SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999.
Commission file number 0-25680
WAVERIDER COMMUNICATIONS INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 33-0264030
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
255 Consumers Road, Suite 500, Toronto, Ontario Canada M2J 1R4
--------------------------------------------------------------
(Address of principal executive offices and Zip (Postal) Code)
(416) 502-3200
---------------------------
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
Yes __X__; No _____
Applicable only to corporate issuers:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: October 26, 1999 - 50,914,310 Common
shares, $.001 par value.
Transitional Small Business Disclosure Format: (check one):
Yes _____; No __X__
<PAGE>
WAVERIDER COMMUNICATIONS INC.
FORM 10 - Q
For the Period Ended September 30, 1999
INDEX
Page
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 4-9
Balance Sheets 4
Statements of Operations 5
Statements of Cash Flows 6
Notes to Financial Statements 7-10
Item 2. Management's Discussion and Analysis or Plan of Operation 11-12
PART II OTHER INFORMATION 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
<PAGE>
PART I. FINANCIAL INFORMATION
Unaudited Consolidated Financial Statements
WAVERIDER COMMUNICATIONS INC.
( A Development Stage Company)
Quarter ended September 30, 1999 and year ended December 31, 1998
The Financial statements for the three and nine months ended September 30,
1999 and 1998 include, in the opinion of the Company, all adjustments (which
consist only of normal recurring adjustments) necessary to present fairly the
results of operations for such periods. Results of operations for the three and
nine months ended September 30, 1999, are not necessarily indicative of results
of operations which will be realized for the year ending December 31, 1999. The
financial statements should be read in conjunction with the Company's Form
10-KSB for the year ended December 31, 1998.
3
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
<TABLE>
<CAPTION>
Quarter ended Year ended
September 30, December 31,
1999 1998
--------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current
Cash $ 401,282 $ 3,047,257
Accounts receivable 444,645 71,257
Inventory 627,640 150,494
Prepaid expenses 113,829 26,730
-------------------------------
1,587,396 3,295,738
Fixed Assets 978,289 808,531
Acquired research and development 1,195,686 -
Goodwill 560,789 42,565
-------------------------------
$ 4,322,160 $ 4,146,834
===============================
LIABILITIES
Current
Bank indebtedness $ 400,000 $ -
Accounts payable and accrued liabilities 1,151,877 942,192
Note Payable 72,000 -
Deferred Revenue 41,314 39,558
Current portion of obligation under capital lease 78,526 54,161
-------------------------------
1,743,718 1,035,911
Obligation under capital lease 28,669 12,555
-------------------------------
1,772,387 1,048,466
SHAREHOLDER'S EQUITY
Share Capital 15,371,833 10,849,376
Other Equity 1,893,105 1,503,782
Deficit accumulated during development stage (14,715,165) (9,254,790)
--------------------------------
2,549,773 3,098,368
$ 4,322,160 $ 4,146,834
===============================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF LOSS
(in U.S. dollars)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended From Inception
September 30 September 30 on Aug 6, 1987
1999 1998 1999 1998 to Sept 30, 1999
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Product sales $ 659,164 $ - $ 804,839 $ - $ 845,972
Internet sales 46,536 39,543 145,941 116,238 388,149
Interest and other 20,404 21,150 49,927 21,929 119,600
-----------------------------------------------------------------------------
726,104 60,693 1,000,707 138,167 1,356,721
COST OF PRODUCT AND INTERNET SALES 488,248 17,562 620,435 64,631 717,700
-----------------------------------------------------------------------------
GROSS MARGIN 237,856 43,131 380,272 73,536 639,021
-----------------------------------------------------------------------------
EXPENSES
Sales, general and administration 1,032,821 461,920 3,688,711 1,161,312 9,925,450
Research and development 756,207 674,211 1,893,881 1,717,790 4,199,901
Depreciation and amortization 122,205 8,275 138,811 25,413 254,478
-----------------------------------------------------------------------------
1,911,233 1,144,406 5,721,406 2,904,515 14,379,829
-----------------------------------------------------------------------------
NET LOSS $ (1,673,377) $ (1,101,275) $ (5,341,131) $ (2,830,979) $ (13,740,808)
=============================================================================
BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.048) $ (0.037) $ (.162) $ (.980) $ (2.094)
=============================================================================
Weighted Average Number of Common Shares 35,042,642 30,050,296 33,014,825 28,835,804 6,560,937
=============================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
<TABLE>
<CAPTION>
Nine Months ended From Inception on
September 30 August 6, 1987 to
1999 1998 September 30, 1999
----------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net loss $ (5,341,131) $ (2,830,979) $ (13,740,808)
Items not involving cash
Depreciation and amortization 390,050 168,521 840,218
Loss on sale of equipment - - 91,616
Compensation shares issued to employees 458,246 - 458,246
Options issued to consultants 55,500 293,267 687,139
Warrants issued on financing 425,000 - 738,325
Net changes in non-cash working capital items (919,442) 37,545 (231,299)
-------------------------------------------------------
(4,931,777) (2,331,646) (11,156,563)
-------------------------------------------------------
INVESTING
Acquisition of fixed assets (232,920) (670,368) (1,389,750)
Purchase of Transformation Techniques (655,288) (655,288)
Purchase of Internet service business - - (38,851)
-------------------------------------------------------
(888,208) (607,368) (2,083,889)
-------------------------------------------------------
FINANCING
Proceeds from sale of shares (net of issue fees) 2,996,660 3,559,124 13,629,741
Dividends on preferred shares (119,244) (40,000) (199,244)
Loans from affiliates - - 2,657
Payments on capital lease obligations (100,920) - (165,905)
-------------------------------------------------------
2,776,496 3,519,124 13,267,249
-------------------------------------------------------
Effect of exchange rate changes on cash (2,486) 22,870 (25,515)
-------------------------------------------------------
Increase (decrease) in cash (3,045,975) 517,110 1,282
Cash, beginning of period 3,047,257 437,746 -
-------------------------------------------------------
Cash, end of period $ 1,282 $ 954,856 $ 1,282
=======================================================
Cash consists of:
Cash $ 401,282 $ 954,856 $ 401,282
Bank Indebtedness ( 400,000) - ( 400,000)
----------------- -------------- ------------------
$ 1,282 $ 954,856 $ 1,282
================= ============== ==================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999 and December 31, 1998
1. GOING CONCERN
The Company incurred an operating loss of $5,341,131 (1998 - $2,830,979) for the
nine months ended September 30, 1999. These financial statements are prepared on
a going-concern basis which assumes the Company will realize its assets and
discharge its liabilities in the normal course of business. The ability of the
Company to continue as a going-concern is dependent upon its ability to obtain
adequate sources of financing as required and its ability to develop and
maintain profitable operations. If the Company is unable to continue as a going
concern, assets and liabilities would require restatement on a liquidation basis
which would differ materially from the going concern basis.
On October 27, 1999, the Company entered into private placement financing which
the Company projects is sufficient to fund the continued development of its
products and the development of its sales and marketing activities. Management
believes that the proceeds from that financing, together with the anticipated
cash flow from the operations of the Company, will be sufficient to support
currently anticipated working capital requirements.
2. NATURE OF OPERATIONS
WaveRider Communications Inc. (formerly Channel i Inc.), incorporated in 1987
under the laws of the state of Nevada, USA is a public company traded on the OTC
Bulletin Board, trading symbol WAVC.
The Company develops and markets wireless data communications products with a
focus on Internet connectivity. Its first product, the "NCL 135" received
Industry Canada approval for sale in Canada during the fourth quarter of 1998
and received FCC approval for sale in the United States during the first quarter
of 1999. On June 15, 1999, the Company acquired Transformation Techniques, Inc.
(see Note 4 - Acquisition), a competitive supplier of high speed wireless data
communications products.
3. PRIOR PERIOD ADJUSTMENT
During the year ended December 31, 1998, it was determined that the Company had
not accounted for stock options issued for services rendered by non-employees
and the purchase of Major Wireless, as required by GAAP. As a result, the
September 30, 1998 consolidated financial statements have been restated to
include the fair value of the non-employee options. These changes, which had no
impact on the Company's cash flow results, have affected the prior reported
financial results as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998 Inception to September 30, 1998
------------------------------------- -------------------------------
Restated Originally Restated Originally
Information Reported Information Reported
-------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Sales, general and administration 1,161,312 986,305 4,590,870 4,156,010
Research and development 1,717,790 1,599,530 2,209,193 2,064,957
Depreciation and amortization 25,413 25,413 105,840 105,840
--------------------------------------------------------------------
Total expenses 2,904,515 2,611,248 6,905,903 6,413,236
--------------------------------------------------------------------
NET LOSS (2,830,979) (2,537,712) (6,753,138) (6,174,041)
====================================================================
LOSS PER COMMON SHARE (0.09) (0.08) (2.08) (1.91)
====================================================================
STOCKHOLDER'S EQUITY
Share Capital 8,131,201 7,845,371
Other Equity 293,267 -
Deficit accumulated during
the development stage (6,793,138) (6,214,041)
--------------------------------
1,631,330 1,631,330
================================
</TABLE>
In addition, note disclosure for the 1998 comparative figures has been modified
to conform with GAAP.
7
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999 and December 31, 1998
4. ACQUISITION
On June 15, 1999, the Company finalized a merger agreement between
Transformation Techniques, Inc. ("TTI") and a newly incorporated subsidiary, TTI
Merger Inc. The new subsidiary subsequently changed its name to WaveRider
Communications (USA) Inc.
Under the terms of the merger agreement, WaveRider issued 256,232 shares of
common stock, having a market value of $442,000 and paid $253,985 in cash on
closing and will pay an additional $99,000, in monthly installments over the
subsequent 11 months to Mr. Peter Bonk, the sole shareholder of TTI, and TTI was
merged into TTI Merger Inc. Prior to the merger agreement Mr. Bonk had no
shareholding in or affiliation with WaveRider. The cash portion of the purchase
has been and will be paid from working capital. Of the cash proceeds, $94,985
was immediately paid by the former shareholder to the new subsidiary to retire
an existing shareholder loan.
The acquisition of TTI has been accounted for using the purchase method of
accounting with the purchase price assigned to the net assets acquired based on
their fair values at the time of acquisition. The carrying value of the deficit
of TTI and the excess purchase price, at the date of acquisition, have been
assigned to acquired research and development and will be deferred and expensed
for accounting purposes over the estimated 3 year useful life of the technology.
TTI is a leader in the design and manufacture of wireless radio frequency
communications systems, offering wireless data, bridging and LAN connectivity
systems in both licensed and unlicensed frequencies. TTI has product design,
manufacturing and head office facilities in Cleveland, Ohio as well as sales and
support operations in San Diego, California and Baton Rouge, Louisiana.
WaveRider intends to further develop TTI's existing sales and support
infrastructure to increase its expansion into the US, in a new subsidiary,
WaveRider Communications (USA) Inc.
5. STOCKHOLDER'S EQUITY
a) Common Stock
In the first quarter of 1999, the remainder of the Series E warrants, amounting
to 30,000 common shares, were exercised for $37,500. In addition, 131,700 common
share options, pursuant to the Employee Stock Option (1997) Plan, were exercised
for $65,303.
In the second quarter of 1999, the Company sold 1,660,945 common shares for
$3,000,000 under the second tranche of the December 1998 financing. In addition,
74,500 common share options, pursuant to the Employee Stock Option (1997) Plan,
were exercised for $31,464.
During the second quarter, the Company issued: 1) 220,178 common shares in
connection with the Reset provisions of the December 1998 financing plan; 2)
256,232 common shares in connection with the acquisition of Transformation
Techniques, Inc.; 3) 267,870 common shares to certain new employees from the
Employee Stock Compensation (1997) Plan; and, 4) 12,000 common shares in
connection with the conversion of Series "C" convertible shares.
In the third quarter of 1999, the Company sold 12,000 common shares for $4,900,
pursuant to the Employee Stock Option (1997) Plan. In addition, the Company
issued: 1) 10,000 common shares in connection with the conversion of Series "C"
convertible shares; 2) 1,268,713 common shares in connection with the Reset
provisions of the December 1998 financing plan; 2) 57,463 common shares in
connection with the Reset provisions of the acquisition of Transformation
Techniques, Inc.
b) Return and Cancellation of Shares
During the quarter, and prior to the first release of common stock from the
escrow agreement, certain holders of escrow shares donated a portion of their
holdings, amounting to a combined total of 1,000,000 common shares, back to the
Company for cancellation.
This return will reduce the number of shares ultimately released from the escrow
agreement.
c) Release from Escrow
The first milestone related to the release of the common shares held in escrow
was met with the delivery of prototype product on August 18, 1999. As a result,
the Company has requested that the Escrow Agent release the first 5% of the
shares currently held under the Escrow Agreement, valued at $534,375. The
valuation is based on the closing price of the common stock on August 18, 1999
of $1.1875 per share.
8
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999 and December 31, 1998
At this time, there is no reasonable assurance of future revenue to allocate a
portion of the value of this share release to acquired in process research and
development or to acquired core technology. Accordingly, the Company has
recorded the cost of $534,375 to goodwill in the third quarter of 1999 and will
amortize the goodwill over its estimated life.
6. COMMITMENTS
a) Employee Stock Option and Compensation Agreements
On June 10, 1997, the Company authorized an Employee Stock Option (1997) Plan
for 5,000,000 common shares and an Employee Compensation (1997) Plan for
2,500,000 common shares. On February 16, 1998, the Company authorized an
increase to the Employee Stock Option (1997) Plan to 6,250,000. Both of these
plans expired on June 10, 1999, though options granted continue until they are
exercised or they expire upon three years of the date of their award.
On May 28, 1999, the shareholders approved the adoption of the Company's 1999
Incentive and Nonqualified Stock Option Plan for 3,000,000 common shares.
As of September 30, 1999, the Directors had awarded 6,226,677 options under the
Employee Stock Option (1997) Plan, 1,887,550 options under the 1999 Incentive
and Nonqualified Stock Option Plan and 270,370 shares under the Employee
Compensation (1997) Plan. Awards under the Employee Stock Option (1997) Plan and
the 1999 Incentive and Nonqualified Stock Option Plan are made at the average
price of the stock on the date of the date of the award.
b) Issue of Reset Shares under the Common Share Purchase Agreement
Under a Common Share Purchase Agreement dated December 29, 1998, the Company
entered into an arrangement to sell up to an aggregate amount of $10,000,000 of
common stock in three tranches and to issue four groups of warrants. On December
29th, 1998 the Company issued 1,167,860 common shares in the First Tranche at
$2.57 per share for cash proceeds of $3,000,000. On June 4th, 1999 the Company
issued 1,660,945 common shares at 1.81 per share for cash proceeds of
$3,000,000.
Pursuant to the agreement, the Company is required to issue additional shares to
the investors if the average bid price for the common stock for 30 days prior to
certain future dates ("Reset Price") is below the initial purchase price
multiplied by 117.5 per cent. The number of shares to be issued will be based on
the following formula: ((Number of shares subject to repricing) X (Initial
Purchase Price X 117.5% - Reset Price)) / Reset Price.
The Reset Price will be determined for certain blocks of shares within a
specified number of days from the date that the registration of the shares
issued is effective under the Securities Act of 1933 as follows: 34% within 30
days, 33% within 60 days and 33% within 90 days.
Shares issued under each Tranche are subject to price reset provisions similar
to those provided under the First Tranche for a period of 90 days from the
respective closing date of each Tranche.
The Company issued 1,002,441 common shares under the reset provisions of the
First Tranche. On September 2, 1999, the Company issued 486,450 common shares
under the first reset provision of the Second Tranche. Subsequent to quarter
end, the Company issued 607,418 common shares and 659,944 common shares under
the second and third reset provisions respectively of the Second Tranche. In
addition, subsequent to the end of the quarter, the Company issued 70,198 common
shares under an Amendment and Agreement arrangement with the Purchasers of the
Second Tranche.
Under the agreement, the Company has the right, but not the obligation to issue
additional shares in a Third Tranche for up to $4,000,000. On October 27, 1999,
the Company notified the Purchasers that it would not be exercising its rights
under this agreement.
c) Issue of Reset Shares under the TTI Acquisition Agreement
Pursuant to the Acquisition Agreement, the Company is required to issue
additional shares to Mr. Peter Bonk if the average bid price for the common
stock for 5 days prior to certain future dates ("Reset Price") falls below the
original price of the shares at acquisition. During the third quarter the
Company issued 57,463 common shares pursuant to the first reset. On October 26,
1999 the Company issued a further 66,668 common shares pursuant to the second
reset and on December 27, 1999 may be required to issue shares pursuant to the
third and final reset.
9
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999 and December 31, 1998
7. SUBSEQUENT EVENTS
a) Loan Agreement
On October 27, 1999, the Company sold a $1,500,000 promissory note in a private
placement. The promissory note, which earns interest at 10% per annum, is
repayable on or before May 23, 2000 and, depending upon the date of repayment,
is subject to a payment premium. The Company has committed to using fifty
percent (50%) of the proceeds from any future financing to repayment of the loan
and has issued 4,000,000 common shares of the Company to act as security for the
loan. Upon repayment of the loan these shares will be returned and cancelled by
the Company.
As part of the placement, the Company has issued 180,000 Warrants to purchase
common shares of the Company, at an exercise price of $1.01 per share. In
addition, the Company has committed to paying legal fees of $25,000 and a
placement fee of seven percent (7%) to Ladenburg Thalmann & Co., Inc., an
Investment Banker.
b) Common Stock Purchase Agreement
On October 27, 1999, the Company entered into private placement to sell up to
$7,500,000 in common shares of the Company. Under the terms of the arrangement,
the Company will sell stock to the purchaser at eighty-seven percent (87%) of
the average closing bid price of the stock over the preceding period. The
maximum value of common shares that the Company can require the purchaser to
acquire in any one period is $600,000, however, the purchaser has the right to
purchase up to an additional fifty percent (50%) of each draw. In total, the
Company may sell up to $5,000,000 in common shares and the purchaser may buy up
to an additional $2,500,000 over the 18 month term of the Agreement.
As a commitment fee, the Company has issued 200,000 Warrants to purchase common
shares of the Company, at an exercise price of $1.01 per share. In addition, the
Company has committed to paying legal fees of $1,000 per sale.
8. COMPARATIVE FIGURES
Certain comparative amounts have been reclassified, where appropriate,
to correspond with the current year's presentation
10
<PAGE>
ITEM 2.
Management's Discussion and Analysis or Plan of Operation.
The following discussion is intended to assist in an understanding of the
Company's financial position and results of operations for the quarter ending
September 30, 1999.
Forward-Looking Information.
This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of its management as well
as assumptions made by and information currently available to its management.
When used in this report, the words "anticipate", "believe", "estimate",
"expect", "intend", "plan", and similar expressions as they relate to the
Company or its management, are intended to identify forward-looking statements.
These statements reflect management's current view of the Company with respect
to future events and are subject to certain risks, uncertainties and
assumptions. Should any of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this report as anticipated, estimated or expected. The
Company's realization of its business aims could be materially and adversely
affected by any technical or other problems in, or difficulties with, planned
funding and technologies, third party technologies which render the Company's
technologies obsolete, the unavailability of required third party technology
licenses on commercially reasonable terms, the loss of key research and
development personnel, the inability or failure to recruit and retain qualified
research and development personnel, or the adoption of technology standards
which are different from technologies around which the Company's business
ultimately is built. The Company does not intend to update these forward-looking
statements.
Liquidity and Capital Resources.
The Company has funded its operations for the most part through equity
financing and has had no line of credit or similar credit facility available to
it. The Company's outstanding shares of Common stock, par value $.001 per share,
are traded under the symbol "WAVC" in the over-the-counter market on the OTC
Electronic Bulletin Board by the National Association of Securities Dealers,
Inc. The Company must rely on its ability to raise money through equity
financing to pursue any business endeavors. The majority of funds raised have
been allocated to the development of the WaveRider(R) line of wireless data
communications products.
On October 27, 1999, the Company entered into a Loan Agreement which
provided it with $1,500,000 in immediate working capital. In addition, the
Company has entered into a Common Stock Purchase Agreement which will allow them
to sell up to $7,500,000 in common stock.
Current Activities.
The Company currently has 57 employees working in its subsidiaries,
WaveRider Communications (Canada) Inc., WaveRider Communications (USA) Inc. and
JetStream Internet Services Inc. The majority of these employees are involved in
the design, development and marketing of the WaveRider(R) line of wireless data
communications products.
Results of Operations - Third Quarter 1999
During the third quarter of the year, the Company incurred a net loss of
$1,673,377. Cash amounted to $401,282 and current liabilities were $1,743,718
including accruals for expenses. Activities during the third quarter related
primarily to ongoing R&D, the integration of the products and operations of
WaveRider Communications (USA) Inc. (formerly Transformation Techniques) and the
further development of sales and marketing programs for the NCL family of
wireless data communications product.
Results of Operations - Third Quarter 1998
During the third quarter of the year, the Company incurred a net loss of
$1,101,275. Cash and equivalents amounted to $954,856 and current liabilities
were $320,866 including accruals for expenses. Expenses during the third quarter
related primarily to R&D costs and the establishment of sales and marketing
programs for the introduction of the NCL 135 wireless data communications
product. During the quarter, accruals of approximately $80,000 related to the
wind-up of Channel i PLC in 1997 were reversed and reduced current period
expenses.
11
<PAGE>
Year 2000 Readiness Disclosure
As a development stage Company, WaveRider has specifically designed and
developed its products not to utilize the two digit format in the "year" data
code field and has considered this issue in procuring outside software and
hardware.
The Company established a Year 2000 Committee in the last quarter of 1998
to evaluate mission critical software and hardware. Data was gathered and
reviewed from software and hardware vendors and testing performed in an effort
to confirm Year 2000 compliance. To date the Company has not spent any monies
specifically to make our application software, operating systems and computer
hardware Year 2000 compliant and does not believe that any future costs to
achieve compliance will have a material impact on the Company's results of
operations.
In completing its acquisition of Transformation Techniques, Inc. the
Company obtained certification that Transformation Technique's products sold
since 1997 comply with Year 2000 requirements.
To extent that the Company is unable to assess and correct Year 2000
problems arising from its software and hardware vendors, problems embedded in
their products could have a material adverse effect on the Company.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits
10.1 Loan Agreement between WaveRider Communications Inc. and AMRO
International, S.A. dated October 15, 1999.
10.2 Common Stock Purchase Agreement between WaveRider Communications Inc. and
Radyr Group Investments dated October 18, 1999.
Reports on Form 8-K
NONE
Signatures:
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized,
WaveRider Communications Inc.
Date: October 27, 1999 /s/ D. Bruce Sinclair
-------------------------------
D. Bruce Sinclair
President and Chief Executive Officer
/s/ T. Scott Worthington
-------------------------------
T. Scott Worthington
Chief Financial Officer.
12
EXHIBIT 10.1
LOAN AGREEMENT
Between
WaveRider Communications Inc.
and
the Lenders Signatory Hereto
LOAN AGREEMENT dated as of October 15, 1999 (the "Agreement"), between
the Lenders signatory hereto (each a "Lender" and together the "Lenders"), and
WaveRider Communications Inc., a corporation organized and existing under the
laws of the State of Nevada (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall borrow from the Lenders the sum
of $1,500,000, and the Lenders shall also receive Warrants (as defined below) to
purchase up to 180,000 shares of the Common Stock (as defined below).
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. "Closing" shall mean the closing of the loan pursuant to Section
2.1.
Section 1.2. "Closing Date" shall mean the date on which all conditions to the
Closing have been satisfied or waived by the appropriate party or parties (as
defined in Section 2.1 (b) hereto) and the Closing shall have occurred.
Section 1.3. "Common Stock" shall mean the Company's common stock, $0.001 par
value.
Section 1.4. "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
Section 1.5. "Escrow Agreement" shall mean the Escrow Agreement in substantially
the form of Exhibit B hereto executed and delivered contemporaneously with this
Agreement.
Section 1.6. "Note(s)" shall mean the promissory note or notes issued to the
Lenders at the Closing in the form of Exhibit A
hereto.
Section 1.7. "Option Shares" shall mean the shares of Common Stock which the
Lenders have the right to purchase following maturity of the Notes, as set forth
in the Notes.
Section 1.8. "Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
1
<PAGE>
Section 1.9. "Purchase Price" shall mean $1,500,000.
Section 1.10. "SEC" shall mean the Securities and Exchange Commission.
Section 1.11. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.12. "Trading Day" shall mean any day during which the Over the Counter
Bulletin Board shall be open for business.
Section 1.13. "Warrants" shall mean the Warrants substantially in the form of
Exhibit C to be issued to the Lenders hereunder.
Section 1.14. "Warrant Shares" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to exercise of the Warrants.
ARTICLE II
Purchase and Sale of the Note and Warrants
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein, the Company
agrees to sell, and each Lender, severally and not jointly, agrees to purchase
an aggregate total of One Million Five Hundred Thousand Dollars ($1,500,000)
principal amount of the Notes at the Purchase Price together with the Warrants,
in the proportions set forth in the signature pages hereto.
(b) Upon execution and delivery of this Agreement, each Lender shall deliver to
the Escrow Agent immediately available funds in their proportionate amount of
the Purchase Price for the Closing as set forth on the signature pages hereto,
and the Company shall deliver the Notes, the Option Shares and the Warrants to
the Escrow Agent, in each case to be held by the Escrow Agent pursuant to the
Escrow Agreement.
Upon satisfaction or waiver by the appropriate party or parties of the
conditions set forth in Section 2.1(c), the Closing shall occur at the offices
of the Escrow Agent at which the Escrow Agent (x) shall release the Notes and
the Warrants to the Lenders, (y) shall release the Purchase Price to the Company
(after all fees have been paid as set forth in the Escrow Agreement), pursuant
to the terms of the Escrow Agreement and (z) shall retain the Option Shares as
custodian thereof.
(c) The Closing is subject to the satisfaction or waiver by the appropriate
party or parties of the following conditions:
(i) acceptance and execution by the Company and by the Lenders, of this
Agreement and all Exhibits hereto;
(ii) delivery into escrow by each Lender of immediately available funds in
the amount of the Purchase Price of the Notes to be issued at the
Closing, as more fully set forth in the Escrow Agreement;
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(iii)all representations and warranties of the Lenders contained herein
shall remain true and correct as of the Closing Date (as a condition
to the Company's obligations);
(iv) all representations and warranties of the Company contained herein
shall remain true and correct as of the Closing Date (as a condition
to the Lenders' obligations);
(v) the Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Notes, the Option
Shares and Warrants, or shall have the availability of exemptions
therefrom;
(vi) the sale and issuance of the Notes and the Warrants hereunder, and the
proposed issuance by the Company to the Lenders of the Common Stock
underlying the Warrants upon exercise thereof and of the Option Shares
upon exercise of the rights of the Lenders with respect thereto shall
be legally permitted by all laws and regulations to which the Lenders
and the Company are subject and there shall be no ruling, judgment or
writ of any court prohibiting the transactions contemplated by this
Agreement;
(vii)delivery of the original fully executed Notes and Warrants and Option
Shares to the Escrow Agent; and
(viii) delivery to the Escrow Agent of the opinion of Foley, Hoag & Eliot
LLP in the form of Exhibit D hereto.
(d) The number of Warrants to be issued at the Closing shall be 180,000, with an
initial exercise price equal to the closing bid price of the Common Stock on the
OTC Bulletin Board on the Trading Day prior to the Closing Date.
ARTICLE III
Representations and Warranties of Lender
Each Lender, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. Intent. The Lender is entering into this Agreement for its own
account and not with a view to or for sale in connection with any distribution
of the Note, the Warrants or the Common Stock issuable upon exercise thereof.
The Lender has no present arrangement (whether or not legally binding) at any
time to sell the Note, the Warrant, any Warrant Shares to or through any person
or entity; provided, however, that by making the representations herein, the
Lender does not agree to hold such securities for any minimum or other specific
term and reserves the right to dispose of the Warrant Shares at any time in
accordance with federal and state securities laws applicable to such
disposition.
Section 3.2. Sophisticated Lender. The Lender is a sophisticated investor (as
described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as
defined in Rule 501 of Regulation D), and Lender has such experience in business
and financial matters that it has the capacity to protect its own interests in
connection with this transaction and is capable of evaluating the merits and
risks of an investment in the Note, the Warrants and the underlying Common
Stock. The Lender acknowledges that an investment in the Note, the Warrants and
the underlying Common Stock is speculative and involves a high degree of risk.
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Section 3.3. Authority. This Agreement and each agreement attached as an Exhibit
hereto that is required to be executed by Lender has been duly authorized and
validly executed and delivered by the Lender and is a valid and binding
agreement of the Lender enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4. Absence of Conflicts. The execution and delivery of this Agreement
and each agreement which is attached as an Exhibit hereto and executed by the
Lender in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by the Lender, will not violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Lender or (a) violate any
provision of any indenture, instrument or agreement to which Lender is a party
or is subject, or by which Lender or any of its assets is bound; (b) conflict
with or constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Lender to any
third party; or (d) require the approval of any third-party (which has not been
obtained) pursuant to any material contract, agreement, instrument, relationship
or legal obligation to which Lender is subject or to which any of its assets,
operations or management may be subject.
Section 3.5. Disclosure; Access to Information. The Lender has received all
documents, records, books and other information pertaining to Lender's
investment in the Company that have been requested by the Lender.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Lenders that, except as set forth on
the Disclosure Schedule prepared by the Company and delivered herewith:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of Nevada
and has all requisite corporate authority to own its properties and to carry on
its business as now being conducted.
Section 4.2. Authority. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement, the Notes, the Escrow Agreement, and the Warrants and to issue the
Notes, the Warrants and the Warrant Shares pursuant to their respective terms
and to issue the Option Shares upon exercise of the Lenders' rights thereto,
(ii) the execution, issuance and delivery of this Agreement, the Escrow
Agreement, the Notes, the Option Shares and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, and (iii) this Agreement, the Escrow Agreement, the Notes and the
Warrants have been duly executed and delivered by the Company and at Closing
shall constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application. The
Company has duly and validly authorized and reserved for issuance shares of
Common Stock sufficient in number for the exercise of the Warrants and for
delivery of the Option Shares against cancellation of the Notes.
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Section 4.3. Valid Issuances. When issued and paid for in accordance with the
Warrants, the Warrant Shares will be duly and validly issued, fully paid, and
non-assessable. The Option Shares have been duly authorized and registered for
sale by the Company pursuant to presently effective registration statement file
no. 333-86251, and upon exercise of the Lenders' rights to tender the Notes in
exchange therefor, the Option Shares shall be validly issued, fully paid and
non-assessable shares of Common Stock of the Company, and shall be freely
transferable by the Lenders if sold in accordance with the distribution plan in
the above-mentioned registration statement.
Section 4.4. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of and payment of
the Notes, the Warrants and the Warrant Shares, and upon exercise of the
Lenders' rights under the Notes, the Option Shares, do not and will not (i)
result in a violation of the Company's Articles of Incorporation or By-Laws or
(ii) conflict with, or constitute a material default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument, or any "lock-up" or similar
provision of any underwriting, equity line or similar agreement to which the
Company is a party, or (iii) result in a violation of any federal, state or
local law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or by which any
material property or asset of the Company is bound or affected, nor is the
Company otherwise in violation of, conflict with or default under any of the
foregoing (except in each case for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not have,
individually or in the aggregate, a Material Adverse Effect). The business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations that
either singly or in the aggregate would not have a Material Adverse Effect. The
Company is not required under any Federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Notes or the Warrants or the Option Shares in accordance with the
terms hereof (other than any registration statement or so-called "blue sky"
filings that may be filed pursuant hereto); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Lenders
herein.
Section 4.5. No Undisclosed Events or Circumstances. Since June 30, 1999, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.6. Litigation and Other Proceedings. Except as disclosed in the
Company's SEC filings (the "SEC Documents"), there are no lawsuits or
proceedings pending or, to the knowledge of the Company, threatened, against the
Company or any subsidiary, nor has the Company received any written or oral
notice of any such action, suit, proceeding or investigation, which could
reasonably be expected to have a Material Adverse Effect. Except as set forth in
the SEC Documents, no judgment, order, writ, injunction or decree or award has
been issued by or, to the knowledge of the Company, requested of any court,
arbitrator or governmental agency.
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Section 4.7. Internal Controls and Procedures. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(i) all transactions to which the Company or any subsidiary is a party or by
which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.8. Payments and Contributions. Neither the Company, any subsidiary,
nor any of its officers or, to its knowledge, directors or other employees has
(i) used any Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other similar
payment to any person with respect to Company matters.
Section 4.9. No Misrepresentation. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the Lenders
pursuant to this Agreement, do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE V
Covenants of the Company
Section 5.1. Registration Statement. The Company shall use its best efforts to
cause its Registration Statement on Form S-3, File No. 333-86251 to remain
effective until payment in full of the Notes.
Section 5.2. Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the Warrant Shares pursuant to any exercise of the
Warrants and to issue the Option Shares as set forth in the Notes. The number of
shares so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
pursuant to any exercise of the Warrants or upon exercise of the Lenders' rights
with respect to the Option Shares and the number of shares so reserved shall be
increased or decreased to reflect potential increases or decreases in the Common
Stock that the Company may thereafter be obligated to issue by reason of
adjustments to the Warrants.
Section 5.3. Listing of Common Stock. So long as any part of the Notes remain
unpaid, from whatever source, or the Option Shares remain held of record by any
Lender, the Company hereby agrees to maintain the listing of the Common Stock on
the OTC Bulletin Board or another nationally recognized stock market.
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Section 5.4. Exchange Act Registration. So long as any part of the Notes remain
unpaid, from whatever source, the Company will cause its Common Stock to remain
registered under Section 12(b) or (g) of the Exchange Act, will use its best
efforts to comply in all respects with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any document
(whether or not permitted by the Exchange Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said Act until the Lenders have disposed of all of
their Warrant Shares and Option Shares, if any.
Section 5.5. Corporate Existence; Conflicting Agreements. Subject to Section
5.6, the Company will take all steps necessary to preserve and continue the
corporate existence of the Company. The Company shall not enter into any
agreement, the terms of which agreement would restrict or impair the right or
ability of the Company to perform any of its obligations under this Agreement or
any of the other agreements attached as exhibits hereto.
Section 5.6. Consolidation; Merger. So long as any part of the Notes remain
unpaid, from whatever source, the Company shall not, at any time after the date
hereof, effect any merger or consolidation of the Company with or into, or a
transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the Company's obligations under this Agreement, including the obligation to
deliver to the Lenders such shares of stock and/or securities as the Lenders are
entitled to receive pursuant to the Warrants or the Notes.
Section 5.7. Cooperation with Respect to Option Shares. In the event that any
Lender shall exercise its rights to purchase Option Shares in exchange for the
Notes, the Company agrees to cooperate with Lenders in the transfer of the
Option Shares. Such cooperation shall include, but not be limited to, causing
the Company's counsel to provide a legal opinion to the Company's transfer agent
concerning the transferability of the Option Shares following a valid purchase
thereof, or directing its transfer agent to rely upon such a legal opinion from
counsel to Lenders.
Section 5.8. Prepayment out of Equity Line of Credit. The Company agrees that if
it shall enter into an equity line of credit or similar funding arrangement
prior to the maturity date of the Notes, that it shall commence making draws or
puts, however denominated in such equity line agreement, no later than
seventy-five (75) days after the Closing Date, if permitted under such equity
line, to the maximum extent permitted under such equity line, for the purpose of
prepaying or paying the Notes. In any event, the Company shall utilize at least
fifty percent (50%) of the net proceeds from any sale by the Company of its
securities for cash for the purpose of prepaying the Notes.
Section 5.9. Pro-Rata Treatment of Notes. At all times, the Company shall use
best efforts to treat the Lenders (if there is more than one Lender) equally,
pro-rata to the principal amounts of their respective Notes, except as may be
otherwise agreed by he Lenders in writing in a particular instance, with respect
to payments and prepayments of principal and interest.
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ARTICLE VI
Survival; Indemnification
Section 6.1. Survival. The representations, warranties and covenants made by
each of the Company and each Lender in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby until payment in
full of the Notes, from whatever source. In the event of a breach or violation
of any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement, irrespective of any investigation made by or on behalf of
such party on or prior to the Closing Date.
Section 6.2. Indemnity. (a) The Company hereby agrees to indemnify and hold
harmless the Lenders, their respective Affiliates (as defined in SEC Rule 405)
and their respective officers, directors, partners and members (collectively,
the "Lender Indemnitees"), from and against any and all Damages, in each case
promptly as incurred by the Lender Indemnitees and to the extent arising out of
or in connection with:
(i) any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement
or certificate entered into or delivered by the Company pursuant to
this Agreement; or
(ii) any failure by the Company to perform in any material respect any of
its covenants, agreements, undertakings or obligations set forth in
this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement; or
(iii)any action instituted against the Lenders, or any of them, by any
stockholder of the Company who is not an Affiliate of an Lender, with
respect to any of the transactions contemplated by this Agreement.
(b) Each Lender, severally and not jointly, hereby agrees to indemnify and hold
harmless the Company, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Company Indemnitees"), from and against
any and all Damages, in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact, or breach of any of the
Lender's representations or warranties contained in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement
or certificate entered into or delivered by the Lender pursuant to
this Agreement; or
(ii) any failure by the Lender to perform in any material respect any of
its covenants, agreements, undertakings or obligations set forth in
this Agreement or any instrument, certificate or agreement entered
into or delivered by the Lender pursuant to this Agreement.
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Section 6.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 6.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
6.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is actually prejudiced by such omission or
delay. In connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
Section 6.4. Direct Claims. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article VII. Judgment upon any award rendered by any arbitrators may be entered
in any court having competent jurisdiction thereof.
ARTICLE VII
Choice of Law; Arbitration
Section 7.1. Governing Law/Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be submitted to arbitration under the American Arbitration Association
(the "AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected
according to the rules governing the AAA. The Board of Arbitration shall meet on
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consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York unless the matter at issue is the corporation
law of the company's state of incorporation, in which event the corporation law
of such jurisdiction shall govern such issue. To the extent practical, decisions
of the Board of Arbitration shall be rendered no more than thirty (30) calendar
days following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30) calendar day period) shall
be final, binding and conclusive on the parties to the dispute, and entitled to
be enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The Board of Arbitration shall be authorized and is
hereby directed to enter a default judgment against any party failing to
participate in any proceeding hereunder within the time periods set forth in the
AAA rules. The non-prevailing party to any arbitration (as determined by the
Board of Arbitration) shall pay the expenses of the prevailing party, including
reasonable attorney's fees, in connection with such arbitration. Any party shall
be entitled to obtain injunctive relief from a court in any case where such
relief is available.
ARTICLE VIII
Assignment
Section 8.1. Assignment. Neither this Agreement nor any rights of the Lenders or
the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Notes or Warrants or Option Shares purchased or acquired by any Lender hereunder
with respect to the Notes or Warrants held by such person, and (b) each Lender's
interest in this Agreement may be assigned at any time, in whole or in part, to
any other person or entity (including any Affiliate of the Lender) who agrees to
make the representations and warranties contained in Article III and who agrees
to be bound by the terms of this Agreement.
ARTICLE IX
Notices
Section 9.1. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited
in the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the first business day
following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
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If to the Company: 255 Consumers Road, Suite 500
Toronto, Ontario, Canada M2J 1R4
Attention: T. Scott Worthington
Telephone: (416) 502-3200
Facsimile: (416) 502-2968
with a copy to (shall not
constitute notice): Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attention: David Broadwin, Esq.
Telephone: (617) 832-1000
Facsimile: (617) 832-7000
if to the Lenders: As set forth on the signature pages hereto
with a copy to: Joseph A. Smith, Esq.
(shall not constitute notice) Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York
Telephone: (212) 351-4500
Facsimile: (212) 661-0989
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 9.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 9.1.
ARTICLE X
Miscellaneous
Section 10.5. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 10.6. Entire Agreement. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Notes, the Warrants
and the Escrow Agreement, set forth the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
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Section 10.7. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 10.8. Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 10.9. Number and Gender. There may be one or more Lenders parties to
this Agreement, which Lenders may be natural persons or entities. All references
to plural Lenders shall apply equally to a single Lender if there is only one
Lender, and all references to an Lender as "it" shall apply equally to a natural
person.
Section 10.10. Fees and Expenses. Each of the Company and the Lenders agrees to
pay its own expenses incident to the execution and delivery of this Agreement
and each agreement which is an Exhibit hereto, except that the Company shall pay
$20,000 for legal and escrow fees as set forth in the Escrow Agreement. The
Company shall reimburse the Lenders for their reasonable expenses and legal fees
incurred in enforcing this Agreement or in any modifications or waivers with
respect thereto.
Section 10.11. Brokerage. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker other
than Ladenburg Thalmann & Co. Inc. who will demand payment of any fee or
commission from the other. The fees of Ladenburg shall be paid by the Company.
The Company on the one hand, and the Lenders, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 10.12. Publicity. Except as required by law, the Company agrees that it
will not issue any press release or other public announcement of the
transactions contemplated by this Agreement without the prior consent of Lenders
holding a majority in interest of the Note, which shall not be unreasonably
withheld nor delayed. No release shall name the Lenders without their express
consent.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be executed by the undersigned, thereunto duly authorized, as of the date
first set forth above.
WaveRider Communications Inc.
By:_______________________________
T. Scott Worthington
Chief Financial Officer
Address: c/o Ultra Finanz AG Lender: AMRO International, S.A.
Grossmuensterplatz 6
Zurich, CH-8022 Switzerland By:_______________________________
Fax: 011-411-262-5515 Name: H.U. Bachofen
Principal Amount of Authorized Signatory
Notes to be Purchased: $1,500,000
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EXHIBIT A
PROMISSORY NOTE
$1,500,000 October 27, 1999
FOR VALUE RECEIVED, and intending to be legally bound, WaveRider
Communications Inc., a Nevada corporation with an office and principal place of
business at 255 Consumers Road, Suite 500, Toronto, Ontario, Canada M2J 1R4 (the
"Maker"), hereby unconditionally and irrevocably promises to pay to the order of
AMRO International, S.A. (the "Payee"), at the offices of Ultra Finanz AG,
Grossmuensterplatz 6, Zurich CH-8022, Switzerland, or such other place as Payee
may designate in writing, in lawful money of the United States of America, the
sum of One Million Five Hundred Thousand Dollars ($1,500,000) plus the Payment
Premium (as hereafter defined), plus all accrued but unpaid interest, on May 24,
2000 [the day which is 210 days from the Closing Date].
Interest shall accrue on the outstanding principal balance of this
Promissory Note daily from the date of issuance until paid in full at the rate
of ten percent (10%) per annum, and shall be due and payable at the maturity
date, except that upon any partial payment or prepayment of the principal
balance hereof, all accrued but unpaid interest shall be paid simultaneous with
such prepayment of principal.
This Promissory Note may be prepaid in whole or in part at any time or from
time to time subject to payment of the Payment Premium set forth herein and of
all accrued but unpaid interest, and shall be prepaid up to the extent of fifty
percent (50%) of the net proceeds to Maker from any public or private sale of
Maker's securities by Maker.
The "Payment Premium" shall be five percent (5%) of the outstanding
principal balance of this Promissory Note until the date which is one hundred
twenty (120) days from the date of this Promissory Note, and ten percent (10%)
thereafter.
For purposes of this Promissory Note, an "Event of Default" shall occur if
the Maker shall: (i) fail to pay the entire principal amount of this Promissory
plus the Payment Premium when due and payable after ten (10) days written notice
to Maker of such default by Payee, (ii) admit in writing its inability to pay
any of its monetary obligations under this Promissory Note, (iii) make a general
assignment of its assets for the benefit of creditors, or (iv) allow any
proceeding to be instituted by or against it seeking relief from or by
creditors, including, without limitation, any bankruptcy proceedings, which, if
not a voluntary proceeding, is not dismissed within ninety (90) days.
In the event that an Event of Default has occurred, the Payee or any other
holder of this Promissory Note may, by notice to the Maker, declare this entire
Promissory Note to be forthwith immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Maker. In the event that an Event of Default
consisting of a voluntary or involuntary bankruptcy filing has occurred, then
this entire Promissory Note shall automatically become due and payable without
any notice or other action by Payee.
The nonexercise or delay by the Payee or any other holder of this
Promissory Note of any of its rights hereunder in any particular instance shall
not constitute a waiver thereof in that or any subsequent instance. No waiver of
any right shall be effective unless in writing signed by the Payee, and no
waiver on one (1) or more occasions shall be conclusive as a bar to or waiver of
any right on any other occasion.
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Upon the occurrence and during the continuation of an Event of Default, in
lieu of Payee's other remedies with respect thereto, Payee may purchase from
Maker shares of Maker's registered Common Stock (registered pursuant to Form
S-3, File No. 333-86251) if such registration statement is then effective, and
tender in full payment therefor this Note or any portion hereof. Such Common
Stock shall be purchased at a price equal to eighty percent (80%) of the average
of the closing bid prices of Maker's Common Stock on the OTC Bulletin Board (or
such other exchange or market on which the majority of trading volume in such
Common Stock then takes place) during the five Trading Days prior to the date on
which Payee tenders this Note to purchase such shares.
Should any part of the indebtedness evidenced hereby be collected by law or
through an attorney-at-law, the Payee or any other holder of this Promissory
Note shall, if permitted by applicable law, be entitled to collect from the
Maker all reasonable costs of collection, including, without limitation,
attorneys' fees.
All notices and other communications must be in writing to the address of
the party set forth in the first paragraph hereof and shall be deemed to have
been received when delivered personally (which shall include via fax or an
overnight courier service) or, if mailed, five (5) business days after having
been mailed by registered or certified mail, return receipt requested, postage
prepaid. The parties may designate by notice to each other any new address for
the purpose of this Promissory Note.
Maker hereby forever waives presentment, demand, presentment for payment,
protest, notice of protest, and notice of dishonor of this Promissory Note and
all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Promissory Note.
This Promissory Note shall be binding upon the successors and assigns of
the Maker, and shall be binding upon, and inure to the benefit of, the
successors and assigns of the Payee.
This Promissory Note shall be governed by and construed in accordance with
the internal laws of the State of New York. All disputes between the Maker and
the Payee relating in any way to this Promissory Note shall be resolved only by
state and federal courts located in New York County, New York, and the courts to
which an appeal therefrom may be taken.
IN WITNESS WHEREOF, the undersigned Maker has executed this Promissory Note
as of October 27, 1999.
MAKER:
WAVERIDER COMMUNICATIONS, INC.
By:_____________________________________
T. Scott Worthington, Chief Financial Officer
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EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of October 15, 1999, by
and among WaveRider Communications Inc. (the "Company"), the lenders signatory
hereto (each a "Lender" and together the "Lenders"), and Epstein Becker & Green,
P.C., (the "Escrow Agent"). Capitalized terms used but not defined herein shall
have the meanings set forth in the Loan Agreement referred to in the first
recital.
W I T N E S S E T H:
WHEREAS, the Lenders will be lending the Company $1,500,000 for the Notes
and the Lenders will receive Warrants to purchase, in the aggregate, up to
180,000 shares of Common Stock, at the purchase price set forth in the Loan
Agreement (the "Loan Agreement") dated the date hereof between the Lenders and
the Company, which will be issued as per the terms contained herein and in the
Loan Agreement; and
WHEREAS, the Company and the Lenders have requested that the Escrow Agent
hold the Purchase Price with respect to the Notes in escrow until the Escrow
Agent has received the Notes, the Warrants, the Option Shares and certain other
closing documents specified herein;
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
Section 1.6. The parties hereby agree to establish an escrow account with
the Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase
of the $1,500,000 principal amount of Notes and the Warrants at the Closing as
contemplated by the Loan Agreement.
Section 1.7. (a) At the Closing, upon Escrow Agent's receipt of the
$1,500,000 Purchase Price for the Notes into its attorney trustee account from
the Lenders, together with executed counterparts of this Agreement and the Loan
Agreement, it shall telephonically advise the Company, or the Company's
designated attorney or agent, of the amount of funds it has received into its
account.
(b) Wire transfers to the Escrow Agent shall be made as
follows:
Epstein Becker & Green, P.C.
Master Escrow Account
Chase Manhattan Bank
1411 Broadway - Fifth Floor
New York, New York 10018
ABA No. 021000021
Account No. 035-1-346036
Attention: L. Borneo
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Section 1.8. The Company, upon receipt of said notice, shall deliver to the
Escrow Agent the Notes and the Warrants to be issued to each Lender together
with:
(i) an original counterpart of this Escrow Agreement;
(ii) the original opinion of Foley, Hoag & Eliot LLP in the form of
Exhibit D to the Loan Agreement;
(iii)certificates representing four million (4,000,000) shares of
Common Stock without any restrictive legend thereon, registered
in the names of the Lenders pro-rata to the principal amounts of
the Notes issued to each Lender; and
(iv) such other closing certificates and documents as the Lenders may
reasonably request.
In the event that the foregoing items are not in the Escrow Agent's
possession within three (3) Trading Days of the Escrow Agent notifying the
Company that the Escrow Agent has custody of the Purchase Price, then each
Lender shall have the right to demand the return of said sum. Section 1.9. At
the Closing, Escrow Agent shall insert the Closing Date and the maturity date on
the face of the certificates representing the Notes and then wire that amount of
funds necessary to purchase the Notes and per the written instructions of the
Company net of the Lenders' legal and escrow administrative costs of twenty
thousand dollars ($20,000) and the commissions of Ladenburg Thalmann & Co., Inc.
of six percent (6%), which shall be paid as directed by Ladenburg Thalmann.
Once the funds (as set forth above) have been sent per the Company's
instructions, the Escrow Agent shall then arrange to have the Notes and the
Warrants delivered as per instructions from the Lenders and the Escrow Agent
shall retain the Option Shares in its capacity as Escrow Agent.
Section 1.1. 1.5 With respect to the Option Shares, the Company covenants
with the Lenders that it will not place or suffer any "stop transfer" or similar
instructions with the transfer agent and registrar of the Company's Common
Stock.
(a) Upon the maturity of the Notes, whether upon their stated maturity date
or upon acceleration for any reason set forth in such Notes, Escrow Agent shall,
at the written direction of the Lenders and without notice or liability to the
Company, deliver to each Lender, as its respective interests may appear, the
certificates representing the Option Shares. If the purchase of Option Shares
will satisfy the entire principal, Payment Premium and accrued interest of such
Note, the Lender shall tender the Note to the Escrow Agent against delivery of
the Option shares, and shall re-deliver such Note to the Company. The debt of
the Company to the Lenders shall be reduced by the value of the Option Shares
purchased, valued as set forth in Section 1.5(b).
(b) The Option Shares shall be valued at eighty percent (80%) of the
average of the closing bid prices of the Company's Common Stock on the OTC
Bulletin Board (or such other exchange or market on which the majority of
trading volume in such Common Stock then takes place) during the five Trading
Days prior to the date on which the Escrow Agent is directed to deliver the
Option Shares to Lenders.
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(c) In the event that at any time or from time to time after the date
hereof, the Company shall declare any dividend or any other distribution on its
Common Stock, whether in securities, cash or other property by way of stock
split, spin-off, split-up or reclassification, combination of shares or the
like, or in case of any reorganization, consolidation or merger of the Company,
then and in each such case, the Company shall deliver to Escrow Agent all such
securities, cash and other property as part of the Option Shares.
(d) Escrow Agent shall redeliver the Option Shares, or such as remain
unpurchased, and all accessions thereto to the Company upon receipt of evidence
reasonably satisfactory to the Escrow Agent that the Notes have all been paid in
full.
(e) Provided no Event of Default is then continuing uncured under any of
the Notes, upon any partial payment of the Notes, Escrow Agent shall release to
the Company certificates representing Option Shares on the basis of 2.5 shares
per dollar of principal repaid.
ARTICLE 2
MISCELLANEOUS
2.1 No waiver or any breach of any covenant or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof, or of
any other covenant or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed any extension of the time
for performance of any other obligation or act.
2.2 All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent as set forth in the Loan Agreement.
Section 1.10. This Escrow Agreement shall be binding upon and shall inure
to the benefit of the permitted successors and permitted assigns of the parties
hereto.
Section 1.11. This Escrow Agreement is the final expression of, and
contains the entire agreement among, the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Escrow Agreement may not be modified, changed, supplemented or terminated, nor
may any obligations hereunder be waived, except by written instrument signed by
the parties to be charged or by its agent duly authorized in writing or as
otherwise expressly permitted herein.
Section 1.12. Whenever required by the context of this Escrow Agreement,
the singular shall include the plural and masculine shall include the feminine.
This Escrow Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Escrow Agreement.
Section 1.13. The parties hereto expressly agree that this Escrow Agreement
shall be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Any action to enforce, arising out of,
or relating in any way to, any provisions of this Escrow Agreement shall only be
brought in a state or Federal court sitting in New York City. Section 1.14. The
Escrow Agent's duties hereunder may be altered, amended, modified or revoked
only by a writing signed by the Company, each Lender and the Escrow Agent.
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Section 1.15. The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall not be personally liable
for any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent
while acting in good faith, and any act done or omitted by the Escrow Agent
pursuant to the advice of the Escrow Agent's attorneys-at-law shall be
conclusive evidence of such good faith.
Section 1.16. The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by any other person
or corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
Section 1.17. The Escrow Agent shall not be liable in any respect on
account of the identity, authorization or rights of the parties executing or
delivering or purporting to execute or deliver the Loan Agreement or any
documents or papers deposited or called for thereunder.
Section 1.18. The Escrow Agent shall be entitled to employ such legal
counsel and other experts as the Escrow Agent may deem necessary properly to
advise the Escrow Agent in connection with the Escrow Agent's duties hereunder,
may rely upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Lenders, and may continue to act as legal counsel for the Lenders, from time to
time, notwithstanding its duties as the Escrow Agent hereunder. The Company
consents to the Escrow Agent in such capacity as legal counsel for the Lenders
and waives any claim that such representation represents a conflict of interest
on the part of the Escrow Agent. The Company understands that the Lenders and
the Escrow Agent are relying explicitly on the foregoing provision in entering
into this Escrow Agreement.
Section 1.19. The Escrow Agent's responsibilities as escrow agent hereunder
shall terminate if the Escrow Agent shall resign by written notice to the
Company and the Lenders. In the event of any such resignation, the Lenders and
the Company shall appoint a successor Escrow Agent. Section 1.20. If the Escrow
Agent reasonably requires other or further instruments in connection with this
Escrow Agreement or obligations in respect hereto, the necessary parties hereto
shall join in furnishing such instruments.
Section 1.21. It is understood and agreed that should any dispute arise
with respect to the delivery and/or ownership or right of possession of the
documents or the escrow funds held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed in the Escrow Agent's sole discretion (1) to
retain in the Escrow Agent's possession without liability to anyone all or any
part of said documents or the escrow funds until such disputes shall have been
settled either by mutual written agreement of the parties concerned by a final
order, decree or judgment or a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but the Escrow Agent
shall be under no duty whatsoever to institute or defend any such proceedings or
(2) to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the City of New York in accordance with the
applicable procedure therefor.
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Section 1.22. The Company and each Lender agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties or performance of the Escrow
Agent hereunder or the transactions contemplated hereby or by the Loan Agreement
other than any such claim, liability, cost or expense to the extent the same
shall have been determined by final, unappealable judgment of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the date set forth above. WaveRider Communications Inc.
By:______________________________________
T. Scott Worthington, Chief Financial Officer
Lender: AMRO International, S.A.
By:__________________________________
Name: H.U. Bachofen
Authorized Signatory
ESCROW AGENT:
EPSTEIN BECKER & GREEN, P.C.
By:___________________________________
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EXHIBIT C
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 180,000 Shares of Common Stock of
WaveRider Communications Inc.
THIS CERTIFIES that, for value received, AMRO International, S.A. (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after
October 31, 1999 (the "Initial Exercise Date") and on or prior to the close of
business on October 31, 2003 (the "Termination Date") but not thereafter, to
subscribe for and purchase from WaveRider Communications, Inc., a corporation
incorporated in Nevada (the "Company"), up to One Hundred Eighty Thousand
(180,000) shares (the "Warrant Shares") of Common Stock, no par value, of the
Company (the "Common Stock"). The purchase price of one share of Common Stock
(the "Exercise Price") under this Warrant shall be $1.01, which is the closing
bid price of the Company's Common Stock on the OTC Bulletin Board on the Trading
Day prior to the date of this Warrant. The Exercise Price and the number of
shares for which the Warrant is exercisable shall be subject to adjustment as
provided herein. In the event of any conflict between the terms of this Warrant
and the Loan Agreement dated as of October 15, 1999 pursuant to which this
Warrant has been issued (the "Loan Agreement"), the Loan Agreement shall
control. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Loan Agreement.
12. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
13. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
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14. Exercise of Warrant.
(b) Except as provided above and as further provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the Notice
of Exercise Form annexed hereto duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company) and upon payment of the Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States or Canadian bank, the holder of this Warrant shall be entitled to receive
a certificate for the number of shares of Common Stock so purchased.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) Trading Days after the date on which this Warrant shall
have been exercised as aforesaid. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by Holder, if any, pursuant to
Section 5 prior to the issuance of such shares, have been paid.
(c) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant.
(d) If the Company shall file a registration statement with the Securities
and Exchange Commission at any time prior to the date on which the Warrant
Shares could be sold under Rule 144(k), on a form which permits the registration
for resale by the Holder of the Warrant Shares, then the Company shall register
the Warrant Shares for resale by the Holder in such registration statement
without cost to the Holder. The Company shall provide Holder with customary
indemnification with respect thereto.
(e) If no registration statement is effective permitting the resale of the
shares of Common Stock issued upon exercise of this Warrant at any time
commencing one year after the issuance date hereof, then this Warrant shall also
be exercisable by means of a "cashless exercise" in which the holder shall be
entitled to receive a certificate for the number of shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election on the Nasdaq Stock
Market, or if the Common Stock is not traded on the Nasdaq Stock Market, then
the principal market in terms of volume, and converted into US Dollars;
(B) = the Exercise Price of the Warrants; and
(X) = the number of shares issuable upon exercise of the Warrants in accordance
with the terms of this Warrant.
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12. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
13. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
14. Closing of Books. The Company will not close its shareholder books or
records in any manner which prevents the timely exercise of this Warrant.
15. Transfer, Division and Combination. (a) Subject to compliance with any
applicable securities laws, transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the principal
office of the Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by Holder or its agent
or attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a
new holder for the purchase of shares of Common Stock without having a new
Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by Holder or its agent or attorney. Subject to compliance
with Section 7(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
16. No Rights as Shareholder until Exercise. This Warrant does not entitle
the holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price, the Warrant Shares so purchased shall
be and be deemed to be issued to such holder as the record owner of such shares
as of the close of business on the later of the date of such surrender or
payment.
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17. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant certificate
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock certificate.
18. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
19. Adjustments of Exercise Price and Number of Warrant Shares. (a) Stock
Splits, etc. The number and kind of securities purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment from time to
time upon the happening of any of the following. In case the Company shall (i)
pay a dividend in shares of Common Stock or make a distribution in shares of
Common Stock to holders of its outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per Warrant Share or other security obtained by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares purchasable pursuant hereto immediately prior to such
adjustment and dividing by the number of Warrant Shares or other securities of
the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(f) Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
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the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 11.
For purposes of this Section 11, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 11 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
12. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant, reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in the absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
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then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the record date for such dividend,
distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
16(d).
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
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16. Miscellaneous.
(g) Jurisdiction. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the laws
of New York, without regard to its conflict of law, principles or rules, and be
subject to arbitration pursuant to the terms set forth in the Loan Agreement.
(h) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(i) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company fails to comply with any provision of this Warrant, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
(j) Notices. Any notice, request or other document required or permitted to
be given or delivered to the holder hereof by the Company shall be delivered in
accordance with the notice provisions of the Loan Agreement.
(k) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(l) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(m) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
(n) Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's negligence,
bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
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(o) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(p) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
(q) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: October 27, 1999
WaveRider Communications, Inc.
By:_____________________________________________
T. Scott Worthington, Chief Financial Officer
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NOTICE OF EXERCISE
To: WaveRider Communications, Inc.
(1) The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), of WaveRider Communications, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
- ---------------------------------------------
(Name)
- ---------------------------------------------
(Address)
Dated:
------------------------------
Signature
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
___________________________________________________________ whose address is
____________________________________________________________________________.
____________________________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address:________________________________
________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
EXHIBIT 10.2
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement') is dated as of
October 18, 1999 by and between WaveRider Communications Inc., a Nevada
corporation (the "Company"), and Radyr Group Investments (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1. Certain Definitions.
(a) "Average Daily Price" shall be the price based on the VWAP of the
Company on the Over the Counter Bulletin Board ("OTCBB") or, if the OTCBB is not
the Principal Market, on the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term in Section
6.1(a) hereof.
(c) "Draw Down Exercise Date" shall have the meaning assigned to such term
in Section 6.1(b) hereof.
(d) "Draw Down Pricing Period" shall mean a period of twenty-two (22)
consecutive Trading Days preceding a Draw Down Exercise Date.
(e) "Effective Date" shall mean the date the Registration Statement of the
Company covering the Shares being subscribed for hereby is declared effective.
(f) "Material Adverse Effect" shall mean any effect on the business,
operations, properties or financial condition of the Company that is material
and adverse to the Company and its subsidiaries and affiliates, taken as a whole
and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement or the Registration Rights Agreement
in any material respect.
(g) "Principal Market" shall mean initially the OTCBB, and shall include
the Nasdaq SmallCap Market, the Nasdaq National Market, the American Stock
Exchange or the New York Stock Exchange if the Company is listed and trades on
such market or exchange. If the Company maintains multiple listings, the
Principal Market shall be the largest market, based upon share trading volume,
over the prior thirty Trading Days.
(h) "Registration Statement" shall mean the registration statement under
the Securities Act of 1933, as amended, on Form S-3, file no. 333-86251 filed
with the Securities and Exchange Commission for the registration of the Shares
pursuant to the Registration Rights Agreement attached hereto as Exhibit A, and
any other registration statement filed pursuant to the Registration Rights
Agreement for the purpose of enabling the Company to Draw Down Shares or to
honor Call Notices.
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(i) "Shares" shall mean, collectively, the shares of Common Stock of the
Company being subscribed for hereunder and those shares of Common Stock issuable
to the Purchaser upon exercise of the Call Option.
(j) "Threshold Price" is the lowest Average Daily Price at which the
Company will sell its Common Stock with respect to this Agreement.
(k) "Trading Day" shall mean any day on which the Principal Market is open
for business.
(l) "VWAP" shall mean the daily volume weighted average price of the
Company on the Principal Market as reported by Bloomberg Financial using the AQR
function.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to the terms and conditions
of this Agreement, the Company shall issue and sell to the Purchaser and the
Purchaser shall purchase from the Company up to Five Million Dollars
($5,000,000) of the Company's Common Stock, $0.001 par value per share (the
"Common Stock"), based on up to eighteen (18) Draw Downs of up to Six Hundred
Thousand Dollars ($600,000) per Draw Down.
Section 2.2 The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs requested and Call Options permitted under this
Agreement. At no time will the Company request a Draw Down which would result in
the issuance of a number of shares of Common Stock pursuant to this Agreement
and the Warrants referred to in Section 5.2(f) which exceeds 19.9% of the number
of shares of Common Stock issued and outstanding on the Closing Date without
obtaining stockholder approval of such excess issuance, if such approval would
be required by the rules of the Principal Market.
Section 2.3 Purchase Price and Closing. The Company agrees to issue and
sell to the Purchaser and, in consideration of and in express reliance upon the
representation, warranties, covenants, terms and conditions of this Agreement,
the Purchaser agrees to purchase that number of the Shares to be issued in
connection with each Draw Down. The closing under this Agreement shall take
place at the offices of Epstein Becker & Green, P.C., 250 Park Avenue, New York,
New York 10177 (the "Closing") at 10:00 a.m. E.S.T. on (i) October 26, 1999, or
(ii) such other time and place or on such date as the Purchaser and the Company
may agree upon (the "Closing Date"). Each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
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ARTICLE III
Representations and Warranties
Section 3.1 Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Nevada and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company does not have any subsidiaries except as set forth in the Company's
Form 10-KSB for the year ended December 31, 1998, including the accompanying
financial statements (the "Form 10-KSB"), or on Schedule 3.1(a) hereto. The
Company and each such subsidiary is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction in which the failure to be so qualified
will not have a Material Adverse Effect on the Company's financial condition.
(b) Authorization, Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered, and constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and the
shares thereof currently issued and outstanding are as set forth in the Form
10-KSB and the documents incorporated by reference in the Company's Registration
Statement (the Registration Statement, the Form 10-KSB and such other
incorporated documents being referred to collectively as the "SEC Documents").
All of the outstanding shares of the Company's Common Stock have been duly and
validly authorized and are fully-paid and non-assessable. Except as set forth in
this Agreement and the Registration Rights Agreement or as set forth in the SEC
Documents, or on Schedule 3.1(c) hereto, no shares of Common Stock are entitled
to preemptive rights or registration rights and there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company. Furthermore, except as set forth in this
Agreement and as set forth in the SEC Documents or on Schedule 3.1(c), there are
no contracts, commitments, understandings, or arrangements by which the Company
is or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except as set forth in the SEC Documents, the Company is
not a party to any agreement granting registration rights to any person with
respect to any of its equity or debt securities. Except as set forth in the SEC
Documents, the Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. Except as set forth in the SEC Documents or on Schedule 3.1(c)
hereto, the offer and sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued prior to the Closing complied with
all applicable Canadian and United States Federal and state securities laws, and
no stockholder has a right of rescission or damages with respect thereto which
would have a Material Adverse Effect on the Company's financial condition or
operating results. The Company has made available to the Purchaser true and
correct copies of the Company's Articles of Incorporation as in effect on the
date hereof (the "Articles"), and the Company's Bylaws as in effect on the date
hereof (the "Bylaws").
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(d) Issuance of Shares. The Shares to be issued under this Agreement have
been duly authorized by all necessary corporate action and, when paid for or
issued in accordance with the terms hereof, the Shares shall be validly issued
and outstanding, fully paid and non-assessable, and the Purchaser shall be
entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated herein do not and will not (i) violate any provision of the
Company's Articles or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party, (iii) create or impose a lien, charge or encumbrance on any property of
the Company under any agreement or any commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any Canadian,
United States Federal, state, local or other foreign statute, rule, regulation,
order, judgment or decree (including any Canadian, United States Federal and
state or provincial securities laws and regulations) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or
any of its subsidiaries are bound or affected, except, in all cases, for such
conflicts, defaults, termination, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under any Canadian, United States Federal, state or local or provincial
law, rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement, or issue and sell the Shares in accordance with the terms hereof
(other than any filings which may be required to be made by the Company with the
Securities and Exchange Commission (the "Commission"), or state or provincial
securities administrators subsequent to the Closing and any registration
statement which may be filed pursuant hereto); provided that, for purpose of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchaser
herein.
(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, except as disclosed in the SEC
Documents or on Schedule 3.1(f) hereto, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act. The Company has not provided to the Purchaser any information which,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been so disclosed, other than with
respect to the transactions contemplated by this Agreement. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
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promulgated thereunder applicable to such documents, and, as of its date the SEC
Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included or
incorporated by reference in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. The SEC Documents or Schedule 3.1(g) hereto sets forth
each subsidiary of the Company, showing the jurisdiction of its incorporation or
organization and showing the percentage of each person's ownership of the
outstanding stock or other interests of such subsidiary. For the purposes of
this Agreement, "subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interests having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and validly issued, and are fully paid and non-assessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is a party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any subsidiary.
(h) No Material Adverse Change. Since June 30, 1999, the date through which
the most recent quarterly report of the Company has been prepared and filed with
the Commission, the Company has not experienced or suffered any Material Adverse
Effect, except as disclosed on Schedule 3.1(h) hereof.
(i) No Undisclosed Liabilities. Except as disclosed in the SEC Documents or
on Schedule 3.1(i) hereto, neither the Company nor any of its subsidiaries has
any liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise)
that would be required to be disclosed on a balance sheet of the Company or any
subsidiary (including the notes thereto) in conformity with GAAP which are not
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company's or its subsidiaries respective businesses since such date and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company or its subsidiaries.
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(j) No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. The SEC Documents or Schedule 3.1(k) hereto sets forth as
of the date hereof all outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $250,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $250,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the SEC
Documents, free of any mortgages, pledges, charges, liens, security interests or
other encumbrances, except for those indicated in the SEC Documents or on
Schedule 3.1(1) hereto or such that do not cause a Material Adverse Effect on
the Company's financial condition or operating results. All said leases of the
Company and each of its subsidiaries are valid and subsisting and in full force
and effect.
(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the SEC Documents or on Schedule
3.1(m) hereto, there is no action, suit, claim, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company or
any subsidiary.
(n) Compliance with Law. The business of the Company and the subsidiaries
has been and is presently being conducted in accordance with all applicable
Canadian, United States Federal, state and local governmental laws, rules,
regulations and ordinances, except as set forth in the SEC Documents or on
Schedule 3.1(n) hereto or such that do not cause a Material Adverse Effect. The
Company and each of its subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of their respective businesses as now being conducted
by them unless the failure to possess such franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(o) Taxes. Except as set forth in the SEC Documents or on Schedule 3.1(o)
hereto, the Company and each of the subsidiaries has accurately prepared and
filed all Canadian, United States Federal, state and other tax returns required
by law to be filed by it, has paid or made provisions for the payment of all
taxes shown to be due and all additional assessments, and adequate provision
have been and are reflected in the financial statements of the Company and the
subsidiaries for all current taxes and other charges to which the Company or any
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subsidiary is subject and which are not currently due and payable. Except as
disclosed on Schedule 3.1(o) hereto, none of the Canadian or United States
federal income tax returns of the Company or any subsidiary have been audited by
the Internal Revenue Service or Canadian fiscal authorities. The Company has no
knowledge of any additional assessments, adjustments or contingent tax liability
(whether federal or state) pending or threatened against the Company or any
subsidiary for any period, nor of any basis for any such assessment, adjustment
or contingency.
(p) Certain Fees. Except as set forth on Schedule 3.1(p) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary with respect to the transactions contemplated by
this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. The Company and each of the subsidiaries owns or
possesses all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations as set forth in the SEC Documents and on Schedule
3.1(r) hereto, and all rights with respect to the foregoing, which are necessary
for the conduct of its business as now conducted without any conflict with the
rights of others.
(s) Regulatory Compliance. Except as disclosed in the SEC Documents or on
Schedule 3.1(s) hereto, the Company and each of its subsidiaries have obtained
all material approvals, authorization, certificates, consents, licenses, orders
and permits or other similar authorizations of all governmental authorities, or
from any other person, that are required for the operation of the Company's
business. The SEC Documents or Schedule 3.1(s) hereto sets forth all material
permits, licenses and other authorizations issued to the Company or its
subsidiaries.
(t) Books and Records. The records and documents of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any subsidiary.
(u) Material Agreements. Except as set forth in the SEC Documents, or on
Schedule 3.1(u) hereto, neither the Company nor any subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
as an exhibit to a registration statement on Form S-1 or other applicable form
(collectively, "Material Agreements") if the Company or any subsidiary were
registering securities under the Securities Act of 1933, as amended (the
"Securities Act"). The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the foregoing agreements, have received no notice of default and, to the
best of the Company's knowledge are not in default under any Material Agreement
now in effect, the result of which could cause a Material Adverse Effect.
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(v) Transactions with Affiliates. Except as set forth in the SEC Documents
or on Schedule 3.1(v) hereto, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing
transactions exceeding $100,000 between (a) the Company, any subsidiary or any
of their respective customers or suppliers on the one hand, and (b) on the other
hand, any officer, employee, consultant or director of the Company, or any of
its subsidiaries, or any person owning any capital stock of the Company or any
subsidiary or any member of the immediately family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
(w) Securities Act of 1933. The Company has complied and will comply with
all applicable Canadian and United States Federal and state securities laws in
connection with the offer, issuance and sale of the Shares hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy the Shares or similar securities
to, or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person (other than the
Purchaser), so as to bring the issuance and sale of the Shares and/or the
Warrants under the registration provisions of the Securities Act and applicable
state securities laws. Neither the Company nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Shares.
(x) Governmental Approvals. Except as set forth in the SEC Documents or on
Schedule 3.1(x) hereto, and except for the filing of any notice prior or
subsequent to the Closing that may be required under applicable Canadian, United
States Federal of state securities laws (which if required, shall be filed on a
timely basis), including the filing of a registration statement or statements
pursuant to this Agreement, no authorization, consent, approval, license,
exemption of, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary for, or in connection with, the execution or delivery of the
Shares, or for the performance by the Company of its obligations under this
Agreement.
(y) Employees. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except as
set forth in the SEC Documents or on Schedule 3(y) hereto. Except as set forth
in the SEC Documents or on Schedule 3(y) hereto, neither the Company nor any
subsidiary is in breach of any employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since the date of the
Notice of Annual Meeting for the most recent Annual Meeting of Shareholder, no
officer, consultant or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, could have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with the
Company or any subsidiary.
(z) Absence of Certain Developments. Except as provided in SEC Documents or
in Schedule 3.1(z) hereto, since June 30, 1999 neither the Company nor any
subsidiary has:
(i) issued any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto;
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(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business during the comparable
portion of its prior fiscal year, as adjusted to reflect the current nature and
volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other property
to stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or canceled
any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual
property rights, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business or to the
Purchaser or its representatives;
(vii) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate in
excess of $ 1,000,000;
(x) entered into any other material transaction, whether or not in the
ordinary course of business;
(xi) suffered any material damage, destruction or casualty loss, whether or
not covered by insurance;
(xii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing kind which in the
aggregate would be material to the Company or its subsidiaries.
(aa) Use of Proceeds. The proceeds from the sale of the Shares will be used
by the Company and its subsidiaries for general corporate purposes.
(bb) Acknowledgment Regarding Purchaser's Purchase of Shares. Company
acknowledges and agrees that Purchaser is acting solely in the capacity of arm's
length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to
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this Agreement and the transactions contemplated hereunder and any advice given
by the Purchaser or any of its representatives or agents in connection with this
Agreement and the transactions contemplated hereunder is merely incidental to
the Purchaser's purchase of the Shares. The Company further represents to the
Purchaser that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation by the Company and its own
representatives and counsel.
Section 3.2 Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the British Virgin Islands.
(b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the Shares
being sold to it hereunder. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
(c) No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by the Purchaser of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of such
Purchaser's charter documents or bylaws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument to which
the Purchaser is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to the Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser). The Purchaser is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or to purchase the Shares in
accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, the Purchaser is assuming and relying upon
the accuracy of the relevant representations and agreements of the Company
herein.
(d) Financial Risks. The Purchaser acknowledges that it is able to bear the
financial risks associated with an investment in the Shares and that it has been
given full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation. The Purchaser is capable
of evaluating the risks and merits of an investment in the Shares by virtue of
its experience as an investor and its knowledge, experience, and sophistication
in financial and business matters and the Purchaser is capable of bearing the
entire loss of its investment in the Shares.
(e) Accredited Investor. The Purchaser is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act.
(f) Compliance With Law. The Purchaser's trading and distribution
activities with respect to the Shares will be in compliance with all applicable
state and Federal securities laws, rules and regulations and the rules and
regulations of the Principal Market. Purchaser shall deliver any prospectus
required by Federal securities laws in connection with any sale of the Shares.
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(g) General. The Purchaser understands that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the suitability of the Purchaser to acquire the Shares.
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows:
Section 4.1 Securities Compliance. The Company shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Shares and the
Warrants to the Purchaser or subsequent holders.
Section 4.2 Registration and Listing. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement, and will not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the OTCBB
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and the OTCBB or other
Principal Market.
Section 4.3 Registration Statement. The Company shall cause to be filed an
amendment or supplement to the Registration Statement, or, in the discretion of
the Company, a new Registration Statement, which amendment or supplement or new
Registration Statement shall provide for the sale of the Shares to the Purchaser
and resale by the Purchaser to the public in accordance with this Agreement. The
Company shall cause such amendment (if the Company determines to file an
amendment) or new Registration Statement to be declared effective by the
Commission as expeditiously as practicable. Before the Purchaser shall be
obligated to accept a Draw Down request from the Company, the Company shall have
caused a sufficient number of shares of Common Stock to be registered to cover
the Shares to be issued in connection with such Draw Down and an equal amount of
Shares to be registered in the event that the Purchaser determines to exercise
its Call Option in connection with such Draw Down.
Section 4.4 Escrow Arrangement. The Company and the Purchaser shall enter
into an escrow arrangement with Epstein Becker & Green, P.C. (the "Escrow
Agent") in the form of Exhibit B hereto respecting payment against delivery of
the Shares.
Section 4.5 Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could have a Material Adverse Effect.
Section 4.6 Keeping of Records and Books of Account. The Company shall keep
and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
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Section 4.7 Amendments. The Company shall not amend or waive any provision
the Articles of Incorporation, Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.8 Other Agreements. The Company shall not enter into any
agreement the terms of which such agreement would restrict or impair the right
to perform of the Company or any subsidiary under this Agreement.
Section 4.9 Notice of Certain Events Affecting Registration; Suspension of
Right to Request a Draw Down. The Company will immediately notify the Purchaser
upon the occurrence of any of the following events in respect of the
Registration Statement or related prospectus in respect of the Shares: (i)
receipt of any request for additional information from the Commission or any
other Federal or state governmental authority during the period of effectiveness
of the Registration Statement the response to which would require any amendments
or supplements to the Registration Statement or related prospectus; (ii) the
issuance by the Commission or any other Federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Purchaser any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Purchaser any Draw Down Notice during the
continuation of any of the foregoing events.
Section 4.10 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Purchaser such shares of stock
and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 4.11 Minimum Issuance of Shares. The Company shall issue Draw Down
Notices in the minimum aggregate amount during the term of this Agreement to
repay that certain promissory note in the principal amount of $1,500,000 issued
on or about October 26, 1999, so long as the Threshold Price condition is
satisfied, unless such loan is otherwise repaid in full from other sources of
funds.
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Section 4.12 Limitation on Future Financing. The Company agrees that,
except as set forth below, it will not enter into any sale of its securities for
cash at a discount to the current market price until the earlier of (i) one year
from the effective date of the Registration Statement or, if later, the date the
Company has satisfied the minimum issuance described in Section 4.11 or
otherwise repaid in full the promissory note referred to therein or (ii) sixty
(60) days after the entire $5,000,000 of Shares has been purchased by Purchaser.
The foregoing shall not prevent or limit the Company from engaging in any sale
of securities (i) in a registered public offering by the Company which is
underwritten by one or more established investment banks, (ii) in one or more
private placements where the purchasers do not have registration rights, (iii)
pursuant to any presently existing or future employee benefit plan which plan
has been or is approved by the Company's stockholders, (iv) pursuant to any
compensatory plan for a full-time employee or key consultant, (v) in connection
with a strategic partnership or other business transaction, the principal
purpose of which is not simply to raise money, or (vi) to which Purchaser gives
its written approval.
ARTICLE V
Conditions to Closing and Draw Downs
Section 5.1 Conditions Precedent to the Obligation of the Company to Sell
the Shares. The obligation hereunder of the Company to issue and sell the Shares
to the Purchaser is subject to the satisfaction or waiver, at or before the
Closing, of each of the conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the Closing and as of each
Draw Down Exercise Date or Call Option Exercise Date as though made at that
time, except for representations and warranties that speak as of a particular
date.
(b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all material covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Closing and as of each Draw
Down Exercise Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
at that time (except for representations and warranties that speak as of a
particular date).
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(b) Performance by the Company. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Purchaser or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
(e) Opinion of Counsel, Etc. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of Closing, in the
form of Exhibit C hereto, and such other certificates and documents as the
Purchaser or its counsel shall reasonably require incident to the Closing.
(f) Warrants. The Purchaser shall receive warrants in the form of Exhibit D
hereto to purchase up to 200,000 shares of Common Stock (the "Warrants") at the
Closing. The Warrants will have a four (4) year term from their date of
issuance. The Warrant strike price shall be the closing bid price of the Common
Stock on the OTC Bulletin Board on the Trading Day prior to the Closing Date.
The Common Stock underlying the Warrants will have piggyback registration rights
as set forth in the Registration Rights Agreement.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction or waiver, at or before each Draw Down Exercise
Date, of each of the conditions set forth below. The conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in its
sole discretion.
(a) Satisfaction of Conditions to Closing. The Company shall have
satisfied, or the Purchaser shall have waived, the conditions set forth in
Section 5.2 hereof
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall remain effective on each Draw Down Exercise Date.
(c) No Suspension. Trading in the Company's Common Stock shall not have
been suspended by the Commission or the Principal Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to each Draw Down request), and, at any
time prior to such request, trading in securities generally shall not have been
suspended or limited by the Principal Market, or minimum prices shall not have
been established on securities whose trades are reported on the Principal
Market.
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(d) Material Adverse Effect. No Material Adverse Effect and no
Consolidation Event shall have occurred.
(e) Opinion of Counsel. The Purchaser shall have received a "down-to-date"
letter from the Company's counsel, confirming that there is no change from the
counsel's previously delivered opinion, or else specifying with particularity
the reason for any change.
ARTICLE VI
Draw Down Terms
Section 6.1 Draw Down Terms. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise a draw
down (a "Draw Down") during each Draw Down Pricing Period, which Draw Down the
Purchaser will be obligated to accept.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing Period.
The price per share paid by the Purchaser shall be based on the Average Daily
Price on each separate Trading Day during the Draw Down Pricing Period. The
number of shares of Common Stock purchased by the Purchaser with respect to each
Draw Down shall be determined on a daily basis during each Draw Down Pricing
Period and settled at the election of the Purchaser on a weekly basis or on the
Draw Down Exercise Date, which shall be the first Trading Day following the end
of the Draw Down Pricing Period. If the Average Daily Price is less than the
Threshold Price on any Trading Day within the Draw Down Pricing Period, the
Purchaser shall not be obligated to fund its Draw Down obligation for such day.
(c) There shall be a minimum of five (5) Trading Days between the end of a
Draw Down Pricing Period and the next Draw Down Notice. There shall be a maximum
of eighteen (18) Draw Downs during the terms of this Agreement.
(d) The Company shall have the right to issue and exercise a Draw Down of
up to $600,000 of the Company's Common Stock per Draw Down, subject to the
limitations set forth immediately below. The minimum Draw Down shall be $150,000
unless otherwise agreed by Purchaser. The maximum dollar amount of each Draw
Down during any Draw Down Pricing Period shall be limited pursuant to the
following formula:
Average Stock Price: Average of the Average Daily Prices for the
22 Trading Days prior to the Draw Down Notice date.
Average Trading Volume: Average daily trading volume for the 45 Trading Days
prior to the Draw Down Notice date.
Maximum dollar amount of
each Draw Down: 20% of (Average Stock Price*(Average Trading
Volume*22))
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(e) The number of Shares of Common Stock to be issued in connection with
each Draw Down shall be equal to the sum of the quotients (for each trading day
within the Draw Down Pricing Period) of (x) 1/22nd of the Draw Down amount and
(y) 87% of the Average Daily Price of the Common Stock on each Trading Day
within the Draw Down Pricing Period. If the Average Daily Price on a given
Trading Day is less than the Threshold Price, then the Purchaser's Draw Down
payment will be reduced by 1/22nd and that day shall be withdrawn from the Draw
Down Pricing Period. At no time shall the Threshold Price be set below $0.50,
unless agreed to by the parties in writing.
(f) The Company must inform the Purchaser via facsimile transmission as to
the amount of the Draw Down the Company wishes to exercise before the first day
of the Draw Down Pricing Period (the "Draw Down Notice"). The Company shall set
the Threshold Price prior to each Draw Down request. At no time shall the
Purchaser be required to purchase more than the scheduled Draw Down amount for a
given Draw Down Pricing Period so that if the Company chooses not to exercise
the maximum permitted Draw Down in a given Draw Down Pricing Period the
Purchaser is not obligated to purchase more than the scheduled maximum amount in
a subsequent Draw Down Pricing Period.
(g) On or before three Trading Days after each Settlement date, the Shares
purchased by the Purchaser shall be delivered to The Depository Trust Company
("DTC") on the Purchaser's behalf. The Shares shall be credited by the Company
to the DTC account designated by the Purchaser upon receipt by the Escrow Agent
of payment for the Draw Down into the Escrow Agent's trust account as provided
in the Escrow Agreement. The delivery of the Shares into the Purchaser's DTC
account in exchange for payment therefor shall be referred to herein as
"Settlement".
Section 6.2 Purchaser's Call Option. The Purchaser shall have the right
(the "Call Option") to purchase up to a further Two Million five Hundred
Thousand Dollars ($2,500,000) of the Company's Common Stock by notice ("Call
Notice") to the Company during any Draw Down Pricing Period commenced by the
Company's delivery to the Purchaser of a Draw Down Notice. The Purchaser shall
have the right to make multiple Call Options during any Draw Down Pricing Period
at a minimum individual amount of $75,000 and a maximum aggregate amount of
$300,000, provided, that during the term of this Agreement, the Purchaser may
not exercise Call Options for an amount in excess of $2,500,000 in the
aggregate. For each additional amount for which the Purchaser exercises its
right pursuant to this Section, the Purchaser must notify the Company in writing
of such exercise no later than 5:30 p.m. Eastern time on the day such Call
Option is made. If the Purchaser so exercises its Call Option to purchase
additional Shares, the number of Shares to be issued in connection with such
Call Option shall be based on a price of 87% of the Average Daily Price for the
Common Stock on the Trading Day of the Call Option Notice, and shall not be less
than the Threshold Price. If the Purchaser does not exercise its right to
exercise a Call Option by such time on the last day of the applicable Draw Down
Pricing Period, the Purchaser's right to exercise a Call Option with respect to
the applicable Draw Down Pricing Period shall terminate. The funding for each
Call Option exercised by the Purchaser shall occur on the applicable Draw Down
Exercise Date.
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ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. The term of this Agreement shall
be twenty-four (24) months from the initial Draw Down. This Agreement may be
terminated at any time by mutual consent of the parties.
Section 7.2 Other Termination. The Purchaser may terminate this Agreement
upon one (1) Trading Day's notice if (i) an event resulting in a Material
Adverse Effect has occurred, (ii) the Common Stock is de-listed from the OTCBB
unless such de-listing is in connection with the listing of the Common Stock on
the Nasdaq National Market, SmallCap Market, or the New York or American Stock
Exchanges, (iii) the Company files for protection from creditors under any
applicable law or (iv) the Company completes any financing prohibited by Section
4.12.
(b) The Company may terminate this Agreement upon one (1) Trading Day's
notice if (i) the Company has repaid the promissory note referred to in section
4.11, or (ii) the Purchaser shall fail to fund more than one properly noticed
Draw Down within three (3) Trading Days of the date payment for such Draw Down
is due.
Section 7.3 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 9.1 and 9.2, and
Article VIII herein. Nothing in this Section 7.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights to the Company and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by the Purchaser
as a result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Company herein. The Purchaser agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable attorneys
fees, charges and disbursements) incurred by the Company as result of any
inaccuracy in or breach of the representations, warranties or covenants made by
the Purchaser herein.
Section 8.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VIII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the indemnified party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
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satisfactory to the indemnified party. In the event that the indemnifying party
advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VIII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VIII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses.
The Company and the Purchaser shall each pay their own fees and expenses
related to the transactions contemplated by this Agreement; provided, that the
Company shall pay, at Settlement of each Draw Down $1,000 as the fees of the
Escrow Agent. In addition, the Company shall pay all reasonable fees and
expenses incurred by the Purchaser in connection with any amendments,
modifications or waivers of this Agreement or the Registration Rights Agreement
or incurred in connection with the enforcement of this Agreement and the
Registration Rights Agreement, including, without limitation, all reasonable
attorneys fees and expenses. The Company shall pay all stamp or other similar
taxes and duties levied in connection with issuance of the Shares pursuant
hereto.
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Section 9.2 Specific Enforcement, Consent to Jurisdiction. (a) The Company
and the Purchaser acknowledge and agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably submits to
the jurisdiction of the United States District Court and other courts of the
United States sitting in the Southern District of New York for the purposes of
any suit, action or proceeding arising out of or relating to this Agreement and
(ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Each of
the Company and the Purchaser consents to process being served in any such suit,
action or proceeding by mailing a copy thereof by certified mail, return receipt
requested, to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section shall affect or
limit any right to serve process in any other manner permitted by law.
Section 9.3 Entire Agreement; Amendment. This Agreement, together with the
Registration Rights Agreement and the Escrow Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Purchaser
makes any representations, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended other than by a
written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
Section 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: WaveRider Communications Inc.
255 Consumers Road, Suite 500
Toronto, Ontario, Canada M2J 1R4
Attention: Scott Worthington, Chief Financial Officer
Telephone: (416) 502-3200
Fax: (416) 502-2968
with copies to: Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attn: David Broadwin, Esq.
Telephone: (617) 832-1000
Fax: (617) 832-7000
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If to Purchaser: Radyr Group Investments
C/o Dr. Batliner & Partners
Aeulestrasse 74
FI-9490 Vaduz, Liechtenstein
Telephone: 011-41-75-2360-406
Fax: 011-41-75-2360-405
Attention: Hans Gassner
with copies to: Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Telephone: (212) 351-4924
Fax: (212) 661-0989
Attention: Joseph A. Smith
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto in accordance
herewith.
Section 9.5 Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 9.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.
Section 9.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 9.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.
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Section 9.11 Publicity. Prior to the Closing, neither the Company nor the
Purchaser shall issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement. After the Closing, the Company may
issue a press release or otherwise make a public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement; provided, that prior to issuing any such press
release, making any such public statement or announcement, the Company obtains
the prior consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed.
Section 9.12 Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
Section 9.13 Further Assurances. From and after the date of this Agreement,
upon the request of the Purchaser or the Company, each of the Company and the
Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
WAVERIDER COMMUNICATIONS INC.
By: ____________________________________
T. Scott Worthington, Chief Financial Officer
Purchaser: Radyr Group Investments
By: ____________________________________
Name: Hans Gassner
Title: Director
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EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 18, 1999, between Radyr
Group Investments ("Purchaser"), and WaveRider Communications Inc. (the
"Company").
WHEREAS, simultaneously with the execution and delivery of this Agreement,
pursuant to a Common Stock Purchase Agreement dated the date hereof (the
"Purchase Agreement") the Purchaser has committed to purchase up to $5,000,000
worth of the Company's Common Stock and may exercise Call Options to purchase a
further $2,500,000 worth of Common Stock (terms not defined herein shall have
the meanings ascribed to them in the Purchase Agreement); and
WHEREAS, the Company desires to grant to the Purchaser the registration
rights set forth herein with respect to the shares of Common Stock issuable at
the direction of the Company under the Purchase Agreement and issuable upon
exercise of the Call Option, as defined in the Purchase Agreement (collectively,
the "Shares") and the shares issuable upon exercise of the Warrants from time to
time (the "Warrant Shares") (hereinafter referred to collectively as the "Stock"
or "Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term "Registrable
Security" means the Securities until (i) all Securities have been disposed of
pursuant to the Registration Statement, (ii) all Securities have been sold under
circumstances under which all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act ("Rule 144") are met,
(iii) all Securities have been otherwise transferred to persons who may trade
such Securities without restriction under the Securities Act, and the Company
has delivered a new certificate or other evidence of ownership for such
Securities not bearing a restrictive legend or (iv) such time as, in the opinion
of counsel to the Company, all Securities may be sold without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act. The term "Registrable Securities" means any
and/or all of the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be deemed to be made in the definition
of "Registrable Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Agreement.
Section 2. Restrictions on Transfer. The Purchaser acknowledges and
understands that in the absence of an effective Registration Statement
authorizing the resale of the Securities as provided herein, the Securities are
"restricted securities" as defined in Rule 144 promulgated under the Act. The
Purchaser understands that no disposition or transfer of the Securities may be
made by Purchaser in the absence of (i) an opinion of counsel to the Purchaser,
in form and substance reasonably satisfactory to the Company, that such transfer
may be made without registration under the Securities Act or (ii) such
registration.
With a view to making available to the Purchaser the benefits of Rule 144
under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Purchaser to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
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(a) comply with the provisions of paragraph (c)(1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Purchaser, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
Section 3. Registration Rights With Respect to the Shares.
(a) The Company has previously registered the Securities under a Form S-3
registration statement, File No. 333-86251, which registration statement is
effective as of the date hereof. The Company agrees that if said registration
statement shall ever be terminated, withdrawn, or shall otherwise be ineffective
for the purpose of enabling the Purchaser to sell the Shares or any part thereof
at any time, it will prepare and file with the Securities and Exchange
Commission ("Commission"), within forty-five (45) days after the date of such
event, a registration statement (on Form S-3 or S-1, or other appropriate form
of registration statement) under the Securities Act (the "Registration
Statement"), at the sole expense of the Company (except as provided in Section
3(c) hereof), in respect of Purchaser, so as to permit a public offering and
resale of the Shares under the Act by Purchaser.
The Company shall use its best efforts to cause the Registration Statement
to become effective within ninety (90) days from the date of filing, or, if
earlier, within five (5) days of SEC clearance to request acceleration of
effectiveness. The Company will notify Purchaser of the effectiveness of the
Registration Statement within one Trading Day of such event.
(b) The Company will maintain the Registration Statement or post-effective
amendment filed under this Section 3 hereof effective under the Securities Act
until the earlier of (i) the date that none of the Securities are or may become
issued and outstanding, (ii) the date that all of the Securities have been sold
pursuant to the Registration Statement, (iii) the date the holders thereof
receive an opinion of counsel to the Company, which counsel shall be reasonably
acceptable to the Purchaser, that the Securities may be sold under the
provisions of Rule 144 without limitation as to volume, (iv) all Securities have
been otherwise transferred to persons who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend, or (v) all Securities may be sold without any time, volume
or manner limitations pursuant to Rule 144(k) or any similar provision then in
effect under the Securities Act in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to the Purchaser (the "Effectiveness
Period").
(c) All fees, disbursements and out-of-pocket expenses and costs incurred
by the Company in connection with the preparation and filing of the Registration
Statement under subparagraph 3(a) and in complying with applicable securities
and Blue Sky laws (including, without limitation, all attorneys' fees of the
Company) shall be borne by the Company. The Purchaser shall bear the cost of
underwriting and/or brokerage discounts, fees and commissions, if any,
applicable to the Securities being registered and the fees and expenses of its
counsel. The Purchaser and its counsel shall have a reasonable period, not to
exceed ten (10) Trading Days, to review the proposed Registration Statement or
any amendment thereto, prior to filing with the Commission, and the Company
shall provide each Purchaser with copies of any comment letters received from
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the Commission with respect thereto within two (2) Trading Days of receipt
thereof. The Company shall make reasonably available for inspection by
Purchaser, any underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant or other agent retained by
such Purchaser or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the Company's officers, directors and employees to
supply all information reasonably requested by such Purchaser or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material non-public information shall be kept
confidential by such Purchaser and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such Purchaser or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Purchaser and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of Purchaser and
other parties. The Company shall qualify any of the securities for sale in such
states as such Purchaser reasonably designates and shall furnish indemnification
in the manner provided in Section 6 hereof. However, the Company shall not be
required to qualify in any state which will require an escrow or other
restriction relating to the Company and/or the sellers, or which will require
the Company to qualify to do business in such state or require the Company to
file therein any general consent to service of process. The Company at its
expense will supply the Purchaser with copies of the Registration Statement and
the prospectus included therein and other related documents in such quantities
as may be reasonably requested by the Purchaser.
(d) The Company shall not be required by this Section 3 to include a
Purchaser's Securities in any Registration Statement which is to be filed if, in
the opinion of counsel for both the Purchaser and the Company (or, should they
not agree, in the opinion of another counsel experienced in securities law
matters acceptable to counsel for the Purchaser and the Company) the proposed
offering or other transfer as to which such registration is requested is exempt
from applicable federal and state securities laws and would result in all
purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
(e) If at any time or from time to time after the effective date of the
Registration Statement, the Company notifies the Purchaser in writing of the
existence of a Potential Material Event (as defined in Section 3(f) below), the
Purchaser shall not offer or sell any Securities or engage in any other
transaction involving or relating to Securities, from the time of the giving of
notice with respect to a Potential Material Event until such Purchaser receives
written notice from the Company that such Potential Material Event either has
been disclosed to the public or no longer constitutes a Potential Material
Event; provided, however, that if the Company so suspends the right to such
holders of Securities for more than twenty (20) days in the aggregate during any
twelve month period, during the periods the Registration Statement is required
to be in effect then the Company must compensate the Purchaser for any decline
in market value of the Securities held by Purchaser at the beginning of such
suspension through the end of such suspension. If a Potential Material Event
shall occur prior to the date the Registration Statement is filed, then the
Company's obligation to file the Registration Statement shall be delayed without
penalty for not more than thirty (30) days. The Company must give Purchaser
notice in writing at least two (2) Trading Days prior to the first day of the
blackout period, if lawful to do so.
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(f) "Potential Material Event" means any of the following: (a) the
possession by the Company of material information that is not ripe for
disclosure in a registration statement, as determined in good faith by the Chief
Executive Officer or the Board of Directors of the Company or that disclosure of
such information in the Registration Statement would be detrimental to the
business and affairs of the Company; or (b) any material engagement or activity
by the Company which would, in the good faith determination of the Chief
Executive Officer or the Board of Directors of the Company, be adversely
affected by disclosure in a registration statement at such time, which
determination shall be accompanied by a good faith determination by the Chief
Executive Officer or the Board of Directors of the Company that the Registration
Statement would be materially misleading absent the inclusion of such
information.
Section 4. Piggyback Rights of Warrant Shares. If the Company shall file a
registration statement at any time prior to the date on which the Warrant Shares
could be sold pursuant to Rule 144(k), on a form which permits the registration
for resale by the Purchaser of the Warrant Shares, then the Company shall
register the Warrant Shares for resale by the Purchaser in such registration
statement. Sections 3(b) through 3(f) and all other sections of this
Registration Rights Agreement shall apply to such piggyback registration.
Section 5. Cooperation with Company. Purchaser will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company (which shall
include all information regarding the Purchaser and proposed manner of sale of
the Registrable Securities required to be disclosed in the Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing its obligations under any underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering. The
Purchaser shall, if so requested in writing by the staff of the Commission,
consent to be named as an underwriter in the Registration Statement. Purchaser
acknowledges that in accordance with current Commission policy, the Purchaser
will be named as the underwriter of the Securities in the Registration
Statement.
Section 6. Registration Procedures. If and whenever the Company is required
by any of the provisions of this Agreement to effect the registration of any of
the Registrable Securities under the Act, the Company shall (except as otherwise
provided in this Agreement), as expeditiously as possible, subject to the
Purchaser's assistance and cooperation as reasonably required:
(a) (i) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Act with respect to the sale or other disposition of
all securities covered by such registration statement whenever the Purchaser of
such Registrable Securities shall desire to sell or otherwise dispose of the
same (including prospectus supplements with respect to the sales of securities
from time to time in connection with a registration statement pursuant to Rule
415 promulgated under the Act) and (ii) take all lawful action such that each of
(A) the Registration Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, not misleading and (B) the Prospectus forming part of the
Registration Statement, and any amendment or supplement thereto, does not at any
time during the Registration Period include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
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(b) (i) prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any prospectus (including any supplements thereto), provide draft copies thereof
to the Purchasers and reflect in such documents all such comments as the
Purchasers (and their counsel) reasonably may propose and (ii) furnish to each
Purchaser such numbers of copies of a prospectus including a preliminary
prospectus or any amendment or supplement to any prospectus, as applicable, in
conformity with the requirements of the Act, and such other documents, as such
Purchaser may reasonably request in order to facilitate the public sale or other
disposition of the securities owned by such Purchaser;
(c) register and qualify the Registrable Securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Purchaser shall reasonably request (subject to the
limitations set forth in Section 3(d) above), and do any and all other acts and
things which may be necessary or advisable to enable each Purchaser to
consummate the public sale or other disposition in such jurisdiction of the
securities owned by such Purchaser, except that the Company shall not for any
such purpose be required to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(d) list such Registrable Securities on the Principal Market, and any other
exchange on which the Common Stock of the Company is then listed, if the listing
of such Registrable Securities is then permitted under the rules of such
exchange or the Nasdaq Stock Market;
(e) notify each Purchaser at any time when a prospectus relating thereto
covered by the Registration Statement is required to be delivered under the Act,
of the happening of any event of which it has knowledge as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and the Company
shall prepare and file a curative amendment under Section 5(a) as quickly as
commercially possible;
(f) as promptly as practicable after becoming aware of such event, notify
each Purchaser who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the
Commission or any state authority of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) cooperate with the Purchasers to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Purchasers reasonably may request and registered in such names as the Purchaser
may request; and, within three (3) Trading Days after a Registration Statement
which includes Registrable Securities is declared effective by the Commission,
deliver and cause legal counsel selected by the Company to deliver to the
transfer agent for the Registrable Securities (with copies to the Purchasers
whose Registrable Securities are included in such Registration Statement) an
appropriate instruction and, to the extent necessary, an opinion of such
counsel;
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(h) take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Purchasers of their Registrable Securities in
accordance with the intended methods therefor provided in the prospectus which
are customary for issuers to perform under the circumstances;
(i) in the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment; and
(j) maintain a transfer agent and registrar for its Common Stock.
Section 7. Indemnification.
a) The Company agrees to indemnify and hold harmless the Purchaser and each
person, if any, who controls the Purchaser within the meaning of the Securities
Act ("Distributing Purchaser") against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), to which the Distributing
Purchaser may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, or any related
preliminary prospectus, final prospectus or amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
preliminary prospectus, final prospectus or amendment or supplement thereto in
reliance upon, and in conformity with, written information furnished to the
Company by the Distributing Purchaser, specifically for use in the preparation
thereof. This Section 6(a) shall not inure to the benefit of any Distributing
Purchaser with respect to any person asserting such loss, claim, damage or
liability who purchased the Registrable Securities which are the subject thereof
if the Distributing Purchaser failed to send or give (in violation of the
Securities Act or the rules and regulations promulgated thereunder) a copy of
the prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such Registrable
Securities, where the Distributing Purchaser was obligated to do so under the
Securities Act or the rules and regulations promulgated thereunder. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
b) Each Distributing Purchaser agrees that it will indemnify and hold
harmless the Company, and each officer, director of the Company or person, if
any, who controls the Company within the meaning of the Securities Act, against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all reasonable costs of defense
and investigation and all reasonable attorneys' fees) to which the Company or
any such officer, director or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, or any related preliminary prospectus, final
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prospectus or amendment or supplement thereto, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, preliminary prospectus, final prospectus or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by such Distributing Purchaser, specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Distributing Purchaser may otherwise have.
c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party except to
the extent of actual prejudice demonstrated by the indemnifying party. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is the Distributing Purchaser, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Purchaser and
the indemnifying party and the Distributing Purchaser shall have been advised by
such counsel that there may be one or more legal defenses available to the
indemnifying party in conflict with any legal defenses which may be available to
the Distributing Purchaser (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of the Distributing
Purchaser, it being understood, however, that the indemnifying party shall, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable only for the reasonable fees and
expenses of one separate firm of attorneys for the Distributing Purchaser, which
firm shall be designated in writing by the Distributing Purchaser). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
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Section 8. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 6 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified party, then the Company and the
applicable Distributing Purchaser shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), in
either such case (after contribution from others) on the basis of relative fault
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Purchaser on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no event shall
any (i) Purchaser be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the net proceeds to
be received by such Purchaser from the sale of such Purchaser's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement.
Section 9. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be delivered as set forth in the
Purchase Agreement.
Section 10. Assignment. Neither this Agreement nor any rights of the
Purchaser or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased by the Purchaser pursuant to the Purchase Agreement,
and (b) upon the prior written consent of the Company, which consent shall not
be unreasonably withheld or delayed in the case of an assignment to an affiliate
of the Purchaser, the Purchaser's interest in this Agreement may be assigned at
any time, in whole or in part, to any other person or entity (including any
affiliate of the Purchaser) who agrees to be bound hereby.
Section 11. Counterparts/Facsimile. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when together shall constitute but one and the same instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
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Section 12. Remedies. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
Section 13. Conflicting Agreements. The Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the holders of Registrable Securities in this Agreement or otherwise
prevents the Company from complying with all of its obligations hereunder.
Section 14. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any action may be brought as set
forth in the Purchase Agreement. Any party shall have the right to seek
injunctive relief from any court of competent jurisdiction in any case where
such relief is available.
Section 16. Severability. If any provision of this Agreement shall for any
reason be held invalid or unenforceable, such invalidity or unenforceablity
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein. Terms not otherwise defined herein shall be defined in accordance with
the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, on the day and year first above written.
WAVERIDER COMMUNICATIONS INC.
By:_______________________________________________
T. Scott Worthington,
Chief Financial Officer
Purchaser: Radyr Investments Group
By:_______________________________________________
Hans Gassner, Director
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EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of October 18, 1999, by
and among WaveRider Communications Inc., a corporation incorporated under the
laws of Nevada, (the "Company"), Radyr Group Investments ("Purchaser"), and
Epstein Becker & Green, P.C., having an address at 250 Park Avenue, New York, NY
10177 (the "Escrow Agent"). Capitalized terms used but not defined herein shall
have the meanings set forth in the Common Stock Purchase Agreement referred to
in the first recital.
W I T N E S S E T H:
WHEREAS, the Purchaser will from time to time as requested by the Company,
or pursuant to its Call Option, purchase shares of the Company's Common Stock
from the Company as set forth in that certain Common Stock Purchase Agreement
(the "Purchase Agreement") dated the date hereof between the Purchaser and the
Company, which will be issued as per the terms and conditions contained herein
and in the Purchase Agreement; and
WHEREAS, the Company and the Purchaser have requested that the Escrow Agent
hold in escrow and then distribute the initial documents and certain funds which
are conditions precedent to the effectiveness of the Purchase Agreement, and
have further requested that upon each exercise of a Draw Down, the Escrow Agent
hold the relevant documents and the applicable purchase price pending receipt by
Purchaser of certificates representing the securities issuable upon such Draw
Down;
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows: ARTICLE 1
TERMS OF THE ESCROW FOR THE INITIAL CLOSING
1.1. The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent shall hold the funds and documents which
are referenced in Section 5.2 of the Purchase Agreement.
1.2. At the Closing, the Company shall deliver to the Escrow Agent:
(i) the original executed Registration Rights Agreement in the form of
Exhibit A to the Purchase Agreement;
(ii) the original executed opinion of Foley, Hoag & Eliot, LLP, in the form
of Exhibit C to the Purchase Agreement;
(iii) the original executed Company counterpart of this Escrow Agreement;
(iv) the original executed Company counterpart of the Purchase Agreement;
and
(v) the certificate representing the Warrants.
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1.3. Upon receipt of the foregoing, and receipt of executed counterparts
from Purchaser of the Purchase Agreement, the Registration Rights Agreement and
this Escrow Agreement, the Escrow Agent shall then arrange to have the Purchase
Agreement, this Escrow Agreement, the Registration Rights Agreement, the
Warrants and the opinion of counsel delivered to the appropriate parties.
ARTICLE 2
TERMS OF THE ESCROW FOR EACH PUT
2.1. Each time the Company shall send a Draw Down Notice to the Purchaser
or the Purchaser shall send a Call Notice to the Company, as provided in the
Purchase Agreement, it shall send a copy, by facsimile, to the Escrow Agent.
2.2 Each time the Purchaser shall purchase Shares pursuant to a Draw Down
or a Call Option, the Purchaser shall send the applicable purchase price of the
Shares to the Escrow Agent, which shall advise the Company in writing that it
has received the purchase price for such Shares. The Company shall promptly, but
no later than three (3) Trading Days after receipt of such funding notice from
the Escrow Agent, cause its transfer agent to issue the Shares to the Purchaser
via DTC deposit to the account specified by the Purchaser from time to time.
Upon receipt of written confirmation from the transfer agent that such Shares
have been so deposited, the Escrow Agent shall within one (1) Trading Day wire
the purchase price per the written instructions of the Company, net of a one
thousand dollar ($1,000) escrow fee.
ARTICLE 3
MISCELLANEOUS
3.1. No waiver or any breach of any covenant or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof, or of
any other covenant or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed an extension of the time
for performance of any other obligation or act.
3.2. All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent by fax, overnight courier, registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
received upon receipt thereof, as set forth in the Purchase Agreement.
3.3. This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties hereto.
3.4. This Escrow Agreement is the final expression of, and contains the
entire agreement among, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by their respective agents duly authorized in writing
or as otherwise expressly permitted herein.
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3.5. Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
3.6. The parties hereto expressly agree that this Escrow Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Except as expressly set forth herein, any action
to enforce, arising out of, or relating in any way to, any provisions of this
Escrow Agreement shall brought in the Federal or state courts of New York, New
York as is more fully set forth in the Purchase Agreement.
3.7. The Escrow Agent's duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the Company, Purchaser and the Escrow
Agent.
3.8. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, excepting only its own gross negligence or willful
misconduct, and any act done or omitted by the Escrow Agent pursuant to the
advice of the Escrow Agent's attorneys-at-law (other than Escrow Agent itself)
shall be conclusive evidence of such good faith.
3.9. The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
3.10. The Escrow Agent shall not be liable in any respect on account of the
identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder or hereunder.
3.11. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Purchaser, and may continue to act as legal counsel for the Purchaser, from time
to time, notwithstanding its duties as the Escrow Agent hereunder. The Company
consents to the Escrow Agent in such capacity as legal counsel for the Purchaser
and waives any claim that such representation represents a conflict of interest
on the part of the Escrow Agent. The Company understands that the Purchaser and
the Escrow Agent are relying explicitly on the foregoing provision in entering
into this Escrow Agreement.
3.12. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Purchaser. In the event of any such resignation, the Purchaser and the
Company shall appoint a successor Escrow Agent.
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3.13. If the Escrow Agent reasonably requires other or further instruments
in connection with this Escrow Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
3.14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or the escrow funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or the escrow funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned by a final order,
decree or judgment or a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings or (2)
to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.
3.15. The Company and the Purchaser agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties or performance of the Escrow
Agent hereunder or the transactions contemplated hereby or by the Purchase
Agreement other than any such claim, liability, cost or expense to the extent
the same shall have been determined by final, unappealable judgment of a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the date set forth above.
WAVERIDER COMMUNICATIONS INC.
By:
----------------------------------------------
T. Scott Worthington,
Chief Financial Officer
RADYR GROUP INVESTMENTS
By:
----------------------------------------------
Hans Gassner, Director
ESCROW AGENT:
EPSTEIN BECKER & GREEN, P.C.
By:
----------------------------------------------
Joseph A. Smith,
Authorized Signatory
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EXHIBIT D
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 200,000 Shares of Common Stock of
WaveRider Communications Inc.
THIS CERTIFIES that, for value received, Radyr Group Investments (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after
October 31, 1999 (the "Initial Exercise Date") and on or prior to the close of
business on October 31, 2003 (the "Termination Date") but not thereafter, to
subscribe for and purchase from WaveRider Communications Inc., a corporation
incorporated in Nevada (the "Company"), up to Two Hundred Thousand (200,000)
shares (the "Warrant Shares") of Common Stock, $0.001 par value, of the Company
(the "Common Stock"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be $1.01, which is the closing bid
price of the Company's Common Stock on the OTC Bulletin Board on the Trading Day
prior to the date of this Warrant. The Exercise Price and the number of shares
for which the Warrant is exercisable shall be subject to adjustment as provided
herein. In the event of any conflict between the terms of this Warrant and the
Common Stock Purchase Agreement dated as of October 18, 1999 pursuant to which
this Warrant has been issued (the "Purchase Agreement"), the Purchase Agreement
shall control. Capitalized terms used and not otherwise defined herein shall
have the meanings set forth for such terms in the Purchase Agreement.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
1
<PAGE>
3. Exercise of Warrant.
Except as provided in Section 4 herein, exercise of the purchase rights
represented by this Warrant may be made at any time or times on or after the
Initial Exercise Date, and before the close of business on the Termination Date
by the surrender of this Warrant and the Notice of Exercise Form annexed hereto
duly executed, at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company) and
upon payment of the Exercise Price of the shares thereby purchased by wire
transfer or cashier's check drawn on a United States or Canadian bank, the
holder of this Warrant shall be entitled to receive a certificate for the number
of shares of Common Stock so purchased. Certificates for shares purchased
hereunder shall be delivered to the holder hereof within three (3) Trading Days
after the date on which this Warrant shall have been exercised as aforesaid.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all taxes required
to be paid by Holder, if any, pursuant to Section 5 prior to the issuance of
such shares, have been paid.
If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant.
If no registration statement is effective permitting the resale of the
shares of Common Stock issued upon exercise of this Warrant at any time
commencing one year after the issuance date hereof, then this Warrant shall also
be exercisable by means of a "cashless exercise" in which the holder shall be
entitled to receive a certificate for the number of shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election on the Nasdaq Stock
Market, or if the Common Stock is not traded on the Nasdaq Stock Market, then
the principal market in terms of volume, and converted into US Dollars;
(B) = the Exercise Price of the Warrants; and
(X) = the number of shares issuable upon exercise of the Warrants in accordance
with the terms of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
2
<PAGE>
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its shareholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination. (a) Subject to compliance with any
applicable securities laws, transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the principal
office of the Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by Holder or its agent
or attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a
new holder for the purchase of shares of Common Stock without having a new
Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by Holder or its agent or attorney. Subject to compliance
with Section 7(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price, the Warrant Shares so purchased shall
be and be deemed to be issued to such holder as the record owner of such shares
as of the close of business on the later of the date of such surrender or
payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant certificate or any
stock certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
3
<PAGE>
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares. (a) Stock
Splits, etc. The number and kind of securities purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment from time to
time upon the happening of any of the following. In case the Company shall (i)
pay a dividend in shares of Common Stock or make a distribution in shares of
Common Stock to holders of its outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per Warrant Share or other security obtained by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares purchasable pursuant hereto immediately prior to such
adjustment and dividing by the number of Warrant Shares or other securities of
the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(b) Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 11.
For purposes of this Section 11, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 11 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4
<PAGE>
12. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant, reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in the absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other distribution, or
any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to receive
any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 30
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 16(d).
5
<PAGE>
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
16. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the laws
of New York, without regard to its conflict of law, principles or rules, and be
subject to arbitration pursuant to the terms set forth in the Purchase
Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
6
<PAGE>
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company fails to comply with any provision of this Warrant, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
(d) Notices. Any notice, request or other document required or permitted to
be given or delivered to the holder hereof by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
(h) Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's negligence,
bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
7
<PAGE>
(k) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: October 27, 1999
WaveRider Communications Inc.
By: /s/ T. Scott Worthington
--------------------------------------------
T. Scott Worthington, Chief Financial Officer
8
<PAGE>
NOTICE OF EXERCISE
To: WaveRider Communications Inc.
(3) The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), of WaveRider Communications Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
(4) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
- -------------------------------------------------
(Name)
- -------------------------------------------------
(Address)
- -------------------------------------------------
Dated:
------------------------------
Signature
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
__________________________________________________________ whose address is
__________________________________________________________________________.
_________________________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address:_____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
<TABLE> <S> <C>
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<CIK> 0000844053
<NAME> WAVERIDER COMMUNICATIONS INC.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 401,282
<SECURITIES> 0
<RECEIVABLES> 478,758
<ALLOWANCES> (34,113)
<INVENTORY> 627,640
<CURRENT-ASSETS> 1,587,396
<PP&E> 1,551,092
<DEPRECIATION> (572,804)
<TOTAL-ASSETS> 4,322,160
<CURRENT-LIABILITIES> 1,743,718
<BONDS> 0
0
778
<COMMON> 15,371,045
<OTHER-SE> 1,893,105
<TOTAL-LIABILITY-AND-EQUITY> 4,322,160
<SALES> 705,700
<TOTAL-REVENUES> 726,104
<CGS> 488,248
<TOTAL-COSTS> 1,911,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,673,377)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,673,377)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,673,377)
<EPS-BASIC> (0.048)
<EPS-DILUTED> (0.048)
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