Exhibit 2.1
COMMON STOCK PURCHASE AGREEMENT
Dated as of October 6, 2000
by and between
GLOBUS WIRELESS, LTD.
and
TORNEAUX FUND LTD.
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TABLE OF CONTENTS
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ARTICLE I Definitions..........................................................1
Section 1.1 Definitions..................................................1
ARTICLE II Purchase and Sale of Common Stock...................................3
Section 2.1 Purchase and Sale of Stock...................................3
Section 2.2 The Shares...................................................3
Section 2.3 The Warrants.................................................4
Section 2.4 Closing......................................................4
ARTICLE III Representations and Warranties.....................................5
Section 3.1 Representations and Warranties of the Company................5
Section 3.2 Representations, Warranties and Covenants of the
Purchaser...................................................11
ARTICLE IV Covenants of the Company...........................................13
Section 4.1 Securities..................................................13
Section 4.2 Registration and Listing....................................13
Section 4.3 Registration Statement......................................14
Section 4.4 Compliance with Laws........................................14
Section 4.5 Keeping of Records and Books of Account.....................15
Section 4.6 Reporting Requirements......................................15
Section 4.7 Other Agreements............................................15
Section 4.8 Non-public Information......................................15
Section 4.9 No Stop Orders..............................................15
Section 4.10 Amendments to the Registration Statement....................16
Section 4.11 Prospectus Delivery.........................................16
Section 4.12 Legends.....................................................17
ARTICLE V Conditions to Closing, Draw Downs and Warrant Exercise..............17
Section 5.1 Conditions Precedent to the Obligation of the Company
to Close this Agreement.....................................17
Section 5.2 Conditions Precedent to the Obligation of the Purchaser
to Close this Agreement.....................................17
Section 5.3 Conditions Precedent to the Obligation of the Purchaser
to Accept a Draw Down or Exercise the Warrants and
Purchase the Shares.........................................18
ARTICLE VI Draw Down Terms....................................................20
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Section 6.1 Draw Down Terms.............................................20
ARTICLE VII Legends 22
Section 7.1 Legend......................................................22
Section 7.2 No Other Legend or Stock Transfer Restrictions..............23
Section 7.3 Purchaser's Compliance......................................23
ARTICLE VIII Termination......................................................23
Section 8.1 Termination by Mutual Consent...............................23
Section 8.2 Other Termination...........................................23
Section 8.3 Effect of Termination.......................................23
ARTICLE IX Indemnification....................................................24
Section 9.1 General Indemnity...........................................24
Section 9.2 Indemnification Procedures..................................25
ARTICLE X Miscellaneous.......................................................26
Section 10.1 Fees and Expenses...........................................26
Section 10.2 Specific Enforcement, Consent to Jurisdiction...............27
Section 10.3 Entire Agreement; Amendment.................................27
Section 10.4 Notices.....................................................27
Section 10.5 Waivers.....................................................28
Section 10.6 Headings....................................................28
Section 10.7 Successors and Assigns......................................28
Section 10.8 Governing Law...............................................29
Section 10.9 Survival....................................................29
Section 10.10 Counterparts................................................29
Section 10.11 Publicity...................................................29
Section 10.12 Severability................................................29
Section 10.13 Further Assurances..........................................29
Section 10.14 Confidentiality.............................................29
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
October 6, 2000 by and between Globus Wireless, Ltd., a Nevada corporation (the
"Company") and Torneaux Fund Ltd., a limited liability company organized under
the laws of the Commonwealth of The Bahamas (the "Purchaser").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchaser,
from time to time as provided herein, and the Purchaser shall purchase, up to
$18,000,000 worth of shares of the Company's common stock, par value $.001 per
share (the "Common Stock"); and
WHEREAS, such investments shall be made in reliance upon the provisions of
Section 4(2) and ("Section 4(2)") and Regulation D ("Regulation D") of the
United States Securities Act of 1933, as amended and the rules and 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 purchases of Common Stock to be made hereunder
from time to time.
The parties hereto agree as follows:
ARTICLE I
Definitions Section 1.1 Definitions.
(a) "Alternate Market" shall mean the Nasdaq National Market, the
Nasdaq Small Cap 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.
(b) "Commission" shall have the meaning assigned to such term in
Section 3.1(f) hereof.
(c) "Commission Documents" shall have the meaning assigned to such
term in Section 3.1(f) hereof.
(d) "Commission Filings" means the Company's Form 10-KSB and Form
10-KSB/A for the fiscal year ended October 31, 1999, its Form 10-QSBs for the
fiscal quarters ended January 31, 2000, April 30, 2000 and July 31, 2000, its
Form 8-K dated May 1, 2000, its Definitive Proxy Statement dated July 7, 2000
and all other filings made by the Company after the date hereof pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
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(e) "Draw Down" shall have the meaning assigned to such term in
Section 6.1(a) hereof.
(f) "Draw Down Amount" means the actual amount of a Draw Down, with a
minimum amount of $200,000 and a maximum amount of $1,000,000, unless otherwise
increased pursuant to the terms of Section 6.1(a) hereof.
(g) "Draw Down Discount Percentage" means 91% if the Threshold Price
is equal to or greater than $2.00; provided, however, that for every $1.00
increase of the Threshold Price above $2.00 up to $10.00, such draw down
discount percentage shall increase by 0.25%, incrementally, until such draw down
discount percentage shall equal 93%.
(h) "Draw Down Exercise Date" shall have the meaning assigned to such
term in Section 5.3 hereof.
(i) "Draw Down Notice" shall have the meaning assigned to such term in
Section 6.1(i) hereof.
(j) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive trading days on the OTC Bulletin Board or an Alternate Market
starting with the first trading day specified in Draw Down Notice (or such other
period of consecutive trading days as mutually agreed upon by the Company and
the Purchaser).
(k) "DWAC" shall have the meaning assigned to such term in Section
6.1(j) hereof.
(l) "Investment Period" shall have the meaning assigned to such term
in Section 8.1 hereof.
(m) "Material Adverse Effect" shall mean any effect on the business,
results of operations, prospects, properties, assets or financial condition of
the Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement in any
material respect.
(n) "Material Change in Ownership" shall mean that, as of any
particular measurement date, the officers and directors of the Company shall
sell in the aggregate more than 15% of their outstanding Common Stock of the
Company, owned as of the date of this Agreement.
(o) "Permitted Transactions" shall have the meaning assigned to such
term in Section 4.7 hereof.
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(p) "Prospectus" as used in this Agreement means the prospectus in the
form included in the Registration Statement, as supplemented from time to time
pursuant to Rule 424(b) of the Securities Act.
(q) "Registration Statement" shall mean the registration statement on
Form S-1 or SB-2, as applicable, to be filed with the Securities and Exchange
Commission for the registration for resale of the Shares, as such Registration
Statement may be amended from time to time.
(r) "Settlement Date" shall have the meaning assigned to such term in
Section 6.1(d) hereof.
(s) "Shares" shall mean the shares of Common Stock of the Company that
may be purchased hereunder pursuant to a Draw Down and/or upon exercise of the
Warrants (as defined Section 2.3).
(t) "Threshold Price" is the lowest price which the Company will set
in the Draw Down Notice in order to sell Shares during each Draw Down Pricing
Period (without taking into account the Draw Down Discount Percentage), which
Threshold Price may be set in increments of at least $.01.
(u) "VWAP" shall mean the daily volume weighted average price (based
on a trading day from 9:30 a.m. to 4:00 p.m., eastern time) of the Company's
Common Stock on the OTC Bulletin Board or an Alternate Market as reported by
Bloomberg Financial LP using the AQR function.
(v) "Warrants" shall have the meaning assigned to such term in Section
2.3(a) hereof.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company (i) up to 1,978,022 shares of
Common Stock, based on Draw Downs in accordance with Section 6.1, and (ii) the
Warrants in accordance with Section 2.3 hereof. In no event shall the amount of
Common Stock required to be purchased by the Purchaser be less than $200,000 or
exceed $1,000,000 (unless otherwise increased pursuant to the terms of Section
6.1(a) hereof) per Draw Down during any Draw Down Pricing Period.
Section 2.2 The Shares. The Company has authorized and has reserved
and covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders,
1,978,022 shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs and the shares of Common Stock issuable pursuant
to the exercise of Warrants.
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(a) Section 2.3 The Warrants. At each Settlement Date, the Company
shall issue to the Purchaser a warrant (the "Warrant"), to purchase up to 30% of
the number of shares of Common Stock purchased for each Settlement Period (such
percentage, as may be adjusted below, the "Warrant Coverage"), each Warrant
being exercisable for a period of five (5) years commencing on the date of
issuance of such Warrant. Each Warrant shall be exercisable at the exercise
price of 115% of the price per Share paid by the Purchaser during such
Settlement Period. The Warrant Coverage shall be adjusted as follows:
(1) If the Threshold Price is equal to or less than $3.00, the
Warrant Coverage shall be 30%;
(2) If the Threshold Price exceeds $3.00 but is less than or
equal to $5.00, the Warrant Coverage shall be 20%;
(3) If the Threshold Price exceeds $5.00, the Warrant Coverage
shall be 10%;
(4) If by the date of issuance of a Draw Down Notice the Company
has achieved a listing on the Nasdaq National Market or the
Nasdaq SmallCap Market, the Warrant Coverage shall be
(i) 15% if the Threshold Price is equal to or less than
$5.00, or
(ii) 5% if the Threshold Price exceeds $5.00.
No Warrant shall be exercisable if the shares of Common Stock issuable upon any
exercise of such Warrant, when aggregated with all other shares of Common Stock
then owned by the Purchaser, would result in the Purchaser owning more than
9.99% of all of such Common Stock as would be outstanding on such date of
exercise, as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder.
Section 2.4 Closing. In consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Company agrees to issue and sell to the Purchaser and the
Purchaser agrees to purchase from the Company, that number of the Shares to be
issued in connection with each Draw Down. The closing of the execution and
delivery of this Agreement (the "Closing") shall take place at the offices of
Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, NY
10174 at 5:00 p.m. Eastern Time on (i) October 6, 2000, or (ii) such other time
and place or on such date as the Purchaser and the Company may agree upon (the
"Closing Date"). Each party shall deliver all documents, instruments and
writings required to be delivered by such party pursuant to this Agreement at or
prior to the Closing.
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ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Nevada and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Company's most recent Form
10-KSB, including the accompanying financial statements (the "Form 10-KSB"), or
in the Company's most recent Form 10-QSB (the "Form 10-QSB"), or on Schedule
3.1(g) attached hereto. The Company and each such subsidiary 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 except for any jurisdiction in which the
failure to be so qualified shall not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Section 3.1(e). This Agreement has been duly executed and delivered by the
Company. This Agreement constitutes, or when executed and delivered shall
constitute, a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of creditor's rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of October 3, 2000 are set forth on
Schedule 3.1(c) attached hereto. All of the outstanding shares of the Company's
Common Stock have been duly and validly authorized, and are fully paid and
non-assessable. Except as set forth in this Agreement or on Schedule 3.1(c)
attached hereto, as of October 3, 2000, no shares of Common Stock are entitled
to preemptive rights or registration rights and there are no outstanding
options, warrants, scrip, rights to subscribe to, call or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company. Furthermore, except as set forth in this
Agreement, as of the date hereof, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities, as of the date hereof,
the Company is not a party to any agreement granting registration rights to any
person with respect to any of its equity or debt securities. The Company is not
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a party to, and it has no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company. The offer and sale
of all capital stock, convertible securities, rights, warrants, or options of
the Company issued prior to the Closing complied with all applicable federal and
state securities laws, and no stockholder has a right of rescission or damages
with respect thereto which would have a Material Adverse Effect. The Company has
furnished or made available to the Purchaser true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Certificate"), and the Company's Bylaws as in effect on the date hereof (the
"Bylaws").
(d) Issuance of Shares. The sale and issuance of the Shares in
accordance with the terms and on the basis of the representations and warranties
set forth in this Agreement shall be exempt from the registration requirements
of the Securities Act in reliance upon Regulation D or Regulation S promulgated
thereunder. The Shares have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the terms hereof, the
Shares shall be validly issued and outstanding, fully paid and non-assessable,
and the Purchaser shall be entitled to all rights accorded to a holder of Common
Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein does not (i) violate any provision of the Company's
Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries are bound or affected, except, in all
cases, for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. 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, or issue and sell the Shares in accordance with the terms hereof
(other than any filings which may be required to be made by the Company with the
Commission subsequent to the Closing, and, any registration statement which may
be filed pursuant hereto); provided that, for purpose of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, and, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Securities and Exchange
Commission (the "Commission") pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (all of the foregoing including filings incorporated by reference
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therein being referred to herein as the "Commission Documents"). The Company has
delivered or made available to the Purchaser true and complete copies of the
Commission Documents filed with the Commission since October 31, 1999 and prior
to the Closing Date. The Company has not provided to the Purchaser any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. The
Form 10-KSB for the year ended October 31, 1999 complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such document, and, as of its date,
such Form 10-KSB did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Commission Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g) attached
hereto set forth each subsidiary of the Company as of the date hereof, showing
the jurisdiction of its incorporation or organization and showing the percentage
of each person's ownership of the outstanding stock or other interests of such
subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any
corporation or other entity of which at least a majority of the securities or
other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries. Except as set forth in the Commission Documents or
the Commission Filings, none of such subsidiaries is a "significant subsidiary"
as defined in Regulation S-X.
(h) No Material Adverse Change. Since September 14, 2000, the Company
has not experienced or suffered any Material Adverse Effect, except continued
losses from operations.
(i) No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet of the
Company or any subsidiary (including the notes thereto) in conformity with GAAP
and are not disclosed in the Commission Documents or Commission Filings, other
than those incurred in the ordinary course of the Company's or its subsidiaries'
respective businesses since September 14, 2000 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.
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(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect.
(k) Indebtedness. The Commission Documents or the Commission Filings
set forth as of July 31, 2000 all outstanding secured and unsecured Indebtedness
of the Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $100,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $100,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has good
and marketable title to all of its real and personal property reflected in the
Commission Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances. All leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect in all
material respects.
(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents or the
Commission Filings, there is no action, suit, claim, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets and
which, if adversely determined, is reasonably likely to result in a Material
Adverse Effect.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or the Commission
Filings or such that do not cause a Material Adverse Effect. The Company and
each of its subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it, except for such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, the failure to possess which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
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(o) Certain Fees. No brokers, finders or financial advisory fees or
commissions shall be payable by the Company or any subsidiary with respect to
the transactions contemplated by this Agreement.
(p) Disclosure. Neither this Agreement or the Schedules hereto nor any
other documents, certificates or instruments furnished to the Purchaser by or on
behalf of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
(q) Operation of Business. The Company or one of the subsidiaries owns
or possesses all patents, trademarks, domain names (whether or not registered)
and any patentable improvements or copyrightable derivative works thereof,
websites and intellectual property rights relating thereto, service marks, trade
names, copyrights, licenses and authorizations as set forth in the Commission
Documents or the Commission Filings and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without any conflict with the rights of others, except to the extent set forth
in the Commission Documents or that a Material Adverse Effect could not
reasonably be expected to result from such conflict.
(r) Environmental Compliance. The Company and each of its subsidiaries
have obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. "Environmental Laws" shall mean all applicable laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature.
Except for such instances as would not individually or in the aggregate have a
Material Adverse Effect, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its subsidiaries that violate or could violate any
Environmental Law after the Closing or that could give rise to any environmental
liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation (i) under any Environmental Law, or
(ii) based on or related to the manufacture, processing, distribution, use,
treatment, storage (including without limitation underground storage tanks),
disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance.
(s) Material Agreements. Neither the Company nor any subsidiary is a
party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to a Commission Filing (collectively,
"Material Agreements") if the Company or any subsidiary were registering
securities under the Securities Act immediately prior to the effectiveness of
this Agreement. The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the foregoing agreements, have received no notice of default and, are not
in default under any Material Agreement now in effect.
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(t) Transactions with Affiliates. Except as set forth in the
Commission Documents or the Commission Filings, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company, any
subsidiary or any of their respective customers (excluding agreements related to
the purchase or lease of the Company's products) or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person who would be covered by Item
404(a) of Regulation S-K or any corporation or other entity controlled by such
officer, employee, consultant, director or person.
(u) Securities Act of 1933. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder. The Company has not
distributed and, prior to the completion of the sale of the Shares to the
Purchaser, shall not distribute any offering material in connection with the
offer and sale of the Shares other than the Registration Statement, the
Prospectus or other materials, if any, permitted by the Securities Act.
(v) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers or
sales of any security or solicited any offers to buy any security, other than
pursuant to this Agreement, under circumstances that would require registration
of the Common Stock under the Securities Act. Neither the Company nor any of its
affiliates nor any person acting on its behalf has conducted or shall conduct
any general solicitation (as that term is defined in Rule 502(c) of Regulation
D) or general advertising with respect to any of the Shares, the Warrants or any
of the shares of Common Stock issuable pursuant to exercise of the Warrants.
(w) Employees. As of the date hereof, neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth in the Commission Documents or the
Commission Filings. Each of the Company and its subsidiaries requires its
officers, employees and certain consultants to enter into agreements regarding
proprietary information, noncompetition, nonsolicitation, confidentiality, or
other similar agreements containing restrictive covenants. As of the date
hereof, except as disclosed in Schedule 3.1(w), no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or
any subsidiary.
(x) Use of Proceeds. The proceeds from the sale of the Shares shall be
used by the Company and its subsidiaries for the purposes set forth in the
Prospectus under "Use of Proceeds."
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(y) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
shall not be, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
(z) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
subsidiaries which is or would have a Material Adverse Effect. The execution and
delivery of this Agreement and the issue and sale of the Shares shall not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of
the Purchaser, or any person or entity that owns a beneficial interest in any of
the Purchaser, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 3.1(y), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(aa) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
Section 3.2 Representations, Warranties and Covenants of the
Purchaser. The Purchaser hereby makes the following representations, warranties
and covenants to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of The Bahamas.
(b) Authorization and Power. The Purchaser has the requisite corporate
power and authority to enter into and perform this Agreement and to purchase the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Purchaser. This Agreement constitutes a valid and
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binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and shall not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose any lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.
(e) Acquisition for Investment. The Purchaser is purchasing the Shares
solely for its own account for the purpose of investment and not with a view to
or for sale in connection with a distribution. The Purchaser has no present
intention to sell the Shares, nor a present arrangement (whether or not legally
binding) to effect any distribution of the Shares to or through any person or
entity; provided, however, that by making the representations herein, the
Purchaser does 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.
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(f) Sophisticated Investor. The Purchaser 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 the Purchaser has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Purchaser
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.
(g) General. The Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from the registration
requirement of federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Purchaser to acquire the Shares.
(h) Ten Percent Limitation. On each Settlement Date, the number of
Shares then to be purchased by the Purchaser shall not exceed the number of such
shares that, when aggregated with all other shares of Common Stock then owned by
the Purchaser beneficially or deemed beneficially owned by the Purchaser, would
result in the Purchaser owning more than 9.9% of all of such Common Stock as
would be outstanding on such Settlement Date, as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 3.2(h), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder is greater on a Settlement Date than on
the date upon which the Draw Down Notice associated with such Settlement Date is
given, the amount of Common Stock outstanding on such Settlement Date shall
govern for purposes of determining whether the Purchaser, when aggregating all
purchases of Common Stock made pursuant to this Agreement would own more than
9.9% of the Common Stock following such Settlement Date.
ARTICLE IV
Covenants of the Company
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees (as defined
herein).
Section 4.1 Securities. The Company shall notify the Commission and
the OTC Bulletin Board or an Alternate Market, if applicable, in accordance with
their rules and regulations, of the transactions contemplated by this Agreement,
and shall take all other necessary actions and proceedings as may be required
and permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares to the Purchaser and the resale of the Shares by the
Purchaser.
Section 4.2 Registration and Listing. The Company shall take all
action necessary to cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, shall comply in all respects with
its reporting and filing obligations under the Exchange Act, and shall not take
any action or file any document (whether or not permitted by the Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
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or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company shall
take all action necessary to continue the listing or trading of its Common Stock
and the listing of the Shares purchased by Purchaser hereunder on the OTC
Bulletin Board or an Alternate Market, if applicable, and shall comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the OTC Bulletin Board or an Alternate Market.
Section 4.3 Registration Statement.
(a) The Company shall cause the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit E (the "Registration Rights
Agreement") to remain in full force and effect and the comply in all respects
with terms thereof.
(b) On or before the 60th day after the Closing Date (the "Filing
Date"), the Company shall cause to be filed with the Commission a Registration
Statement on Form S-1 (or any other comparable form) to register for resale the
Shares (pursuant to a Draw Down or the exercise of any Warrant) to be purchased
by the Purchaser pursuant to this Agreement. The Company shall use its
reasonable best efforts to cause the Registration Statement to be declared
effective under the Securities Act (including filing with the Commission a
request for acceleration of effectiveness in accordance with Rule 12dl-2
promulgated under the Exchange Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not be
subject to further review) within 120 days after the Filing Date, but in no
event later than 150 days after the Filing Date.
(c) Before the Purchaser shall be obligated to accept any Draw Down
request from the Company, the Company shall have caused the maximum number of
shares of Common Stock to be registered to cover the Shares to be issued in
connection with such Draw Down request (including any Warrants to be exercised
in connection therewith).
(d) The Company shall file a prospectus supplement to its then current
Registration Statement on the first business day immediately following the end
of each Settlement Period, and will deliver a prospectus and a prospectus
supplement to the Purchaser on the corresponding Settlement Date.
Section 4.4 Compliance with Laws.
(a) The Company shall comply, and cause each subsidiary to comply,
with all applicable laws, rules, regulations and orders, noncompliance with
which could reasonably be expected to have a Material Adverse Effect.
(b) At no time will the Purchaser be obligated to purchase any shares
of the Company's Common Stock which would result in the issuance under this
Agreement of Shares representing more than nineteen and ninety-nine hundredths
percent (19.99%) of the issued and outstanding shares of the Company's Common
Stock on the date hereof.
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Section 4.5 Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries shall be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.6 Reporting Requirements. Upon written request, the Company
shall furnish the following to the Purchaser so long as such Purchaser shall be
obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as soon
as available, and in any event within 45 days after the end of each of the first
three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-KSB as soon as
available, and in any event within 90 days after the end of each fiscal year of
the Company.
Section 4.7 Other Agreements. The Company is restricted from entering
into any other financing agreement during the Investment Period (an "Other
Financing"), the primary purpose of which would be to obtain equity financing
for the Company, without the prior written consent of the Purchaser. If the
Purchaser consents to the Company entering into an Other Financing (a "Permitted
Transaction"), the Purchaser shall have the option (the "Purchase Option"),
which option shall be exercised within five (5) calendar days of the date the
Purchaser gives such consent, (A) if the Other Financing occurs during a Draw
Down Pricing Period, to (i) purchase up to the same number of shares of Common
Stock or securities convertible, exercisable or exchangeable into Common Stock
("Financing Securities") issued or to be issued in the Other Financing at the
price and on such terms as the Company would issue Shares to the Purchaser
during such Draw Down Pricing Period, (ii) purchase up to the same number of
shares of Common Stock or Financing Securities issued or to be issued in the
Other Financing at the price and on such terms of the Other Financing, or (iii)
elect not to purchase any Shares during such Draw Down Pricing Period, or (B) if
the Other Financing occurs before the first Draw Down Pricing Period or between
Draw Down Pricing Periods, to (i) purchase up to the same number of shares of
Common Stock or Financing Securities issued or to be issued in the Other
Financing at the price and on such terms of the Other Financing, or (ii) consent
but elect not to participate in such Other Financing. If the Purchaser does not
exercise its Purchase Option in writing before 5 p.m., eastern time, on such
fifth (5th) calendar day following the Purchaser's consent to the applicable
Other Financing, the Company shall have the right to close such Other Financing
on the scheduled closing date with a third party; provided that all of the
financial terms and conditions of such closing are the same as those provided to
the Purchaser prior to the Purchaser giving its consent to such Other Financing.
Section 4.8 Non-Public Information. Neither the Company nor any of its
directors, officers or agents shall disclose any material non-public information
about the Company to the Purchaser.
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Section 4.9 No Stop Orders. The Company shall advise the Purchaser
promptly and, if requested by the Purchaser, shall confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company shall make commercially reasonable efforts
to obtain the withdrawal of such order at the earliest possible time.
Section 4.10 Amendments to the Registration Statement. The Company
shall not (i) file any amendment to the Registration Statement or make any
amendment or supplement to the Prospectus of which the Purchaser shall not
previously have been advised or to which the Purchaser shall reasonably object
after being so advised or (ii) so long as, in the reasonable opinion of counsel
for the Purchaser, a Prospectus is required to be delivered in connection with
sales by any Purchaser or dealer, file any information, documents or reports
pursuant to the Exchange Act without delivering a copy of such information,
documents or reports to the Purchaser promptly following such filing.
Section 4.11 Prospectus Delivery. Prior to any Settlement Date, the
Company will deliver to the Purchaser, without charge, in such quantities as
reasonably requested by the Purchaser, copies of each form of Prospectus. As
soon after the Registration Statement has been declared effective by the
Commission and thereafter from time to time for such period as in the opinion of
counsel for the Purchaser a prospectus is required by the Securities Act to be
delivered in connection with sales by the Purchaser, the Company shall
expeditiously deliver to the Purchaser, without charge, as many copies of the
Prospectus (and of any amendment or supplement thereto) as the Purchaser may
reasonably request. The Company consents to the use of the Prospectus (and of
any amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Purchaser is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company shall forthwith prepare and, subject to the
provisions of Section 4.10 above, file with the Commission an appropriate
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supplement oramendment thereto, and shall expeditiously furnish to the Purchaser
a reasonable number of copies thereof. The Company shall file a prospectus
supplement to its current Registration Statement on the first business day
immediately following the end of each Settlement Period, and the Company shall
deliver to the Purchaser an appropriate Prospectus and prospectus supplement on
each Settlement Date.
Section 4.12 Legends. The certificates evidencing the Shares and the
shares of Common Stock issuable upon exercise of the Warrants shall be free of
legends, except as provided for in Article VII.
Section 4.13 No Material Adverse Effect or Material Change in
Ownership; Notice. No Material Adverse Effect or Material Change in Ownership
shall occur during the Investment Period. The Company shall immediately notify
the Purchaser that (i) a Material Adverse Effect or Material Change in Ownership
has occurred or (ii) the Company has entered into an Other Financing (as defined
in Section 4.7).
ARTICLE V
Conditions to Closing and Draw Downs
Section 5.1 Conditions Precedent to the Obligation of the Company to
Close this Agreement. The obligation hereunder of the Company to enter into this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) No Injunction. No statute, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(b) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close this Agreement. The obligation hereunder of the Purchaser to enter this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Purchaser's
sole benefit and may be waived by the Purchaser at any time in its sole
discretion.
(a) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
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(b) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(c) Registration Rights Agreement. At or prior to the Closing, the
Company shall have executed and delivered the Registration Rights Agreement to
the Purchaser.
(d) Opinion of Counsel, etc. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of Closing, in the
form of Exhibit A hereto, and such other certificates and documents as the
Purchaser or its counsel shall reasonably require incident to the Closing.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction or waiver, at or before the date of each Draw Down
request (the "Draw Down Exercise Date"), of each of the conditions set forth
below. The conditions are for the Purchaser's sole benefit and may be waived by
the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Draw Down Exercise
Date as though made at that time except for representations and warranties that
speak as of a particular date.
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission
prior to the initial Draw Down Exercise Date, and such Registration Statement
shall remain effective on each Settlement Date, and shall be amended or
supplemented, as required, to disclose the sale of the Shares at least one (1)
trading day prior to each Settlement Date.
(c) No Suspension. Trading in the Company's Common Stock shall not
have been suspended by the Commission or the OTC Bulletin Board or an Alternate
Market (except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to each Draw Down
request), and, at any time prior to such request, trading in securities
generally as reported on the OTC Bulletin Board or an Alternate Market shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by the American Stock
Exchange, or on the New York Stock Exchange, nor shall a banking moratorium have
been declared either by the United States or New York State authorities, nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in each
case, in the judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Shares. The Common Stock shall not have been delisted from the OTC
Bulletin Board or an Alternate Market.
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(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing. The Company shall have issued
transfer agent instructions to its transfer agent, and an original copy of the
transfer agent instructions shall have been signed by the transfer agent as
acknowledged and agreed.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(g) Material Adverse Effect; Material Change in Ownership. No Material
Adverse Effect and no Material Change in Ownership shall have occurred.
(h) 40,000 Share Requirement. The Purchaser will not be required to
accept a Draw Down Notice if the 10-day average trading volume (using the HP
function of Bloomberg Financial LP) of the Common Stock of the Company for the
10 consecutive trading days preceding the first trading day of the Draw Down
Pricing Period set forth in such Draw Down Notice, does not exceed 40,000 shares
per day.
(i) No Knowledge. The Company shall have no knowledge of any event
more likely than not to have the effect of causing the Registration Statement to
be suspended or otherwise ineffective (which event is more likely than not to
occur within the 25 trading days following the trading day on which the Draw
Down Notice is deemed delivered.)
(j) Limitation on Obligation to Purchase. At no time will the
Purchaser be obligated to purchase any Shares which would result in the issuance
under this Agreement of Shares representing more than nineteen and nine-tenths
percent (19.9%) of the issued and outstanding shares of the Company's Common
Stock on the Closing Date, unless approved by the stockholders of the Company if
required by law or stock market or exchange regulation.
(k) Other. On each Settlement Date, the Purchaser shall have received
a certificate in substantially the form and substance of Exhibit B hereto,
executed by an executive officer of the Company to the effect that all the
conditions to such Settlement Date shall have been satisfied as at the date of
each such certificate.
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ARTICLE VI
Draw Down Terms
Section 6.1 Draw Down Terms. Subject to the satisfaction of the conditions set
forth in this Agreement, the parties agree as follows:
(a) During the Investment Period, the Company, may, in its sole
discretion, issue up to twelve (12) Draw Down Notices, each with respect to a
draw down (a "Draw Down"), which Draw Down the Purchaser shall be obligated to
accept, of a Draw Down Amount equal to $200,000 if the Threshold Price is equal
to or greater than $2.00, and an additional $100,000 for every $1.00 increase of
the Threshold Price above $2.00. The maximum Threshold Price shall be $10.00 for
a maximum Draw Down Amount of up to $1,000,000. The minimum Threshold Price
shall be $2.00 (unless otherwise agreed upon by both parties) for a minimum Draw
Down Amount of $200,000. Prior to issuing any Draw Down Notice, the Company
shall have Shares representing at least the Draw Down Amount registered under
the Registration Statement.
(b) The number of Shares to be issued in connection with each Draw
Down shall be equal to the sum of the quotients (for each trading day of the
Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/20th (or such other fraction based upon the agreed upon Draw
Down Pricing Period) of the Draw Down Amount divided by (y) (A) the applicable
Draw Down Discount Percentage multiplied by (B) the VWAP for such day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. Each Draw Down Pricing Period shall consist of two (2) periods of ten
(10) consecutive trading days beginning on the date set forth in the Draw Down
Notice as the Draw Down Pricing Period start date (each, a "Settlement Period").
(d) The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of each
Settlement Period (the "Settlement Date").
(e) There shall be a minimum of five (5) trading days (or such other
number of trading days mutually agreed upon by the Purchaser and the Company)
between Draw Downs. (f) There shall be a maximum of twelve (12) Draw Downs
during the term of this Agreement.
(g) Each Draw Down shall expire on the last trading day of each Draw
Down Pricing Period.
(h) For each trading day during the Draw Down Pricing Period that the
VWAP is at or above the Threshold Price, 1/20th (or such other fraction based
upon the agreed upon Draw Down Pricing Period) of the Draw Down Amount shall be
allocated to purchase Shares at a price equal to the product of (w) the Draw
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Down Discount Percentage multiplied by (x) the VWAP for such day. If the VWAP on
a given trading day is less than the Threshold Price, then the amount of the
Draw Down for the relevant Draw Down Pricing Period shall be reduced by 1/20th
(or such other fraction based upon the agreed upon Draw Down Pricing Period). At
no time shall the Threshold Price be set below $2.00, unless otherwise agreed
upon by both parties. If in any trading day, (y) there are no reported trades of
the Company's Common Stock, or (z) trading in the Company's Common Stock is
suspended for any reason for more than three (3) hours, the price of the Common
Stock shall be deemed to be below the Threshold Price for that trading day and
the Draw Down Amount for the relevant Draw Down Pricing Period will be reduced
by 1/20th.
(i) The Company must inform the Purchaser via facsimile transmission
as to the Draw Down Amount the Company wishes to exercise before commencement of
trading on the first trading day of the Draw Down Pricing Period (the "Draw Down
Notice"), substantially in the form attached hereto as Exhibit C. In addition to
the Draw Down Amount, the Company shall set the Threshold Price and shall
designate the first trading day of the Draw Down Pricing Period with each Draw
Down Notice.
(j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser during the Draw Down Pricing Period to the Purchaser
or its designees via the Purchaser's prime broker account through its Deposit
Withdrawal Agent Commission System ("DWAC"), and upon receipt of the Shares, the
Purchaser shall cause payment therefor to be made to the Company's designated
account by wire transfer of immediately available funds; provided that the
Shares are received by the Purchaser no later than 1:00 p.m., eastern time, or
next day available funds if the Shares are received thereafter.
(k) If on the Settlement Date, the Company fails to deliver the Shares
to be purchased by the Purchaser, and such failure continues for ten (10)
trading days, the Company shall pay, in cash or restricted shares of Common
Stock (subject to the Company's compliance with applicable securities laws), at
the option of the Purchaser, as liquidated damages and not as a penalty, to the
Purchaser an amount equal to two percent (2%) of the Draw Down Amount for the
initial thirty (30) days and each additional thirty (30) day period thereafter
until such failure has been cured, which shall be pro rated for such periods
less than thirty (30) days (the "Periodic Amount"). Cash payments to be made
pursuant to this Section 6.1(k) shall be due and payable immediately upon demand
in immediately available cash funds. Certificates evidencing the restricted
shares of Common Stock shall be delivered immediately upon demand. The parties
agree that the Periodic Amount represents a reasonable estimate on the part of
the parties, as of the date of this Agreement, of the amount of damages that may
be incurred by the Purchaser if the Company fails to deliver the Shares on the
Settlement Date. If the Purchaser elects to receive shares of Common Stock
instead of cash, the Purchaser shall have the right to demand registration once
within twelve (12) months of the date of issuance of such shares of Common Stock
and piggyback registration rights if the Company files a separate registration
statement.
(l) Prior to issuing a Draw Down Notice, the Company shall place in
escrow, with an entity designated by the Purchaser (the "Escrow Agent"), such
number of shares of Common Stock as shall equal the maximum number of Shares
which the Purchaser could purchase during the Draw Down Pricing Period. The
shares of Common Stock subject to the escrow shall be released by the Escrow
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Agent to the Purchaser only in the event that the Company fails to deliver the
Shares on the relevant Settlement Date. The Purchaser's obligation to purchase
the Shares to be issued on the Settlement Date shall be contingent upon the
fulfillment by the Company of the escrow requirements contained in this Section
6.1(l). The Purchaser may, at its sole discretion, waive the escrow requirements
contained in this Section 6.1(l) at any time prior to the relevant Settlement
Date.
ARTICLE VII
Legends
Section 7.1 Legend. Unless otherwise provided below, each certificate
representing the Shares and the shares of Common Stock issuable upon exercise of
the Warrants shall be stamped or otherwise imprinted with a legend substantially
in the following form (the "Legend"):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR GLOBUS
WIRELESS, LTD. (THE "COMPANY") SHALL HAVE RECEIVED AN
OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
As soon as practicable after the execution and delivery hereof, the Company
shall issue to the transfer agent instructions in substantially the form of
Exhibit D hereto. Such instructions shall be irrevocable by the Company from and
after the date thereof or from and after the issuance thereof. It is the intent
and purpose of such instructions, as provided therein, to require the transfer
agent to issue to the Purchaser, at the Purchaser's option, via DWAC or in the
form of certificates evidencing the Shares incident to a Draw Down and issued on
a Settlement Date, free of the Legend, 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 Purchaser; provided, that (a) the Registration
Statement shall then be effective, (b) the Purchaser confirms to the transfer
agent and the Company that it has or intends to sell such Shares to a third
party that is not an affiliate of the Purchaser or the Company and the Purchaser
agrees to redeliver the certificate representing such Shares to the transfer
agent to add the Legend in the event the Shares are not sold, and (c) if
reasonably requested by the transfer agent or the Company, the Purchaser
confirms to the transfer agent and the Company that the Purchaser has complied
with the prospectus delivery requirement under the Securities Act. At any time
after the date the Registration Statement has been declared effective by the
Commission, upon surrender of one or more certificates evidencing Common Stock
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that bear the Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the Legend to replace those surrendered,
the transfer agent shall reissue such shares of common stock via DWAC or free of
the Legend. If the transfer agent fails to deliver the Shares on the Settlement
Date, then the Company shall pay liquidated damages to the Purchaser in the
amount of two percent (2%) of the purchase price of the Shares to be delivered
on such Settlement Date.
Section 7.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 7.1 has been or shall be placed on the
share certificates representing the Shares and the shares of Common Stock
issuable upon exercise of the Warrants 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 VII.
Section 7.3 Purchaser's Compliance. Nothing in this Article VII shall
affect in any way the Purchaser's obligations under any agreement to comply with
all applicable securities laws upon resale of the Shares and the shares of
Common Stock issuable upon exercise of the Warrants.
ARTICLE VIII
Termination
Section 8.1 Termination by Mutual Consent. The term of this Agreement
shall be the earlier of (i) fifteen (15) months from the date on which the
Commission declares the Registration Statement effective (the "Investment
Period") and (ii) the date that all of the Shares registered under the
Registration Statement have been issued and sold. This Agreement may be
terminated at any time by mutual consent of the parties.
Section 8.2 Other Termination. The Purchaser may terminate this
Agreement upon one (1) day's notice (v) if an event resulting in a Material
Adverse Effect has occurred, (w) the Registration Statement is not declared
effective within 150 days following the Filing Date, (x) there shall occur any
stop order or suspension of the effectiveness of the Registration Statement for
an aggregate of five (5) trading days during the Investment Period, for any
reason other than deferrals or suspension during a blackout period as a result
of corporate developments subsequent to the Closing Date that would require such
Registration Statement to be amended to reflect such event in order to maintain
its compliance with the disclosure requirements of the Securities Act, or (y)
the Company shall at any time fail to comply with the requirements of Section
4.2, 4.3 or 4.4 hereof. This Agreement shall terminate immediately if (i) the
Company breaches Section 4.7 hereof, (ii) a Material Change in Ownership shall
occur or (iii) the Purchaser shall fail to comply with Section 3.2(h) (each, a
"Terminating Event"); provided, however, that if a Terminating Event occurs
during a Draw Down Pricing Period, this Agreement shall terminate on the final
Settlement Date for such Draw Down Pricing Period.
Section 8.3 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
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terminated without further action by either party. If this Agreement is
terminated as provided in Section 8.1 or 8.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 10.9.
Nothing in this Section 8.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE IX
Indemnification
Section 9.1 General Indemnity.
(a) Indemnification by the Company. The Company shall indemnify and
hold harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against any losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
reasonable attorney's fees) to which the Purchaser and each person, if any, who
controls the Purchaser may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or the Prospectus
relating to the shares being sold to the Purchaser, or any amendment or
supplement to it, or (ii) the omission or alleged omission to state in that
Registration Statement or any document incorporated by reference in the
Registration Statement, a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
Company shall not be liable under this Section 9.1(a) to the extent that a court
of competent jurisdiction shall have determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or such
person through its bad faith or willful misconduct; provided, however, that the
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
The Company shall reimburse the Purchaser and each such controlling
person promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or the controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding, except that the Company shall not be liable to the extent a claim or
action which results in a loss, claim, damage, liability or expense arises out
of, or is based upon, an untrue statement, alleged untrue statement, omission or
alleged omission, included in the Registration Statement or any Prospectus in
reliance upon, and in conformity with, written information furnished by the
Purchaser to the Company for inclusion in the Registration Statement or
Prospectus.
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(b) Indemnification by the Purchaser. The Purchaser shall indemnify
and hold harmless the Company, each of its directors and officers, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
reasonable attorneys fees) to which the Company and any director or officer of
the Company and each person, if any, who controls the Company may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out of
or are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus or (ii) the omission or alleged
omission to state in the Registration Statement or any Prospectus a material
fact required to be stated therein or necessary to make the statements therein
not misleading, to the extent, but only to the extent, the untrue statement,
alleged untrue statement, omission or alleged omission was made in reliance
upon, and in conformity with, written information furnished by the Purchaser to
the Company for inclusion in the Registration Statement or Prospectus, and the
Purchaser shall reimburse the Company and each such director, officer or
controlling person promptly upon demand for any legal or other costs or expenses
reasonably incurred by the Company or the other person in investigating,
defending against, or preparing to defend against any such claim, action, suit
or proceeding.
Section 9.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 9.1, the
person shall notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party shall not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 9.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party shall be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but shall not be
required to) assume the defense against the claim, action, suit or proceeding
with counsel satisfactory to it. After an indemnifying party notifies an
indemnified party that the indemnifying party wishes to assume the defense of a
claim, action, suit or proceeding the indemnifying party shall not be liable for
any legal or other expenses incurred by the indemnified party in connection with
the defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be separately represented in connection with a claim, action,
suit or proceeding the indemnifying party shall pay the reasonable fees and
expenses of one separate counsel for the indemnified parties. Each indemnified
party, as a condition to receiving indemnification as provided in Paragraph (a)
or (b) or Section 9.1, shall cooperate in all reasonable respects with the
indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party shall be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.
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<PAGE>
If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
9.1, each indemnifying party shall, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
ARTICLE X
Miscellaneous
Section 10.1 Fees and Expenses.
(a) Except as set forth in Article IX, the Company shall pay (i) all
reasonable fees and expenses related to the transactions contemplated by this
Agreement; provided, that the Company shall pay, at the Closing, all reasonable
attorneys fees and expenses (exclusive of disbursements and out-of-pocket
expenses and reasonably itemized) incurred by the Purchaser up to $30,000 in
connection with the preparation, negotiation, execution and delivery of this
Agreement, and (ii) all reasonable fees and expenses incurred by the Purchaser
in connection with any amendments, modifications or waivers of this Agreement or
incurred in connection with the enforcement of this Agreement, including,
without limitation, all reasonable attorneys fees and expenses.
(b) If on the seven (7) month anniversary of the commencement of the
Investment Period the Company has not requested Draw Down Amounts in an
aggregate of $800,000, the Company shall, at its option, either (i) pay the
Purchaser a fee equal to $50,000 in cash, or (ii) issue warrants to purchase
50,000 shares of the Company's Common Stock at an exercise price of 100% of the
VWAP of the Common Stock on the date of the Closing. If the Company elects to
issue warrants instead of cash, the Company shall register the shares of Common
Stock issuable upon exercise of such warrants on the next registration statement
the Company files with the Commission.
Section 10.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
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entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 10.2 shall affect or limit any right to serve process in any other
manner permitted by law.
Section 10.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 10.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: Globus Wireless, Ltd.
1955 Moss Court
Kelowna, British Columbia
Canada V1Y 9L3
Tel. No.: (250) 860-3130
Fax No.: (250) 860-3110
Attention: Nick Wizinsky, Chief Financial Officer
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With copies to: Sichenzia, Ross & Friedman LLP
135 West 50th Street, 20th Floor
New York, New York 10024
Tel. No.: (212) 664-1200
Fax No.: (212) 664-7329
Attention: Gregory Sichenzia
If to the Purchaser: Torneaux Fund Ltd.
c/o Fortis Fund Services (Bahamas) Limited
Montegue Sterling Centre
East Bay Street
P.O. Box SS-6238
Nassau, Bahamas
Tel. No.: (242) 394-2700
Fax No.: (242) 394-8348
Attention: Karen Zyp
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days prior written notice of such changed address to
the other party hereto.
Section 10.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 10.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 10.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior written consent of the Company, which
consent shall not be unreasonably withheld. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. After
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 10.9 Survival. The representations and warranties of the
Company and the Purchaser contained in Article III and the covenants contained
in Article IV shall survive the execution and delivery hereof and the Closing
until the termination of this Agreement, and the agreements and covenants set
forth in Article IX of this Agreement shall survive the execution and delivery
hereof and the Closing hereunder. Section 10.14 shall survive the termination of
this Agreement.
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Section 10.10 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five (5) days of the execution and delivery hereof.
Section 10.11 Publicity. Except as required by applicable law, the
Company shall not issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement without the prior consent of the
Purchaser, which consent shall not be unreasonably withheld.
Section 10.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 10.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
Section 10.14 Confidentiality. Purchaser agrees to maintain the
confidentiality of all information about the Company received from any officer,
employee or agent of the Company, until such time as that confidential
information is released to the public generally other than as a result of any
disclosure by Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
GLOBUS WIRELESS, LTD.
By: /s/
-----------------------------
Nick G. Wizinsky
Chief Financial Officer
TORNEAUX FUND LTD.
By: /s/
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Nevada. The Company has the
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted. The Company and each such
subsidiary 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.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Purchase Agreement and to issue and
sell the Common Stock, the Warrants and the Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares"). The execution, delivery and performance
of the Purchase Agreement by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required. The Purchase
Agreement has been duly executed and delivered, and the Common Stock and the
Warrants have been duly executed, issued and delivered by the Company and the
Purchase Agreement constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms.
The Common Stock is not subject to preemptive rights under the Company's
certificate of incorporation or bylaws.
3. The Common Stock and the Warrants have been duly authorized and the
Common Stock, when delivered against payment in full as provided in the Purchase
Agreement, shall be validly issued, fully paid and nonassessable. The Warrants
Shares have been duly authorized and reserved for issuance, and, when delivered
upon exercise or against payment in full as provided in the Warrants, shall be
validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the terms
of the Purchase Agreement and the consummation by the Company of the
transactions contemplated thereby do not (i) violate any provision of the
Company's certificate of incorporation or bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases other than violations pursuant to clause (i) or
<PAGE>
(with respect to any federal or state securities laws and regulations) clause
(iii) above, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect.
5. There is no action, suit, claim, investigation or proceeding pending or
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. There is no action, suit, claim,
investigation or proceeding pending or, to our knowledge, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets and which, if adversely determined, is reasonably likely to result in a
Material Adverse Effect.
6. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required in
connection with the valid execution and delivery of the Purchase Agreement, or
the offer, sale or issuance of the Common Stock and the Warrants or the
consummation of any other transaction contemplated by the Purchase Agreement
(other than any filings which may be required to be made by the Company with the
Commission, or the OTC Bulletin Board or an Alternate Market subsequent to the
Closing, and, any registration statement which may be filed pursuant to the
Purchase Agreement).
7. The offer, issuance and sale of the Common Stock and the Warrants
pursuant to the Purchase Agreement, and the issuance of the Warrant Shares to
the Purchaser, pursuant to the Purchase Agreement shall be exempt from
registration under the Securities Act of 1933, as amended, pursuant to Rule 4(2)
and Regulation D promulgated thereunder.
8. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
shall not be, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of Globus
Wireless, Ltd., (the "Company") pursuant to the Draw Dawn Notice, dated
___________ delivered by the Company to Torneaux Fund Ltd. (the "Purchaser")
pursuant to Article VI of the Common Stock Purchase Agreement dated October 6,
2000, by and between the Company and the Purchaser (the "Agreement"), the
undersigned hereby certifies as follows:
1. The undersigned is the duly elected Chief Financial Officer of the
Company.
2. The representations and warranties of the Company set forth in Section
3.1 of the Agreement are true and correct in all material respects as though
made on and as of the date hereof, except for representations and warranties
that speak as of a particular date.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material respects with all obligations and conditions contained in Section
5.3 of the Agreement.
The terms used herein but not defined herein shall have the meanings
specified in the Agreement.
The undersigned has executed this Certificate this ________ day of
_________, 20__.
By:__/s/_________________________
Name: Nick G. Wizinsky
Title: Chief Financial Officer
<PAGE>
EXHIBIT C
TO THE COMMON STOCK PURCHASE AGREEMENT
FORM OF
DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
October 6, 2000 (the "Purchase Agreement ") between Globus Wireless, Ltd., a
Nevada corporation (the "Company") and Torneaux Fund Ltd. Capitalized terms used
and not otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.
In accordance with and pursuant to Section 6.1 of the Purchase Agreement,
the Company hereby issues this Draw Down Notice to exercise a Draw Down request
for the Draw Down Amount indicated below.
Draw Down Amount:___________________________________________
Draw Down Pricing Period start date:________________________
Draw Down Pricing Period end date:__________________________
Settlement Date 1:__________________________________________
Settlement Date 2:__________________________________________
Threshold Price: ___
--------------
Minimum Threshold Price: $2.00
----------------
The Company hereby certifies that the conditions set forth in Section 5.3
of the Purchase Agreement have been satisfied as of the date hereof.
Dated:_________________________
--------------------------------
By:__/s/________________________
Name:
Title:
Address:
Facsimile No.:
Wire Instructions:__________________
Contact Name:
-----------------------
RECEIPT ACKNOWLEDGED:
TORNEAUX FUND LTD.
By:__/s/____________________________
Name:
Title:
<PAGE>
DISCLOSURE SCHEDULES
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF OCTOBER 6, 2000 BETWEEN
GLOBUS WIRELESS, LTD. AND
TORNEAUX FUND LTD.
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO SUCH
NUMBERS AND LETTERS AS SET FORTH IN THE COMMON STOCK PURCHASE AGREEMENT (THE
"AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE
AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE MODIFIED
IN THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES CONTAINED IN
THESE DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL THE
DISCLOSURES SHALL BE READ TOGETHER.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 3.1(c)
Authorized and Issued Capital Stock
Shares of Outstanding Stock:
Common Stock, par value $.001 - 100,000,000 shares authorized
12,697,621 shares issued and outstanding
Preferred Stock, par value $.001- 20,000,000 shares authorized
No shares issued and outstanding
Outstanding Stock Options/Warrants/Other:
Position/ Number of Exercise Date Date Date Granted/
Name Capacity Options Price Reserved Allotted Vested
---- -------- ------- ----- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Bernard D. Penner President/CEO
Chairman 50,000 $0.85 06/08/99 08/30/99 08/30/99
50,000 $0.85 06/08/99 08/30/99
50,000 $0.85 06/08/99 08/30/99
50,000 $0.85 06/08/99 08/30/99 03/29/00
200,000 $3.00 08/30/99 08/30/99
A. Cary Tremblay Vice President
Corp. Marketing 33,333 $0.85 06/08/99 08/30/99
33,333 $0.85 06/08/99 08/30/99 03/29/00
75,000 $3.00 08/30/99 08/30/99
75,000 $3.00 08/30/99 08/30/99
75,000 $3.00 08/30/99 08/30/99
Nick G. Wizinsky C.O.O. & Secretary
Treasurer 10,000 $1.60 02/02/00 03/29/00 03/29/00
30,000 $3.00 02/02/00 03/29/00
30,000 $5.00 02/02/00 03/29/00
30,000 $6.00 02/02/00 03/29/00
GM Celltech
Shawn McMillen Research Inc. 50,000 $1.60 08/05/99 08/30/99 09/02/00
50,000 $1.40 02/02/00 03/29/00
50,000 $3.00 02/02/00 03/29/00
50,000 $5.00 02/02/00 03/29/00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Position/ Number of Exercise Date Date Date Granted/
Name Capacity Options Price Reserved Allotted Vested
---- -------- ------- ----- -------- -------- ------
<C>
<S> Vice President <C> <C> <C> <C> <C>
Gord Walsh Sales Wireless 20,000 $4.00 03/29/00 03/29/00 04/17/00
Devices
10,000 $5.00 03/29/00 03/29/00
10,000 $6.00 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
10,000 TBA 03/29/00 03/29/00
20,000 TBA 03/29/00 03/29/00
Lynda Newitt Investor Relations 6,500 $1.327 12/22/99 03/08/00 03/08/00
Kari Armstrong Marketing Admin 7,500 $1.327 12/22/99 03/08/00 03/08/00
Pat d'Easum Exec. Asst. 6,000 $1.327 12/22/99 03/08/00 03/08/00
Kerry McIntrye Inventory Manager 2,000 $1.327 12/22/99 03/08/00 03/08/00
Marleen Knoblick Secretary 1,000 $1.327 12/22/99 03/08/00 03/08/00
Ben Hewson Controller 7,500 4.00 7/8/00 7/8/00 08/16/00
7,500 5.50 7/8/00 7/8/00
10,000 85%mkt 7/8/00 7/8/00
10,000 85%mkt 7/8/00 7/8/00
Employees Various 500,000 1.8598 8/17/00 8/17/00
(85%)
Jerome Cwiertnia Director 24,000 1.8598 8/17/00 8/17/00 08/17/00
36,000 1.8598 8/17/00 8/17/00 08/17/00
Anthony Dyck Director 24,000 1.8598 8/17/00 8/17/00 08/17/00
36,000 1.8598 8/17/00 8/17/00 08/17/00
Hans Schroth Director 24,000 1.8598 8/17/00 8/17/00 08/17/00
36,000 1.8598 8/17/00 8/17/00 08/17/00
WARRANTS:
Coleman
Securities Investment Banker 30,000 4.00 9/12/00 9/12/00
30,000 5.00 9/12/00 9/12/00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Position/ Number of Exercise Date Date Date Granted/
Name Capacity Options Price Reserved Allotted Vested
---- -------- ------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C>
Philip C. Puccio, Sr. Investment Banker 17,500 4.00 9/12/00 9/12/00
17,500 5.00 9/12/00 9/12/00
Christopher P. Moore Investment Banker 17,500 4.00 9/12/00 9/12/00
17,500 5.00 9/12/00 9/12/00
Sichenzia, Ross & Legal Counsel 30,000
Friedman LLP
Notes:
-----
1. All options above without confirmed grant/vest date are subject to the
achievement of certain performance criteria.
2. Up to 60,000 stock options reserved for Gord Walsh, Vice President
Marketing & Sales Wireless Devices, will have their exercise price
determined by the following formula: 85% of Fair Market Value of 10
day closing average price from the date certain sales milestone(s)
achieved.
</TABLE>
<PAGE>
SCHEDULE 3.1(g)
Subsidiaries
State of Incorporation
Subsidiary or Organization Ownership
---------- --------------- ---------
Celltech Research, Inc. British Columbia, Canada wholly-owned
Globus Wireless Canada, Ltd. British Columbia, Canada wholly-owned
<PAGE>
SCHEDULE 3.1(w)
Employment Matters
None
