As filed with the Securities and Exchange Commission on January 19, 1999
Registration No. 333-___________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
WAVERIDER COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its Charter)
Nevada 33-0264030
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
235 Yorkland Blvd., Suite 1101
Toronto, Ontario Canada M2J 4Y8
(416) 502-3200
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(Address, including zip code, and telephone number,
including area code, of principal executive offices)
T. SCOTT WORTHINGTON
235 Yorkland Blvd., Suite 1101
Toronto, Ontario Canada M2J 4Y8
(416) 502-3200 / Facsimile No.: (416) 502-2968
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications to:
DAVID A. BROADWIN, ESQ.
FOLEY, HOAG & ELIOT LLP
One Post Office Square
Boston, Massachusetts 02109-2170
(617) 832-1000 / Facsimile No.: (617) 832-7000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum Amount of
Title of each class of Amount to be offering price aggregate registration
securities to be registered Registered per share (1) offering price fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 7,250,000(2) $2.375 $17,218,750 $4,787
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purposes of determining the registration fee. In
accordance with Rule 457(c) under the Securities Act of 1933, the above
calculation is based on the closing bid price reported on the OTC Bulletin
Board on January 15, 1999.
(2) Assumes that all shares of Preferred Stock are converted into Common Stock,
that all the Warrants are exercised and that WaveRider exercises in full
its right to sell Common Stock to certain selling stockholders.
In accordance with Rule 416 under the Securities Act of 1933, this
Registration Statement also covers such indeterminate number of additional
shares of WaveRider's Common Stock, $0.001 par value, as may become issuable to
prevent dilution resulting from stock splits, stock dividends or similar
transactions as set forth in WaveRider's Articles of Incorporation and the terms
of the Warrants referred to above.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
SUBJECT TO COMPLETION, DATED JANUARY 20, 1999
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.
WaveRider Communications, Inc.
7,250,000 Shares of Common Stock
800,000 shares of Common Stock, $0.001 par value per share ("Common
Stock"), of WaveRider Communications, Inc. ("WaveRider") are issuable by
WaveRider to certain selling stockholders upon exercise of warrants ("Series F
Warrants") held by such selling stockholders, and 800,000 shares of Common Stock
are issuable to certain selling stockholders upon conversion of shares of
Preferred Stock ("Preferred Stock") held by such selling stockholders. See
"Selling Stockholders".
500,000 shares of Common Stock are issuable by WaveRider to certain
selling stockholders upon exercise of warrants ("Series G Warrants") that were
issued to certain selling stockholders in connection with a Convertible
Debenture Agreement. See "Selling Stockholders".
1,167,860 shares of Common Stock were sold and issued by WaveRider, and
an additional 2,932,140 shares of Common Stock may be sold by WaveRider, to
certain selling stockholders upon exercise by WaveRider of its right to sell
shares of Common Stock to such selling stockholders pursuant to a Common Stock
Purchase Agreement entered into in December 1998. 1,050,000 shares of Common
Stock are issuable by WaveRider to certain selling stockholders upon the
exercise of warrants (the "December Warrants") held by such selling
stockholders. See "Selling Stockholders".
(The Series F and G Warrants and the December Warrants are collectively
referred to as the "Warrants").
This Prospectus covers the sale of shares of Common Stock by WaveRider
to certain selling stockholders and, from time to time, by the selling
stockholders. See "Selling Stockholders".
The selling stockholders, or any pledgees, donees, transferees or other
successors in interest of the selling stockholders, may offer the Shares, from
time to time, for sale in the over-the-counter market or in one or more
negotiated transactions, or through a combination of methods of sale, at prices
and on terms then prevailing or at negotiated prices. Sales may be effected to
or through broker-dealers, who may receive compensation in the form of
discounts, concessions or commissions in connection with such sales. See "Plan
of Distribution".
WaveRider has informed the selling stockholders that the
anti-manipulative rules under the Exchange Act of 1934, including Regulation M,
may apply to their sales in the market. WaveRider has furnished the selling
stockholders with a copy of Regulation M. WaveRider has also informed the
selling stockholders that they must deliver a copy of this Prospectus with any
sale of their shares.
WaveRider's Common Stock is currently quoted on the OTC Bulletin Board,
under the symbol "WAVC". On January 15, 1999, the last reported sale price of
WaveRider's Common Stock was $2.375 per share.
Investing in the Common Stock involves risks.
See "Risk Factors" beginning on page 5.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is January __, 1999
<PAGE>
In purchasing the Shares under this Prospectus, you should rely only on
the information provided to you in this Prospectus. WaveRider has not authorized
anyone else to provide you with different information. Neither WaveRider nor any
of the selling stockholders is making an offer of these securities in any state
where the offer is not permitted. You should not assume that the information in
this Prospectus is accurate as of any date other than the date on the front page
of this Prospectus. In this Prospectus, reference to "we", "us" and "our" refer
to WaveRider Communications, Inc.
TABLE OF CONTENTS
Page
Prospectus Summary 3
Risk Factors 5
Where You Can Find More Information 9
Use of Proceeds 11
Dividends 11
Selling Stockholders 11
Plan of Distribution 17
Disclosure of SEC Position on Indemnification
for Securities Act Liabilities 18
Legal Matters 18
Experts 18
<PAGE>
PROSPECTUS SUMMARY
Because this is a summary, it does not contain all the information that
may be important to you. You should read the entire prospectus carefully before
you decide to purchase our shares of common stock being offered by this
Prospectus. You should also carefully consider the information provided in this
Prospectus under the heading "Risk Factors."
WaveRider
WaveRider's products, both released and under development, are designed
to provide high-speed, reliable and cost effective wireless access to local area
networks, wide area networks and the Internet. Our products are alternatives to
traditional "hard-wired" network access technologies based on wires or fiber
optic cables. All of WaveRider's current and currently planned products operate
in radio bands which are regulated but do not require a license in the United
States and many other countries.
WaveRider's first commercial product, the NCL135, allows wireless
connection of one computer network to another. The NCL135 has received Industry
Canada approval for sale in the Canadian marketplace. The NCL135 is still
awaiting Federal Communications Commission approval for sale in the United
States. Potential customers for this product include any entities with multiple
locations using local area network technologies and any firms that provide
Internet access to others.
WaveRider's products currently under development are expected to
provide wireless connectivity for consumers and small businesses to the Internet
at speeds up to 135kbps, which is more than twice the speed of the fastest
standard telephone modem currently existing. We expect this wireless Internet
network technology to be deployed and sold to end-users by telecommunication
carriers such as Internet service providers, wireless network operators and
telephone companies.
WaveRider was incorporated in Nevada in 1987.
Risk Factors
Purchasing the shares of Common Stock being offered under this
Prospectus involves a high degree of risk and may not be appropriate for
investors who cannot afford to lose their entire investment. See "Risk Factors"
beginning on page 5.
The Offering
Securities Offered by
the Selling Stockholders 7,250,000 Shares of Common Stock.
See "Selling Stockholders" and
"Plan of Distribution".
Use of Proceeds Any money received by the Company
upon the sale of shares of Common
Stock to the selling stockholders
and upon the exercise of Warrants
will be used for working
capital and other corporate
purposes. The Company will not
receive any proceeds from the sale
of shares of Common Stock by the
selling stockholders. See "Use of
Proceeds."
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Common Stock Outstanding
Before the Offering 40,120,221(1)
Common Stock Outstanding
After the Offering 47,370,221(2)
OTC Bulletin Board Symbol WAVC
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(1) As at September 30, 1998, as reported in WaveRider's filing with the
Securities and Exchange Commission on Form 10-QSB.
(2) Assuming all preferred stock are converted, all warrants are exercised and
that WaveRider exercises in full its right to sell Common Stock to certain
selling stockholders.
Address
The mailing address, the telephone and facsimile numbers and the e-mail address
of WaveRider's executive offices is:
235 Yorkland Blvd., Suite 1101
Toronto, Ontario Canada M2J 4Y8
Telephone No.:(416) 502-3200; Facsimile No.: (416) 502-2968
e-mail address: [email protected]
home page: http://www.waverider.com
Information contained in WaveRider's website shall not be deemed part of this
Prospectus.
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RISK FACTORS
Investment in our shares of Common Stock is risky. In addition to the
information contained in this Prospectus, including information incorporated by
reference, you should consider carefully the following risk factors, before
purchasing the Shares offered under this Prospectus.
Some of the information in this Prospectus contains forward-looking
statements that involve substantial risks and uncertainties. Any statement, in
this Prospectus and in the documents incorporated by reference into this
Prospectus, that is not a statement of an historical fact constitutes a
"forward-looking statement". Further, when we use the words "may", "expect",
"anticipate", "plan", "believe", "seek", "estimate", "internal", and similar
words, we intend to identify statements and expressions that may be
forward-looking statements. We believe it is important to communicate certain of
our expectations to our investors. Forward-looking statements are not guarantees
of future performance. They involve risks, uncertainties and assumptions that
could cause WaveRider's future results to differ materially from those expressed
in any forward-looking statements. Many factors are beyond our ability to
control or predict. You are accordingly cautioned not to place undue reliance on
such forward-looking statements. We have no obligation or intent to update
publicly any forward-looking statements whether in response to new information,
future events or otherwise. Important factors that may cause our actual results
to differ from such forward-looking statements include, but are not limited to,
the risk factors discussed below. Before you invest in our Common Stock, you
should be aware that the occurrence of any of the events described under "Risk
Factors" below or elsewhere in this Prospectus could have a material adverse
effect on our business, financial condition and results of operation. In such a
case, the trading price of our Common Stock could decline and you could lose all
or part of your investment.
We Have No Operating History
Up to the present time our company has been entirely a research and
development entity, with no sales or revenues. There can be no assurance that
the products that we offer will meet with market acceptance. In addition, there
is no guarantee that even if there proves to be a market for our products, such
market will be able to sustain our profitability requirements.
None of our current products have achieved widespread distribution or
customer acceptance. Although, some of our products have passed the development
stage, we have not yet established market for them. Although we believe that we
have the expertise to commercialize our products and establish a market for
them, there is no assurance that we will be successful or that such products
will prove to have widespread customer appeal.
We Have a History of Losses, and Our Future Profitability is Uncertain
Due to our limited operating history, we are subject to the
uncertainties and risks associated with any new business. Until recently we had
no product that could be commercialized, and therefore we experienced
significant operating losses every year since incorporation. Our net losses for
the fiscal year that ended December 31, 1997, was $1,039,130, and for the fiscal
year that ended December 31, 1996 was $121,776. We have an accumulated deficit
of approximately $6,214,041 as of September 30, 1998.
There can be no assurance that we will ever generate profit from our
products or that we will ever reach profitability on a sustained basis.
5
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We Need Additional Financing and There Is Uncertainty We Can Get It
The timing and amount of our capital expenditures may vary
significantly depending on a number of factors. We will need to raise the
additional funds through the sale of additional equity or debt securities, in
private or public financing, or through strategic partnerships, in order to
fully exploit the potential of our products. There can be no assurance that we
can raise the funds that we need.
We Face Significant Competition
Competition in the data communication industry is intense.
Specifically, although our products are based on a wireless technology, we
compete not only against companies that base their products on wireless
technology, but also against companies that base their products on hard-wired
technology (wire or fiber optic cable). There can be no assurance that we will
be able to compete successfully in the future against existing or new
competitors or that our operating results will not be adversely affected by
increased price competition. Competition is based on design and quality of the
products, product performance, price and service, with the relative importance
of such factors varying among products and markets. Competition, in the various
markets we serve, comes from companies of various sizes, many of which are
larger and have greater financial and other resources than we do and, thus, can
better withstand adverse economic or market conditions than we can.
Our Technology is an Early Stage Technology
Our technology is at an early stage of development. As a result, we
have no historical financial information upon which you as an investor could
make an evaluation of your investment. Our future operating results are subject
to a number of risks, including our ability or inability to implement our
strategic plan, to attract qualified personnel and to raise sufficient financing
as required. Inability of our management to guide growth effectively, including
implementing appropriate systems, procedures and controls, could have a material
adverse effect on our business, financial condition and operating results.
We Face Risk of Rapid Technological Change
We may be unable to keep up with technological advances in the data
communications industry. As a result, our products may become obsolete or
unattractive. The data communications industry is characterized by rapid
technological change. In addition to frequent improvements of existing
technology, there is frequent introduction of new technologies leading to more
complex and powerful products. Keeping up with these changes requires
significant management, technological and financial resources. As a small
company, we do not have the management, technological and financial resources
that larger companies in our industry may have. There can be no assurance that
we will be able or successful in enhancing our existing products, or in
developing, manufacturing and marketing new products. An inability to do so
would adversely effect our business, financial condition and results of
operation.
We Have Limited Intellectual Property Protection
Our ability to compete depends to a significant extent on our ability
to protect our intellectual property and to operate without infringing the
intellectual property rights of others. We regard our technology as proprietary.
We have no issued patents or pending patent applications, nor do we have any
registered copyrights with respect to our intellectual property rights, but we
intend to file patent applications. We rely on employee and third party
non-disclosure agreements and on the legal principles restricting the
unauthorized disclosure and use of trade secrets. Despite our precautions, it
might be possible for a third party to copy or otherwise obtain our technology,
and use it without authorization. Although we intend to defend our intellectual
property, we can not assure you that the steps we have taken or that we may take
in the future will be sufficient to prevent misappropriation or unauthorized use
of our technology. In addition, there can be no assurance that foreign
intellectual property laws will protect our intellectual property rights. There
is no assurance that patent application or copyright registration that may be
filed will be granted, or that any issued patent or copyrights will not be
challenged, invalidated or circumvented. There is no assurance that the rights
granted under patents that may be issued or copyrights that may be registered
will provide sufficient protection to our intellectual property rights.
Moreover, we can not assure you, that our competitors will not independently
develop technologies similar or even superior to our technology.
6
<PAGE>
Use of Our Products is Subordinated to Other Uses
License-free operation of our products, in certain bands, is
subordinated to certain licensed and unlicensed uses of these bands. This
subordination means that our products must not cause harmful interference to
other equipment operating in the band, and must accept potential interference
from any of such other equipment. If our equipment is unable to operate without
any such harmful interference, or is unable to accept interference caused by
others, our customers could be required to cease operations in some or all of
these bands in the locations affected by the harmful interference. As well, in
the event these bands become unacceptably crowded, and no additional frequencies
are allocated to unlicensed use, our business could be adversely affected.
Adverse Consequences are Associated with Our Obligation to Issue Substantial
Shares of Common Stock upon Conversion of Convertible Securities
We are obligated to issue a substantial number of shares of Common
Stock upon the conversion or exercise of our outstanding warrants and
convertible preferred stock. The price which we may receive for the Common Stock
issuable upon conversion or exercise of such convertible securities will be less
than the market price of the Common Stock at the time of such exercise.
Consequently, for the life of such convertible securities the holders of such
convertible securities may have been given, at nominal cost, the opportunity to
profit from a rise in the market price of the Common Stock.
The exercise of all of the aforementioned securities may also adversely
affect the terms under which we could obtain additional equity capital. In
addition, should a significant number of these securities be exercised or
converted, the resulting increase in the amount of the Common Stock in the
public market could have a substantial dilutive effect on our outstanding Common
Stock.
We May Be Subject to Regulation of Wireless Communications
Currently, our products are designed to operate in frequency bands for
which licenses are not required in the United States, Canada and other countries
that we view as our potential market. Extensive regulation of the data
communications industry by U.S. or foreign governments, and in particular
imposing license requirements in the frequency bands of our products, could
materially and adversely affect us through the effect on our customers and
potential customers. Continued license-free operation will depend upon the
continuation of existing U.S., Canadian and such other countries' government
policy and, while no planned policy changes have been announced or are expected,
this cannot be assured.
We May Be Subject to Product Liability Claims,
and We Lack Product Liability Insurance
We face an inherent risk of exposure to product liability claims in the
event that the products designed and sold by us contain errors, "bugs" or
defects. There can be no assurance that we will avoid significant product
liability exposure. We do not currently have a product liability insurance, and
there can be no assurance that insurance coverage will be available in the
future on commercially reasonable terms, or at all. Further, there can be no
assurance that such insurance, if obtained, will be adequate to cover potential
product liability claims, or that a loss of insurance coverage or the assertion
of a product liability claim or claims would not materially adversely affect our
business, financial condition and results of operations.
7
<PAGE>
We Depend Upon a Single Third Party Manufacturer
We depend upon a single third party manufacturer to make our products.
We do not have a second source. If our single supplier is not able to
manufacture for us for any reason, we will have no products to sell.
Accordingly, no assurance can be given that manufacturing capacity will continue
to be available to us, on commercially reasonable terms or otherwise. Inability
to obtain manufacturing capacity will have a material adverse effect on our
business, financial condition and results of operation.
We Depend on Key Personnel
Our technological and financial performance will depend in significant
part upon the continued contributions of Bruce Sinclair. We maintain no key
person life insurance on Bruce Sinclair. The loss of Bruce Sinclair or any other
key person could have a material adverse effect on our business, financial
condition and results of operations.
In addition, our future operating results depend in part upon our
ability to attract and retain other qualified management, engineering,
financial, technical, marketing and sales and support personnel for our
operations. Competition for such personnel is intense, and there can be no
assurance that we will be successful in attracting or retaining such personnel.
The failure to attract or retain such persons could materially adversely affect
our business, financial condition and results of operations.
We Have Not Resolved All of Our Year 2000 Issues
Computer systems and software products that were designed to accept
entries of only two digits in the "year" date code field may be unable to
properly process date information beyond the year 1999. Inability of our
products to process these dates could have a material adverse effect on our
business. We have established a centrally coordinated project team to determine
the Year 2000 readiness of our products, business processes and internal
systems. We have began to review the year 2000 readiness of our products, and
expect to complete such review by the end of March 1999. We can not presently
estimate the total cost of this review but do not expect it to be material. We
are also in the process of assessing our internal systems, the computer systems
that we use in our business. We expect to have addressed all internal Year 2000
issues identified in this process by the end of June 1999.
However, there can be no assurance that we will be able to complete our
Year 2000 assessment and programs on a timely basis, that the costs of such
programs will not be greater than expected, or that as yet undiscovered
unanticipated Year 2000 problems will not affect our products or material
systems. Greater than expected assessment and remediation costs or unanticipated
Year 2000 problems could have a material adverse effect on our business,
financial condition and results of operation.
We Have Paid No Dividends and No Dividend Payment Is Anticipated
To date, we have paid no dividends on our Common Stock. The payment of
any future dividends will be at the sole discretion of our Board of Directors.
We intend to retain earnings, if any, to finance the expansion of our business,
and we do not anticipate paying dividends on the Common Stock in the foreseeable
future. See "Dividend Policy".
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The Trading Market for Our Stock May Be Illiquid
The shares of our Common Stock are quoted on the OTC Bulletin Board
system. This system generally supports companies that do not meet the listing
requirements of the NASDAQ SmallCap Market. As a result, investors may find it
more difficult to dispose of or to obtain accurate quotations of our Common
Stock. In addition, quotations on the Bulletin Board depends on the willingness
of broker-dealers to make a market for the stock. There can be no assurance that
our Common Stock will continue to be quoted on the Bulletin Board or that there
will continue to be a market for such stock.
Our Stock Price May Be Volatile
The market price of our Common Stock has been in the past and will be
in the future subject to wide fluctuations in response to announcements of
technological innovations or new products by us or by our competitors, trends in
the data communications industry, and other events or factors such as variations
in operating results. In addition, the stock market has experienced extreme
price and volume fluctuations that have particularly affected the market prices
for many technology companies, including WaveRider. These broad market
fluctuations may adversely affect the market price of our Common Stock.
WHERE YOU CAN FIND MORE INFORMATION
This Prospectus is a part of a registration statement on Form S-3 ,
WaveRider filed with the Securities and Exchange Commission, or the SEC, under
the Securities Act of 1933. This Prospectus omits certain information contained
in the registration statement and the exhibits to the registration statements.
Reference is made to the registration statement and the exhibits to the
registration statement for further information with respect to WaveRider and the
shares offered under this Prospectus. You may read and copy the registration
statement at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. You can request copies of these documents by writing
to the SEC and paying a fee for the copying costs. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the public reference
rooms. WaveRider files certain documents with the SEC electronically and these
documents may be inspected and copied at the SEC's Web site at
http://www.sec.gov. WaveRider is a reporting company under the Securities
Exchange Act of 1934, and consequently, files reports, proxy statements and
other information with the SEC. You may read and copy these reports, proxy
statements and other information at the SEC's public reference rooms appears
above.
The SEC allows us to "incorporate by reference" the information we file
with them. Incorporation by reference means that we can disclose important
information to you by referring you to the information we filed with the SEC.
The information incorporated by reference is considered to be part of this
Prospectus, and later information filed with the SEC will update and supercede
this information.
We incorporate by reference the information listed below and any future
information we file with the SEC pursuant to sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act of 1934.
(a) WaveRider's annual report, filed with the SEC on Form 10-KSB, for
the fiscal year ended December 31, 1997;
(b) WaveRider's quarterly reports, filed with the SEC on Form 10-QSB,
for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998;
9
<PAGE>
(c) WaveRider's current reports, on Form 8-K, filed with the SEC on
February 10, 1998, February 25, 1998, May 4, 1998, May 20, 1998 and June 18,
1998;
(d) WaveRider's amendment to the current report dated May 20, 1998,
filed with the SEC on Form 8-K/A on May 29, 1998;
(e) WaveRider's Schedule 13G, filed with the SEC on Form SC 13G on
August 18, 1998;
(f) WaveRider's amendments to Schedule 13D, filed with the SEC on Form
SC 13D/A on August 25, 1998 and on August 28, 1998;
(g) The description of WaveRider's Common Stock contained in the
registration statement on Form 8-A filed with the SEC on March 18, 1995 under
section 12 of the Exchange Act, including all amendments and reports
subsequently filed for the purpose of updating such description.
You may request and receive, at no cost, copies of these filings by
writing or telephoning us at the following address:
T. Scott Worthington
WaveRider Communications, Inc.
235 Yorkland Blvd., Suite 1101
Toronto, Ontario Canada M2J 4Y8
Telephone No.: (416) 502-3200; Facsimile No.: (416) 502-2968
E-mail Address: [email protected]
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USE OF PROCEEDS
Any money received by WaveRider upon the sale of shares of Common Stock
to the selling stockholders, and any money received by WaveRider upon the
exercise of the Warrants will be used for working capital and general corporate
purposes. The aggregate maximum amount of proceeds that WaveRider received and
will receive upon the sale of shares of Common Stock to the selling stockholders
and upon the exercise of the Warrants is $15,812,250.
The maximum amount WaveRider will receive from the sale of Common Stock
to the selling stockholders, in addition to the amount of $3,000,000 of Common
Stock already sold to them, is $7,000,000 (a total of $10,000,000). The maximum
amount of proceeds that WaveRider will receive upon the exercise of the December
Warrants is $3,062,250. The maximum amount of proceeds that WaveRider will
receive upon the exercise of the Series F Warrants is $2,000,000. The maximum
amount of proceeds that WaveRider will receive upon the exercise of the Series G
Warrants is $750,000.
WaveRider will not receive any proceeds from the sale of the shares of
Common Stock by the selling stockholders. WaveRider will, however, receive the
exercise price upon the exercise of any Warrants held by the selling
stockholders, if and to the extent that such Warrants are exercised. However,
there can be no assurance that any or all of the Warrants will be exercised and
that WaveRider will receive any proceeds from such exercise.
The costs associated with this offering are approximately $20,000.
DIVIDEND POLICY
To date, WaveRider has not paid dividends on any shares of our Common
Stock and we do not plan to pay any dividends on our Common Stock in the
foreseeable future. The decision to pay dividends on the Common Stock in the
future is up to WaveRider's Board of Directors. Such decision to pay dividends
depends upon, among other things, our earnings, our capital requirements and our
financial condition. Although dividends are not limited currently by any
agreements, it is anticipated that future agreements, if any, with institutional
lenders or others may also limit our ability to pay dividends on the Common
Stock.
SELLING STOCKHOLDERS
JUNE SELLING STOCKHOLDERS
Of the 7,250,000 shares of Common Stock offered by this Prospectus,
1,600,000 shares are being registered and may be offered for sale from time to
time during the period the effectiveness of the registration statement of which
this Prospectus is part, for the accounts of selling stockholders who acquired
convertible preferred stock and warrants to purchase Common Stock in a private
placement in June 1998 (the "June Selling Stockholders") set forth in the table
below. The June Selling Stockholders' shares of Common Stock registered under
this Prospectus consist of:
(a) 800,000 shares of Common Stock issuable upon conversion of
Series C Voting 8% Convertible Preferred Shares;
(b) 800,000 shares of Common Stock issuable upon the exercise of
800,000 Series F Warrants, at $2.50 per share. The Series F
Warrants expire on June 11, 1999.
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<PAGE>
The Series C Preferred Shares may be converted, prior to April 30,
2000, into shares of Common Stock, at a conversion ratio of one share of Common
Stock per one preferred share.
WaveRider will not receive any portion of the proceeds from the sale of
shares by the June Selling Stockholders pursuant to this Prospectus. To the
extent that Series F Warrants are exercised, WaveRider will receive the proceeds
from the exercise of such Warrants. WaveRider cannot, however, predict the
extent to which Series F Warrants will be exercised, if at all.
NOVEMBER SELLING STOCKHOLDERS
CONVERTIBLE DEBENTURE AGREEMENT
On December 15, 1998, WaveRider entered into an agreement to issue up
to $2,000,000 of 8% Convertible Debentures (the "Convertible Debenture") to
International Advisory Services Ltd. and Wyndel Consulting Ltd. (the "November
Selling Stockholders"). The Convertible Debenture granted WaveRider the right to
require the November Selling Stockholders to lend to WaveRider from time to time
up to an aggregate total amount of $2,000,000. WaveRider has not required any
loan advancement from the November Selling Stockholders under the Convertible
Debenture, and the Convertible Debenture was terminated on January 8, 1999.
Prior to termination of the Convertible Debenture, and as a commitment
fee, WaveRider issued to each of the November Selling Stockholders Series G
Warrant to purchase 250,000 shares of Common Stock of WaveRider ("Series G
Warrants"). The Series G Warrants may be exercised at any time prior to December
15, 2003. The exercise price per share for the Series G Warrants is $1.50.
DECEMBER SELLING STOCKHOLDERS
COMMON STOCK PURCHASE AGREEMENT
Overview of Purchase Agreement
On December 29, 1998, WaveRider entered into a Common Stock Purchase
Agreement (the "Purchase Agreement") with Sovereign Partners LP and Canadian
Advantage Limited Partnership (collectively , the "December Selling
Stockholders"). The Purchase Agreement provides for the sale to, and the option
to sell to, the December Selling Stockholders up to an aggregate of $10,000,000
of Common Stock of WaveRider, and for issuance to the December Selling
Stockholders, and for the issuance to the December Selling Stockholders of four
groups of Warrants, each to purchase 225,000 shares of WaveRider's Common Stock,
at a different exercise price for each group of Warrants. The sale and the
option to sell to the December Selling Stockholders is pro rata amongst them in
accordance with a ratio set forth in the Purchase Agreement (the "Purchase
Ratio"). At the Closing of the Purchase Agreement, WaveRider sold to the
December Selling Stockholders 1,167,860 shares of Common Stock for $3,000,000.
In connection with the Purchase Agreement, the parties also entered into a
Registration Rights Agreement and an Escrow Agreement.
The Purchase Agreement refers to three financing "tranches". Pursuant
to the "First Tranche" WaveRider sold to the December Selling Stockholders, on
December 29, 1998 (the "Subscription Date") 1,167,860 shares of WaveRider's
Common Stock, for a total amount of $3,000,000 (the "First Tranche"). Pursuant
to the "Second Tranche" WaveRider was granted the right to require the December
Selling Stockholders to purchase additional shares of Common Stock at a minimum
of $1,000,000 and a maximum of $3,000,000 (the "Second Tranche"). Pursuant to
the "Third Tranche" WaveRider was granted the right to require the December
Selling Stockholders to purchase additional shares of Common Stock at a minimum
of $1,000,000 and a maximum of $4,000,000 (the "Third Tranche"). WaveRider is
not obligated to sell shares of Common Stock to the Selling Stockholders
pursuant to the Second and the Third Tranches, but rather has an option to do
so. The December Selling Stockholders, however, are required to purchase such
shares of Common Stock subject only to the conditions described below.
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<PAGE>
WaveRider has issued to Prudential Securities Incorporated warrants to
purchase 150,000 shares of Common Stock at an exercise price of $3 per share.
These warrants will expire on December 29, 2003.
First Tranche
On December 29, 1998 (the "Subscription Date") WaveRider sold to the
December Selling Stockholders, pro rata amongst them in accordance with the
Purchase Ratio, 1,167,860 shares of Common Stock WaveRider (the "Initial
Shares"), for a First Tranche Issuance Price of $2.57 per share (the "First
Tranche Issuance Price") and for a total amount of $3,000,000. The First Tranche
Issuance Price is subject to reset, as described below, and upon such reset
WaveRider may be required to issue additional Common Stock to the December
Selling Stockholders.
Second Tranche
At WaveRider's option, WaveRider may sell to the December Selling
Stockholders, pro rata amongst them in accordance with the Purchase Ratio,
additional shares of Common Stock (the "Secondary Shares") for a total dollar
amount of a minimum of $1,000,000 and a maximum of $3,000,000, that number of
Secondary Shares to be derived from dividing the dollar amount set forth in
WaveRider's option notice by the Secondary Shares Issuance Price. WaveRider's
option may be exercised upon giving each of the December Selling Stockholders a
prior written notice ("Sale Notice") at least five business days prior to the
closing of the Second Tranche, after the earlier to occur of (a) 165 calendar
days after the Subscription Date, and (b) two business days after the expiration
of the second Reset Period for the Initial Shares, as more fully described below
under Reset of Issuance Price, which option must be exercised by WaveRider
within 20 calendar days after the earlier of (b) and (c) above.
WaveRider's right to exercise the option in the Second Tranche is
subject to satisfaction of each of the conditions described below.
Third Tranche
At WaveRider's option, WaveRider may sell to the December Selling
Stockholders, pro rata amongst them in accordance with the Purchase Ratio,
additional shares of Common Stock (the "Tertiary Shares") for a total dollar
amount of a minimum of $1,000,000 and a maximum of $4,000,000, that number of
Tertiary Shares to be derived from dividing the dollar amount set forth in
WaveRider's option notice by the Tertiary Shares Issuance Price. WaveRider's
option may be exercised upon giving each of the December Selling Stock holders a
prior written notice ("Sale Notice") at least five business days prior to the
closing of the Third Tranche, after the earlier to occur of (a) 255 calendar
days after the Subscription Date, and (b) two business days after the expiration
of the final Reset Period for the Secondary Shares, as more fully described
below under Reset of Issuance Price, which option must be exercised by WaveRider
within 20 calendar days after the earlier of (a) and (b) above.
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<PAGE>
WaveRider's right to exercise the option in the Third Tranche is
subject to satisfaction of each of the conditions described below.
Conditions to the Sale
WaveRider right to exercise its option to require sale of Common Stock
under the Second and the Third Tranche, is subject to each one of the following
conditions: (1) effectiveness of this registration statement, (2) delivery of
shares to the escrow agent, (3) delivery of an opinion of counsel, (4) continued
accuracy of representations and warranties, (5) compliance with covenants, (6)
absence of proceedings adversely affecting the transaction, (7) continued
trading of the Common Stock, and (8) no change in control. In addition, the
Stock Purchase Agreement also expressly requires that:
(A) The average closing bid price of the Common Stock for the 20
consecutive trading days immediately preceding the notice by WaveRider to
require sale of additional Common Stock and the days immediately preceding the
closing of the sale and purchase of the shares shall be greater than $1.25;
(B) The average daily trading volume for the Common Stock for the 20
trading days immediately preceding the notice by WaveRider's to require sale of
additional Common Stock and the days immediately preceding the closing of the
sale and purchase of the shares shall be a minimum of 100,000; and
(C) None of the December Selling Stockholders, in the event of the
closing of the sale and purchase of the shares would own or be deemed
beneficially deemed to own, more than 9.99% of the outstanding shares of Common
Stock of WaveRider.
The Price Per Share and Reset of the Price Per Share
The purchase price per share ("Issuance Price") of the Common Stock
sold pursuant to the First Tranche or to be sold pursuant to the Second Tranche
and the Third Tranche is based on the average of the closing bid price for the
Common Stock (the "Closing Bid Price") for the five consecutive trading days
prior to the closing of such Tranche. In each case, the Issuance Price is
subject to reset, as described below.
The price per share upon which WaveRider may sell the Common Stock in
the each one of the Tranches is subject to reset. As a result of such reset,
WaveRider may be required to issue additional shares to the December Selling
Stockholders. The Purchase Agreement provides for three "reset periods" per
Tranche, each such reset period consists of 30 calendar days.
For each reset period, the "reset price" shall be equal to the average
of the Closing Bid Prices for the trading days during such period ("Reset
Price"). The number of shares of Common Stock to be issued upon the expiration
of each Reset Period (the "Reset Shares") shall be calculated in accordance with
the following formula:
A x B x 117.5% - C = N
------------------
C
Where: A = number of shares subject to repricing; B = Issuance
Price of shares subject to repricing; C = Reset Price; and
N = Reset Shares.
Upon the expiration of each reset period, WaveRider will issue that
number of Reset Shares (if any) resulting from the above formula. If the
additional shares are not delivered by WaveRider on due date, WaveRider will
have to pay liquidated damages to the December Selling Stockholders.
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<PAGE>
Warrants
On the Subscription Date, WaveRider issued to the December Selling
Stockholders, four groups of Warrants to purchase a total aggregate of 900,000
shares of Common Stock ("Warrant Shares"). The four groups and the exercise
prices per one Warrant Share ("Exercise Price") for each of them are as follows:
Warrants to purchase 225,000 Warrant Shares have an Exercise Price of $2,
Warrants to purchase 225,000 Warrant Shares have an Exercise Price of $2.61,
Warrants to purchase 225,000 Warrant Shares have an Exercise Price of $3, and
Warrants to purchase 225,000 Warrant Shares have an Exercise Price of $4. The
Warrants may be exercised during a five-year period after they were issued.
The number and kind of securities that may be purchased upon the
exercise of the Warrants and the Exercise Prices of the Warrants are subject to
adjustment from time to time upon the happening of certain events, such as
distribution of dividends in shares Common Stock , stock splits, and issuance of
other shares of capital stock in a reclassification of the Common Stock.
Indemnification of the December Selling Stockholders
WaveRider is obliged to indemnify and hold harmless the December
Selling Stockholders and each officer, director of the December Selling
Stockholders or person, if any, who controls the December Selling Stockholder
("Indemnified Party"), against any losses, claims, damages or liabilities, joint
or several (which shall include all costs of defense and investigation and all
attorneys' fees), to which the Indemnified Party may become subject, under the
Securities Act of 1933 or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
breach of any term of the Purchase Agreement by WaveRider. This indemnity
obligation is in addition to any liability which the WaveRider may otherwise
have.
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SELLING STOCKHOLDERS
TABLE OF HOLDINGS
Based on the information supplied to WaveRider by each selling stockholder, the
following table sets forth, as of January 19, 1999, certain information
regarding the beneficial ownership of each selling Stockholder and number of
shares owned by each selling stockholder. The table assumes the conversion of
all of the shares of Preferred Stock, exercise of all Series F and G Warrants
and the December Warrants, and that WaveRider exercises in full its right to
sell Common Stock.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Owned Beneficially Owned
Prior to Offering(1) Number After Offering(1)
-------------------- of Shares ---------------------
Name and Address Number Percent Offered Number Percent
- ---------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Sovereign Partners LP(2) 1,550,895 3.80% 1,550,895 0 0.00%
Canadian Advantage Limited Partnership(2) 516,965 1.28 516,965 0 0.00
Alliance Equities Ltd. 1,717,110 4.23 514,000 1,203,110 2.96
Interior Holdings Ltd. 1,761,365 4.33 514,000 1,247,365 3.07
International Advisory Services Ltd. 1,101,000 2.73 250,000 851,000 2.11
Wyndel Consulting Ltd. 687,500 1.70 250,000 437,500 1.08
Prudential Securities Incorporated 150,000 0.37 150,000 0 0.00
Lori Birzins 156,000 0.39 100,000 56,000 0.14
Charles W. Williams, Jr. 82,900 0.21 80,000 2,900 0.01
Fredrick L. Aycock 60,000 0.15 60,000 0 0.00
Charles G. Maton 60,000 0.15 60,000 0 0.00
Lawson K. Broadrick and Kay W. Broadrick 40,000 0.10 40,000 0 0.00
Frank A. Zimmerman 28,000 0.07 28,000 0 0.00
Bruce Caldwell 24,000 0.06 24,000 0 0.00
Stanley Bland 39,000 0.10 20,000 19,000 0.05
Equity Hedge Fund Ltd. 20,000 0.05 20,000 0 0.00
Global Securities Corporation 20,000 0.05 20,000 0 0.00
Samuel D. Kerr 20,000 0.05 20,000 0 0.00
J. Houston Lennard and Celeste C. Lennard 22,800 0.06 20,000 2,800 0.01
Timothy J. Lindgren 21,000 0.05 20,000 1,000 0.00
Jason W. Peck 21,125 0.05 20,000 1,125 0.00
James Hutton 16,000 0.04 16,000 0 0.00
Edward C. Bonawitz 8,500 0.02 8,000 500 0.00
Kentex Corporation 8,000 0.02 8,000 0 0.00
Miramar Investments Ltd. 8,000 0.02 8,000 0 0.00
</TABLE>
- -----------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Except as indicated, each person possesses sole voting and investment power with
respect to all of the shares of common stock owned by such person, subject to
community property laws where applicable. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days are deemed outstanding. Such shares,
however, are not deemed outstanding for the purpose of computing the percentage
ownership of any other person. The information as to each person has been
furnished by such person.
(2) Assuming that WaveRider exercises in full its right to sell shares Common
Stock to each of Sovereign Partners LP ("Sovereign") and Canadian Advantage
Limited Partnership ("Advantage") and that each of Sovereign and Advantage
exercises in full the warrants it owns, then Sovereign would own prior to the
offering 3,750,000 shares of Common Stock constituting 8.31% of WaveRider's
Common Stock prior to the offering, and Advantage would own 1,250,000 shares of
Common Stock constituting 2.77% of WaveRider's Common Stock prior to the
offering.
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PLAN OF DISTRIBUTION
The shares of Common Stock offered by this prospectus may be sold from
time to time by the selling stockholders, or by pledgees, donees, transferees or
other successors in interest. The selling stockholders will act independently of
WaveRider in making decisions with respect to the timing, manner and size of
each sale. The sales may be made on the OTC Bulletin Board (or on one or more
exchanges on which WaveRider's Common Stock may then be listed) or in the
over-the-counter market, or otherwise. The sales will be made at prices and at
terms then prevailing, or at prices related to the then current market price, or
in negotiated transactions. The shares of Common Stock may be sold by one or
more of the following types of transactions:
(a) a block trade in which the broker or dealer so engaged will attempt
to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus;
(c) an exchange distribution in accordance with the rules of such
exchange; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; (e) privately negotiated transactions;
(f) short sales; (g) if such a sale qualify, in accordance with Rule
144 promulgated under the Securities Act rather
than pursuant to this Prospectus; and
(h) any other method permitted pursuant to applicable law.
In effecting sales, brokers or dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from selling stockholders in
amounts to be negotiated immediately prior to the sale. Such brokers or dealers
and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of section 2(11) of the Securities Act in
connection with such sales. Accordingly any commission received by them and
profit on any resale of the Shares as principal, might be deemed to be
underwriting discounts and commissions under the Securities Act. In addition,
because selling stockholders may be deemed to be "underwriters" they will be
subject to prospectus delivery requirements under the Securities Act of 1933.
Upon WaveRider being notified by a selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
the shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(c) under the
Securities Act of 1933. Such supplement will disclose:
(1) the name of each selling stockholder and of the participating
broker-dealer(s);
(2) the number of shares involved;
(3) the price at which such shares were sold;
(4) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
(5) that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this Prospectus; and
(6) other facts material to the transaction.
WaveRider has agreed to pay the expenses incurred in connection with
preparing and filing this Prospectus and the Registration Statement of which it
is a part (other than selling commissions). WaveRider has agreed to indemnify
the selling stockholders against certain liabilities, including liabilities
under the Securities Act.
17
<PAGE>
In addition, in the event the selling stockholders sell short the
Common Stock of WaveRider, this Prospectus may be delivered in connection with
such short sales and the shares offered by this Prospectus may be used to cover
such short sales. To the extent, if any, that the December Selling Stockholders
may be considered "underwriters" within the meaning of the Securities Act, the
sale of the shares by them shall be covered by this Prospectus. In making sales,
broker-dealers or agents engaged by the selling stockholders may arrange for
other broker-dealers or agents to participate. Such broker-dealers or agents may
receive commissions or discounts from the selling stockholders in amounts to be
negotiated immediately prior to the sale. These broker-dealers or agents, and
any other participating broker-dealers or agents, as well as the selling
stockholders, may be considered "underwriters" within the meaning of the
Securities Act of 1933.
DISCLOSURE OF SEC POSITION
ON INDEMNIFICATION FOR SECURITIES ACTS LIABILITIES
WaveRider's amended and restated Articles of Incorporation and By-Laws
provide that WaveRider shall indemnify its directors and officers, to the
fullest extent permitted under Nevada law, including in circumstances in which
indemnification is otherwise discretionary under Nevada law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of WaveRider,
pursuant to the foregoing provisions, or otherwise, WaveRider has been advised
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable.
LEGAL MATTERS
Foley, Hoag & Eliot LLP, of One Post Office Square, Boston,
Massachusetts 02109-2170 will issue an opinion, for WaveRider and the selling
stockholders, about the legality and validity of the shares. WaveRider knows of
no members of Foley, Hoag & Eliot who are beneficial owners of Common Stock of
WaveRider.
EXPERTS
The financial statements for each of the two fiscal years ended
December 31, 1997 and 1996, incorporated by reference in this Prospectus and in
the registration statement of which this prospectus is part, have been audited
by Johnson, Holscher & Company, P.C., independent public accountants, as
indicated in their report with respect to such financial statements. The
incorporation by reference in this Prospectus and in the registration statement
of which it is part, is in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection
with the sale of the Shares being registered hereby:
SEC registration fee $ 4,787
Printing and engraving $ 1,000
Accountants' fees and expenses $ 1,000
Legal fees $10,000
Miscellaneous $ 3,213
-------
Total $20,000
Item 15. Indemnification of Directors and Officers
Article VI of WaveRider's By-Laws provides that: "Every Director,
officer, employee and agent of the Company, and every person serving at the
Company's request as a director, officer (or in a position functionally
equivalent to that of officer or director), employee or agent of another
corporation, partnership, joint venture, trust or other entity, shall be
indemnified to the extent and in the manner provided by the Company's Charter,
as it may be amended, and in the absence of any such provision therein, in
accordance with Nevada law."
Articles Ninth and Tenth of WaveRider's Charter contains, among other
provisions, the following provisions regarding the indemnification of directors
and officers:
ARTICLE NINTH: (a) Actions, Suits or Proceedings Other than by or in
the Right of the Corporation. The Corporation may indemnity any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges, expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contenders or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation or that, with respect to any criminal proceeding, he had reasonable
cause to believe that his conduct was unlawful.
(b) Actions or Suits by or in the Right of the Corporation. The
Corporation may indemnity any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving or
has agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges and expenses (including amounts
paid in settlement and attorney's fees) actually and reasonably incurred by him
or on his behalf in connection with the defense or settlement of such action or
suit and any appeal therefrom, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation. No indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged by a court of competent
jurisdiction after exhaustion of all appeals therefrom to be liable to the
Corporation or for amounts paid in settlement to the Corporation unless and only
to the extent that the court in which such action or suit was brought or other
court of competent jurisdiction shall determine upon application that, despite
the adjudication of such liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such costs,
charges and expenses which the court shall deem proper.
II-1
<PAGE>
(c) Indemnification for Costs, Charges and Expenses of Successful
Party. Notwithstanding the other provisions of this Article NINTH, to the extent
that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Sections (a) and (b) of this Article NINTH, or in
defense of any claim, issue or matter therein, he shall be indemnified against
all costs, charges and expenses (including attorney's fees) actually and
reasonably incurred by him or on his behalf in connection therewith.
(d) Exceptions to Indemnification Right. Notwithstanding any other
language in these Articles, the Company shall not be obligated pursuant to the
terms of these Articles:
(1) Claims Initiated by Indemnitee. To indemnity or advance
expenses to any person with respect to proceedings or claims initiated
or brought voluntarily by him or her and not by way of defense, expect
with respect to proceedings brought to establish or enforce a right to
indemnification under these Articles or any other statue or law or
otherwise as required under the General Corporation Law of Nevada, but
such indemnification or advancement of expenses may be provided by the
Corporation in specific cases if the Board of Directors finds it to be
appropriate; or
(2) Lack of Good Faith. To indemnify any person for any
expenses incurred by him or her with respect to any proceeding
instituted by him or her to enforce or interpret this Agreement, if a
court of competent jurisdiction determines that each of the material
assertions made by him or her in such proceeding was not made in good
faith or was frivolous;
(3) Insured Claims. To indemnity any person for expenses or
liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid directly to him or her by an insurance
carrier under a policy of officers' and directors' liability insurance
maintained by the Corporation.
(4) Claims Under Section 16(b). To indemnity any person for
expenses or the payment of profits arising from the purchase and sale
by him or her of securities in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any similar or
successor statute.
(e) Subsequent Legislation. If the General Corporation Law of Nevada is
amended after adoption of these Articles to further expand the indemnification
permitted to directors, officers, employees or agents of the Corporation, then
the Corporation shall indemnity such persons to the fullest extent permitted by
the General Corporation Law of Nevada, as so amended.
(f) Restriction. Notwithstanding any other provision hereof whatsoever,
no person shall be indemnified under this Article NINTH who is adjudged liable
for (i) a breach of duty to the Company or its shareholders that resulted in
personal enrichment to which he was not legally entitled, (ii) intentional fraud
or dishonesty or illegal conduct, or (iii) for any other cause prohibited by
applicable state or federal law, unless a court determines otherwise.
II-2
<PAGE>
ARTICLE TENTH: As authorized by Section 78.037(1) of the General
Corporation Law of Nevada, no director or officer of the Company shall be
personally liable to the Company or any shareholder thereof for monetary damages
for breach of his fiduciary duty as a director or officer, except for liability
for (a) any acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (b) any payment of dividends in violation of
Section 78.300 of the General Corporation Law of Nevada, as it now exists or may
hereafter be amended. This Article TENTH shall apply to a person who has ceased
to be a director or officer of the Company with respect to any breach of
fiduciary duty which occurred when such person was serving as a director or
officer. This Article TENTH shall not be construed to limit or modify in any way
any director's or officer's right to indemnification or other right whatsoever
under these Articles, the Company's Bylaws or the General Corporation Law of
Nevada. If the General Corporation Law of Nevada hereafter is amended to
authorize the further elimination or limitation of the liability of directors or
officers generally, then the liability of the Company's directors and officers,
in addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the General Corporation Law of Nevada
as so amended. Any repeal or modification of this Article TENTH by the
shareholders shall be prospective only and shall not adversely affect any
limitation on the personal liability of any director or officer existing at the
time of such repeal or modification. The affirmative vote of at least a majority
of the total voting power shall be required to amend or repeal, or adopt any
provision inconsistent with, this Article TENTH.
Section 78.7502 of Nevada General Corporation Law ("Nevada Corporation
Law") provides, that:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
II-3
<PAGE>
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner in which he reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstance of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, the corporation shall indemnify him against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense.
Section 78.751 of Nevada Corporation Law provides, that: Any
discretionary indemnification under Section 78.7502, unless ordered by a court
or advanced pursuant to subsection 2, may be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
The indemnification and advancement of expenses authorized or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to Section 78.7502 or for
the advancement of expenses made pursuant to subsection 2, may not be made to or
on behalf of any director or officer if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
In accordance with the provisions of Section 78.752 of Nevada
Corporation Law, WaveRider purchased and maintains insurance coverage on certain
liabilities of its directors and officers.
II-4
<PAGE>
Item 16. Exhibits
Exhibit No. Description
3.1 Articles of Incorporation of WaveRider, incorporated by reference to
Exhibit 3.1 registration statement on Form S-18, File no. 33-25889-LA.
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3.2 to the
annual report on Form 10-KSB for the year ended December 31, 1996.
3.3 Certificate of Amendment to the Articles of Incorporation of the Company
filed with the Nevada Secretary of State on October 8th, 1993, incorporated
by reference to Exhibit 3.3 to the quarterly report on Form 10-QSB for the
period ended September 30th, 1994.
3.4 Certificate of Amendment to the Articles of Incorporation of the Company
filed with the Nevada Secretary of State on October 25th, 1993,
incorporated by reference to Exhibit 2(d) to the registration statement on
Form 8-A, File No. 0-25680.
3.5 Certificate of Amendment to the Articles of Incorporation of WaveRider
filed with the Nevada Secretary of State on March 25th, 1995, incorporated
by reference to Exhibit 2(e) to registration statement on Form 8-A, File
no. 0-25680.
3.6 Certificate of Amendment to the Articles of Incorporation of the Company,
designating the Series A Voting Convertible Preferred Stock, filed with the
Nevada Secretary of State on March 24th, 1997, incorporated by reference to
Exhibit 3.6 on Form 10KSB for the year ended December 31, 1996.
3.7 Certificate of Amendment to the Articles of Incorporation of the Company
designating the Series B Voting Convertible Preferred Stock, filed with the
Nevada Secretary of State on May 16, 1997.
3.8 Certificate of Amendment to the Memorandum of WaveRider changing the name
to WaveRider Communications Inc., filed with the Nevada Secretary of State
on May 27, 1997.
4.1 Specimen common stock certificate, incorporated by reference to Exhibit 4.1
to registration statement on Form S-18, File no. 33-25889-LA.
4.2 Specimen Class A Common Stock Purchase Warrant Certificate, incorporated by
reference to Exhibit 4.2 on Form 10KSB for the year ended December 31,
1996.
4.3 Specimen Class B Common Stock Purchase Warrant Certificate, incorporated by
reference to Exhibit 4.3 on Form 10KSB for the year ended December 31,
1996.
4.4 Specimen Class C Common Stock Purchase Warrant Certificate, incorporated by
reference to Exhibit 4.4 on Form 10KSB for the year ended December 31,
1996.
4.5 Specimen Class D Common Stock Purchase Warrant Certificate, incorporated by
reference to Exhibit 4.5 on Form 10KSB for the year ended December 31,
1996.
4.6 Warrant Terms dated February 10th, 1997, relating to the Class A, Class B,
Class C and Class D, Common Stock Purchase Warrants, incorporated by
reference to Exhibit 4.6 on Form 10KSB for the year ended December 31,
1996.
II-5
<PAGE>
5.1 Form of Opinion of Foley, Hoag & Eliot LLP; a signed opinion will be filed
by amendment.
10.1 Agreement dated February 2nd, 1997, between Ray Hoag and WaveRider,
incorporated by reference to Exhibit 10.2 on Form 10KSB for the year ended
December 31, 1996.
10.2 Agreement dated February 2nd, 1997, between C. Jeremy Renton and WaveRider,
incorporated by reference to Exhibit 10.21 on Form 10KSB for the year ended
December 31, 1996.
10.3 Stock Option Agreement dated January 22nd, 1997 between WaveRider and
Charlie Rodriguez, incorporated by reference to Exhibit 10.22 on Form 10KSB
for the year ended December 31, 1996.
10.4 Stock Option Agreement dated January 22nd, 1997 between WaveRider and C.
Jeremy Renton, incorporated by reference to Exhibit 10.23 on Form 10KSB for
the year ended December 31, 1996.
10.5 Stock Option Agreement dated January 22nd, 1997, between WaveRider and Ray
Hoag, incorporated by reference to Exhibit 10.24 on Form 10KSB for the year
ended December 31, 1996.
10.6 Share Exchange Agreement executed the 13th day of May, 1997 between
WaveRider and the shareholders of Major Wireless Communications Inc.,
("Major Wireless"), with respect to the purchase by the Company of all the
issued and outstanding shares in the capital stock of Major Wireless,
incorporated by reference to Exhibit 2.1 in Form 8-K filed May 29, 1997.
10.7 Agreement supplemental to the Share Exchange Agreement executed the 13th
day of May, 1997 (see 10.6 supra) incorporated by reference to Exhibit 10.1
in Form 8-K filed May 29, 1997.
10.8 Employee Stock Compensation (1997) Plan incorporated by reference to
Exhibit 99 in Form S-8 filed August 29th, 1997.
10.9 Employee Stock Option (1997) Plan incorporated by reference to Exhibit 99
in Form S-8 filed August 29th, 1997.
10.10Employment Agreement between WaveRider and D. Bruce Sinclair dated
November 18, 1997 incorporated as Exhibit 10.10 to WaveRider's annual
report on Form 10-KSB, for the year ended December 31, 1997.
10.11Convertible Debenture Agreement between WaveRider and International
Advisory Services Ltd. And Wyndel Consulting Ltd. Dated December 15, 1998.
10.12Letter of termination of the Convertible Debenture Agreement contained in
Exhibit 10.11, dated January 8, 1999.
10.13Common Stock Purchase Agreement between WaveRider and Sovereign Partners
LP and Canadian Advantage Limited Partnership, dated December 31, 1998,
including the exhibits to such agreement.
23.1 Consent of Johnson, Holscher & Company P.C., independent auditors.
23.2 Consent of Foley, Hoag & Eliot LLP (included in last sentence of Exhibit
5.1).
24.1 Power of Attorney (contained in the signature page).
II-6
<PAGE>
Item 17. Undertakings
WaveRider hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(2) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(3) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(4) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(5) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(6) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(7) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons of
the registrant, pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(8) For determining any liability under the Securities Act, to treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the issuer under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(9) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements of filing on Form S-3 and authorized this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on
January 20, 1999.
WAVERIDER COMMUNICATIONS INC.
By: /s/ D. Bruce Sinclair
------------------------------
Bruce Sinclair, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Bruce Sinclair and William Krebs, and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits and schedules thereto, and all other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing, which they, or either of them, may
deem necessary or advisable to be done in connection with this Registration
Statement, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes or any of them, may
lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on January 20, 1999.
Signature Title Date
- --------- ------- ------
/s/ D. Bruce Sinclair President, Chief Executive Officer January 20, 1999
- --------------------- (Principal Executive Officer)
D. Bruce Sinclair and Director
/s/William E. Krebs Secretary and Director January 20, 1999
- -------------------
William E. Krebs
/s/ William H. Laird Director January 20, 1999
- --------------------
William H. Laird
II-8
Exhibit 5.1
January **, 1999
WaveRider Communications Inc.
235 Yorkland Blvd., Suite 1101
Toronto, Ontario Canada
M2J 4Y8
Ladies and Gentlemen:
We are familiar with the Registration Statement on Form S-3 filed today
by WaveRider Communications, Inc., a Nevada corporation (the "Company"), with
the Securities and Exchange Commission under the Securities Act of 1933 (the
"S-3 Registration Statement"). The S-3 Registration Statement relates to the
registration of a total of 7,250,000 shares of the Company's Common Stock,
$0.001 par value per share ("Shares"), which were issued or are issuable to
certain selling stockholders as set forth below, and as more specifically
described in the S-3 Registration Statement:
(1) 800,000 Shares are issuable upon conversion of the Series C
Preferred Stock, sold in connection with WaveRider's June 1998 financing;
(2) 800,000 Shares are issuable upon the exercise of 800,000 Series F
Warrants, issued in connection with WaveRider's June 1998 financing;
(3) 500,000 Shares are issuable upon the exercise of 500,000 Series G
Warrants, issued in connection with WaveRider's December 1998 financing;
(4) 1,167,860 Shares were sold in a private placement in connection
with WaveRider's December 1998 financing;
(5) 2,932,140 Shares are issuable upon the sale by WaveRider of shares
of Common Stock in connection with WaveRider's December 1998 financing;
(6) 1,050,000 Shares are issuable upon the exercise of 1,050,000
warrants, issued in connection with WaveRider's December 1998 financing;
In arriving at the opinions expressed below, we have examined and
relied on the following documents: (a) the Articles of incorporation of the
Company, as amended; (b) the Amended and Restated By-Laws of the Company; and
(c) the records of meetings and consents of the Board of Directors and
stockholders of the Company provided to us by the Company. In addition, we have
examined and relied on the originals or copies certified or otherwise identified
to our satisfaction of all such corporate records of the Company and such other
instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis for the opinions
expressed below. We have further assumed that a sufficient number of duly
authorized and unissued shares of Common Stock will be available for issuance at
the time the Series C Preferred Stock is converted, the Common Stock is sold and
the warrants are exercised, in accordance with the terms thereof; and that the
consideration received by WaveRider in respect of each Share will be no less
than its par value.
II-9
<PAGE>
Based upon the foregoing, it is our opinion that:
1. the Company has taken all necessary corporate action required to
authorize the issuance and sale of the Shares; and
2. the Shares have been validly and legally issued and are fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the S-3
Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By: ________________________
A Partner
***********
II-10
Exhibit 10.11
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") AND MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN ACCORDANCE WITH (I) RULE 144A
UNDER THE U.S. SECURITIES ACT, OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF
APPLICABLE, OR (3) WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY, PURSUANT TO
ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT.
Registered No. 1 December 15, 1998
US$2,000,000 Vancouver, British Columbia, Canada
WAVERIDER COMMUNICATIONS INC.
8% Secured CONVERTIBLE DEBENTURE
WAVERIDER COMMUNICATIONS INC. ("WaveRider"), a corporation under the laws of the
State of Nevada, for value received, hereby promises to pay to the registered
owners whose names are set forth on the signature page hereof (referred to
herein collectively as the "Holders" and each individually as a "Holder") at the
addresses set forth on the signature page hereof or at such other addresses as
the Holders may designate in writing, the principal sum of US$2,000,000 in
lawful money of the United States of America, together with interest thereon
from the date hereof at the interest rate hereinafter set forth until payment in
full of the outstanding principal balance, in accordance with all the terms of
this Debenture. The principal shall be made available to WaveRider as follows:
as to US$500,000, on or before January 15, 1998; as to US$500,000, on or before
February 15, 1999; as to US$500,000, on or before March 15, 1999; and as to
US$500,000, on or before April 15, 1999.
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS
The terms used in this Debenture shall, unless there is
something in the subject matter or the context inconsistent therewith, have the
following meanings:
a) "Accumulated Debt" at any time means the aggregate of all Loan
Advances made by the Holders to WaveRider plus all interest
accrued thereon at the time minus all amounts in respect
thereof paid by WaveRider to the Holders.
b) "Audit Committee" means William Laird, Bruce Sinclair and
Cameron A. Mingay until such time as the audit committee of
WaveRider is constituted in accordance with its bylaws, and
thereafter means the audit committee of WaveRider from time to
time.
c) "Average Trading Volume" means the average number of Common
Shares traded daily as reported by Bloomberg L.P. or Yahoo
Finance, provided that if at any time there is a discrepancy
between them the actual number based on National Association
of Securities Dealers' records will be determined and used for
purposes hereof.
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<PAGE>
d) "Budget" means the projected cash flow statements for
WaveRider for the balance of the calendar year 1998 and the
calendar year 1999, including the sales and marketing programs
referred to therein, the Revenue Forecast and the Development
and Production Plan, all of which have been approved by
resolution of the directors of WaveRider prior to the Closing
Date.
e) "Business Day" means a day (other than a Saturday or a Sunday)
on which banks are generally open for business in Vancouver,
Toronto and New York.
f) "Class G Warrant" means a right to acquire Common Shares
pursuant to the terms of a warrant in the form attached hereto
as Schedule A.
g) "Closing Date" means December 15, 1998 or such other date as
WaveRider and the Holders agree as the date for the execution
and delivery of this Debenture.
h) "Common Shares" means fully paid and non-assessable common
shares with a par value of US$0.001 per share in the capital
of WaveRider.
i) "Consolidation Event" means any reduction in the number of
Common Shares resulting from an alteration by any corporate
means to the share capital of WaveRider.
j) "Consolidation Factor" means the quotient obtained when the
number of Common Shares immediately prior to a Consolidation
Event is divided by the number of Common Shares immediately
after the Consolidation Event.
k) "Conversion Number" at any time means the quotient obtained
when the Accumulated Debt at the time is divided by the
Conversion Price at the time.
l) "Conversion Option" means the right of the Holders hereunder
to convert the Accumulated Debt to Common Shares if there is
an Event of Default.
m) "Conversion Price" at any time means the price at which
WaveRider will issue Common Shares pursuant to the Conversion
Option, determined in accordance with section 4.5.
n) "Designated Subsidiaries" means WCC and JIS and any other
company direct or indirect control of which is acquired by
WaveRider before the Accumulated Debt is repaid in full or the
Conversion Option in respect thereof has been exercised.
o) "Designated Subsidiary Guarantee" means a guarantee of the
obligations of WaveRider hereunder given by a Designated
Subsidiary.
p) "Development and Production Plan" means the development and
production plan for WaveRider, including the technology
referred to as "Voice Over IP", that has been approved by
resolution of the directors of WaveRider prior to the Closing
Date.
q) "Event of Default" has the meaning ascribed to it in section
9.1 hereof.
r) "First Average Price" means the average closing price of the
Common Shares on the NASD OTC Bulletin Board from and
including November 9, 1998 to and including November 27, 1998.
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<PAGE>
s) "GSA" means a general security agreement between the grantor
thereof and the Holders granting to the Holders a security
interest in all the presently owned and after acquired
property of the grantor.
t) "Holder's Proportionate Interest" means the percentage
obtained by dividing 100% by the number of parties signing
this Debenture as Holder.
u) "JIS Shares" means all shares in the capital of JIS currently
owned by WCC.
v) "JIS" means Jetstream Internet Services Inc., a British
Columbia company.
w) "Loan Advances" means amounts advanced from the Holders to
WaveRider from time to time pursuant to this Debenture.
x) "Loan Facility" means the loan facility referred to in section
2.1 hereof.
y) "Permitted Encumbrances" means:
i) liens or privileges imposed by law in respect of
obligations not yet due or delinquent such as
carriers' liens, warehousemen's liens and other
privileges of a similar nature; or liens for taxes,
assessments or governmental charges or levies not at
the time due or delinquent or the validity of which
is being in good faith diligently contested in
appropriate proceedings; or undetermined or inchoate
liens, privileges and charges incidental to current
operations, that have not been filed pursuant to law
or that relate to obligations not due or delinquent;
ii) minor encumbrances, including without limitation,
easements, rights of way, servitudes or other similar
rights in land granted to or reserved by other
persons, rights of way for sewers, electric lines,
telegraph, telephone lines, oil and gas pipelines and
related facilities and other similar purposes, or
zoning or other restrictions as to the use of real
properties, which encumbrances, easements, servitudes,
rights of way, other similar rights and restrictions
do not in the aggregate materially detract from the
value of the said properties or materially impair
their use in the operation of the business of their
owner;
iii) the right reserved to or vested in any municipality
or governmental or other public authority by the
terms of any lease, license, franchise, grant or
permit acquired by WaveRider or any of the Designated
Subsidiaries by any statutory provision, to require
annual or other periodic payment as a condition of
the continuance thereof;
iv) security given by WaveRider or any of the Designated
Subsidiaries to a public utility or any municipality
or governmental or other public authority when
required by such utility or municipality or other
authority in connection with the operations of
WaveRider or such Designated Subsidiary in the
ordinary course of its business; and
v) the reservations, limitations, provisos and
conditions, if any, expressed in any Crown
grants.
II-13
<PAGE>
z) "Pledge of JIS Shares" means a pledge of the JIS Shares by
WCC to the Holders in the form attached hereto as Schedule C.
aa) "Pledge of WCC Shares" means a pledge of the WCC Shares by
WaveRider to the Holders in the form attached hereto as
Schedule C.
bb) "Registration Statement" means a registration statement
qualifying the Common Shares to be issued by WaveRider
pursuant to the Conversion Option and the Class G Warrants for
sale without restriction.
cc) "Repayment Date" means the date that is the second anniversary
of the Closing Date.
dd) "Representative" means the person identified in section 10.1
hereof as the representative of the Holders for the purposes
of this Debenture and all ancillary documents.
ee) "Revenue Forecast" means a forecast of revenues for WaveRider
on a consolidated basis for the balance of the calendar year
1998 and the calendar year 1999 that has been approved by
resolution of the directors of WaveRider prior to the Closing
Date.
ff) "Security Instruments" means the security instruments
described in section 5.1 hereof.
gg) "WCC Shares" means all shares in the capital of WCC currently
owned by WaveRider.
hh) "WCC" means WaveRider Communications (Canada) Inc., a British
Columbia company.
1.2 HEADINGS
The division of this Debenture into sections and the insertion of
headings are for convenience of reference only and shall not affect the
interpretation of this Debenture.
1.3 CROSS-REFERENCES
A reference in this Debenture to a numbered or lettered article,
section or clause refers to the article, section or clause bearing the number or
letter in this Debenture.
1.4 NUMBER AND GENDER
Words herein importing the singular number only shall include the
plural and vice versa, and words importing the masculine gender shall include
the feminine and neuter genders and vice versa.
1.5 ACCOUNTING TERMINOLOGY
All accounting terms used in this Debenture shall have the meanings
ascribed to them in accordance with United States of America generally accepted
accounting principles applied consistently.
1.6 US DOLLARS
In this Debenture, all words or figures expressed in dollars or the
symbol for dollars including "US$" means the currency of the United States of
America.
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<PAGE>
1.7 GOVERNING LAW
This Debenture shall be governed by and construed in accordance with
the laws of the Province of British Columbia. Any legal action or proceeding
with respect to this Debenture against any of the parties hereto may be brought
in the Courts of the Province of British Columbia, which Courts the parties
irrevocably acknowledge and agree to be a convenient forum for the resolution of
any such legal action or proceeding, and each of the parties hereto hereby
irrevocably submits to the jurisdiction of the Courts of the Province of British
Columbia (whether or not an Appearance on their behalf is entered or any other
step is taken on their behalf in any such legal action or proceeding).
1.8 SEVERABILITY
If any one or more of the provisions contained in this Debenture should
be held to be invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such provision or
provisions shall not in any way be affected or impaired in any other
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein shall not thereby in any way be affected or
impaired.
ARTICLE II
LOAN FACILITY
2.1 LOAN ADVANCES
Subject to all the terms and conditions herein, the Holders agree to
lend up to an aggregate of US$2,000,000 to WaveRider as follows:
a) by making a Loan Advance of US$500,000 to WaveRider on or before
January 15, 1999;
b) by making a Loan Advance of US$500,000 to WaveRider on or before
February 15, 1999;
c) by making a Loan Advance of US$500,000 to WaveRider on or before March
15, 1999; and
d) by making a Loan Advance of US$500,000 to WaveRider on or before April
15, 1999, as requested by WaveRider from time to time.
2.1 FUNDING REQUESTS BY WAVERIDER
If WaveRider requires the Holders to make all or any portion of any of
the Loan Advances referred to in clauses (a), (b), (c) or (d) of section 2.1
then WaveRider will give written notice of the amount thereof, which amount
shall not be less than US$250,000, to the Holders not less than five Business
Days prior to the date for the making of such Loan Advance and the Holders
shall, subject to sections 6.1 and 6.2, as the case may be, on the date provided
for make such Loan Advance to WaveRider. If WaveRider elects to not require the
Holders to advance the full amount of US$500,000 in any particular Loan Advance
then the difference between US$500,000 and the amount of the particular Loan
Advance specified by WaveRider will no longer be available to be borrowed by
WaveRider in any future Loan Advances and will be returned to the Holders out of
any trust funds held in anticipation of future Loan Advances
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2.2 PURPOSE
The Loan Advances shall be used to permit WaveRider and the Designated
Subsidiaries to fund the Budget and all the work and programs referred to in the
Budget or for such other purpose as the Holders may approve in writing from time
to time.
2.3 METHOD OF PAYMENT
All Loan Advances shall be made by direct deposit to WaveRider's
account at the Hongkong Bank of Canada, 1578 Marine Drive, West Vancouver,
British Columbia, or such other bank account as WaveRider may from time to time
specify to the Representative.
2.4 ELECTION TO TERMINATE FACILITY
WaveRider shall be entitled to terminate its rights to all Loan
Advances hereunder by written notice to the Representative made at any time
before any funding request has been given pursuant to section 2.2 and if
WaveRider so elects as provided for herein and no Loan Advances have been made
by the Holders then this Debenture shall be terminated as of the date of such
notice, the Holders will forthwith release all security given by WaveRider
hereunder and the Holders shall be released from all obligations to provide any
Loan Advances thereafter, provided that nothing herein shall limit the rights of
the Holders to or under the Class G Warants referred to in section 3.2.
ARTICLE III
FEES AND INTEREST
3.1 COMMITMENT FEE
Within five Business Days of the Closing Date, WaveRider shall issue
and deliver to each Holder as a commitment fee and in consideration of the
execution and delivery of this Debenture by the Holders a Class G Warrant for
the Holder's Proportionate Interest in 500,000 Common Shares, such warrant to be
irrevocably issued and in addition to all other rights of the Holders hereunder.
3.2 RATES OF INTEREST
WaveRider shall pay to each Holder the Holder's Proportionate Interest
in interest on the Loan Advances outstanding from time to time and on overdue
interest at a rate equal to 8% per annum, payable on the first Business Day of
each calendar month commencing February 1, 1999. All interest payments shall be
made by separate cheques payable to each of the Holders for the Holder's
Proportionate Interest in the amount thereof delivered to such bank account or
accounts for deposit or otherwise as the Representative may from time to time
specify to WaveRider.
3.3 CALCULATION OF INTEREST
Interest shall be calculated on the Loan Advances daily from the date
of receipt of funds by WaveRider on the basis of a 365 day year both before and
after default and maturity.
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ARTICLE IV
REPAYMENT AND CONVERSION
4.1 MANDATORY REPAYMENT
Unless the Holders have exercised the Conversion Option, WaveRider
shall pay to each Holder the Holder's Proportionate Interest in all of the
Accumulated Debt:
a) on the Repayment Date; or
b) within 24 hours of the funding of any debt or equity financing
or a transaction or series of transactions in or as a result
of which any person or group of persons acting in concert
acquire more than 50% of the issued and outstanding Common
Shares.
If the Accumulated Debt becomes due as a result of any of the events referred to
in clause (b) hereof then, in addition to all other interest due in respect
thereof, WaveRider shall, at the time of repayment of the Accumulated Debt, pay
the Holders a premium of 2% of the Accumulated Debt per month calculated on a
daily basis from the date or dates of all Loan Advances made for the period of
time during which such amounts were outstanding.
4.1 VOLUNTARY PREPAYMENT
WaveRider may from time to time prepay all or part of the Accumulated
Debt, without bonus or penalty, upon giving not less than 15 Business Days'
written notice to the Holders specifying the amount of prepayment and the date
for the making thereof; provided that the maximum amount of the Loan Facility
available hereunder shall be permanently reduced by the amount of any such
prepayment.
4.2 PLACE OF PAYMENT
All payments of principal, interest, fees and other amounts payable
under or by virtue of this Debenture shall be made to the Holders by payments as
directed by the Representative from time to time. All such payments shall be in
United States dollars.
4.3 CONVERSION
4.4.1 This Debenture shall be convertible at the option of the Holders at any
time after the Closing Date and up to and including November 27, 2000,
if but only if there is an Event of Default and the Representative
gives written notice thereof (the "Conversion Notice") to WaveRider
specifying the particulars of the Event of Default and stating that the
Holders have elected to convert all their rights under this Debenture
including the Accumulated Debt at the time of the Event of Default into
the Conversion Number of fully paid and non-assessable Common Shares,
rounded to the nearest one-tenth of one share. If there is an Event of
Default and the Holders elect to convert all their rights under this
Debenture then the Holders shall surrender this certificate, duly
endorsed by the Representative on behalf of the Holders, at the
registered office of WaveRider at or after the time of delivery of the
Conversion Notice. WaveRider shall issue and deliver to each Holder a
certificate or certificates for the Holder's Proportionate Interest in
the number of Common Shares to which each Holder shall be entitled. The
conversion shall be deemed to have occurred immediately prior to the
close of business on the date of the surrender of this Debenture to be
converted (the "Conversion Date"), and the Holders shall be treated for
all purposes as the registered holder of such Common Shares as of that
date. WaveRider shall cancel this Debenture when surrendered to
WaveRider and shall so annotate its books and records. Upon the
issuance and delivery of the Common Shares, the Holders shall have no
more rights under this Debenture and shall be treated for all purposes
as the registered holder of Common Shares as of that date. No
fractional Common Shares shall be issued on the conversion of this
Debenture. If any fractional interest in a Common Share would, except
for the provisions of this subparagraph, be deliverable on the
conversion of this Debenture, WaveRider shall, in lieu thereof, adjust
the fractional interest by payment to the Holder of an amount in cash
(computed to the nearest cent) equal to the then Conversion Price
multiplied by the fractional interest.
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4.4.2 If the Holders are entitled and elect to exercise the Conversion Option
pursuant to section 4.4.1 then the Holders shall have the option of
surrendering to WaveRider for cancellation the certificates for any
Class G Warrants issued to them pursuant to section 4.9 (but not Class
G Warrants issued pursuant to section 3.1) but not exercised as of the
Conversion Date in exchange for warrant certificates of like tenor and
representing in the aggregate the right to purchase a like number of
Common Shares at the Conversion Price as of and from the Conversion
Date.
4.1 CONVERSION PRICE
Subject to section 4.6, the Conversion Price shall be 85% of the lesser
of (y) the First Average Price and (z) the average closing price of the Common
Shares on the NASD OTC Bulletin Board for the five trading days prior to the
Conversion Date. If the shares of WaveRider trade on another exchange then the
closing prices on such other exchange shall be used for the purposes hereof.
4.2 ADJUSTMENTS TO CONVERSION PRICE
4.6.1 Subject to section 4.7, the Conversion Price shall be subject to
adjustment from time to time in the event of a stock split or stock
dividend of Common Shares (any of which is referred to herein as a
"Dilution Event"). Upon a Dilution Event, the Conversion Price shall be
adjusted, rounded to the nearest US$0.01, to be equal to the Conversion
Price immediately prior to the Dilution Event, multiplied by a
fraction, the numerator of which is the sum of (y) the number of Common
Shares outstanding immediately prior to the Dilution Event, including
the number of Common Shares issuable upon exercise of all options,
warrants, or rights, upon conversion of all convertible securities or
upon conversion of all securities issuable upon exercise of all
options, warrants, or rights for such convertible securities issued in
all prior Dilution Events plus (z) the number of Common Shares that the
effective price for any Common Shares issued in respect of the Dilution
Event giving rise to this adjustment would purchase at the then
Conversion Price, and the denominator of which is the number of Common
Shares outstanding immediately after the Dilution Event, including the
number of Common Shares issuable upon exercise of all options,
warrants, or rights, upon conversion of all convertible securities, or
upon conversion of all convertible securities issuable upon exercise of
all options, warrants, or rights for such convertible securities issued
in this and all prior Dilution Events. The effective price for any
Common Shares issued in respect of any Dilution Event shall be the sum
of all cash and the fair market value of all property other than cash,
as determined by WaveRider's board of directors in good faith and
absent manifest error, received or applied to the benefit of WaveRider
plus, for options, warrants, and rights, the amount equal to the
exercise price multiplied by the number of securities subject to such
option, warrant, or right. A consolidation of Common Shares shall not
be a Dilution Event.
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4.6.2 If prior to exercise of the Conversion Option there is a Consolidation
Event then the Conversion Price after the date of the Consolidation
Event shall be 85% of the lesser of (y) the First Average Price and (z)
the average closing price of the Common Shares on the NASD OTC Bulletin
Board for the five trading days prior to the Conversion Date divided by
the Consolidation Factor.
4.1 TERMINATION OF ANTI-DILUTION
The provisions of section 4.6.2 will cease to apply as soon as each of
the following events have occurred:
a) WaveRider has completed and received gross proceeds of not
less than US$10,000,000 in debt and/or equity financings after
the date of this Debenture; and
b) the Common Shares have been listed for trading on The Nasdaq
SmallCap Market or another recognized national stock market;
and
c) all Common Shares that are subject to the escrow agreement
made as of March 16, 1998 among WaveRider, William E. Krebs as
escrow agent and certain holders of Common Shares have been
released from the restrictions imposed thereby; and
d) the Accumulated Debt shall have been repaid in full.
4.1 RECORD OF ADJUSTMENTS
Upon any adjustment of the Conversion Price, WaveRider shall maintain
at its registered office a statement, signed by the Chief Executive Officer and
the Chief Financial Officer, showing in reasonable detail the facts requiring
the adjustment and the Conversion Price after the adjustment.
4.2 OTHER ADJUSTMENTS
If WaveRider shall reorganize or reclassify its capital (other than a
subdivision or consolidation of its outstanding Common Shares), consolidate or
amalgamate with or into another corporation, or convey all or substantially all
of its assets to another corporation, this Debenture shall thereafter be
convertible into the number of shares or other securities or property to which a
holder of the number of Common Shares deliverable on conversion of this
Debenture would have been entitled on the reorganization, reclassification,
consolidation, amalgamation, or conveyance; and in any such case, appropriate
adjustments (as determined by the Board of Directors of WaveRider) shall be made
in the application of the provisions herein set forth with respect to the rights
and interests thereafter of the Holder to the end that the provisions set forth
(including provisions with respect to changes in, and other adjustments of, the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares or other property thereafter deliverable on
conversion of this Debenture.
4.3 CLASS G WARRANTS
Within 10 days of the receipt by WaveRider of each Loan Advance,
WaveRider shall issue to each Holder the Holder's Proportionate Share in the
number of Class G Warrants that is equal to the quotient obtained when the
amount of such Loan Advance is divided by 85% of the lesser of (y) the First
Average Price and (z) the average closing price of the Common Shares on the NASD
OTC Bulletin Board for the five trading days prior to the date on which the full
amount of such Loan Advance is received by WaveRider.
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4.4 RESERVATION OF SHARES
WaveRider shall at all times reserve and keep available, out of its
authorized but unissued Common Shares solely for the purpose of effecting
conversion of this Debenture or exercise of the Class G Warrants, the full
number of Common Shares deliverable on conversion of this Debenture or exercise
of the Class G Warrants. WaveRider shall, from time to time, in accordance with
applicable law, increase the authorized number of Common Shares if at any time
the authorized number of Common Shares remaining unissued shall not be
sufficient to permit the conversion of this Debenture or exercise of the Class G
Warrants.
4.5 ISSUE COSTS
WaveRider shall pay any and all issue and other taxes that may be
payable in respect of any issue or delivery of Common Shares on conversion of
this Debenture or exercise of the Class G Warrants. WaveRider shall not,
however, be required to pay any tax that may be payable in respect of any
transfer involved in the issue and delivery of Common Shares in a name other
than that of the Holders, and no such issue or delivery shall be made unless and
until the Holder requesting the transfer has paid to WaveRider the amount of any
such tax or has established to the satisfaction of WaveRider that such tax has
been paid.
4.6 LEGEND
Upon the original issuance thereof, and until such time as the same is
no longer required under applicable requirements of the U.S. Securities Act or
applicable state securities laws, certificates representing the Common Shares
and all certificates issued in exchange therefor or in substitution thereof,
shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES
ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN ACCORDANCE WITH (1)
RULE 144A UNDER THE U.S. SECURITIES ACT, (2) RULE 144 UNDER THE U.S.
SECURITIES ACT, IF APPLICABLE, OR (3) WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY, PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE
U.S. SECURITIES ACT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE
"GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN
CANADA. A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL
CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM THE TRANSFER AGENT AND
REGISTRAR UPON DELIVERY OF THE CERTIFICATE AND A DULY EXECUTED
DECLARATION, IN A FORM SATISFACTORY TO THE TRANSFER AGENT AND REGISTRAR
OF THE COMPANY AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904
OF REGULATION S UNDER THE U.S. SECURITIES ACT";
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provided that if Securities are being sold under paragraph (B) of the above
legend, the legend may be removed by providing a declaration to the transfer
agent and registrar of WaveRider, to the following effect:
"The undersigned (a) acknowledges that the sale of the securities of
the Company to which the declaration relates is being made in reliance
on Rule 904 of Regulation S under the United States Securities Act of
1933, as amended (the "U.S. Securities Act"), and (b) certifies that
(1) the seller is not an affiliate of WaveRider as defined in Rule 405
under the U.S. Securities Act, (2) the offer of such securities was not
made to a person in the United States and either (A) at the time the
buy order was originated, the buyer was outside the United States, or
the seller and any person acting on its behalf reasonably believed that
the buyer was outside the United States, or (B) the transaction was
executed in, on or through the facilities of any designated offshore
securities market as defined in Regulation S under the U.S. Securities
Act and neither the seller nor any person acting on its behalf knows
that the transaction has been prearranged with a buyer in the United
States, (3) neither the seller nor any affiliate of the seller nor any
person acting on any of their behalf has engaged or will engage in any
directed selling efforts in the United States in connection with the
offer and sale of such securities, (4) the sale is bona fide and not
for the purpose of "washing off" the resale restrictions imposed
because the securities are "restricted securities" (as such term is
defined in Rule 14(a)(3) under the U.S. Securities Act), (5) the seller
does not intend to replace the securities sold in reliance on Rule 904
of the U.S. Securities Act with fungible unrestricted securities and
(6) the contemplated sale is not a transaction, or part of a series of
transactions which, although in technical compliance with Regulation S,
is part of a plan or scheme to evade the registration provisions of the
U.S. Securities Act. Terms used herein have the meanings given to them
by Regulation S under the U.S. Securities Act",
and, provided, further, that, if any such securities are being sold under
paragraph (C)(2) or (C)(3) of the above legend, the legend may be removed by
delivery to the transfer agent and registrar of WaveRider and to WaveRider an
opinion of counsel, of recognized standing reasonably satisfactory to WaveRider,
that such legend is no longer required under applicable requirements of the U.S.
Securities Act or state securities laws.
ARTICLE V
SECURITY
5.1 PRE-FUNDING SECURITY
WaveRider shall prior to the Closing Date grant and cause to be granted
to the Holders as security for its obligations under or by virtue of this
Debenture the following security instruments (the "Security Instruments"), each
ranking first in priority over any other security interest:
a) a GSA by WaveRider;
b) a Designated Subsidiary Guarantee from WCC;
c) a GSA by WCC;
d) a Designated Subsidiary Guarantee from JIS;
e) a GSA by JIS;
f) the Pledge of WCC Shares; and
g) the Pledge of JIS Shares.
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5.1 INCONSISTENCY
In case of any inconsistency between the provisions of this Debenture
and the provisions of the Security Instruments, the provisions of this Debenture
shall prevail. Without limiting the generality of the foregoing, the Holder
shall not make demand for payment in respect of any of the Security Instruments
unless an Event of Default has occurred and is continuing.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS FOR BENEFIT OF THE HOLDER - FIRST LOAN ADVANCE
The following are conditions precedent to the obligation of the Holders
to make the first Loan Advance and the Holders shall not be obliged to make the
first Loan Advance unless all of the following conditions precedent have been
satisfied or waived in writing by the Holder as of the Closing Date:
a) the Security Instruments shall have been duly executed and
delivered and registrations in respect thereof shall have been
filed in all appropriate registries;
b) the Average Trading Volume for the period immediately prior to
the Closing Date shall not less than 150,000, confirmed to the
satisfaction of the Holders;
c) the Holders shall have received:
i) certified copies of resolutions of the directors of
WaveRider and the Designated Subsidiaries approving
and authorizing this Debenture and the Security
Instruments, as applicable;
ii) certified copies of resolutions of the directors of
WaveRider approving the Budget and every part thereof
(not including attachments); and
iii) such additional documents as the Holders or their
counsel may reasonably request;
d) the representations and warranties contained in Article VII
hereof were true and correct at the time they were made and
continue to be true and correct;
e) no breach of any of the covenants contained in Article VIII
hereof has occurred and is continuing;
f) no Event of Default and no event which, through the giving of
notice or lapse of time or both, would constitute an Event of
Default, has occurred and is continuing; and
g) the making of the Loan Advance is not contrary to any
statutes, regulations, restrictions or rules of any competent
regulatory authority having jurisdiction over the Holders.
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6.1 SUBSEQUENT LOAN ADVANCES
The following are conditions precedent to the making of the each Loan
Advance after the first Loan Advance and the Holders shall not be obliged to
make any such Loan Advance unless all of the following conditions precedent have
been satisfied or waived by the Holder as of the time therefor:
a) the Audit Committee shall have delivered to the Representative
written certification that sales targets of WaveRider are at
least 80% of the Revenue Forecast as of the date of the
request for Loan Advance, that work under the Development and
Production Plan is within the timetable referred to therein
and that all prior Loan Advances have been or will be applied
in accordance with the Budget;
b) no Event of Default and no event which, through the giving of
notice or lapse of time or both, would constitute an Event of
Default, has occurred or is continuing; and
c) the making of the Loan Advance is not contrary to any
statutes, regulations, restrictions or rules of any competent
regulatory authority having jurisdiction over the Holders.
6.1 WAIVERS
A waiver by the Holders of one or more of the conditions precedent in
sections 6.1 or 6.2 hereof in respect of the making of a Loan Advance shall be
limited to the making of such Loan Advance and shall not be construed to be
continuous or to apply to any other proposed Loan Advance.
6.2 PROVISION OF INFORMATION
If the sales targets of WaveRider are not at least 80% of the Revenue
Forecast as of the date of a request for a Loan Advance then WaveRider will, if
requested to do so by the Holders, provide the Holders with such additional
financial, marketing, sales or other information (referred to herein as
"Financial Information") as the Holders may reasonably request to permit the
Holders to determine whether to waive the requirement therefor, provided that
nothing herein shall require WaveRider to provide any information prohibited by
any applicable securities regulations. The Holders will keep confidential all
Financial Information disclosed to them by WaveRider hereunder and not copy,
disclose or make any use of, nor, if at the time WaveRider provides Financial
Information WaveRider states to the Holders that such Financial Information
includes material facts required to be disclosed to the public, trade any Common
Shares until all material facts therein are disclosed to the public in
accordance with applicable securities regulations.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES
WaveRider represents and warrants to the Holders that:
a) each of WaveRider and the Designated Subsidiaries was duly
incorporated or amalgamated and validly exists under the laws
of the following jurisdictions:
i) WaveRider - Nevada
ii) WCC - British Columbia
iii) JIS - British Columbia;
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b) each of WaveRider and the Designated Subsidiaries has all
corporate power and owns all assets (including licenses)
necessary in any material respect to carry on its respective
business;
c) the financial statements of WaveRider for the year ended
December 31, 1997 and the quarterly financial statements of
WaveRider to and including September 30, 1998 fairly reflected
the financial conditions of WaveRider and the Designated
Subsidiaries as of the date of such statements and there has
been no material adverse change in the financial conditions of
WaveRider and the Designated Subsidiaries since September 30,
1998;
d) there are no facts that, to the knowledge of WaveRider
materially adversely affect, or so far as WaveRider can
reasonably foresee would materially adversely affect, the
properties, assets, conditions (financial or otherwise),
business or operations of WaveRider or any of the Designated
Subsidiaries;
e) neither WaveRider nor any of the Designated Subsidiaries is in
breach of or in default under any applicable law, statute or
regulation of any jurisdiction where it carries on business or
any agreement or instrument to which any of them is a party
which in any way would materially adversely affect the ability
of WaveRider or the Designated Subsidiaries to meet their
respective obligations under this Debenture or the Security
Instruments;
f) there are no actions or proceedings pending (including appeals
or applications for review), or to the knowledge of WaveRider
threatened, before any court, arbitrator, administrative
agency, referee or governmental body which, if determined
against WaveRider or any of the Designated Subsidiaries, would
result in a change occurring in the properties, assets,
conditions (financial or otherwise) business or operations of
WaveRider or the Designated Subsidiaries which would
materially adversely affect the ability of WaveRider or the
Designated Subsidiaries to meet their respective obligations
under this Debenture or the Security Instruments or to carry
on their respective businesses;
g) WaveRider and the Designated Subsidiaries each has the
corporate power and authority to enter into this Debenture and
the Security Instruments and to perform their respective
obligations thereunder and hereunder;
h) this Debenture and each of the Security Instruments has been
duly authorized, executed and delivered by and is a valid and
legally binding instrument of the parties thereto;
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i) neither the execution and delivery of this Debenture or any of
the Security Instruments nor performance in accordance
therewith is or will constitute a breach or a default under:
i) any law, statute or regulation of Canada or of any
jurisdiction where WaveRider or the Designated
Subsidiaries carry on business;
ii) the constating documents of WaveRider or the
Designated Subsidiaries; or
iii) any agreement or instrument to which WaveRider or the
Designated Subsidiaries is a party
which breach or default would materially adversely affect (x)
the ability of WaveRider or the Designated Subsidiaries to
carry on business, (y) the legality, validity or
enforceability of this Debenture or any of the Security
Instruments or (z) the ability of WaveRider or the Designated
Subsidiaries to perform their respective obligations under
this Debenture or the Security Instruments;
j) WaveRider and the Designated Subsidiaries have good and
marketable title to all of their respective properties and
assets free and clear of all liens, charges and encumbrances
other than Permitted Encumbrances;
k) WaveRider is the legal and beneficial owner of all the issued
and outstanding shares of WCC and WCC is the legal and
beneficial owner of all the issued and outstanding shares of
JIS and no person, firm or corporation owns or has any rights
to acquire any shares in the capital of the Designated
Subsidiaries;
l) WaveRider has paid on a timely basis with the appropriate
authorities all federal, state, provincial and local taxes and
any other amounts due to federal, state, provincial and local
governmental authorities that are capable of forming a lien,
charge or encumbrance in favour of such authorities against
any of the assets of WaveRider; and
m) all necessary consents, approvals and waivers have been
obtained to permit WaveRider to enter into this Debenture and
the Security Instruments.
7.1 NATURE OF REPRESENTATIONS AND WARRANTIES
The representations and warranties set out in this Article VII shall
survive the execution and delivery of this Debenture and the Security
Instruments notwithstanding any investigations or examinations made by the
Holders or their counsel, and the Holders shall be deemed to have relied on such
representations and warranties when making any Loan Advance.
ARTICLE VIII
COVENANTS OF BORROWER
8.1 AFFIRMATIVE COVENANTS
WaveRider covenants and agrees to and with the Holders that so long as
the Accumulated Debt or any portion thereof is outstanding:
a) WaveRider and the Designated Subsidiaries will observe and
perform all of the covenants, agreements, terms and conditions
to be respectively observed and performed by them in this
Debenture and the Security Instruments;
b) WaveRider will use its best reasonable efforts to obtain a
certificate of effectiveness for the Registration Statement
referred to in clause 6.1(e) within 120 days of the Closing
Date and will thereafter maintain such Registration Statement
or otherwise qualify the Common Shares to be issued by
WaveRider pursuant to the Conversion Option and the Class G
Warrants to permit the Holders to sell such Common Shares
without restriction;
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c) the Holders will be provided with:
i) the unaudited consolidated of WaveRider for each
fiscal quarter end prepared in accordance with
generally accepted accounting principles applied
consistently within 45 days of each fiscal quarter
end of WaveRider (not including the fiscal year end);
ii) the audited consolidated financial statements of
WaveRider for each fiscal year end prepared in
accordance with generally accepted accounting
principles applied consistently, within 90 days of
each fiscal year end of WaveRider;
iii) such other financial and other information relating
to WaveRider and the Designated Subsidiaries as the
Holders may reasonably request including, without
limitation, copies of the most recent financial
statements for the businesses operated or to be
acquired by WaveRider or the Designated Subsidiaries
as soon as reasonably possible after they are
received by WaveRider;
d) WaveRider and the Designated Subsidiaries will carry on and
conduct their respective businesses in a proper and efficient
manner, will keep all of their assets in a good state of
repair and in proper working condition, and will keep or cause
to be kept proper books of account;
e) WaveRider and the Designated Subsidiaries will from time to
time pay or cause to be paid all rents, taxes, rates, levies
or assessments, ordinary or extra-ordinary, and government
fees or dues levied, assessed or imposed upon WaveRider or any
of the Designated Subsidiaries or their assets capable of
forming a lien, charge or encumbrance on any of the assets of
WaveRider or any of the Designated Subsidiaries, as and when
the same become due and payable unless their validity is
disputed in good faith by WaveRider or one of the Designated
Subsidiaries and the Holders are provided security acceptable
to it, acting reasonably, for the payment of same;
f) WaveRider and the Designated Subsidiaries will maintain their
corporate existences and all registrations in jurisdictions in
which they respectively carry on business;
g) WaveRider and the Designated Subsidiaries will maintain all
licenses and permits required to carry on their respective
businesses and will not transfer, surrender or otherwise
dispose of any such licenses or permits;
h) WaveRider and the Designated Subsidiaries will comply with all
laws, regulations, rules and orders, the non-compliance with
which could have a material adverse effect on their respective
businesses;
i) WaveRider will forthwith on becoming aware of same, provide
the Holders with notice of the occurrence of any Event of
Default or any event which, through the giving of notice or
lapse of time or both, would constitute an Event of Default;
j) WaveRider and the Designated Subsidiaries will cause all the
property and assets of WaveRider and the Designated
Subsidiaries which are of a character usually insured by
companies operating like businesses to be insured and kept
insured in such amounts as the Holders may reasonably require
against loss or damage from any cause which is customarily
insured against by companies carrying on like businesses with
insurers approved by the Holders, with the Holders as a loss
payee as their interest may appear, and will pay all premiums
necessary for such purpose as the same shall become due and
shall provide particulars of all such policies and all
renewals thereof to the Holders, all such policies or
contracts to be in terms satisfactory to the Holders, acting
reasonably;
II-26
<PAGE>
k) WaveRider and the Designated Subsidiaries will maintain public
liability insurance in such amounts as the Holders may
reasonably require with insurers approved by the Holder,
acting reasonably, and will pay all premiums necessary for
such purpose as the same shall become due and shall provide
particulars of all such policies and all renewals thereof to
the Holders, all such policies or contracts to be in terms
satisfactory to the Holder, acting reasonably;
l) each Designated Subsidiary will grant a Designated Subsidiary
Guarantee and a GSA to the Holder forthwith upon becoming
wholly owned by WaveRider, directly or indirectly.
8.2 NEGATIVE COVENANTS
WaveRider covenants and agrees to and with the Holders that, unless the
Holders consent in writing, so long as the Accumulated Debt or any portion
thereof is outstanding:
a) WaveRider and the Designated Subsidiaries will not grant,
create, assume or permit to exist any mortgage, pledge,
assignment, lien, charge, encumbrance or other security
interest, whether fixed or floating, upon any of the assets of
WaveRider and the Designated Subsidiaries other than Permitted
Encumbrances;
b) WaveRider and the Designated Subsidiaries will not make any
loans or advances to, whether secured or unsecured, or
guarantee or otherwise become contingently liable for any
obligations of any person, firm or corporation;
c) WaveRider and the Designated Subsidiaries will not in any
fiscal year, except in the ordinary course of business, sell
or otherwise dispose of any of their assets having in the
aggregate a value exceeding US$250,000 unless the proceeds
therefrom are paid to the Holder on account of Loan Advances;
d) WaveRider and the Designated Subsidiaries will not merge,
amalgamate (other than an amalgamation with one or more
Designated Subsidiaries which have granted a Designated
Subsidiary Guarantee to the Holder), reorganize or become a
party to any other transaction whereby all or substantially
all of their respective assets become the property of any
other person, firm or corporation or, in the case of an
amalgamation, of the continuing corporation resulting from the
amalgamation;
e) WaveRider and the Designated Subsidiaries will not change
their fiscal year end; and
f) except payments to WaveRider or a Designated Subsidiary,
WaveRider and the Designated Subsidiaries will not pay
management fees or bonuses except in accordance with existing
contracts or usual industry practices or declare or pay any
dividend except pursuant to the rights of the holders of
issued and outstanding Series "C" Voting 8% Convertible
Preferred Shares of WaveRider, or redeem, reduce, purchase or
retire in any manner any of their respective shares or
otherwise reduce their respective issued or paid-up capital in
any fiscal year.
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<PAGE>
ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT
The occurrence of any one or more of the following events (each such
event being herein called an "Event of Default") shall constitute a default
under this Debenture:
a) if WaveRider fails to make any payment to the Holder due under
this Debenture or any Security Instrument, whether for
principal, interest, fees or otherwise, for more than five
Business Days after its due date;
b) if WaveRider or a Designated Subsidiary defaults in the
performance or observance of any provision contained in this
Debenture or the Security Instruments on its part to be
performed or observed (other than making a payment referred to
in clause (a) above) and such default continues for more than
30 days after the Holder has given WaveRider or such
Designated Subsidiary written notice of the default;
c) the Holder, acting reasonably, is not satisfied on the basis
of monthly reports of the Audit Committee with the financial
condition of WaveRider;
d) the Average Daily Trading Volume becomes less than 150,000;
e) trading of the Common Shares is halted generally for more than
three consecutive days by order of any securities regulators
having jurisdiction;
f) the Registration Statement referred to in clause 6.1(e) is not
effective without restriction within 120 days of the Closing
Date
g) if proceedings are commenced for the dissolution, liquidation
or winding up of WaveRider unless such proceedings are being
actively and diligently contested in good faith by WaveRider;
h) if a default under any indenture or instrument evidencing
indebtedness for borrowed money of WaveRider or a Designated
Subsidiary shall occur and any such indebtedness shall have
been lawfully accelerated or shall lawfully be or become due
and payable prior to the date on which the same would
otherwise have become due and payable;
i) if WaveRider or a Designated Subsidiary is adjudged or
declared bankrupt or becomes insolvent or makes an assignment
for the benefit of creditors, or admits in writing its
inability to satisfy its debts generally as they become due,
or petitions or applies to any tribunal for the appointment of
a receiver or trustee for it or for any substantial part of
its property, or commences any proceedings relating to it
under any reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction
whether now or hereafter in effect, or by any act indicates
its consent to, approval of, or acquiescence in, any such
proceeding for it or for any substantial part of its property;
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<PAGE>
j) if a receiver, receiver and manager, receiver-manager,
custodian, liquidator or trustee (or any person with like
powers) shall be appointed for all or any substantial part of
the property of WaveRider or a Designated Subsidiary, provided
that such appointment shall not constitute an Event of Default
if and for so long as:
i) WaveRider or such Designated Subsidiary as the case
may be, obtains within two Business Days of such
appointment an order of a court of competent
jurisdiction staying such appointment and such order
(or a replacement thereof to similar effect) remains
in full force and effect; or
ii) WaveRider or such Designated Subsidiary, as the case
may be, forthwith bona fide disputes and continues to
dispute such appointment and provides or causes to be
provided to the Holder, such security as the Holder,
acting reasonably, shall require for payment of such
sum as may be necessary to discharge such
appointment, and for the purposes hereof it is agreed
that the Holder, in determining whether any proposed
security is sufficient, may assume the validity of
any such appointment and of the powers purported to
be granted to the person so appointed;
k) if any representation or warranty made in this Debenture by
WaveRider or any information furnished in writing to the
Holder by WaveRider or a Designated Subsidiary before or after
the date hereof proves to have been incorrect in any material
adverse respect when made or furnished;
l) if a writ, execution or attachment or similar process is
issued or levied against all or a substantial portion of the
property of WaveRider or a Designated Subsidiary in connection
with any judgment against WaveRider or such Designated
Subsidiary, as the case may be, in any amount which materially
affects the assets of WaveRider or such Designated Subsidiary,
as the case may be, and such writ, execution, attachment or
similar process is not released, bonded, satisfied,
discharged, vacated or stayed or unless being actively and
diligently contested by WaveRider or such Designated
Subsidiary, as the case may be, in good faith within 60 days
after its entry, commencement or levy;
m) if an encumbrancer or lienor takes possession of any
substantial part of the properties or assets of WaveRider or a
Designated Subsidiary unless WaveRider or such Designated
Subsidiary, as the case may be, disputes and continues to
dispute such possession in good faith and provides to the
Holder, such security for the payment of such encumbrance or
lien as the Holder shall reasonably require;
n) if an order is made or legislation enacted by any competent
body having authority for the expropriation, confiscation,
forfeiture, escheating, other taking or compulsory
divestiture, whether or not with compensation, of all or a
significant portion of the assets of WaveRider on a
consolidated basis (including the WCC Shares and the JIS
Shares) and such order or legislation remains in effect and
has not been stayed by a court of competent jurisdiction for a
period of more than thirty (30) days from the date of
pronouncement of the order or enactment of the legislation, as
the case may be;
o) if there has been a material adverse change in the businesses,
operations, assets, financial or other conditions of the
Designated Subsidiaries since the date hereof;
II-29
<PAGE>
p) if judgment in excess of US$250,000 is granted against
WaveRider or a Designated Subsidiary in respect of which
WaveRider or such Designated Subsidiary does not have
insurance coverage and the same remains undischarged or
unsatisfied after the time for appeal therefrom has expired
without WaveRider or such Designated Subsidiary having
appealed the judgment and obtaining a stay of execution of the
judgment, provided that such judgment shall not constitute an
Event of Default if WaveRider or such Designated Subsidiary
provides or causes to be provided to the Holder such security
as the Holder, acting reasonably, shall require for the
payment of such judgment; or
q) if WaveRider declares a dividend on any class of shares other
than as required on its issued and outstanding Series "C"
Voting 8% Convertible Preferred Shares.
9.2 TERMINATION AND ACCELERATION
Upon the occurrence of an Event of Default and for so long as such
Event of Default shall continue, the Holders may, by one or more notices to
WaveRider do any or all of the following:
a) terminate the obligations of the Holders to make any further
Loan Advances; or
b) declare the entire principal amount of the Loan Advances, all
interest accrued thereon and all fees and other amounts
required to be paid by WaveRider hereunder, to be immediately
due and payable without the necessity of further notice or
time for payment, presentment for payment, protest, notice of
non-payment and of protect (all of which are hereby expressly
waived) and proceed to exercise any and all rights under this
Debenture and the Security Instruments; or
c) request from WaveRider such additional financial, marketing,
sales or other information (referred to herein as "Financial
Information") as the Holders may reasonably request to permit
the Holders to determine whether to waive the Event of
Default, provided that nothing herein shall require WaveRider
to provide any information prohibited by any applicable
securities regulations. The Holders will keep confidential all
Financial Information disclosed to them by WaveRider hereunder
and not copy, disclose or make any use of, nor, if at the time
WaveRider provides Financial Information WaveRider states to
the Holders that such Financial Information includes material
facts required to be disclosed to the public, trade any Common
Shares until all material facts therein are disclosed to the
public in accordance with applicable securities regulations.
9.3 REGISTRATION STATEMENT DEFAULT
If there is an Event of Default pursuant to clause 9.1(f) then the
Holders may, in lieu of taking any other remedies in respect thereof, give
written notice to WaveRider that the Holders require WaveRider to pay, as
liquidated damages therefor, 2% of the Accumulated Debt pro rata on a daily
basis for each and every 30 day period after the occurrence of such Event of
Default until the Registration Statement has been declared to be effective
without restriction. If the Holders give such notice to WaveRider then
thereafter they shall be entitled to no other remedy hereunder in respect of the
Event of Default pursuant to clause 9.1(f).
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<PAGE>
9.4 REMEDIES CUMULATIVE AND WAIVERS
For greater certainty, it is expressly understood and agreed that the
respective rights and remedies of the Holders under this Debenture and the
Security Instruments are cumulative and are in addition to and not in
substitution for any rights or remedies provided by law or by equity; and any
single or partial exercise by the Holders of any right of remedy for a default
or breach of any term, covenant, condition or agreement contained in this
Debenture or the Security Instruments shall not be deemed to be a waiver of or
to alter, affect or prejudice any other right or remedy or other rights or
remedies to which the Holders may be lawfully entitled for such default or
breach. Any waiver by the Holders of the strict observance, performance or
compliance with any term, covenant, condition or agreement herein contained or
contained in the Security Instruments and any indulgence granted either
expressly or by course of conduct, by the Holders shall be effective only in the
specific instance and for the purpose for which it was given and shall be deemed
not to be a waiver of any rights and remedies of the Holders under this
Debenture or the Security Instruments.
ARTICLE X
THE REPRESENTATIVE
10.1 APPOINTMENT OF REPRESENTATIVE
Each Holder irrevocably hereby constitutes and appoints International
Advisory Services Ltd. (the "Representative") as such Holder's true and lawful
agent, proxy and attorney-in-fact and agent and authorizes the Representative
acting for such Holder and in such Holder's name, place and stead, in any and
all capacities to do and perform every act and thing required or permitted to be
done by such Holder hereunder or otherwise in connection with the agreements and
transactions contemplated by this Debenture, as fully to all intents and
purposes as such person might or could do in person, including, without
limitation:
a) deliver all notices, demands, requests, payments and other
communications of any kind whatsoever required or permitted to
be delivered by such Holder to WaveRider under this Debenture;
and
b) receive all notices, payments or certificates and other
communications of any kind whatsoever required or permitted to
be delivered to such Holder by WaveRider under this Debenture.
10.2 RATIFICATION OF REPRESENTATIVE'S ACTIONS
Each Holder hereby ratifies and confirms all that the Representative
may lawfully do or cause to be done by virtue hereof and agrees that the agency,
proxy and power of attorney under section 11.1 are coupled with an interest, and
are therefore irrevocable without the consent of the Representative and
WaveRider and shall survive the death, incapacity, or bankruptcy of such Holder.
Each Holder acknowledges that any execution and delivery by the Representative
of any waiver, amendment, agreement, opinion, certificate or other documents
pursuant to this Debenture will bind the Holder by such documents or decision as
fully as if such Holder had executed and delivered such documents or made such
decisions. The Representative shall not have by reason of this Debenture a
fiduciary relationship in respect of any Holder, except in respect of amounts
received on behalf of such Holder. Upon the death, disability, bankruptcy or
other incapacity of the initial Representative, each Holder acknowledges and
agrees that such Representative's executor, guardian, trustee or other legal
representative, as the case may be, shall (in consultation with the Holders)
appoint a replacement reasonably believed by such person as capable of carrying
out the duties and performing the obligations of the Representative hereunder
within 30 days. If the Representative resigns for any reason, the Representative
shall (in consultation with the Holders) select another representative to fill
such vacancy. Any substituted representative shall be deemed the Representative
for all purposes of this Debenture.
II-31
<PAGE>
10.3 AUTHORIZED ACTIONS
Each Holder agrees that WaveRider shall be entitled to rely on any
action taken by the Representative on behalf of the Holders (each, an
"Authorized Action"), and that each Authorized Action shall be binding on each
Holder as fully as if such Holder had taken such Authorized Action. WaveRider
agrees that the Representative as such shall have no liability to WaveRider for
any Authorized Action, except to the extent that such Authorized Action is found
by a final order of a court of competent jurisdiction to have constituted fraud
or willful misconduct. Each Holder hereby releases and discharges WaveRider from
and against any liability arising out of or in connection with the
Representative's failure to distribute any amounts received by the
Representative on the Holders' behalf to the Holders.
10.4 REFERENCES TO HOLDER AND THE REPRESENTATIVE
References herein to the "Holder" or to the "Representative" are
intended to be interchangeable as the context requires with the result that the
Representative shall be the sole point of contact between WaveRider and the
Holder for purposes of delivery of all notices, monies, information, requests
for information, demands and all other communications but without derogation in
any way of the rights and interest of each Holder in and under this Debenture.
For greater certainty, it is not intended that the Representative as such
acquires any interest herein arising from his appointment thereas.
10.5 INTERESTS OF HOLDER; JOINT AND SEVERAL LIABILITY
WaveRider shall be entitled to treat each Holder as having the Holder's
Proportionate Interest in and under this Debenture for all purposes including
payment of interest, repayment of principal and issuance of Class G Warrants,
with no obligation on the part of WaveRider to inquire as to the respective
amounts advanced by each Holder hereunder. Each Holder will be jointly and
severally liable to WaveRider for all obligations of the Holders hereunder
including without limitation the obligation to make all Loan Advances pursuant
to section 2.1, and each Holder hereby covenants to indemnify WaveRider and save
it harmless from all losses, expenses or damages arising from any failure of the
Holders hereunder.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 COSTS AND EXPENSES
WaveRider shall pay promptly all costs and expenses incurred by the
Holders and reasonable agency fees of the Holders in connection with
preparation, execution, delivery and registration of this Debenture and the
Security Instruments, and in connection with arranging and publicizing the
establishment of the Loan Facility hereby established and reasonable
out-of-pocket expenses of the Holders' counsel with respect thereto and with
respect to advising the Holders as to their rights and responsibilities under
this Debenture and the Security Instruments. Except for ordinary expenses of the
Holders relating to the day-to-day administration of this Debenture and not
involving the preparation or review of any waiver, consent or amendment,
WaveRider further agrees to pay all reasonable costs and expenses incurred by
the Holders (including reasonable fees and expenses of counsel, accountants and
other experts), in connection with the preservation or enforcement of rights of
the Holders under this Debenture and the Security Instruments including, without
limitation, all reasonable costs and expenses sustained by the Holders as a
result of any failure by WaveRider to perform or observe its obligations
contained in this Debenture and the Security Instruments.
II-32
<PAGE>
11.2 NOTICES
Any notice, demand or other communication to be made in respect of this
Debenture may be made or given by personal delivery, registered mail or
facsimile transmission to the parties as follows:
a) to WaveRider:
WaveRider Communications Inc.
235 Yorkland Blvd., Suite 1101
Toronto, ON
M2J 4Y8
Attention: Vice-President, Finance
Fax No.: (416) 502-2968
b) to the Representative:
International Advisory Services Ltd.
Box 42682
Freeport, Bahamas
Attention: V. Stephanie Cox
Fax No.: (242) 352-4810
or at such other addresses or facsimile numbers as may be designated by written
notice given by the other party from time to time.
11.3 SUCCESSORS AND ASSIGNS
This Debenture shall become effective when it shall have been executed
by the parties hereto and thereafter shall be binding upon and enure to the
benefit of WaveRider and the Holders and their respective successors and
permitted assigns. WaveRider shall not have the right to assign its rights
hereunder or any interest herein. Subject to all applicable securities laws, the
Holders from time to time (y) may grant a participation in all or any part of
the Loan Facility to any third party (a "Participant"), after notice to but
without any requirement of consent by WaveRider, and (z) with the prior written
consent of WaveRider (which consent shall not be unreasonably withheld), may
assign all or any part of its rights and obligations under this Debenture to any
third party (an "Assignee"). The Holders may give any Participant or Assignee
copies of financial statements and other reports and al1 other information
furnished to it by or on behalf of WaveRider for the purposes of this Debenture.
Without limitation of its obligations hereunder, WaveRider shall, at its sole
cost and expense, give such certificates, acknowledgments and further assurances
in respect of this Debenture and the Loan Facility as the Holders may require in
connection with any participation or assignment pursuant to this section. The
Holder shall act on behalf of all of its Participants and Assignees in all
dealings with WaveRider in respect of the Loan Facility, until such time as an
Event of Default occurs as a result of WaveRider's failure to pay any amount on
account of principal or interest owing under or by virtue of this Debenture.
Save as aforesaid, any Participant or Assignee shall be entitled to the full
benefit of this Debenture and the Security Instruments to the same extent as if
it were an original party in respect of the rights and obligations granted or
assigned to it.
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<PAGE>
11.4 WHOLE AGREEMENT
This Debenture constitutes the whole and entire agreement between the
parties hereto and cancels and supersedes any prior agreements, undertakings,
declarations, commitments and representations, written or oral, in respect
thereof except for arrangement fees.
11.5 AMENDMENTS
Any provision of this Debenture or the Security Instruments may be
amended only if WaveRider and the Holders so agree in writing.
11.6 FURTHER ASSURANCES
WaveRider agrees that it will, at the request of the Holders, do all
such further acts and execute and deliver all such further assurances and
documents as may be reasonably required by the Holders to carry out the intent
of this Debenture.
IN WITNESS WHEREOF this Debenture has been duly executed as of the date
first above written.
WAVERIDER COMMUNICATIONS INC.
Per:________________________
Authorized Signatory
Per:________________________
Authorized Signatory
WYNDEL CONSULTING LTD. INTERNATIONAL ADVISORY SERVICES LTD.
Per:________________________ Per:________________________
Authorized Signatory Authorized Signatory
II-34
Exhibit 10.12
January 8, 1999
DIRECT LINE: (604) 691-7540
e-mail: [email protected]
OUR FILE: 18465/0002
International Advisory Services Ltd.
Box 42682
Freeport, Bahamas
Dear Sirs/Mesdames:
Re: WaveRider Communications Inc.
8% Secured Convertible Debenture
We are solicitors for WaveRider Communications Inc. ("WaveRider"). Pursuant to
section 2.5 of the above Debenture dated as of December 15, 1998, WaveRider
hereby elects to terminate its right to all Loan Advances under the Debenture
and requests that the Holders (as defined in the Debenture) forthwith release
all security given in respect thereof.
Yours truly,
OWEN, BIRD
Ian W. Muirhead
IWM/js
c: Scott Worthington
II-35
Exhibit 10.13
================================================================================
COMMON STOCK PURCHASE AGREEMENT
between
WaveRider Communications, Inc.
and
Sovereign Partners, LP
Canadian Advantage Limited Partnership
December 29, 1998
================================================================================
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<PAGE>
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT, dated as of December 29, 1998
(the "Agreement"), between the entities listed on Schedule A attached hereto
(collectively referred to as the "Investors"), 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 issue and sell to the Investors,
and the Investors shall purchase up to an aggregate principal amount of
$10,000,000 of Common Stock pursuant to the terms set forth herein and Warrants
to purchase 900,000 Warrant Shares; and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Additional Shares" shall have that meaning set forth in
Section 2.5 below.
Section 1.2 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.3 "Business Day" means any day except Saturday, Sunday and
any day which shall be a Federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
government actions to close.
Section 1.4 "Capital Shares" shall mean the Common Stock and any shares
of any other class of Common Stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.5 "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for, or giving
any right to, subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.6 "Closing" shall mean one of the closings of the purchase
and sale of the Common Stock and Warrants pursuant to Article II below.
Section 1.7 "Closing Date" shall mean the date the closing of the
purchase and sale of the Common Stock and Warrants occurs pursuant to Article II
below.
Section 1.8 "Common Stock" shall mean the Company's common stock,
$0.001 par value per share.
Section 1.9 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses which shall include, but not be limited to, reasonable
attorney's fees, disbursements, costs and expenses of expert witnesses and
investigation.
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<PAGE>
Section 1.10 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of
5,000,000 shares of Common Stock.
Section 1.11 "Escrow Agent" shall mean the law firm of The Goldstein
Law Group, P.C., pursuant to the terms of the Escrow Agreement attached as
Exhibit A.
Section 1.12 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.13 "First Tranche Purchase Price" shall mean $3,000,000.
Section 1.14 "Initial Shares" shall mean the shares of Common Stock
issuable upon the Closing of the first tranche as contained in Section 2.7
below.
Section 1.15 "Legend" shall have the meaning set forth in Article VIII
below.
Section 1.16 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise in any material respect interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, the Registration Rights Agreement, the Escrow Agreement, or the
Warrants in any material respect.
Section 1.17 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.18 "Outstanding" when used with reference to shares of Common
Stock, or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that Outstanding shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.19 "Person" shall mean an individual, a corporation, a
partnership, an association, a limited liability company, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.20 "Principal Market" shall mean the OTC Bulletin Board,
Nasdaq National Market, the Nasdaq Small Cap Stock Market, the American Stock
Exchange, or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.21 "Purchase Price" shall mean collectively the First Tranche
Purchase Price, the Second Tranche Purchase Price and the Third Tranche Purchase
Price.
Section 1.22 "Registrable Securities" shall have the definition set
forth in the Registration Rights Agreement.
Section 1.23 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company, and the Investors on
the Subscription Date annexed hereto as Exhibit B.
Section 1.24 "Registration Statement" shall mean a registration
statement on Form S-3, S-2 or other available form, for the registration of the
resale by the Investors of the Registrable Securities under the Securities Act.
Section 1.25 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.26 "SEC" shall mean the Securities and Exchange Commission.
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<PAGE>
Section 1.27 "Second Tranche Purchase Price" shall mean that dollar
amount set forth in the Company's option notice for the Secondary Shares which
shall be a minimum of $1,000,000 and a maximum of $3,000,000
Section 1.28 "Secondary Shares" shall mean the shares of Common Stock
issuable upon the Closing of the second tranche as contained in Section 2.7
below.
Section 1.29 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.30 "Securities" shall mean the Initial Shares, Secondary
Shares, Tertiary Shares, Additional Shares, and Warrant Shares.
Section 1.31 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.32 "SEC Documents" shall mean the Company's latest Form 10-K
(and all amendments thereto) or 10-KSB (and all amendments thereto) as of the
time in question, all Form 10-Qs or 10-QSBs, Form 8-Ks, and the Proxy Statement
for its latest fiscal year as of the time in question until such time as the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.33 "Subscription Date" shall mean the date on which this
Agreement and all Exhibits and attachments hereto, are executed and delivered by
the parties hereto and all of the conditions relating to the issuance of the
Initial Shares and Warrants shall have been fulfilled.
Section 1.34 "Tertiary Shares" shall mean the shares of Common Stock
issuable upon the Closing of the third tranche as contained in Section 2.7
below.
Section 1.35 "Third Tranche Purchase Price shall mean that dollar
amount set forth in the Company's option notice for the Tertiary Shares which
shall be a minimum of $1,000,000 and a maximum of $4,000,000.
Section 1.36 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.37 "Warrants" shall mean the Common Stock Purchase Warrants
annexed hereto as Exhibit C.
Section 1.38 "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to the exercise of the Warrants.
ARTICLE II
Purchase and Sale of the Common Stock and Warrants
Section 2.1 Closing. The Company will sell, and the Investors will buy,
on the Closing Dates of the three tranches as set forth in Section 2.7 below, an
aggregate of up to $10,000,000 of Common Stock, and shall acquire Warrants to
purchase that number of Warrant Shares as set forth in Section 2.4 below for the
Purchase Price, provided each of the conditions set forth in Section 2.7 below
have been satisfied or waived in writing.
Section 2.2 Form of Payment. The Investors shall pay the Purchase Price
by delivering good funds in United States Dollars by wire transfer to the Escrow
Agent, against delivery of the original shares of Common Stock and Warrants. The
parties have entered into an Escrow Agreement annexed hereto as Exhibit A.
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Section 2.3 Wire Instructions. Wire instructions for the Escrow Agent
are as follows:
Chase Manhattan Bank, N.A.
ABA No. 021000021
For the Account of:
United States Trust Company of New York
Account No. 920-1-073195
In favor of:
The Goldstein Law Group, P.C. Attorney Escrow Account
Account No. 59-01405
Section 2.4 Warrants. On the Subscription Date, the Company will issue
to the Investors Warrants exercisable beginning on the Subscription Date and
then exercisable any time over the five year period thereafter, to purchase
900,000 Warrant Shares at an Exercise Price (as defined in the Warrant) as
follows: Warrants to purchase 225,000 Warrant Shares shall have an Exercise
Price equal to $2.00, Warrants to purchase 225,000 Warrant Shares shall have an
Exercise Price equal to $3.00, Warrants to purchase 225,000 Warrant Shares shall
have an Exercise Price equal to $4.00, and Warrants to purchase 225,000 Warrant
Shares shall have an Exercise Price equal to $2.61. The Warrant shall be
delivered by the Company to the Escrow Agent, and delivered to the Investor
pursuant to the terms of this Agreement and the Escrow Agreement. The Warrant
Shares shall be registered for resale pursuant to the Registration Rights
Agreement.
Section 2.5 [Intentionally Omitted]
Section 2.6 Liquidated Damages. In addition to any other provisions for
liquidated damages in this Agreement or any Exhibit annexed hereto, in the event
that the Company does not deliver unlegended Common Stock in connection with the
sale of such Common Stock by the Investor(s) as set forth in Article VIII below
within five (5) Business Days of surrender by the Investor(s) of the Common
Stock certificate in accordance with the terms and conditions set forth in
Article VIII below (such date of receipt is referred to as the "Receipt Date"),
the Company shall pay to the Investor(s), in immediately available funds, upon
demand, as liquidated damages for such failure and not as a penalty, one quarter
of one percent of the value of the Common Stock undelivered (based upon the Bid
Price of the Common Stock on the Receipt Date) for every day thereafter for the
first ten days and two percent for every day thereafter that the unlegended
shares of Common Stock are not delivered, which liquidated damages shall run
from the sixth Business Day after the Receipt Date. The parties hereto
acknowledge and agree that the sum payable pursuant to the Registration Rights
Agreement and as set forth above, and the obligation to issue Registrable
Securities, shall constitute liquidated damages and not penalties. The parties
further acknowledge that the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, and the parties are
sophisticated business parties and have been represented by sophisticated and
able legal and financial counsel and negotiated this Agreement at arm's length.
Any and all payments required pursuant to this paragraph shall be payable only
in cash, and any payment hereunder shall not relieve the Company of its delivery
obligations under this Section.
Section 2.7 Closings. The Company agrees to sell and the Investors
agree to purchase up to an aggregate of $10,000,000 of Common Stock in three
separate tranches of $3,000,000, and up to $3,000,000, and up to $4,000,000 as
is more fully set forth in (a), (b) and (c) below. The number of shares of
Common Stock issuable upon the Closing of each tranche shall be determined by
dividing principal amount by the 100% of the average Bid Price for the five
consecutive Trading Days immediately preceding the applicable Closing Date (the
"Issuance Price").
(a) First Tranche. On the Subscription Date, The Company will
sell and the Investors will buy (in the amounts set forth on Schedule A), in
reliance upon the representations and warranties contained in this Agreement,
and upon the terms and satisfaction of each of the conditions set forth below,
that number of Initial Shares derived from dividing the First Tranche Purchase
Price by the Issuance Price.
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The conditions precedent to the sale of the Initial
Shares and Warrants are as follows:
(A) Acceptance by each of the Investors of a
satisfactory Common Stock Purchase Agreement and due execution by all
parties of this Agreement and the Exhibits annexed hereto;
(B) Delivery into escrow by the Company of the
original Initial Shares, and the original Warrants, as more fully set
forth in the Escrow Agreement attached hereto;
(C) All representations and warranties of the Company
contained herein shall remain true and correct in all material respects
as of the First Tranche Closing Date;
(D) Each of the Investors shall have received an
opinion of counsel substantially in the form of Exhibit D annexed
hereto; and
(E) The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the
Initial Shares, and Warrants, or shall have the availability of
exemptions therefrom. At the First Tranche Closing Date, the sale and
issuance of the Initial Shares and Warrants shall be legally permitted
by all laws and regulations to which the Company and each of the
Investors are subject.
(b) Second Tranche. At the Company's option (which must be in
the form of written notice to each of the Investors at least five Business Days
prior to the Closing of the Second Tranche setting forth the dollar amount which
shall be a minimum of $1,000,000 and a maximum of $3,000,000) the Company will
sell and the Investors will buy, in reliance upon the representations and
warranties contained in this Agreement, and upon the terms and satisfaction of
each of the conditions set forth below, that number of Secondary Shares derived
from dividing the dollar amount set forth in the Company's option notice by the
Issuance Price (pro rata amongst the Investors based upon each Investor's First
Tranche Purchase Price), after the earlier to occur of (y) 165 calendar days
after the Subscription Date, and (z) two Business Days after the expiration of
the second Reset Period for the Initial Shares, upon the satisfaction of each of
the following conditions (the Company must exercise this option within 20
calendar days after the earlier of (y) and (z) herein):
(A) Delivery into escrow by the Company of the
original Secondary Shares, as more fully set forth in the Escrow
Agreement attached hereto;
(B) The Investors shall have received an opinion of
counsel of the Company as set forth in Exhibit D annexed to this
Agreement, dated on the Second Tranche Closing Date;
(C) The Registration Statement (which includes at
least 150% of the Initial Shares which have not yet been subject to a
Reset Period, 100% of the Initial Shares that were subject to a Reset
Period, 150% of the Secondary Shares, and 100% of the Warrant Shares)
has previously become effective and remains effective for at least 40
calendar days and during the ten (10) Trading Days immediately prior to
the Company's notice for the Second Tranche and the Second Tranche
Closing Date, and (A) neither the Company nor any of the Investors
shall have received notice that the SEC has issued or intends to issue
a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends
or has threatened to do so (unless the SEC's concerns have been
addressed and the Investors are reasonably satisfied that the SEC no
longer is considering or intends to take such action), and (B) no other
suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist;
(D) The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the
Secondary Shares, or shall have the availability of exemptions
therefrom. The sale and issuance of the Secondary Shares shall be
legally permitted by all laws and regulations to which the Company is
subject;
(E) The Investors shall have received written
certification that the representations and warranties of the Company
contained in this Agreement and all Exhibits annexed hereto are true
and correct in all material respects as of the Second Tranche Closing
Date as though made at each such time (except for representations and
warranties specifically made as of a particular date) with respect to
all periods, and as to all events and circumstances occurring or
existing to and including the Second Tranche Closing Date;
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(F) The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and
conditions required by this Agreement, the Escrow Agreement, the
Registration Rights Agreement and the Warrants, to be performed,
satisfied or complied with by the Company at or prior to the Second
Tranche Closing Date;
(G) No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction that prohibits or directly and adversely affects
any of the transactions contemplated by this Agreement or the Exhibits
annexed hereto, and no proceeding shall have been commenced that may
have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement or the Exhibits annexed
hereto;
(H) The trading of the Common Stock is not suspended
by the SEC or the Principal Market, and the Common Stock shall not have
been delisted from the OTC Bulletin BoardThe Company currently meets
all applicable listing requirements of the Principal Market;
(I) No change of control in the Company shall have
occurred. Change of Control shall mean the occurrence of any of (a) an
acquisition after the Subscription Date by a Person of in excess of 50%
of the voting securities of the Company, (b) a replacement of more than
one half of the board of directors in place as of the Subscription Date
which is not approved by those individuals who are members of the board
of directors on the Subscription Date in one or a series of
transactions, (c) the merger of the Company with, or into another
entity, consolidation or sale of all or substantially all of the assets
of the Company in one or a series of related transactions, or (d) the
execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set
forth in (a), (b) or (c) herein;
(J) The average Bid Price for the 20 consecutive
Trading Days immediately preceding the notice by the Company of its
intention to proceed with the second tranche and the days immediately
preceding the Second Tranche Closing Date shall be greater than $1.25;
(K) The average daily trading volume for the Common
Stock as reported by Bloomberg, LP for the 20 Trading Days immediately
preceding the Company's notice for the Second Tranche and preceding the
Closing for the second tranche shall be a minimum of 100,000; and
(L) None of the Investor's, in the event of the
Closing of the Secondary Shares would own or be deemed beneficially
deemed to own, more than 9.99% of the outstanding shares of Common
Stock.
(c) Third Tranche. At the Company's option (which must be in
the form of written notice to each of the Investors at least five Business Days
prior to the Closing of the Third Tranche setting forth the dollar amount which
shall be a minimum of $1,000,000 and a maximum of $4,000,000) the Company will
sell and the Investors will buy, in reliance upon the representations and
warranties contained in this Agreement, and upon the terms and satisfaction of
each of the conditions set forth below, that number of Tertiary Shares derived
from dividing the dollar amount set forth in the Company's option notice by the
Issuance Price (pro rata amongst the Investors based upon their Investor's First
Tranche Purchase Price), after the earlier to occur of (x) 255 calendar days
after the Subscription Date, and (z) two calendar days after the expiration of
the final Reset Period for the Secondary Shares, upon the satisfaction of each
of the following conditions (the Company must exercise this option within 20
calendar days after the earlier of (y) and (x) herein):
(A) Delivery into escrow by the Company of the
original Tertiary Shares, as more fully set forth in the Escrow
Agreement attached hereto;
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(B) The Investors shall have received an opinion of
counsel of the Company as set forth in Exhibit D annexed to this
Agreement, dated on the Third Tranche Closing Date;
(C) The Registration Statement (which includes at
least 100% of the Initial Shares, 100% of the Secondary Shares which
have been subject to a Reset Period, 150% of the Secondary Shares which
have not yet been subject to a Reset Period, 150% of the Tertiary
Shares, and 100% of the Warrant Shares) has previously become effective
and remains effective for at least 40 calendar days and during the ten
(10) Trading Days immediately prior to the Company's notice for the
Third Tranche and the Third Tranche Closing Date, and (A) neither the
Company nor any of the Investors shall have received notice that the
SEC has issued or intends to issue a stop order with respect to the
Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so
(unless the SEC's concerns have been addressed and the Investors are
reasonably satisfied that the SEC no longer is considering or intends
to take such action), and (B) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or
related prospectus shall exist;
(D) The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the
Tertiary Shares, or shall have the availability of exemptions
therefrom. The sale and issuance of the Tertiary Shares shall be
legally permitted by all laws and regulations to which the Company is
subject;
(E) The Investors shall have received written
certification that the representations and warranties of the Company
contained in this Agreement and all Exhibits annexed hereto are true
and correct in all material respects as of the Third Tranche Closing
Date as though made at each such time (except for representations and
warranties specifically made as of a particular date) with respect to
all periods, and as to all events and circumstances occurring or
existing to and including the Third Tranche Closing Date;
(F) The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and
conditions required by this Agreement, the Escrow Agreement, the
Registration Rights Agreement and the Warrants, to be performed,
satisfied or complied with by the Company at or prior to the Third
Tranche Closing Date;
(G) No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction that prohibits or directly and adversely affects
any of the transactions contemplated by this Agreement or the Exhibits
annexed hereto, and no proceeding shall have been commenced that may
have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement or the Exhibits annexed
hereto;
(H) The trading of the Common Stock is not suspended
by the SEC or the Principal Market, and the Common Stock shall not have
been delisted from the OTC Bulletin Board. The Company currently meets
all applicable listing requirements of the Principal Market;
(I) No change of control in the Company shall have
occurred. Change of Control shall mean the occurrence of any of (a) an
acquisition after the Subscription Date by a Person of in excess of 50%
of the voting securities of the Company, (b) a replacement of more than
one half of the board of directors in place as of the Subscription Date
which is not approved by those individuals who are members of the board
of directors on the Subscription Date in one or a series of
transactions, (c) the merger of the Company with, or into another
entity, consolidation or sale of all or substantially all of the assets
of the Company in one or a series of related transactions, or (d) the
execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set
forth in (a), (b) or (c) herein;
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(J) The average Bid Price for the 20 consecutive
Trading Days immediately preceding the notice by the Company of its
intention to proceed with the third tranche and the days immediately
preceding the Third Tranche Closing Date shall be greater than $1.25;
(K) The average daily trading volume for the Common
Stock as reported by Bloomberg, LP for the 20 Trading Days immediately
preceding the Company's notice for the Third Tranche and preceding the
Closing for the third tranche shall be a minimum of $100,000; and
(L) None of the Investor's, in the event of the
Closing of the Tertiary Shares would own or be deemed beneficially
deemed to own, more than 9.99% of the outstanding shares of Common
Stock.
Notwithstanding the foregoing, the Investors will not be obligated to
purchase the Secondary and/or Tertiary Shares in the event the Registration
Statement has not been declared effective by the SEC prior to six months after
the First Tranche Closing Date.
Section 2.8 Repricing. There will be three "Reset Periods" per
tranche. Each Reset Period will consist of 30 calendar days. The first Reset
Period for the Initial Shares will expire on the 30th calendar day after the
Effective Date and will cover 34% of the Initial Shares. The second and third
Reset Period for the Initial Shares will expire on the 30th and 60th calendar
day respectively after the expiration of the first Reset Period for the Initial
Shares, each for 33% of the Initial Shares. The first Reset Period for the
Secondary Shares will expire on the 30th calendar day after the Closing Date for
the Secondary Shares and will cover 34% of the Secondary Shares. The second and
third Reset Periods for the Secondary Shares will expire on the 30th and 60th
calendar day respectively after the expiration of the first Reset Period for the
Secondary Shares, each for 33% of the Secondary Shares. The first Reset Period
for the Tertiary Shares will expire on the 30th calendar day after the Closing
Date for the Tertiary Shares and will cover 34% of the Tertiary Shares. The
second and third Reset Periods for the Tertiary Shares will expire on the 30th
and 60th calendar day respectively after the expiration of the first Reset
Period for the Tertiary Shares, each for 33% of the Tertiary Shares.
For each Reset Period, the "Reset Price" shall be equal to the
average of the Bid Prices during the Trading Days during such period. The number
of shares of Common Stock (the "Reset Shares") to be issued upon the expiration
of each Reset Period shall be calculated by the following formula:
((# of shares subject to repricing as set forth above) x
(Purchase Price of shares subject to repricing x 117.5% - Reset Price))
/ Reset Price
Upon the expiration of each Reset Period the Company agrees to issue
that number of Reset Shares (if any) resulting from the above formula. Such
shares shall be delivered within five Business Days following the expiration of
the applicable Reset Period. In the event that the Company does not deliver
unlegended Reset Shares within five (5) Business Days after the expiration of a
Reset Period (if so required pursuant to the terms herein), the Company shall
pay to the Investor(s), in immediately available funds, upon demand, as
liquidated damages for such failure and not as a penalty, one quarter of one
percent of the value of the Reset Shares undelivered (based upon the Bid Price
of the Common Stock on the Receipt Date) for every day thereafter for the first
ten calendar days and two percent per calendar day thereafter that the
unlegended Reset Shares are not delivered, which liquidated damages shall run
from the sixth Business Day after the expiration of the applicable Reset Period.
The parties hereto acknowledge and agree that the sum payable herein, shall
constitute liquidated damages and not penalties. The parties further acknowledge
that the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, and the parties are sophisticated business
parties and have been represented by sophisticated and able legal and financial
counsel and negotiated this Agreement at arm's length. Any and all payments
required pursuant to this paragraph shall be payable only in cash, and any
payment hereunder shall not relieve the Company of its delivery obligations
under this Section. All Reset Shares shall be included in the Registration
Statement.
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ARTICLE III
Representations and Warranties of the Investors
Each of the Investors represents and warrants to the Company that:
Section 3.1 Intent. Each of the Investors is entering into this
Agreement for its own account and has no present arrangement (whether or not
legally binding) at any time to sell the Common Stock to or through any person
or entity; provided, however, that by making the representations herein, the
Investors do not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investors. Each of the Investors 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 each of the
Investors has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Initial
Shares, Secondary Shares, Tertiary Shares, Reset Shares, and Warrants. Each of
the Investors acknowledges that an investment in the Common Stock is speculative
and involves a high degree of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by each of the Investors and is a valid and
binding agreement of the Investors enforceable against each of them 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 Not an Affiliate. None of the Investors is an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
Section 3.5 Organization and Standing. Each of the Investors is duly
organized, validly existing, and in good standing under the laws of the
countries and/or states of their incorporation or organization.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investors, or, to
the Investors knowledge, (a) violate any provision of any indenture, instrument
or agreement to which any of the Investors are a party or are subject, or by
which any of the Investors or any of their 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 Investors 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 any of the Investors is subject or to
which any of their assets, operations or management may be subject.
Section 3.7 Disclosure; Access to Information. Each of the Investors
has received all documents, records, books and other information pertaining to
Investors investment in the Company that have been requested by Investors,
including the opportunity to ask questions and receive answers. The Company is
subject to the periodic reporting requirements of the Exchange Act, and each of
the Investors has reviewed or received copies of any such reports that have been
requested by it. Each of the Investors represents that it has reviewed the
Company's, Form 10-KSB for the year ended December 31, 1997, Form 10-QSB's, and
Form 8-K's filed for the twelve months prior to the Subscription Date.
Section 3.8 Manner of Sale. At no time were any of the Investors
presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general solicitation or
advertising.
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Section 3.9 Registration or Exemption Requirements. Each of the
Investors further acknowledges and understands that the Securities may not be
transferred, resold or otherwise disposed of except in a transaction registered
under the Securities Act and any applicable state securities laws, or unless an
exemption from such registration is available. Each of the Investors understands
that the certificate(s) evidencing the Initial Shares, Secondary Shares,
Tertiary Shares, Reset Shares, and Warrants will be imprinted with a legend that
prohibits the transfer of these securities unless (i) they are registered or
such registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration.
Section 3.10 No Legal, Tax or Investment Advice. Each of the Investors
understands that nothing in this Agreement or any other materials presented to
the Investors in connection with the purchase and sale of the Initial Shares,
Secondary Shares, Tertiary Shares, Reset Shares, and Warrants constitutes legal,
tax or investment advice. The Investors have relied on, and have consulted with,
such legal, tax and investment advisors as they, in their sole discretion, have
deemed necessary or appropriate in connection with their purchase of the Initial
Shares, Secondary Shares, Tertiary Shares, Reset Shares, and Warrants.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investors that:
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 except as described in the SEC
Documents. The Company is duly qualified to do business as a foreign corporation
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,
other than those in which the failure so to qualify would not reasonably be
expected to have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, and all Exhibits annexed hereto, and to issue the Initial Shares,
Secondary Shares, Tertiary Shares, Reset Shares, Warrants, Additional Shares,
and the Warrant Shares, (ii) the execution, issuance and delivery of this
Agreement, and all Exhibits annexed hereto, 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, and (iii) this Agreement, and all Exhibits
annexed hereto, have been duly executed and delivered by the Company and
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. Upon their issuance and
delivery pursuant to this Agreement, the Initial Shares, Secondary Shares,
Tertiary Shares, Reset Shares, Warrants, Warrant Shares and Additional Shares,
will be validly issued, fully paid and nonassessable and will be free of any
liens or encumbrances other than those created hereunder or by the actions of
the Investors; provided, however, that the Initial Shares, Secondary Shares,
Tertiary Shares, Reset Shares, Warrants, Warrant Shares and Additional Shares
are subject to restrictions on transfer under state and/or federal securities
laws. The issuance and sale of the Initial Shares, Secondary Shares, Tertiary
Shares, Reset Shares, Warrants, Warrant Shares and Additional Shares hereunder
will not give rise to any preemptive right or right of first refusal or right of
participation on behalf of any person.
Section 4.3 Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, $0.001 par value per share, of
which approximately 40,120,000 shares are issued and outstanding, and 5,000,000
shares of Preferred Stock, of which 800,000 have been designated as Series C
Preferred Stock and 800,000 are issued and outstanding. All of the outstanding
shares of Common Stock and Preferred Stock of the Company have been duly and
validly authorized and issued and are fully paid and nonassessable. No shares of
Common Stock are entitled to preemptive or similar rights. Except as
specifically disclosed in the SEC Documents, there are no outstanding options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or, except as a result of the purchase and sale of the
Initial Shares, Secondary Shares, Tertiary Shares, Reset Shares, and the
Warrants, securities, rights or obligations convertible into or exchangeable
for, or giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings, or arrangements by
which the Company or any subsidiary is or may become bound to issue additional
shares of Common Stock or securities or rights convertible or exchangeable into
shares of Common Stock. Except as disclosed in the SEC Documents, to the
knowledge of the Company, no Person or group of Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) or has the
right to acquire by agreement with or by obligation binding upon the Company
beneficial ownership of in excess of five percent of the Common Stock.
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Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and such Common Stock is currently
listed or quoted on the OTC Bulletin Board, and the Company is in full
compliance with all of the listing requirements of the OTC Bulletin Board.
Section 4.5 SEC Documents. The Company has delivered or made available
to the Investors true and complete copies of the SEC Documents filed by the
Company with the SEC during the twelve (12) months immediately preceding the
Subscription Date (including, without limitation, proxy information and
solicitation materials). The Company has not provided to any of the Investors
any information that, according to applicable law, rule or regulation, should
have been disclosed publicly prior to the date hereof by the Company, but which
has not been so disclosed. The SEC Documents comply in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and rules and regulations of the SEC promulgated thereunder and none of the
SEC Documents contain any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended.
Section 4.6 Valid Issuances. When issued and payment has been made
therefor, Initial Shares, Secondary Shares, Tertiary Shares, Reset Shares,
Warrants, Warrant Shares, and the Additional Shares, sold to the Investors will
be duly and validly issued, fully paid, and nonassessable. Neither the issuance
of the Initial Shares, Secondary Shares, Tertiary Shares, Reset Shares,
Warrants, Warrant Shares, and Additional Shares, to the Investors, pursuant to,
nor the Company's performance of its obligations under this Agreement, and all
Exhibits annexed hereto will (i) result in the creation or imposition by the
Company of any liens, charges, claims or other encumbrances upon the Initial
Shares, Secondary Shares, Tertiary Shares, Reset Shares, Warrants, Warrant
Shares, or Additional Shares, issued to the Investors, or any of the assets of
the Company, or (ii) entitle the holders of Outstanding Capital Shares to
preemptive or other rights to subscribe to or acquire the Capital Shares or
other securities of the Company.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Initial Shares, Secondary
Shares, Tertiary Shares, Reset Shares, Additional Shares, Warrants, or Warrant
Shares, or (ii) made any offers or sales of any security or solicited any offers
to buy any security under any circumstances that would require registration of
the Initial Shares, Secondary Shares, Tertiary Shares, Reset Shares, Additional
Shares, Warrants, or Warrant Shares under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to each of the Investors true and correct copies of the Company's
Articles of Incorporation, as amended and in effect on the date hereof, and the
Company's by-laws, as amended and in effect on the date hereof (the "By-Laws").
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Section 4.9 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Initial Shares, Secondary Shares, Tertiary Shares, Reset Shares, Warrants,
Warrant Shares and Additional 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, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, nor is the Company otherwise in violation of,
conflict with or in default under any of the foregoing as would not reasonably
be expected to 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 reasonably be
expected to have a Material Adverse Effect. Except for the Company's obligations
to make the SEC Reports, the Company is not required under 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 (including all Exhibits annexed hereto) or to issue and sell the
Initial Shares, Secondary Shares, Tertiary Shares, Reset Shares, Warrants,
Warrant Shares, or Additional Shares in accordance with the terms hereof;
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 Investors herein.
Section 4.10 No Material Adverse Change. Since December 31, 1997, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents, or as publicly announced.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
or obligations which are material, individually or in the aggregate, that are
not disclosed in the SEC Documents or otherwise publicly announced, other than
those set forth in the Company's financial statements or as incurred in the
ordinary course of the Company's businesses since December 31, 1997, and which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
Section 4.12 No Undisclosed Events or Circumstances. Since December 31,
1997, 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 4.13 No Integrated Offering. To the Company's knowledge,
neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, other than pursuant to
this Agreement or pursuant to the Company's existing employee benefit plan,
under circumstances that would cause the offering of the Initial Shares,
Secondary Shares, Tertiary Shares, Reset Shares, and Warrants pursuant to this
Agreement to be integrated with prior or future offerings by the Company for
purposes of the Securities Act or any applicable stockholder approval
provisions, except as set forth in the SEC Documents.
Section 4.14 Litigation and Other Proceedings. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which would 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, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which would
be reasonably expected to result in a Material Adverse Effect.
Section 4.15 Accuracy of Reports and Information. The Company is in
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the 1934 Act. The Company has registered
its Common Stock pursuant to Section 12 of the 1934 Act and the Common Stock is
listed and trades on the OTC Bulletin Board. The Company has complied in all
material respects and to the extent applicable with all reporting obligations,
under either Section 13(a) or 15(d) of the 1934 Act for a period of at least
twelve (12) months immediately preceding the offer and sale of the Initial
Shares, Secondary Shares, Tertiary Shares, and Warrants (or for such shorter
period that the Company has been required to file such material).
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. The Company is aware and acknowledges that issuance of Initial
Shares, Secondary Shares, Tertiary Shares, Reset Shares, and/or exercise of the
Warrants, may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market conditions. The Company
further acknowledges that its obligation to issue (i) the Additional Shares in
accordance with Section 2.5 herein, (ii) the Warrant Shares in accordance with
the Warrants is unconditional and absolute regardless of the effect of any such
dilution.
Section 4.17 Employee Relations. The Company is not involved in any
labor dispute, nor, to the knowledge of the Company, is any such dispute
threatened which could reasonably be expected to have a Material Adverse Effect.
None of the Company's employees is a member of a union and the Company believes
that its relations with its employees are good.
Section 4.18 Environmental Laws. The Company is (i) in compliance with
any and all foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants and which the Company know is
applicable to them ("Environmental Laws"), (ii) has received all permits,
licenses or other approvals required under applicable Environmental Laws to
conduct its business, and (iii) is in compliance with all terms and conditions
of any such permit, license or approval.
Section 4.19 Insurance. The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has no notice to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires, or obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operation, of the Company.
Section 4.20 Board Approval. The board of directors of the Company has
concluded, in its good faith business judgment, that the issuances of the
securities of the Company in connection with this Agreement are in the best
interests of the Company.
Section 4.21 Integration. The Company shall not and shall use its best
efforts to ensure that no affiliate shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security of the Company that
would be integrated with the offer or sale of the Initial Shares, Secondary
Shares, Tertiary Shares, Reset Shares, and Warrants in a manner that would
require the registration under the Securities Act of the issue, offer or sale of
the Initial Shares, Secondary Shares, Tertiary Shares, Reset Shares, and
Warrants to the Investors. The Initial Shares, Secondary Shares, Tertiary
Shares, Reset Shares, and Warrants are being offered and sold pursuant to the
terms hereunder, are not being offered and sold as part of a previously
commenced private placement of securities.
Section 4.22 Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses, trade secrets and other
intellectual property rights which are necessary for use in connection with its
business or which the failure to so have would have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). To the best knowledge of the
Company, none of the Intellectual Property Rights infringe on any rights of any
other Person, and the Company either owns or has duly licensed or otherwise
acquired all necessary rights with respect to the Intellectual Property Rights.
The Company has not received any notice from any third party of any claim of
infringement by the Company of any of the Intellectual Property Rights, and has
no reason to believe there is any basis for any such claim. To the best
knowledge of the Company, there is no existing infringement by another Person on
any of the Intellectual Property Rights.
Section 4.23 Use of Proceeds. The Company represents that the net
proceeds from this offering will be used for working capital purposes, and not
for the repayment of any outstanding judgments against the Company (including
any affiliate or subsidiary) or any officer, director or employee of the
Company.
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Section 4.24 Subsidiaries. Except as disclosed in the Reports, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
ARTICLE V
Covenants of the Investors
Section 5.1 Additional Agreements. Each Investor consents to its
inclusion in the Registration Statement, or Registration Statements, required to
be filed by the Company pursuant to this Agreement and the Registration Rights
Agreement. Each Investor covenants and agrees that it will (i) timely supply the
Company with all information reasonably required by the Company in connection
with the preparation and filing of such Registration Statements or any
supplements or amendments thereto, and (ii) make, and permit the inclusion in
such Registration Statements or supplements or amendments thereto, all
disclosures and filings required by the SEC to be made in connection with such
Registration Statements or supplements or amendments thereto. Each Investor will
comply with the prospectus delivery requirements of the Securities Act.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect so long as any
Registrable Securities remain outstanding and the Company shall comply in all
material respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has authorized and 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 satisfy any obligation to issue
the Additional Shares, Initial Shares, Secondary Shares, Tertiary Shares, Reset
Shares, and Warrant Shares. 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 so obligated to issue by reason of
adjustments to the Warrants.
Section 6.3 Listing of Common Stock. If required by the Principal
Market, the Company shall (a) not later than the fifth Business Day following
the date the Principal Market requires prepare and file with the Principal
Market (as well as any other national securities exchange, market or trading
facility on which the Common Stock is then listed) an additional shares listing
application covering at least the sum of (i) Initial Shares, Secondary Shares,
Tertiary Shares, Reset Shares,, and (ii) the Warrant Shares issuable upon
exercise in full of the Warrants, (b) take all steps necessary to cause such
shares to be approved for listing on the Principal Market (as well as on any
other national securities exchange, market or trading facility on which the
Common Stock is then listed) as soon as possible thereafter, and (c) provide to
the Investors evidence of such listing, and the Company shall maintain the
listing of its Common Stock on such exchange or market. In addition, if at any
time the number of shares of Common Stock issuable hereunder, and upon exercise
in full of the Warrants is greater than the number of shares of Common Stock
theretofore listed with the Principal Market (and any such other national
securities exchange, market or trading facility), the Company shall promptly
take such action (including the actions described in the preceding sentence) to
file an additional shares listing application with the Principal Market (and any
such other national securities exchange, market or trading facility) covering
such number of shares of Common Stock as would be necessary. The Company (i) has
not received any notice, oral or written, affecting its continued listing on the
OTC Bulletin Board, and (ii) is in full compliance with the requirements for
continued listing on the OTC Bulletin Board. The Company will take no action
which would impact its continued listing or eligibility of the Company for such
listing (except as set forth in Section 6.11 below). The Company will comply
with the listing and trading requirements of its Common Stock on a Principal
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Principal Market. In the
event the Company receives notification from the Principal Market or any other
controlling entity stating that the Company is not in compliance with the
listing qualifications of such Principal Market, the Company will take all
action necessary to bring the Company within compliance with all applicable
listing standards of the Principal Market.
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Section 6.4 Exchange Act Registration. The Company will maintain the
registration of its Common Stock under Section 12 of the Exchange Act, will
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 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, for so long as the Registrable Securities are owned by the
Investors.
Section 6.5 Legends. The Initial Shares, Secondary Shares, Tertiary
Shares, Warrants, Warrant Shares, and Additional Shares to be issued by the
Company pursuant to this Agreement shall be free of legends, except as set forth
in Article VIII.
Section 6.6 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Notice of Certain Events Affecting Registration. The
Company will immediately notify each of the Investors within three Business Days
after the occurrence of any of the following events in respect of a registration
statement or related prospectus in respect of an offering of Registrable
Securities: (i) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (the Company shall not
be required to notify the Investors in this case in the event such notification
would be deemed the release of nonpublic information); and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate. The Company will, within three Business Days of
when filed with the SEC make available to the Investors any such supplement or
amendment to the related prospectus.
Section 6.8 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 the
obligation to deliver to the Investors such shares of stock and/or securities as
the Investors are entitled to receive pursuant to this Agreement.
Section 6.9 Issuance of Warrant Shares. The issuance of the Warrant
Shares pursuant to exercise of the Warrants shall be made in accordance with the
provisions and requirements of Section 4(2) of the Securities Act, or Regulation
D and any applicable state securities law.
Section 6.10 Legal Opinion. The Company's independent counsel shall
deliver to the Investors upon execution of this Agreement, an opinion in the
form of Exhibit D annexed hereto. The Company will obtain for the Investors, at
the Company's expense, any and all opinions of counsel which may be reasonably
required in order to remove the Legend from the Initial Shares, Secondary
Shares, Tertiary Shares, and Warrant Shares, as such opinion can be given under
applicable law.
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Section 6.11 20% Rule Limitation. In the event the Principal Market
requires, the Company shall call a meeting of its shareholders, to be held no
later than 60 calendar days after the such date, seeking shareholder approval of
the below market issuances of shares of Common Stock (and securities convertible
into and exercisable for Common Stock) to the Investors of an aggregate of 20%
or more of the number of shares of Common Stock outstanding as of Subscription
Date. In the event that the aforementioned proposal is not so approved within
such 60 calendar day period, the Company shall seek a waiver from the Principal
Market for such below market issuances. In the event the Company does not
receive such waiver within the earlier of ten calendar days after the
aforementioned shareholders meeting, or 70 calendar days after so required, the
Company shall either delist the Common Stock from the Principal Market and
immediately (within two Trading Days thereafter) list the Common Stock on the
OTC Bulletin Board.
Section 6.12 Exercise of Warrants. The Company will permit the
Investors to exercise the Warrants, by telecopying an executed and completed
Notice of Exercise to the Company, and the payment of the Exercise Price, as is
set forth in the Warrant.
Section 6.13 Increase in Authorized SharesSect65535on IV.6 Increase in
Authorized Shares. At such time as the Company would be, if a notice of exercise
were to be delivered on such date, precluded from honoring the exercise in full
of the Warrants, due to the unavailability of a sufficient number of shares of
authorized but unissued or re-acquired Common Stock, the Board of Directors of
the Company shall promptly (and in any case within 90 calendar days from such
date) hold a shareholders meeting in which the shareholders would vote for
authorization to amend the Company's certificate of incorporation to increase
the number of shares of Common Stock which the Company is authorized to issue to
at least a number of shares equal to the sum of (i) all shares of Common Stock
then outstanding, (ii) the number of shares of Common Stock issuable on account
of all outstanding warrants, options and convertible securities (other than the
Warrants) and on account of all shares reserved under any stock option, stock
purchase, warrant or similar plan, and (iv) such number of Warrant Shares as
would then be issuable upon the exercise in full of the Warrants. In connection
therewith, the Board of Directors shall promptly (x) adopt proper resolutions
authorizing such increase, (y) recommend to and otherwise use its best efforts
to promptly and duly obtain shareholder approval to carry out such resolutions
and (z) within three Business Days of obtaining such shareholder authorization,
file an appropriate amendment to the Company's certificate of incorporation to
evidence such increase. In no way shall the aforementioned be deemed a waiver of
the Company's obligations contained in Section 6.2 above.
Section 6.14 Notice of BreachesSect65535on IV.9 Notice of Breaches.
Each of the Company on the one hand, and the Investors on the other, shall give
prompt written notice to the other of any breach by it of any representation,
covenant, warranty or other agreement contained in this Agreement or any Exhibit
annexed hereto, as well as any events or occurrences arising after the date
hereof, which would reasonably be likely to cause any representation, covenant,
or warranty or other agreement of such party, as the case may be, contained in
this Agreement or any Exhibit annexed hereto, to be incorrect or breached as of
such date. However, no disclosure by either party pursuant to this Section shall
be deemed to cure any breach of any representation, warranty or other agreement
contained in this Agreement or any Exhibit annexed hereto. Notwithstanding the
generality of the foregoing, the Company shall promptly notify each Investor of
any notice or claim (written or oral) that it receives from any lender of the
Company to the effect that the consummation of the transactions contemplated by
this Agreement or any Exhibit annexed hereto, violates or would violate any
written agreement or understanding between such lender and the Company, and the
Company shall promptly furnish by facsimile to each Investor a copy of any
written statement in support of or relating to such claim or notice.
ARTICLE VII
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 7.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investors, advisors to and representatives of the
Investors (who may or may not be affiliated with the Investors), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investors pursuant to the Registration Statement, any such registration
statement or amendment or supplement thereto or any blue sky, NASD or other
filing, all financial and other records, all SEC Documents and other filings
with the SEC, and all other corporate documents and properties of the Company as
may be reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such information
reasonably requested by any of the Investors or any such representative, advisor
or underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries reasonably
made or submitted by any of them), prior to and from time to time after the
filing and effectiveness of the Registration Statement for the sole purpose of
enabling the Investors and such representatives, advisors and underwriters and
their respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
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Section 7.2 Non-Disclosure of Non-Public Information
(a) The Company has not disclosed, and hereafter shall not
disclose non-public information to the Investors, advisors to, or
representatives of, the Investors unless prior to disclosure of such information
the Company identifies such information as being non-public information and
provides each Investor, and its advisors and representatives with the
opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public information
hereunder, require each of the Investors advisors and representatives to enter
into a confidentiality agreement in form reasonably satisfactory to the Company
and the Investors.
(b) Nothing herein shall require the Company to disclose
non-public information to any of the Investors or their advisors or
representatives, and the Company represents that it does not disseminate
non-public information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts, provided, however,
that notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section shall be construed to mean that such persons or entities other
than the Investors (without the written consent of the Investors prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE VIII
Legends
Section 8.1 Legends. The Investors agree to the imprinting, so
long as is required by this Section, of the following legend (or such
substantially similar legend as is acceptable to the Investors and their
counsel, the parties agreeing that any unacceptable legended securities shall be
replaced promptly by and at the Company's cost) on the securities:
[FOR WARRANTS AND INITIAL SHARES] NEITHER THESE SECURITIES NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
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[ONLY FOR RESET SHARES, WARRANT SHARES TO THE EXTENT THE RESALE THEREOF
IS NOT COVERED BY AN EFFECTIVE REGISTRATION STATEMENT AT THE TIME OF
ISSUANCE OR EXERCISE] THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
The Warrant Shares shall not contain the legend set forth above or any
other restrictive legend if the exercise of Warrants, occurs at any time while a
Registration Statement is effective under the Securities Act in connection with
the resale of the shares of Common Stock or, in the event there is not an
effective Registration Statement at such time, if in the opinion of counsel to
the Company such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company agrees that it will provide the
Investors, upon request, with a certificate or certificates representing the
Warrant Shares, free from such legend at such time as such legend is no longer
required hereunder. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the restrictions
of transfer set forth in this Section.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit E hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investors to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and except as provided below, without consultation
by the transfer agent with the Company or its counsel and without the need for
any further advice or instruction or documentation to the transfer agent by or
from the Company or its counsel or the Investors:
(a) at any time after the Effective Date, upon
surrender of one or more certificates evidencing the Warrants, Initial
Shares, Secondary Shares, Tertiary Shares, or Warrant Shares that bear
the aforementioned Legend, to the extent accompanied by a notice
requesting the issuance of new certificates free of the aforementioned
legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor(s) confirm to the
transfer agent that it has sold, pledged or otherwise transferred or
agreed to sell, pledge or otherwise transfer such Common Stock in a
bona fide transaction to a third party that is not an affiliate of the
Company; and (iii) the Investor(s) confirm to the transfer agent that
the Investor(s) have complied with the prospectus delivery requirement.
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(b) at any time upon any surrender of one or more
certificates evidencing Registrable Securities, that bear the
aforementioned legend, to the extent accompanied by a notice requesting
the issuance of new certificates free of such legend to replace those
surrendered and containing representations that (i) the Investor(s) is
permitted to dispose of such Registrable Securities, without limitation
as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor(s) has sold, pledged or otherwise
transferred or agreed to sell, pledge or otherwise transfer such
Registrable Securities, in a manner other than pursuant to an effective
registration statement, to a transferee who will upon such transfer be
entitled to freely tradeable securities. The Company shall have counsel
provide any and all opinions necessary for the sale under Rule 144, as
permitted under applicable law.
Any of the notices referred to above in this Section may be sent by
facsimile to the Company's transfer agent.
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in this Article has been or shall be placed on the
share certificates representing the Common Stock, and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article.
Section 8.3 Investor's Compliance. Nothing in this Article shall affect
in any way any of the Investors obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE IX
Choice of Law
Section 9.1 Choice of Law; Venue; Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive jurisdiction of the U.S. District Court sitting in the Southern
District of the State of New York sitting in Manhattan in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. Each
party hereby agrees that if another party to this Agreement obtains a judgment
against it in such a proceeding, the party which obtained such judgment may
enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law. Each party waives
its right to a trial by jury.
ARTICLE X
Assignment; Entire Agreement, Amendment; Termination
Section 10.1 Assignment. Subject to Section 3.9, the Investor's
interest in this Agreement and its ownership of Initial Shares, Secondary
Shares, Tertiary Shares, Reset Shares, and Warrants may be assigned or
transferred at any time, in whole or in part, to any other person or entity
(including any affiliate of the Investors) provided that the Company must
consent to such assignment or transfer (which consent shall not be unreasonably
withheld), and such assignee or transferee must agree to, and truthfully, make
the representations and warranties contained in Article III, agree to be bound
by the covenants of Article V, and has the financial capabilities to fund the
Second and Third Tranches (as applicable). The provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the shares of Initial Shares, Secondary Shares, Tertiary Shares, Reset Shares,
and/or Warrants purchased or acquired by the Investors hereunder with respect to
the Common Stock held by such person. In the event an Investor(s) transfer or
assign as set forth herein, such Investor shall remain liable under this
Agreement up until the time such transfer or assignment is completed, and shall
remain liable after the transfer or assignment is completed for its actions
taken prior to such assignment or transfer.
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Section 10.2 Termination. This Agreement shall terminate upon the
earliest of (i) the date that all the Registrable Securities have been sold by
the Investors pursuant to the Registration Statement; (ii) the date the
Investors receive an opinion from counsel to the Company that all of the
Registrable Securities may be sold under the provisions of Rule 144, without
volume limitation; or (iii) two years after the expiration of the last Reset
Period.
ARTICLE XI
Notices
Section 11.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is
to be received), or (b) on the second Business Day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company:
WaveRider Communications, Inc.
235 Yorkland Blvd., Suite 1101
Toronto Ontario
Canada M2J 4Y8
Attention: President
Facsimile: (416) 502-2968
Telephone: (416) 502-3200
with a copy to:
Foley, Hoag & Eliot, LLP
One Post Office Square
Boston, MA 02109
Attention: David A. Broadwin
Facsimile: (617) 832-7000
Telephone: (617) 832-1000
If to the Investors, at the addresses listed on Schedule A.
with a copy to:
The Goldstein Law Group, P.C.
65 Broadway, 10th Floor
New York, NY 10006
Attention: Scott H. Goldstein, Esq.
Telephone: (212) 809-4220
Facsimile: (212) 809-4228
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Either party hereto may from time to time change its address or
facsimile number for notices under this Section 11.1 by giving at least ten
calendar days' prior written notice of such changed address or facsimile number
to the other party hereto.
Section 11.2 Indemnification. The Company agrees to indemnify and hold
harmless each of the Investors and each officer, director of the Investors or
person, if any, who controls the Investors within the meaning of the Securities
Act 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
costs of defense and investigation and all attorneys' fees), to which the
Investors 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 the breach of any term of this Agreement by the
Company. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
Each Investor 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 costs of defense and
investigation and all 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 the breach of any term of this
Agreement by the Investor. This indemnity agreement will be in addition to any
liability which the Investors or any subsequent assignee may otherwise have.
Promptly after receipt by an indemnified party under this Section 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, 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 otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section. 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 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
one of the Investors, 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
Investors and the indemnifying party and the Investors 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 Investors (in which case the indemnifying party shall not have the right to
assume the defense of such action on behalf of the Investors, 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 Investor(s), which firm shall be designated in writing by the
Investor(s)). 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.
Section 11.3 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 11.2 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 11.2 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 Investor 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 costs of
defense and investigation and all 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 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 Section 11.2 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 contributions from any person who was
not guilty of such fraudulent misrepresentation.
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ARTICLE XII
Miscellaneous
Section 12.1 Counterparts; Facsimile; Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by the Company on the one hand, and the Investors, on the other hand.
Section 12.2 Entire Agreement. This Agreement, the Exhibits or
Attachments hereto, which include, but are not limited to the Warrant, the
Escrow Agreement, and the Registration Rights 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 and Attachments
to this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as if fully set forth herein.
Section 12.3 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 12.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 12.5 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
and all Exhibits shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Investors and the Company shall be required to employ any
other reporting entity.
Section 12.6 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Initial Shares, Secondary Shares,
Tertiary Shares, Reset Shares, Warrants, Warrant Shares, or Additional Shares,
and (ii) in the case of any such loss, theft or destruction of such certificate,
upon delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate of like tenor.
Section 12.7 Fees and Expenses. Each of the parties shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay on each of
the Subscription Date, Closing Date for the Secondary Shares, and Closing Date
for the Tertiary Shares up to $30,000, in cash, out of the escrowed funds, to
the Escrow Agent for legal, administrative, and escrow fees.
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Section 12.8 PublicityVI.11 Publicity. The Company and the Investors
shall consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and no
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other parties, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the names of the Investors without the prior written consent of the
Investors, except to the extent required by law or in response to a written SEC
request, in which case the Company shall provide the Investors with prior
written notice of such public disclosure.
[Remainder of page intentionally left blank]
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Purchase Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
WAVERIDER COMMUNICATIONS, INC.
By ____________________________
SOVEREIGN PARTNERS, LP
By ____________________________
CANADIAN ADVANTAGE LIMITED PARTNERSHIP
By ____________________________
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SCHEDULE A
INVESTORS:
1. SOVEREIGN PARTNERS LP
90 Grove Street, Suite #01
Ridgefield, CT 06877
Telephone: (203) 431-8300
Facsimile: (203) 431-8301
Initial Investment Amount: $2,250,000
2. CANADIAN ADVANTAGE LIMITED PARTNERSHIP
365 Bay Street, 10th Floor
Toronto Ontario
Canada M5H 2V2
Facsimile: (416) 860-6140
Telephone: (416) 860-6130
Initial Investment Amount: $750,000
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EXHIBIT A
ESCROW AGREEMENT
THIS AGREEMENT is made as of the 29th day of December, 1998 by and between
WAVERIDER COMMUNICATIONS, INC., with its principal office at WaveRider
Communications, Inc., 235 Yorkland Blvd., Suite 1101, Toronto, Ontario Canada
M2J 4Y8, (hereinafter the "Company"), the entities listed on Schedule A
(hereinafter collectively referred to as the "Subscribers"), and THE GOLDSTEIN
LAW GROUP, P.C., 65 Broadway, 10th Floor, New York, NY 10006 (hereinafter the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Common Stock Purchase Agreement dated as of
December 29, 1998 (the "Purchase Agreement"), the Subscribers will be purchasing
Common Stock and Warrants of the Company (the "Securities") in three separate
tranches at purchase prices as set forth in the Purchase Agreement and the
Company shall be issuing Warrants to purchase an aggregate of 900,000 shares of
Common Stock; and
WHEREAS, the Company has requested that the Escrow Agent hold the funds
of the Subscribers in escrow until the Escrow Agent has received the Securities
and has confirmed their issuance, and there is a Closing under the Purchase
Agreement. The Escrow Agent will then immediately wire transfer or otherwise
deliver at the Company's direction immediately available funds to the Company or
the Company's account and arrange for delivery of the Securities to each
Subscriber per each Subscriber's written instructions.
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 I
TERMS OF THE ESCROW FOR THE
INITIAL SHARES
1.1 Upon Escrow Agent's receipt of the First Tranche Purchase
Price from the Subscribers for the Initial Shares, and Warrants to be purchased
pursuant to the terms set forth in the Purchase Agreement on the Closing Date of
the Initial Shares, into its attorney trustee account, it shall notify the
Company in writing, or the Company's designated attorney or agent, of the amount
of funds it has received into its account.
1.2 The Company, upon receipt of said notice and acceptance
of the Purchase Agreement (including all Exhibits annexed thereto) by both
parties, as evidenced by the Company, and all of the Subscriber's execution
thereof, shall deliver to the Escrow Agent the original Initial Shares and
Warrants being purchased by the Subscribers in connection with the Closing Date
for the Initial Shares. Escrow Agent shall then communicate with the Company
to confirm their issuance.
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1.3 Once Escrow Agent confirms the issuance of the Initial
Shares and Warrants, he shall immediately wire that amount of funds necessary to
purchase the Initial Shares and Warrants in connection with the Closing Date for
the Initial Shares per the written instructions of the Company. The Company
authorizes Escrow Agent to retain from escrow and send to The Goldstein Law
Group, P.C.'s operating account the fees due to The Goldstein Law Group, P.C. as
set forth in the Purchase Agreement after Escrow Agent has wired net funds to
the Company. Once the funds (as set forth above) have been received per the
Company's instructions, the Escrow Agent shall then arrange to have the Initial
Shares and Warrants delivered as per instructions from the Subscribers.
ARTICLE 2
TERMS OF THE ESCROW FOR THE SECONDARY SHARES
2.1 The Company shall certify in writing to the Escrow Agent
and each of the Subscribers that it has satisfied all of the terms and
conditions precedent to the Closing Date of the Secondary Shares contained in
the Purchase Agreement and the Registration Rights Agreement. The Company shall
then deliver to the Escrow Agent the original Secondary Shares being purchased
by the Subscribers. Upon receipt of such notice the Subscribers shall wire the
Second Tranche Purchase Price to the Escrow Agent's attorney trustee account.
The Escrow Agent shall notify the Company, or the Company's designated attorney
or agent, of the amount of funds it has received into its attorney trustee
account in connection with the Closing Date for the Secondary Shares, and the
Company shall thereafter confirm the issuance of the Secondary Shares.
2.2 Once Escrow Agent confirms the issuance of the Secondary
Shares, he shall immediately wire that amount of funds necessary to purchase the
Secondary Shares per the written instructions of the Company net of all fees, if
any. The Company authorizes Escrow Agent to retain from escrow and send to The
Goldstein Law Group, P.C.'s operating account the fees due to The Goldstein Law
Group, P.C. as set forth in the Purchase Agreement after Escrow Agent has wired
net funds to the Company. Once the funds (as set forth above) have been received
per the Company's instructions, the Escrow Agent shall then arrange to have the
Secondary Shares delivered as per instructions from the Subscribers.
ARTICLE 3
TERMS OF THE ESCROW FOR THE TERIARY SHARES
3.1 The Company shall certify in writing to the Escrow Agent
and each of the Subscribers that it has satisfied all of the terms and
conditions precedent to the Closing Date of the Tertiary Shares contained in the
Purchase Agreement and the Registration Rights Agreement, and that the Tertiary
Shares have been duly registered. The Company shall then deliver to the Escrow
Agent the original Tertiary Shares being purchased by the Subscribers. Upon
receipt of such notice the Subscribers shall wire the Third Tranche Purchase
Price to the Escrow Agent's attorney trustee account. The Escrow Agent shall
notify the Company, or the Company's designated attorney or agent, of the amount
of funds it has received into its attorney trustee account in connection with
the Closing Date for the Tertiary Shares, and the Company shall thereafter
confirm the validity of the issuance of the Tertiary Shares.
3.2 Once Escrow Agent confirms the validity of the issuance of
the Tertiary Shares, he shall immediately wire that amount of funds necessary to
purchase the Tertiary Shares per the written instructions of the Company net of
all fees. The Company authorizes Escrow Agent to retain from escrow and send to
The Goldstein Law Group, P.C.'s operating account the fees due to The Goldstein
Law Group, P.C. as set forth in the Purchase Agreement after Escrow Agent has
wired net funds to the Company. Once the funds (as set forth above) have been
received per the Company's instructions, the Escrow Agent shall then arrange to
have (i) the Tertiary Shares delivered as per instructions from the Subscribers.
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ARTICLE 4
MISCELLANEOUS
4.1 Should the Company attempt to change this Agreement in a
manner which, in the Escrow Agent's discretion, shall be undesirable, the Escrow
Agent may resign as Escrow Agent by notifying the Company and the Subscribers in
writing. In the case of the Escrow Agent's resignation or removal pursuant to
the foregoing, his only duty, until receipt of notice from the Company and the
Subscribers or their agent that a successor escrow agent shall have been
appointed, shall be to hold and preserve the Securities and/or funds. Upon
receipt by the Escrow Agent of said notice from the Company and the Subscribers
of the appointment of a successor escrow agent, the name of a successor escrow
account and a direction to transfer the Securities and/or funds, the Escrow
Agent shall promptly thereafter transfer all of the Securities and/or funds held
in escrow to said successor escrow agent. Immediately after said transfer of
Securities, the Escrow Agent shall furnish the Company and the Subscribers with
proof of such transfer. The Escrow Agent is authorized to disregard any notices,
requests, instructions or demands received by it from the Company or the
Subscribers after notice of resignation or removal shall have been given, unless
the same shall be the aforementioned notice from the Company and the Subscribers
to transfer the Securities and funds to a successor escrow agent or to return
same to the respective parties.
4.2 The Escrow Agent shall be reimbursed by the Company and
the Subscribers for any reasonable expenses incurred in the event there is a
conflict between the parties and the Escrow Agent shall deem it necessary to
retain counsel.
4.3 The Escrow Agent shall not be liable for any action taken
or omitted by him in good faith in accordance with the advice of the Escrow
Agent's counsel; and in no event shall the Escrow Agent be liable or responsible
except for the Escrow Agent's own gross negligence or willful misconduct.
4.4 The Company and each of the Subscribers warrant to and
agree with the Escrow Agent that, unless otherwise expressly set forth in this
Agreement:
(i) there is no security interest in the Securities
or any part thereof;
(ii) no financing statement under the Uniform
Commercial Code is on file in any jurisdiction claiming a security
interest or in describing (whether specifically or generally) the
Securities or any part thereof; and
(iii) the Escrow Agent shall have no responsibility
at any time to ascertain whether or not any security interest exists in
the Securities or any part thereof or to file any financing statement
under the Uniform Commercial Code with respect to the Securities or any
part thereof.
4.5 The Escrow Agent has no liability hereunder to either
party other than to hold the Securities and funds and to deliver them under the
terms hereof. Each party hereto agrees to indemnify and hold harmless the Escrow
Agent from and with respect to any suits, claims, actions or liabilities arising
in any way out of this transaction including the obligation to defend any legal
action brought which in any way arises out of or is related to this Escrow.
4.6 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.
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4.7 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 follows, or as set forth on
Schedule A:
(i) WaveRider Communications, Inc.
235 Yorkland Blvd., Suite 1101
Toronto Ontario
Canada M2J 4Y8
Attention: President
Facsimile: (416) 502-2968
Telephone: (416) 502-3200
with a copy to:
Foley, Hoag & Eliot, LLP
One Post Office Square
Boston, MA 02109
Attention: David A. Broadwin
Facsimile: (617) 832-7000
Telephone: (617) 832-1000
(ii) The Goldstein Law Group, P.C.
65 Broadway, 10th Floor
New York, NY 10006
Attention: Scott H. Goldstein, Esq.
Telephone: (212) 809-4220
Facsimile: (212) 809-4228
4.8 This Agreement shall be binding upon and shall inure to
the benefit of the permitted successors and assigns of the parties hereto.
4.9 This Agreement is the final expression of, and contains
the entire Agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This
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.
4.10 Whenever required by the context of this Agreement, the
singular shall include the plural and masculine shall include the feminine. This
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 Agreement.
4.11 The Company acknowledges and confirms that it is not
being represented in a legal capacity by The Goldstein Law Group, P.C., and it
has had the opportunity to consult with its own legal advisors prior to the
signing of this Agreement.
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4.12 The parties hereto expressly agree that this Agreement
shall be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts for the Southern District of the State of New
York, in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
state or country having jurisdiction over the party against whom such judgment
was obtained, and each party hereby waives any defenses available to it under
local law and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the 29th day of December, 1998.
WAVERIDER COMMUNICATIONS, INC.
By____________________________
Name:
Title:
SOVEREIGN PARTNERS, LP
By_____________________________
CANADIAN ADVANTAGE LIMITED
PARTNERSHIP
By______________________________
THE GOLDSTEIN LAW GROUP, P.C.
Escrow Agent
By______________________________
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 29th day of
December, 1998, between the entities listed on Schedule A attached hereto
(referred to as a the "Investors" or "Holders"), and WAVERIDER COMMUNICATIONS,
INC., a corporation incorporated under the laws of the State Nevada, and having
its principle place of business at 235 Yorkland Blvd., Suite 1101, Toronto
Ontario, Canada M2J 4Y8 (the "Company").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Investors are purchasing from the Company, pursuant to the
Common Stock Purchase Agreement dated the date hereof (the "Purchase
Agreement"), shares of Common Stock and Warrants (hereinafter collectively
referred to as the "Securities" of the Company); All capitalized terms not
hereinafter defined shall have that meaning assigned to them in the Purchase
Agreement; and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein with respect to the securities set forth in
the Purchase Agreement.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Initial Shares, the Secondary Shares, the
Tertiary Shares, the Reset Shares, the Additional Shares and the Warrant Shares;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under the Securities Act
of 1933, as amended (the "1933 Act") and disposed of pursuant thereto, (ii)
registration under the 1933 Act is no longer required for the immediate public
distribution of such security as a result of the provisions of Rule 144
promulgated under the 1933 Act, or (iii) it has ceased to be outstanding. 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 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 Holders acknowledge
and understand that prior to the registration of the Registrable Securities as
provided herein, the Registrable Securities and the Securities are "restricted
securities" as defined in Rule 144 promulgated under the Act. The Holders
understand that no disposition or transfer of the Registrable Securities or the
Securities may be made by the Holders in the absence of (i) an opinion of
counsel to the Holders that such transfer may be made without registration under
the 1933 Act (which shall be reasonably acceptable to the Company), or (ii) such
registration.
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Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("SEC"), within 30 calendar days after the
Closing Date, a registration statement (on Form S-2, S-3 or other appropriate
form) under the 1933 Act (the "Registration Statement"), at the sole expense of
the Company (except as provided in Section 3(c) hereof), in respect of all
holders of Registrable Securities, so as to permit a public offering and sale of
the Registrable Securities under the Act. The Company shall use its best efforts
to cause the Registration Statement to become effective within 120 calendar days
from the Closing Date. The number of shares of Common Stock designated in the
Registration Statement to be registered shall be 5,000,000. The Company agrees
that it will file such amendments and/or supplements to the Registration
Statement, and also agrees to file such additional Registration Statements as is
necessary in order to ensure that at least 100% of the Warrant Shares and at
least 150% of the number of shares of Common Stock issued under the Purchase
Agreement are included in a Registration Statement, which are not subject to a
Reset Date. The parties acknowledge that the Registration Statement will include
approximately an additional 2,100,000 shares of Common Stock previously issued
by the Company. In no event shall the filing and/or effectiveness of the
Registration Statement be delayed due to any delay caused by the inclusion of
these shares of Common Stock in the Registration Statement, in such event the
Company agrees to remove these shares from the Registration Statement, provided
that in no event would the exercise in cash of the Warrants extend the date
during which the Company would have to keep the Registration Statement effective
beyond the date that it would have obtained in the event of a cashless exercise.
(b) The Company will maintain the Registration Statement, or
post-effective amendment filed under this Section 3 hereof current under the
1933 Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the applicable Registration Statement,
(ii) the date the holders thereof receive an opinion of counsel that the
Registrable Securities may be sold under the provisions of Rule 144, or (iii)
two (2) years after takedown of the third tranche.
(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) shall be borne by the Company. The Holders shall bear the cost, pro rata,
of underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company shall qualify any of the securities for sale in such states as such
Holder reasonably designates and shall furnish indemnification in the manner
provided in Section 9 hereof. The Company at its expense will supply the Holders
with copies of the Registration Statement and the prospectus or offering
circular included therein and other related documents in such quantities as may
be reasonably requested by the Holders.
(d) The Company shall not be required by this Section 3 to include a
Holder's Registrable Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder 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 1933 Act.
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(e) In the event the Registration Statement to be filed by the Company
pursuant to Section 3(a) above is not filed with the SEC on or before the 30th
calendar day after the Closing Date and/or the Registration Statement is not
declared effective by the SEC on or before the 120th calendar day after the
Closing Date, then the Company will pay the Holders (pro rated on a daily
basis), as liquidated damages for such failure and not as a penalty, two percent
of the Purchase Price of the Initial Shares, Secondary Shares and Tertiary
Shares that have been drawn down by the Company for every 30 calendar day period
until the Registration Statement has been filed and/or declared effective. Such
payment of the liquidated damages shall be made to the Holders in cash,
immediately upon demand, provided, however, that the payment of such liquidated
damages shall not relieve the Company from its obligations to register the
Registrable Securities pursuant to this Section. If the Company does not remit
the damages to the Holder as set forth above, the Company will pay the Holders
reasonable costs of collection, including attorneys fees, in addition to the
liquidated damages. The registration of the Securities pursuant to this
provision shall not affect or limit Holder's other rights or remedies as set
forth in this Agreement. Anything in this Section (e) to the contrary
notwithstanding, the Company shall not be liable for liquidated damages, or any
other costs or liabilities to the Holders of Registrable Securities if the delay
in the effectiveness of the Registration Statement is due to (i) the failure of
any Holder of Registrable Securities to provide information requested by the SEC
for inclusion in the Registration Statement, or (ii) the failure by the Holder
of Registrable Securities to make or permit the Company to make any disclosure
which is required by the SEC in the Registration Statement.
(f) No provision contained herein shall preclude the Company from
selling securities pursuant to any registration statement in which it is
required to include Registrable Securities pursuant to this Section 3.
(g) The Company agrees that it shall request acceleration of the
Registration Statement within two Business Days after being informed by the SEC
that it may do so. The Company also agrees that it shall respond in writing to
any questions and/or comments from the SEC which relate to the Registration
Statement within ten Business Days of receipt of such question or comment.
Section 4. Cooperation with Company. Each of the Holders will cooperate
with the Company in all respects in connection with this Agreement, including
timely supplying all information reasonably requested by the Company, executing
and returning all documents reasonably requested in connection with the
registration and sale of the Registrable Securities, and making any filings
and/or disclosures reasonably required by the SEC in connection with the
registration and sale of the Registrable Securities. Each Holder agrees that it
will deliver a prospectus in connection with each sale and it will notify the
Company when it has sold all of its Registrable Securities.
Section 5. 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:
(a) prepare and file with the SEC such amendments and supplements to
the registration statements 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 Holder of
such 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);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) register and qualify the securities covered by the Registration
Statement under such other securities or blue sky laws of such jurisdictions as
the Holders shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable each Holder to consummate the
public sale or other disposition in such jurisdiction of the securities owned by
such Holder, 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;
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(d) list such securities on the Principal Market on which any
securities of the Company are then listed, if the listing of such securities is
then permitted under the rules of such exchange;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
(f) notify each Holder of Registrable Securities covered by the
Registration Statement 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.
(g) If at any time or from time to time after the effective date of the
Registration Statement, the Company notifies the Holders in writing of the
existence of a Potential Material Event (as defined in Section 3(h) below), the
Holders shall not offer or sell any Registrable Securities or engage in any
other transaction involving or relating to Registrable Securities, from the time
of the giving of notice with respect to a Potential Material Event until such
Holder 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 the Company may not so suspend
the right to such holders of Securities for more than two twenty day periods
during any twelve month period, during the period in which the Registration
Statement, or any amendment or supplement, is required to be in effect. 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 ten days.
(h) "Potential Material Event" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
registration statement; or (b) any material engagement or activity by the
Company which would be adversely affected by disclosure in a registration
statement at such time, or (c) the Registration Statement, or any supplement, or
amendment would be deemed to be materially misleading absent the inclusion of
such information.
(i) In the event that, a "blackout period" occurs subsequent to the
effective date as set forth in Section 5 (g) above, and (h) the Bid Price on the
Trading Day immediately preceding such "blackout period" (the "Old Bid Price")
is greater than the Bid Price on the first Trading Day following such "blackout
period" (the "New Bid Price"), the Company shall issue to the Holders the number
of additional shares equal to the difference between (y) the product of the
number of Securities held by the Holders during such "blackout period" that are
or were not otherwise freely tradeable and the Old Bid Price, divided by the New
Bid Price and (z) the number of Securities held by the Holders during such
"blackout period" that were not otherwise freely tradeable during such Blackout
Period. In the event the Company is obligated to issue these shares of Common
Stock but any Holder then owns more than 9.99% of the then outstanding shares of
Common Stock, the Company will issue such shares at such time as such Holder
owns less than 9.99% of the then outstanding shares of Common Stock.
Section 6. Information by Holder. Each Holder of Registrable Securities
included in any registration statement shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Section.
Section 7. Assignment. The rights granted the Holders under this
Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unreasonably withheld. This Agreement is binding upon
and inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
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Section 8. Termination of Registration Rights. The rights granted
pursuant to this Agreement shall terminate as to each Holder (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:
(a) all such Holder's securities subject to this Agreement have been
registered;
(b) all of such Holder's securities subject to this Agreement may be
sold without such registration pursuant to Rule 144 promulgated by the SEC
pursuant to the Securities Act; or
(c) all of such Holder's securities subject to this Agreement can be
sold pursuant to Rule 144(k) without volume limitation.
Section 9. Indemnification.
(a) In the event of the filing of any Registration Statement with
respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holders and each officer, director of
the Holders, and person, if any, who controls the Holders within the meaning of
the Securities Act ("Distributing Holders") 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 costs of defense and
investigation and all attorneys' fees), to which the Distributing Holders 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 any such Registration Statement or any related preliminary
prospectus, final prospectus, offering circular, notification 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
such Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company by the
Distributing Holders, specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Distributing Holder 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 costs of defense and
investigation and all 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 a Registration Statement,
requested by such Distributing Holder, or any related preliminary prospectus,
final prospectus, offering circular, notification 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 such Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto
in reliance upon, and in conformity with, written information furnished to the
Company by such Distributing Holder, specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which the
Distributing Holders may otherwise have.
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(c) Promptly after receipt by an indemnified party under this Section
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, 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 otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section. 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 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 Holder, 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 Holder and the indemnifying party and the Distributing Holder 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 Holder (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Holder, 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 Holder,
which firm shall be designated in writing by the Distributing Holder). 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.
Section 10. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the Distributing
Holder makes a claim for indemnification pursuant to Section 9 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 9 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Holder, then the Company and the
applicable Distributing Holder 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 costs of defense
and investigation and all 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 Holder, 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 each Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section 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. 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 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.
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Section 11. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder shall be in writing and shall be deemed to have been
duly given if delivered by (i) hand, (ii) facsimile and followed by mail
delivery or (iii) if mailed, by certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Company:
WaveRider Communications, Inc.
235 Yorkland Blvd., Suite 1101
Toronto Ontario
Canada M2J 4Y8
Attention: President
Facsimile: (416) 502-2968
Telephone: (416) 502-3200
with a copy to:
Foley, Hoag & Eliot, LLP
One Post Office Square
Boston, MA 02109
Attention: David A. Broadwin
Facsimile: (617) 832-7000
Telephone: (617) 832-1000
(b) If to the Investors, to their address set forth on Schedule A
annexed to the Purchase Agreement.
Notices shall be deemed given at the time they are delivered personally
or five calendar days after they are mailed in the manner set forth above. If
notice is delivered by facsimile to the Company and followed by mail, delivery
shall be deemed given two calendar days after such facsimile is sent.
Section 12. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13. 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 14. Choice of Law; Venue; Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive jurisdiction of the U.S. District Court sitting in the Southern
District of the State of New York sitting in Manhattan in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. Each
party hereby agrees that if another party to this Agreement obtains a judgment
against it in such a proceeding, the party which obtained such judgment may
enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law. Each party waives
its right to a trial by jury.
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Section 15. Severability. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
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.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on the day and year first above written.
Attest: WAVERIDER COMMUNICATIONS, INC.
By:_________________________ By:____________________________
Name: Name:
Title: Title: President
SOVEREIGN PARTNERS, LP
By_____________________________
CANADIAN ADVANTAGE LIMITED
PARTNERSHIP
By_____________________________
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EXHIBIT C
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
No. __
To Purchase ______ Shares of Common Stock of
WAVERIDER COMMUNICATIONS, INC.
THIS CERTIFIES that, for value received, ___________________ (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or prior
to December , 2003 (the "Termination Date") but not thereafter, to subscribe for
and purchase from WAVERIDER COMMUNICATIONS, INC., a Nevada corporation (the
"Company"), ( ) shares of Common Stock (the "Warrant Shares"). The purchase
price of one share of Common Stock (the "Exercise Price") under this Warrant
shall be ______ ($___) Dollars. This Warrant is being issued in connection with
the Common Stock Purchase Agreement dated December , 1998 (the "Agreement")
entered into between the Company, the Investor and other entities not a party to
this Warrant. In the event of any conflict between the terms of this Warrant and
the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof 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).
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3. Exercise of Warrant. Exercise of the purchase rights represented by
this Warrant may be made at any time or times, in whole or in part, before the
close of business on the Termination Date, or such earlier date on which this
Warrant may terminate as provided in paragraph 11 below, by the surrender of
this Warrant and the Notice of Exercise 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 in cash or by cashless exercise as hereinafter provided;
whereupon 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 five Business
Days after the date on which this Warrant shall have been exercised as
aforesaid.
The Investor may pay the Exercise Price in cash or pursuant to a
cashless exercise, as follows:
(a) Cash Exercise. The Investor shall deliver immediately
available funds in an amount equal to the exercise price multiplied by the
number of shares being purchased;
(b) Cashless Exercise. The Investor shall surrender this
Warrant to the Company together with a notice of cashless exercise, in which
event the Company shall issue to the Investor the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be
issued to the Investor.
Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
A = the average of the closing sale prices
of the Common Stock for the five (5) Trading
Days immediately prior to (but not
including) the date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Investor, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date 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.
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 provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
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<PAGE>
6. Closing of Books. The Company will at no time close its shareholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
7. 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 thereof. If, however, at the time of the
surrender of this Warrant and purchase of the shares the holder hereof shall be
entitled to exercise this Warrant, the 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 date on which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by
the surrender of this Warrant and the Assignment 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); provided,
however, that this Warrant may not be resold or otherwise transferred except (i)
in a transaction registered under the Securities Act, or (ii) in a transaction
pursuant to an exemption, if available, from such registration and whereby, if
requested by the Company, an opinion of counsel reasonably satisfactory to the
Company is obtained by the holder of this Warrant to the effect that the
transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, 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 this Warrant or stock certificate.
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 in the state of New York,
then such action may be taken or such right may be exercised on the next
succeeding day not a legal holiday.
11. Effect of Certain Events. If at any time the Company proposes (i)
to sell or otherwise convey all or substantially all of its assets or (ii) to
effect a transaction (by merger or otherwise) in which more than 50% of the
voting power of the Company is disposed of (collectively, a "Sale or Merger
Transaction"), in which the consideration to be received by the Company or its
shareholders consists solely of cash, and in case the Company shall at any time
effect a Sale or Merger Transaction in which the consideration to be received by
the Company or its shareholders consists in part of consideration other than
cash, the holder of this Warrant shall have the right thereafter to purchase, by
exercise of this Warrant and payment of the aggregate Exercise Price in effect
immediately prior to such action, the kind and amount of shares and other
securities and property which it would have owned or have been entitled to
receive after the happening of such transaction had this Warrant been exercised
immediately prior thereto.
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<PAGE>
12. Adjustments of Exercise Price and Number of Warrant Shares. 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) declare or 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,
(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, 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. 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.
13. Voluntary Adjustment by the Company. The Company may at its option,
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.
14. 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 after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
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 Common Stock
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 shares of the Company's Common
Stock 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
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the OTC Bulletin Board
or any domestic securities exchange upon which the Common Stock may be listed.
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<PAGE>
16. Miscellaneous.
(a) Issue Date; Choice of Law; Venue; Jurisdiction. The
provisions of this Warrant shall be construed and shall be given effect in all
respects as if it had been issued and delivered by the Company on the date
hereof. This Warrant shall be binding upon any successors or assigns of the
Company. This Warrant will be construed and enforced in accordance with and
governed by the laws of the State of New York, except for matters arising under
the Securities Act, without reference to principles of conflicts of law. The
parties consent to the exclusive jurisdiction of the U.S. District Court sitting
in the Southern District of the State of New York in connection with any dispute
arising under this Warrant and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions. Each party hereby
agrees that if the other party to this Warrant obtains a judgment against it in
such a proceeding, the party which obtained such judgment may enforce same by
summary judgment in the courts of any country having jurisdiction over the party
against whom such judgment was obtained, and each party hereby waives any
defenses available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Warrant irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law. Each party waives its right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered (or
if no exemption from registration exists), will have restrictions upon resale
imposed by state and federal securities laws. Each certificate representing the
Warrant Shares issued to the Holder upon exercise (if not registered or if no
exemption from registration exists) will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated:
WAVERIDER COMMUNICATIONS, INC.
By ______________________________
Name:
Title:
II-82
<PAGE>
NOTICE OF EXERCISE
To: WAVERIDER COMMUNICATIONS, INC.
(1) The undersigned hereby elects to purchase ________ shares of Common Stock of
WAVERIDER COMMUNICATIONS, INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price in full or pursuant to a
cashless exercise, 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
II-83
<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.
II-84
<PAGE>
EXHIBIT D
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
[Date]
Address
Re: Common Stock Purchase Agreement dated December , 1998
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Common Stock Purchase
Agreement by and between the entities (the "Investors") listed on Schedule A,
and WaveRider Communications, Inc., (the "Company"), dated December , 1998 (the
"Purchase Agreement"), which provides for the issuance of Common Stock, and,
certain additional shares and rest shares upon the occurrence of certain events
as set forth thereof (the "Additional Shares" and "Reset Shares"), and warrants
to purchase shares of Common Stock of the Company (the "Warrants", and the
shares of Common Stock issued or issuable pursuant to exercise of the Warrants,
the "Warrant Shares"). All terms used herein have the meanings defined for them
in the Purchase Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Purchase Agreement, the Warrants, the Escrow Agent, and the
Registration Rights Agreement (the "Registration Rights Agreement") between the
Investors, and the Company, dated December , 1998, and the Escrow Agreement
between the Investors, the Company and the Escrow Agent, dated December , 1998
(the "Escrow Agreement", and together with the Purchase Agreement and the
Registration Rights Agreement, the "Agreements"). As counsel, we have made such
legal and factual examinations and inquires as we have deemed advisable or
necessary for the purpose of rendering this opinion. In addition, we have
examined, among other things, originals or copies of such corporate records of
the Company, certificates of public officials and such other documents and
questions of law that we consider necessary or advisable for the purpose of
rendering this opinion. In such examination we have assumed the genuineness of
all signatures on original documents, the authenticity and completeness of all
documents submitted to us as originals, the conformity to original documents of
all copies submitted to us as copies thereof, the legal capacity of natural
persons, and the due execution and delivery of all documents (except as to due
execution and delivery by the Company) where due execution and delivery are a
prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreements and the
Warrants and the transactions contemplated thereby.
For purposes of this opinion, we have assumed that you have all
requisite power and authority, and have taken any and all necessary corporate
action, to execute and deliver the Agreements, and we are assuming that the
representations and warranties made by the Investor in the Agreements and
pursuant thereto are true and correct.
The opinions hereinafter expressed are subject to the following
qualifications:
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of ________ and has all requisite
power and authority (corporate and other) to carry on its business and to own,
lease and operate its properties and assets as described in the Company's SEC
Documents. To our knowledge, the Company does not own or control any other
business entity. The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the Company owns
or leases property, other than those in which the failure so to qualify would
not have a Material Adverse Effect.
II-85
<PAGE>
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements, and to issue the Common
Stock, the Additional Shares, the Reset Shares, the Warrants, and the Warrant
Shares. The execution and delivery of the Agreements, and the execution,
issuance and delivery of the Common Stock, and the Warrants, by the Company and
the consummation by it of the transactions contemplated thereby 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. Each of the Agreements has been duly executed and delivered, and the
Warrants, and Common Stock have been duly executed, issued and delivered, by the
Company and each of the Agreements, the Common Stock, and the Warrants
constitutes valid and binding obligations of the Company enforceable against the
Company in accordance with their respective 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.
3. The execution, delivery and performance of the Agreements, the
Common Stock, and the Warrants by the Company and the consummation by the
Company of the transactions contemplated thereby, including, without limitation,
the issuance of the Additional Shares, the Reset Shares, the Warrants, the
Warrant Shares, and the Common Stock, do not and will not (i) result in a
violation of the Company's Articles or By-Laws; (ii) to our knowledge, 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, instrument or any "lock-up" or similar provision of any underwriting
or similar agreement to which the Company is a party, except for such conflicts,
defaults, terminations, amendments, accelerations and cancellations as would
not, individually or in the aggregate, have a Material Adverse Effect; or (iii)
result in a violation of any federal or state law, rule or regulation applicable
to the Company or by which any property or asset of the Company is bound or
affected, except for such violations as would not, individually or in the
aggregate, have a Material Adverse Effect. To our knowledge, the Company is not
in violation of any terms of its Articles or Bylaws.
4. The issuance of the Additional Shares, the Reset Shares, the
Warrants, the Warrant Shares, and the Common Stock in accordance with the
Purchase Agreement will be exempt from registration under the Securities Act of
1933 and will be in compliance with ________ state securities laws. When so
issued, subject to sufficient reserved authorized shares of Common Stock, the
Additional Shares, the Additional Shares, the Reset Shares, the Warrants, the
Warrant Shares will be duly and validly issued, fully paid and nonassessable,
and free of any liens, encumbrances and preemptive or similar rights contained
in the Company's Articles of Incorporation (the "Articles") or Bylaws or, to our
knowledge, in any agreement to which the Company is party.
5. To our knowledge, except as disclosed in the SEC Documents, there
are no claims, actions, suits, proceedings or investigations that are pending
against the Company or its properties, or against any officer or director of the
Company in his or her capacity as such, nor has the Company received any written
threat of any such claims, actions, suits, proceedings, or investigations which
are required to be and have not been disclosed in the SEC Documents.
6. To our knowledge, there are no outstanding options, warrants, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any right to
subscribe for or acquire any shares of Common Stock or contracts, commitments,
understanding, or arrangements by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock, except as described in the SEC
Documents. To our knowledge, the Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
7. The Company currently is in full compliance with all of the listing
requirements of the American Stock Exchange and the issuance of the Securities
will not violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are listed.
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<PAGE>
8. As more specifically described in the SEC Documents, the authorized
capital stock of the Company consists of ________ shares of Common Stock, $0.01
par value per share, and ________ shares of Preferred Stock, par value $___ per
share.
This opinion is furnished to the Investors solely for their benefit in
connection with the transactions described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.
Very truly yours,
II-87
<PAGE>
EXHIBIT E
INSTRUCTIONS TO TRANSFER AGENT
WaveRider Communications, Inc.
_______________, 1998
[Name and address of Transfer Agent]
Dear Sirs:
Reference is made to the Common Stock Purchase Agreement and all Exhibits and
Attachments thereto (the "Agreement") dated as of December ___, 1998, between
the entities referred to on Schedule A annexed hereto (the "Investors"), and
WaveRider Communications, Inc. (the "Company"). Pursuant to the Agreement, and
subject to the terms and conditions set forth in the Agreement, the Investors
have agreed to purchase from the Company and the Company has agreed to sell to
the Investors from time to time during the term of the Agreement shares of
Common Stock of the Company, $____ par value per share (the "Common Stock"), and
(ii) the Company has agreed to issue to the Investors warrants to purchase
Common Stock (the "Warrants"). As a condition to the effectiveness of the
Agreement, the Company has agreed to issue to you, as the transfer agent for the
Common Stock (the "Transfer Agent"), these instructions relating to the Common
Stock, and Warrants to be issued to the Investors (or a permitted assignee)
pursuant to the Agreement, upon issuance of the Common Stock, or upon exercise
of the Warrants. All terms used herein and not otherwise defined shall have the
meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK
Pursuant to the Agreement, the Company is required to prepare and file
with the Commission, and maintain the effectiveness of, a registration statement
or registration statements registering the resale of the Common Stock to be
acquired by the Investors (i) under the Agreement and (ii) upon exercise of the
Warrants. The Company will advise the Transfer Agent in writing of the
effectiveness of any such registration statement promptly upon its being
declared effective. The Transfer Agent shall be entitled to rely on such advice
and shall assume that the effectiveness of such registration statement remains
in effect unless the Transfer Agent is otherwise advised in writing by the
Company and shall not be required to independently confirm the continued
effectiveness of such registration statement. In the circumstances set forth in
the following paragraph, the Transfer Agent shall deliver to the Investors
certificates representing Common Stock not bearing the Legend without requiring
further advice or instruction or additional documentation from the Company or
its counsel or the Investors or its counsel or any other party (other than as
described in such paragraphs).
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer
Agent and Company Counsel in writing that such registration statement
is not effective) upon any surrender of one or more certificates which
bear the Legend, to the extent accompanied by (i) a notice requesting
the issuance of new certificates free of the Legend to replace those
surrendered, (ii) a confirmation in writing to the Transfer Agent that
the Investors have sold, pledged or otherwise transferred or agreed to
sell, pledge or otherwise transfer such Common Stock in a bona fide
transaction to a third party that is not an affiliate of the Company;
and (iii) the Investors confirm to the Transfer Agent that it has
complied with the prospectus delivery requirement the Transfer Agent
shall deliver to the Investors the certificates representing the Common
Stock not bearing the Legend, in such names and denominations as the
Investors, shall request. In the event a registration statement is not
filed by the Company, or for any reason the registration statement
which is filed by the Company is not declared effective by the
Securities and Exchange Commission the Investors, or its permitted
assignee, or either of their brokers confirms to the Transfer Agent
that (i) the Investors have held the shares of Common Stock for at
least one year, (ii) counting the shares surrendered as being sold upon
the date the unlegended Certificates would be delivered to the
Investors (or the Trading Day immediately following if such date is not
a Trading Day), the Investors will not have sold more than the greater
of (a) one percent of the total number of outstanding shares of Common
Stock, or (b) the average weekly trading volume of the Common Stock for
the preceding four weeks during the three months ending upon such
delivery date (or the Trading Day immediately following if such date is
not a Trading Day), and (iii) the Investors have complied with the
manner of sale and notice requirements of Rule 144 under the Securities
Act, and the Company shall have furnished an opinion from its
independent counsel to the extent available, authorizing the removal of
the Legend.
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<PAGE>
At any time prior to the effective date of the applicable registration
statement, and provided no exemption from registration exists, upon
issuance of any Common Stock certificate by the Investors, and upon
receipt of authorization from the Company to the Transfer Agent, the
Transfer Agent shall deliver to the Investors certificates representing
Common Stock bearing the Legend without requiring further advice or
instruction or additional documentation from the Company or its counsel
or the Investors or its counsel or any other party (other than as
described in such paragraphs).
Any advice, notice, or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of ( ) ___-____.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any issuance of Common Stock by the Transfer
provided that all of the conditions set forth in Section 1 above have been
satisfied, pursuant to which the Investors acquires Common Stock under the
Agreement, the Transfer Agent shall deliver to the Investors certificates
representing Common Stock (with or without the Legend, as appropriate) as soon
as possible.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investors is an express third party beneficiary of these Irrevocable
Instructions and shall be entitled to rely upon, and enforce, the provisions
thereof.
WAVERIDER COMMUNICATIONS, INC.
By__________________________
AGREED:
By:__________________________
Name:
Title:
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<PAGE>
Exhibit 23.1
Johnson, Holscher & Company, P.C.
Certified Public Accountants
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-3 of WaveRider Communications, Inc. (the "Company") to
register 7,250,000 shares of Common Stock, of our report dated March 20, 1998,
on our audits of the consolidated financial statements of the Company as of
December 31, 1997 and 1996, which report is included in the Company's 1997
annual report on Form 10-KSB, filed with the Securities and Exchange Commission.
We also consent to the reference to our firm under the caption
"Experts".
/s/ Johnson, Holscher & Company, P.C.
January 15, 1999
Member of theAmerican Institute 5975 Greenwood Plaza Boulevard, Suite 140
of Certified Public Accountants Greenwood Village, Colorado 80111
Member of the Private (303) 694-2727
Companies Practice Section Fax (303) 694-3172
Member of the SEC Practice Section
II-90
