 Act and any
applicable state securities laws or unless the Company receives an opinion of
counsel satisfactory to it that an exemption from registration is available. The
Series B Holder understands and acknowledges that until such time as the same is
no longer required under the requirements of applicable securities laws, the
certificates representing the shares of Common Stock to be issued upon
conversion of the Series B Preferred Stock and all certificates issued in
exchange therefor or in substitution thereof shall bear the following legend:
SEC 1746 (10-97) Page 21 of 23
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES ACT OF ANY STATE AND THUS MAY
NOT BE TRANSFERRED OR HYPOTHECATED UNLESS REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAW OR UNLESS AN EXEMPTION
FROM REGISTRATION IS AVAILABLE UNDER BOTH THE SECURITIES ACT OF 1933 AND
ANY APPLICABLE STATE SECURITIES LAW
Stop transfer instructions have been or will be placed on the Shares so as
to restrict the resale, pledge, hypothecation or other transfer thereof
except in accordance with the provisions hereof. The undersigned consents
to such instructions.
l. The Series B Holder is not a resident or citizen of the United
States.
5. Indemnification. Each of the Series B Holders acknowledges that the
representations and warranties and agreements contained herein are made by the
Series B Holder with the intent that they may be relied upon by the Company in
determining whether the shares of Common Stock may be issued in accordance with
federal and state securities laws. Each Series B Holder hereby agrees to
indemnify the Company, its officers, agents and employees and hold them harmless
from and against any and all liability, damage, cost or expense incurred on
account or arising out of: (1) Any inaccuracy in the declarations,
representations, and warranties of such Series B Holder set forth in this
Agreement; or (2) the disposition of any of the shares by the Series B Holder,
contrary to the foregoing declarations, representations and warranties.
6. Miscellaneous.
a. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada without
giving effect to its conflicts of laws provisions.
b. Severability. If any term or provision of this Agreement shall be
adjudicated to be invalid, illegal or unenforceable, this Agreement shall
be deemed amended to delete therefrom the term or provision thus
adjudicated to be invalid, illegal or unenforceable and the validity of the
other terms and provisions of this Agreement shall not be affected thereby.
c. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of
which together shall constitute but one and the same instrument.
d. Entire Agreement. This Agreement sets forth the entire agreement
among the parties. No provision of this Agreement shall be altered, amended
or revoked except by an instrument in writing signed by the Company and all
of the Shareholders.
e. References. The section headings used in this Agreement are for
convenient reference only and shall not be considered or referred to in
resolving any interpretation of this Agreement. Words used herein,
regardless of the number or gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context requires.
f. Attorneys' Fees. If a legal action or other proceeding is brought
for enforcement of this Agreement because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party shall be entitled to
SEC 1746 (10-97) Page 22 of 23
<PAGE>
recover reasonable attorney's fees and costs incurred, both before and
after judgment, in addition to any other relief to which they may be
entitled.
In Witness Whereof, the parties hereto have executed this Agreement on the dates
indicated to be effective for all purposes as of the date first set forth above.
WaveRider Communications Inc., by:
- --------------------------------------- ------------------
Secretary Date
By:
- ---------------------------- ---------------------- ------------------
Stockholder Witness Date
SEC 1746 (10-97) Page 23 of 23
