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COMMON STOCK
PURCHASE AGREEMENT
among
TELECOM WIRELESS CORPORATION
(the "COMPANY")
and
THE PERSONS LISTED ON SCHEDULE 1
(the "PURCHASERS")
RULE 506 OFFERING - PART A
Dated as of May 25, 1999
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TABLE OF CONTENTS
Section 1. Common Stock. . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1 Authorization, Issuance, and Sale of Common Stock.. . . . .1
Section 1.2 Form of Payment.. . . . . . . . . . . . . . . . . . . . . .2
Section 1.3 Initial and Additional Closings.. . . . . . . . . . . . . .2
Section 1.4 Deliveries at Closing.. . . . . . . . . . . . . . . . . . .2
Section 2. Purchaser's Representatives and Warranties. . . . . . . . .3
Section 2.1 Investment Purpose. . . . . . . . . . . . . . . . . . . . .3
Section 2.2 Accredited Purchaser Status.. . . . . . . . . . . . . . . .3
Section 2.3 Reliance on Exemptions. . . . . . . . . . . . . . . . . . .3
Section 2.4 Information.. . . . . . . . . . . . . . . . . . . . . . . .3
Section 2.5 No Governmental Review. . . . . . . . . . . . . . . . . . .3
Section 2.6 Transfer or Resale. . . . . . . . . . . . . . . . . . . . .4
Section 2.7 Legends.. . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 2.8 Authorization Enforcement.. . . . . . . . . . . . . . . . .5
Section 2.9 Residence.. . . . . . . . . . . . . . . . . . . . . . . . .5
Section 2.10 No Scheme to Evade Registration.. . . . . . . . . . . . . .5
Section 3. Representations And Warranties Of The Company . . . . . . .5
Section 3.1 Organization and Qualification. . . . . . . . . . . . . . .5
Section 3.2 Authorization, Enforcement, Compliance with Other
Instruments.. . . . . . . . . . . . . . . . . . . . . . . .5
Section 3.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . .6
Section 3.4 Issuance of Securities. . . . . . . . . . . . . . . . . . .6
Section 3.5 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . .6
Section 3.6 Financial Statements. . . . . . . . . . . . . . . . . . . .7
Section 3.7 Absence of Certain Changes. . . . . . . . . . . . . . . . .8
Section 3.8 Absence of Litigation.. . . . . . . . . . . . . . . . . . .8
Section 3.9 Purchase of Purchased Common Shares.. . . . . . . . . . . .8
Section 3.10 No Undisclosed Events, Liabilities, Developments, or
Circumstances.. . . . . . . . . . . . . . . . . . . . . . .8
Section 3.11 No General Solicitation.. . . . . . . . . . . . . . . . . .8
Section 3.12 No Integrated Offering. . . . . . . . . . . . . . . . . . .9
Section 3.13 Employee Relations. . . . . . . . . . . . . . . . . . . . .9
Section 3.14 Intellectual Property Rights. . . . . . . . . . . . . . . .9
Section 3.15 Environmental Laws. . . . . . . . . . . . . . . . . . . . .9
Section 3.16 Title.. . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 3.17 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.18 Regulatory Permits. . . . . . . . . . . . . . . . . . . . 10
Section 3.19 Internal Accounting Controls. . . . . . . . . . . . . . . 10
Section 3.20 No Materially Adverse Contracts, Etc. . . . . . . . . . . 10
Section 3.21 Tax Status. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.22 Certain Transactions. . . . . . . . . . . . . . . . . . . 11
Section 3.23 Dilutive Effect.. . . . . . . . . . . . . . . . . . . . . 11
Section 3.24 Fees and Rights of First Refusal. . . . . . . . . . . . . 11
Section 4. Covenants.. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . 11
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Section 4.2 Form D. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.3 Reporting Status. . . . . . . . . . . . . . . . . . . . . 12
Section 4.4 Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . 12
Section 4.5 Financial Information.. . . . . . . . . . . . . . . . . . 12
Section 4.6 Listings. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.7 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.8 Authorized Shares of Common Stock, Reservation of Shares. 13
Section 4.9 Corporate Existence.. . . . . . . . . . . . . . . . . . . 13
Section 4.10 Transactions With Affiliates. . . . . . . . . . . . . . . 13
Section 4.11 Transfer Agents.. . . . . . . . . . . . . . . . . . . . . 14
Section 4.12 Shareholder Approval. . . . . . . . . . . . . . . . . . . 14
Section 4.13 Transfer Agent Instructions.. . . . . . . . . . . . . . . 14
Section 5. Conditions To The Company's Obligation To Sell. . . . . . 15
Section 6. Conditions To The Purchasers' Obligation To Purchase. . . 15
Section 7. Indemnification.. . . . . . . . . . . . . . . . . . . . . 16
Section 8. Governing Law: Miscellaneous. . . . . . . . . . . . . . . 17
Section 8.1 Governing Law.. . . . . . . . . . . . . . . . . . . . . . 17
Section 8.2 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.3 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.4 Severability. . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.5 Entire Agreement. Amendments. . . . . . . . . . . . . . . 18
Section 8.6 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.7 Successors and Assigns. . . . . . . . . . . . . . . . . . 19
Section 8.8 No Third Party Beneficiaries. . . . . . . . . . . . . . . 19
Section 8.9 Survival. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.10 Publicity.. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.11 Further Assurances. . . . . . . . . . . . . . . . . . . . 20
Section 8.12 Termination.. . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.13 Finder. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.14 No Strict Construction. . . . . . . . . . . . . . . . . . 20
SCHEDULES AND EXHIBITS
Schedule 1 List of Purchasers
Schedule 2 Disclosure Schedule
Exhibit A Form of Repricing Warrant
Exhibit B Registration Rights Agreement
Exhibit C Escrow Agreement
Exhibit D Placement Agent Agreement
Exhibit E Opinion of Company Counsel
Exhibit F Irrevocable Transfer Agent Instructions
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CROSS REFERENCE TO DEFINED TERMS
Term Defined in Section
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Accredited Purchaser Section 2.2
Affiliate Section 4.10
Agreement Preamble
Articles of Incorporation Section 3.3
Augsback Section 1.4(e)
Blue Sky Section 4.2
Bylaws Section 3.3
Certificate of Designations Background
Certificates Section 1.4(b)
Closing Section 1.3
Closing Date Section 1.3
Common Stock Background
Company Preamble
Controls Section 4.10
ERISA Section 2.20(a)(i)
Environmental Laws Section 3.15
Escrow Agreement Section 1.2
Financial Statements Section 3.6
Indemnified Liabilities Section 7
Indemnities Section 7
Intellectual Property Section 3.14
Irrevocable Transfer Agent Instructions Section 1.4(i)
NASD Section 4.12
Purchase Price Section 1.1
Purchaser Preamble
Person Preamble
Placement Agreement Section 1.4(e)
Purchased Common Shares Section 1.1
Registration Period Section 4.3
Registration Rights Agreement Background
Regulation D Background
Related Party Section 4.10
Rule 144 Section 2.6(b)
Sale of the Company Section 4.9
Purchased Common Shares Background
SEC Background
1934 Act Section 3.6
1933 Act Background
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COMMON STOCK
PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT ("AGREEMENT") is made and entered
into as of July 28, 1999, between TELECOM WIRELESS CORPORATION, a Utah
corporation (the "COMPANY") and the Persons listed on Purchaser Signature Pages
attached hereto (each of whom is individually referred to as a "PURCHASER" and
all of whom collectively are referred to as the "PURCHASERS").
BACKGROUND
The Company has most recently authorized the issuance, sale, and
delivery of up to Two Hundred Thousand (200,000) shares of the Company's
Common Stock, par value $.001 (the "PURCHASED COMMON SHARES"), having
previously authorized the issuance, sale, and delivery of up to 300,000
shares of the Company's Common Stock in the first part of this offering. The
Purchased Common Shares upon issuance have accompanying repricing rights
evidenced by a warrant in substantially the form attached hereto as EXHIBIT A
(the "REPRICING WARRANT"), exercisable under certain circumstances for
additional shares of Common Stock (the "REPRICING SHARES") at the exercise
price of $.001. The Purchasers collectively wish to purchase, upon the terms
and conditions stated in this Agreement, up to Two Hundred Thousand (200,000)
shares of Common Stock in the respective amounts set forth on each
Purchaser's signature page hereto. Contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement in substantially the form attached hereto as
EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company
has agreed to provide certain registration rights under the 1933 Act (as
defined below) and the rules and regulations promulgated thereunder, and
applicable state securities laws. The Company and the Purchasers are
executing and delivering this Agreement in reliance upon the exemption from
securities registration pursuant to Section 4(2) and/or Regulation D
("REGULATION D") as promulgated by the U.S. Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"1933 ACT"), at the sole election of Purchasers in the event that a
registration statement filed by the Company pursuant to Section 2(a) of the
Registration Rights Agreement is not declared effective by the Registration
Deadline (as defined therein).
AGREEMENT
For and in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Purchaser
hereby agree as follows:
SECTION 1. COMMON STOCK.
SECTION 1.1 AUTHORIZATION, ISSUANCE, AND SALE OF COMMON STOCK. The
Company has authorized in this Part B of the offering the sale and issuance in
accordance with the terms of this Agreement of up to Two Hundred Thousand
(200,000) shares of Common Stock having the rights and privileges set forth
herein. The Company agrees to issue and sell to each Purchaser and each
Purchaser agrees to purchase from the Company, at a Closing, the number of
Purchased Common Shares set forth adjacent to the caption "PURCHASED COMMON
SHARES" on the signature page to this Agreement of each Purchaser hereto at a
purchase price of $7.00 per share (the "PURCHASE PRICE").
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SECTION 1.2 FORM OF PAYMENT. On or before the Closing Date, each
Purchaser shall pay the Purchase Price for the Purchased Common Shares to be
issued and sold to such Purchaser at the Closing, by wire transfer of
immediately available funds to the Escrow Agent as follows:
Bank: SunTrust Bank, Atlanta
Corporate Trust Department
ABA Routing No.: 000000000
Center: 008
Account No.: 9088000008
Attn: Xxxxxxx Xxxxxxx
Re: Telecom Wireless Corporation --
Escrow Account
as more particularly described in Section 3 of that certain Escrow Agreement in
the form attached hereto as EXHIBIT C (the "ESCROW AGREEMENT").
SECTION 1.3 INITIAL AND ADDITIONAL CLOSINGS. The closings of the
purchase and sale of the Purchased Common Shares shall take place at the offices
of Xxxxxxx Law Group LLC, 0000 Xxxxx Xxxx, X.X., Xxxxx 000, Xxxxxxx, Xxxxxxx
00000 at 10:00 a.m., within five (5) business days after the date hereof,
subject to the satisfaction or waiver of the conditions set forth in Sections 5
and 6 below, or at such other location, date, and time as may be agreed upon
between Purchaser and the Company (each such closing being called a "CLOSING"
and such date and time being called the "CLOSING DATE"). Additional Closings
shall take place at the above location by agreement of the parties from time to
time in accordance with the terms of this Agreement.
SECTION 1.4 DELIVERIES AT CLOSING. At the Closing the Company shall
deliver to Purchasers:
(a) this Agreement, executed by the Company;
(b) certificates in definitive form, registered in the name of
each Purchaser, or the designee of such Purchaser, representing the
Purchased Common Shares purchased by such Purchaser (the "CERTIFICATES");
(c) a Repricing Warrant registered in the name of each
Purchaser or the designee of such Purchaser, executed by the Company;
(d) the Registration Rights Agreement, executed by the Company;
(e) the Placement Agent Agreement between the Company and
Augsback and Associates, Inc. ("AUGSBACK"), in substantially the form
attached hereto as EXHIBIT D (the "PLACEMENT AGREEMENT"), executed by the
Company;
(f) the opinion of Xxxx X. Xxxxxx, Esq., counsel to the
Company, in substantially the form of EXHIBIT E hereto;
(g) the Escrow Agreement, executed by the parties thereto;
(h) the certificates described in Sections 6(c) (the
"COMPLIANCE CERTIFICATE") and 6(i) (the "SECRETARY CERTIFICATE") hereof,
each executed by the Company; and
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(i) the Irrevocable Transfer Agent Instructions, in
substantially the form of EXHIBIT F hereto (the "IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS"), executed by the Company.
SECTION 2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Each Purchaser represents and warrants with respect to only itself that:
SECTION 2.1 INVESTMENT PURPOSE. Such Purchaser is acquiring the
Purchased Common Shares and accompanying Repricing Warrants, and, upon
conversion of the Repricing Warrants, will acquire the Repricing Shares then
issuable (the Purchased Common Shares, the accompanying Repricing Warrant, and
the Repricing Shares are hereinafter sometimes collectively, the "SECURITIES"),
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; PROVIDED HOWEVER,
that by making the representations herein, such Purchaser does not agree to hold
any Securities for any minimum or other specific term, and reserves the right to
dispose of such Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
SECTION 2.2 ACCREDITED INVESTOR STATUS. Such Purchaser is an
"accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D.
SECTION 2.3 RELIANCE ON EXEMPTIONS. Such Purchaser understands that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments, and understandings of such Purchaser
set forth herein in order to determine the availability of such exemptions and
the eligibility of such Purchaser to acquire such Securities.
SECTION 2.4 INFORMATION. Such 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 Securities, which have been requested by such Purchaser. Such Purchaser
and its advisors, if any, have been afforded the opportunity to ask questions
of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Purchaser or its advisors, if any, or its
representatives shall modify, amend, or affect such Purchaser's right to rely
on the Company's representations and warranties contained in Section 3 below.
Such Purchaser understands that its investment in the Securities involves a
high degree of risk. Such 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 Securities.
SECTION 2.5 NO GOVERNMENTAL REVIEW. Such Purchaser understands that
no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement
of the Securities, or the fairness or suitability of the investment in the
Securities, nor have such authorities passed upon or endorsed the merits of
the offering of the Securities.
SECTION 2.6 TRANSFER OR RESALE. Such Purchaser understands that
except as provided in the Registration Rights Agreement:
(a) the Securities have not been and are not being registered
under the 1933 Act or any state securities laws, and may not be offered
for sale, sold, assigned, or transferred unless;
(i) subsequently registered thereunder;
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(ii) such Purchaser shall have delivered to the Company
an opinion of counsel, in a generally acceptable form, to the
effect that such securities to be sold, assigned, or transferred
may be sold, assigned, or transferred pursuant to an exemption
from such registration; or
(iii) such Purchaser provides the Company with reasonable
assurance that such securities can be sold, assigned, or
transferred pursuant to Rule 144 or promulgated under the 1933 Act
(or a successor rule thereto);
(b) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("RULE 144")
may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the
0000 Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and
(c) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any
exemption thereunder.
SECTION 2.7 LEGENDS. Such Purchaser understands that the certificates
or other instruments representing the Purchased Common Shares and, if and when
issued until such time as the sale of the Repricing Shares have been registered
under the 1933 Act as contemplated by the Registration Rights Agreement, the
stock certificates representing the Repricing Shares shall bear a restrictive
legend in substantially the following form (and a stop transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, when, (a) the sale of the Purchased Common Shares and the Repricing
Shares is registered under the 1933 Act, (b) in connection with a sale
transaction, such holder provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment, or
transfer of the Securities may be made without registration under the 1933 Act,
or (c) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
SECTION 2.8 AUTHORIZATION ENFORCEMENT. This Agreement has been duly
and validly authorized, executed, and delivered on behalf of such Purchaser and
is a valid and binding agreement of such Purchaser enforceable in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
and other
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similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
SECTION 2.9 RESIDENCE. Such Purchaser is a resident of that country
specified in its address on the Section of the Disclosure Schedule of
Purchasers.
SECTION 2.10 NO SCHEME TO EVADE REGISTRATION. Purchaser represents and
warrants to the Company that the acquisition of the Purchased Common Shares and
the Repricing Shares is not a transaction (or any element of a series of
transactions) that is part of a plan or scheme by the Purchaser to evade the
registration provisions of the 1933 Act.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
The Company represents and warrants to each of the Purchasers that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries are corporations duly organized, validly existing, and in good
standing under the laws of the jurisdictions of their respective incorporation,
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its subsidiary
corporations is duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole.
SECTION 3.2 AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS.
(a) The Company has the requisite corporate power and authority
to enter into and perform each of this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Placement Agreement, the Repricing
Warrants, and any related agreements (collectively, the "TRANSACTION
AGREEMENTS"), and to issue the Securities in accordance with the terms
hereof and thereof;
(b) the execution and delivery of each of this Agreement and
the other Transaction Agreements by the Company, and the consummation by
it of the transactions contemplated hereby and thereby, including without
limitation the issuance of the Purchased Common Shares and the
reservation for issuance and the issuance of the Repricing Shares
issuable upon conversion or exercise thereof, have been duly authorized
by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders;
(c) each of the Transaction Agreements has been duly executed
and delivered by the Company; and
(d) each of the Transactions Agreements constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
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SECTION 3.3 CAPITALIZATION. Immediately prior to Closing, the
authorized capital stock of the Company consisted of 125,000,000 shares of
capital stock, of which 100,000,000 shares are Common Stock, par value $.001,
of which 14,990,135 are issued and outstanding, and 25,000,000 shares are
Preferred Stock, par value $.001 ("PREFERRED STOCK") of which no shares are
issued and outstanding. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. Except as disclosed in Section
3.3 of the Disclosure Schedule, no shares of Common Stock or Preferred Stock
are subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed in
Section 3.3 of the Disclosure Schedule, as of the effective date of this
Agreement, (a) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments,
understandings, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, (b) there are no other
outstanding debt securities, and (c) except for the Registration Rights
Agreement and this Agreement, there are no other agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register
the sale of any of their securities under the 1933 Act. There are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities as described in this
Agreement. The Company has furnished to the Purchaser true and correct copies
of the Company's Articles of Incorporation, as amended and as in effect on
the date hereof (the "ARTICLES OF INCORPORATION"), and the Company's Bylaws,
as in effect on the date hereof (the "BYLAWS"), and the terms of all
securities convertible into or exercisable for Common Stock and the material
rights of the holders thereof in respect thereto.
SECTION 3.4 ISSUANCE OF SECURITIES. The Purchased Common Shares are
duly authorized and, upon issuance in accordance with the terms hereof, shall be
validly issued, fully paid, and nonassessable, are free from all taxes, liens,
and charges with respect to the issue thereof and are entitled to the rights and
preferences set forth in the Purchased Common Shares. The Repricing Shares
issuable upon conversion of the Repricing Warrants have been duly authorized and
reserved for issuance. Upon conversion or exercise of the Repricing Warrants,
the Repricing Shares will be validly issued, fully paid, and nonassessable, and
free from all taxes, liens, and charges, with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
SECTION 3.5 NO CONFLICTS.
Except as disclosed in Section 3.5 of the Disclosure Schedule, the execution,
delivery, and performance of this Agreement and the Transaction Agreements by
the Company, and the consummation by the Company of the transactions
contemplated hereby and thereby, will not (a) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences, and
Rights applicable to any Preferred Stock of the Company, or the Bylaws of the
Company or (b) conflict with, constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration, or cancellation of, any
agreement, indenture, or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment, or decree (including federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange on
which the Common Stock is traded or listed) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected. Except as disclosed in Section 3.5 of the
Disclosure Schedule, neither the Company nor any subsidiary is in violation of
any term of, or in default under, its Articles of Incorporation or Bylaws or
their organizational charter or Bylaws, respectively, or any material contract,
agreement, mortgage,
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indebtedness, indenture, instrument, judgment, decree, or order or any
statute, rule, or regulation applicable to the Company or its subsidiaries.
The business of the Company and its subsidiaries is not being conducted, and
shall not be conducted in violation of any law, ordinance, or regulation of
any governmental entity. Except as specifically contemplated by this
Agreement and the other Transaction Agreements, and as required under the
1933 Act and any applicable state securities laws, the Company 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, and perform any of its obligations under or contemplated
by this Agreement and the Transaction Agreements in accordance with the terms
hereof or thereof. Except as disclosed in Section 3.5 of the Disclosure
Schedule, all consents, uthorizations, orders, filings, and registrations
which the Company is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the date hereof. The Company
and its subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
SECTION 3.6 FINANCIAL STATEMENTS. Attached as Section 3.6 of the
Disclosure Schedule are true, correct, and complete copies of: the 06/30/98
financial statements of the Company together with the audit report dated
September 22, 1998 thereon, and the unaudited Balance Sheet of the Company
dated March 31, 1999, and the unaudited Statements of Income, Cash Flows, and
Stockholder's Equity for the nine months then ended (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements (i) are in accordance with
the books and records of the Company, (ii) present fairly the financial
condition of the Company as of the respective dates indicated and the results
of operations for such periods, and (iii) the audited Financial Statements
have been prepared with consistently applied accounting principles throughout
the periods involved. The Financial Statements do not contain any items of
special or nonrecurring income, or other income not earned in the ordinary
course of business, except as specifically set forth in Section 3.6 of the
Disclosure Schedule. The financial books, financial records, and financial
accounts of the Company shown to Purchaser accurately and fairly reflect, in
reasonable detail, all transactions, assets, and liabilities of the Company.
The Company has not engaged in any transaction, maintained any bank account,
or used any of the funds of the Company, except for transactions, bank
accounts, and funds which have been and are reflected in the normally
maintained books and records of the Company. Except as reflected on Section
3.6 of the Disclosure Schedule, there is no liability or indebtedness of the
Company for dividends or other distributions declared or accumulated but
unpaid with respect to the Common Stock or the Purchased Common Shares. No
other information provided by or on behalf of the Company to the Purchaser
which is not included in the Financial Statements, including, without
limitation, information referred to in Section 2.4 of this Agreement,
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in the light
of the circumstance under which they are or were made, not misleading.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Section 3.7 of the Disclosure Schedule, since the date of the most recent
audited Balance Sheet included in the Financial Statements, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations, or
prospects of the Company or its subsidiaries. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or its subsidiaries have
any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
SECTION 3.8 ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry, or investigation before or by any court, public board,
government agency, self-regulatory organization, or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
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affecting the Company, the Common Stock, or any of the Company's
subsidiaries, wherein an unfavorable decision, ruling or finding would (a)
have a material adverse effect on the transactions contemplated hereby, (b)
adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under the Transaction
Agreements, or any of the other documents contemplated therein, or (c) except
as expressly set forth in Section 3.8 of the Disclosure Schedule, have a
material adverse effect on the business, operations, properties, financial
condition, or results of operation of the Company and its subsidiaries taken
as a whole.
SECTION 3.9 PURCHASE OF PURCHASED COMMON SHARES. The Company
acknowledges and agrees that each Purchaser is acting solely in the capacity
of an arm's length purchaser with respect to this Agreement and the other
Transaction Agreements and the transactions contemplated hereby and thereby.
The Company further acknowledges that each Purchaser is not acting as a
financial advisor or agent or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by such Purchaser or any of their respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Purchaser's
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based
solely on the independent evaluation by the Company and its representatives.
SECTION 3.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS, OR
CIRCUMSTANCES. No event, liability, development, or circumstance has
occurred or exists, or is contemplated to occur, with respect to the Company
or its subsidiaries or their respective businesses, properties, prospects,
operations, or financial condition, which could be material but which has not
been publicly announced or disclosed in writing to Purchasers.
SECTION 3.11 NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
SECTION 3.12 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 to
buy any security, under circumstances that would require registration of the
Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions.
SECTION 3.13 EMPLOYEE RELATIONS. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
SECTION 3.14 INTELLECTUAL PROPERTY RIGHTS. The Company and its
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets, and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Section 3.14 of the
Disclosure Schedule, none of the Company's trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations, trade
secrets, or other intellectual
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property rights have expired or terminated, or are expected to expire or
terminate in the near future. The Company and its subsidiaries do not have
any knowledge of any infringement by the Company or its subsidiaries of the
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade
secret, or other similar rights of others, or of any such development of
similar or identical trade secrets, or technical information by others and,
except as set forth on Section 3.14 of the Disclosure Schedule, there is no
claim, action, or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its
subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service xxxx
registrations, trade secret, or other infringement, and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and its subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality, and
value of all of their intellectual properties.
SECTION 3.15 ENVIRONMENTAL LAWS. The Company and its subsidiaries are
(a) in compliance with any and all applicable foreign, federal, state, and local
laws and regulations relating to the protection of human health and safety, the
environment, or hazardous, toxic substances, wastes, pollutants, or contaminants
("ENVIRONMENTAL LAWS"), (b) have received all permits, licenses, or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses, and (c) are in compliance with all terms and conditions
of any such permit, license, or approval.
SECTION 3.16 TITLE. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances, and defects except as described in Section 3.16 of the Disclosure
Schedule or as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting,
and enforceable leases with such exceptions as are not material, and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.
SECTION 3.17 INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks, and in such amounts, as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for, and neither the Company
nor any such subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial, or otherwise, or the earnings, business, or operations of
the Company and its subsidiaries, taken as a whole.
SECTION 3.18 REGULATORY PERMITS. The Company and its subsidiaries
possess all certificates, authorizations, and permits issued by the appropriate
federal, state, or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization, or permit.
SECTION 3.19 INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (a) transactions are executed in accordance
with management's general or specific authorizations, (b)
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transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (c) access to assets is permitted only in
accordance with management's general or specific authorization, and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 3.20 NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company
nor any of its subsidiaries is subject to any charter, corporate, or other legal
restriction, or any judgment, decree, order, rule, or regulation which in the
judgment of the Company's officers has, or is expected in the future to have, a
material adverse effect on the business, properties, operations, financial
condition, results of operations, or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has, or is
expected to have, a material adverse effect on the business, properties,
operations, financial condition, results of operations, or prospects of the
Company or its subsidiaries.
SECTION 3.21 TAX STATUS. Except as set forth on Section 3.21 of the
Disclosure Schedule, the Company and each of its subsidiaries has made or filed
all federal and state income and all other tax returns, reports, and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes), and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports, and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports,
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
SECTION 3.22 CERTAIN TRANSACTIONS. Except as set forth on Section 3.22
of the Disclosure Schedule, and except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties, and none of
the officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers,
and directors), including any contract, agreement, or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director, or such employee or, to the knowledge of the Company, any
corporation, partnership, trust, or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee, or partner.
SECTION 3.23 DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Repricing Shares issuable upon conversion of the Repricing
Warrants will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Repricing Shares upon conversion of
the Repricing Warrants in accordance with this Agreement and the Repricing
Warrant is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
SECTION 3.24 FEES AND RIGHTS OF FIRST REFUSAL. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents, or other
third parties.
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SECTION 4. COVENANTS.
SECTION 4.1 BEST EFFORTS. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
5 and 6 of this Agreement.
SECTION 4.2 FORM D. The Company shall, on or before the Closing Date,
take such action as is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Purchasers at the Closing pursuant
to this Agreement under applicable securities or "BLUE SKY" laws of the
respective states of the United States applicable to each Purchaser, and shall
provide evidence of any such action so taken to the Purchasers on or prior to
the Closing Date. Unless required to do so sooner under applicable state
securities laws pursuant to the previous sentence, the Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing not later
than 15 days after each such Purchaser's purchase hereunder.
SECTION 4.3 REPORTING STATUS. Until the earlier of (a) the date as of
which the Purchasers (as that term is defined in the Registration Rights
Agreement) may sell all of the Repricing Shares without restriction pursuant to
Rule l44(k) promulgated under the 1933 Act (or successor thereto), or (b) the
date on which (i) the Purchasers shall have sold all the Repricing Shares and
(ii) none of the Purchased Common Shares is owned by any Purchaser (the
"REGISTRATION PERIOD"), the Company shall file all reports required to be filed
with the SEC pursuant to the 0000 Xxx. The Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit such
termination.
SECTION 4.4 USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Purchased Common Shares for substantially the same purposes and
in substantially the same amounts as indicated in Section 4.4 of the Disclosure
Schedule.
SECTION 4.5 FINANCIAL INFORMATION. The Company agrees to send the
following to each Purchaser during the Registration Period and while a
Registration Statement with respect to the Securities is in effect: (a) within
five (5) days after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K, and any registration statements or amendments filed pursuant to the
1933 Act; (b) within one (1) day after release thereof, copies of all press
releases issued by the Company or any of its subsidiaries, (c) copies of the
same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders; and
(d) with reasonable promptness, such other financial information and data with
respect to the Company as Purchaser may request.
SECTION 4.6 LISTINGS. The Company shall promptly secure the listing
of the Purchased Common Shares and Repricing Shares upon each national
securities exchange or automated quotation system, if any, upon which shares
of Common Stock are then listed (subject to official notice of issuance) and
shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Purchased Common Shares and Repricing Shares from
time to time issuable under the terms of the Registration Rights Agreement.
The Company shall maintain the Common Stock's authorization for quotation in
the over-the-counter market. The Company shall promptly provide to each
Purchaser copies of any notices it receives regarding the continued
eligibility of the Common Stock for trading in the over-the-counter market.
SECTION 4.7 EXPENSES. Any costs and expenses incurred by a
Purchaser in connection with its own negotiation, investigation, preparation,
execution, and delivery of this Agreement and the Registration Rights
Agreement and the Escrow Agreement shall be borne by such Investor. The
legal costs and expenses for Augsback and its counsel (not to exceed $12,000
in legal fees plus all expenses for the First Closing) shall be paid for by
the Company at the First Closing, and the legal fees
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and expenses for all subsequent Closings (not to exceed $4,000 in legal fees
plus all expenses for the Second Closing and $2,500 for each subsequent
Closing) shall be paid for by the Company at each subsequent Closing. These
Transaction Fees are fixed at this level based upon Augsback's counsel
providing all documents necessary for a given Transaction, and receiving a
level of comments to these documents that do not require extensive
negotiations or redrafting. However, should such counsel encounter any
situation requiring extensive negotiation or redrafting of documents (for
example if, after a first closing, substantial comments are received from the
issuer or an investor or substantial revisions are required for a subsequent
Closing), the fee limits discussed above would not apply and the fees in such
case would be substantially based upon such firm's hourly rates for those
attorneys and Firm personnel performing work on that Closing.
SECTION 4.8 AUTHORIZED SHARES OF COMMON STOCK, RESERVATION OF SHARES.
The Company shall at all times, so long as any of the Repricing Warrants are
outstanding and subject to conversion, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Repricing Warrants, such number of shares of Common Stock
equal to or greater than 200% of the number of shares of Common Stock which are
issuable upon conversion of all Repricing Warrants which are then outstanding or
which could be issued at any time under this Agreement.
SECTION 4.9 CORPORATE EXISTENCE. So long as any Repricing Warrants
remain outstanding, the Company shall not directly or indirectly consummate
any merger, reorganization, restructuring, consolidation, sale of all or
substantially all of the Company's assets, or any similar transaction or
related transactions (each such transaction, a "SALE OF THE COMPANY") except
if the surviving or successor entity in such transaction (a) expressly
assumes, in writing, the Company's obligations hereunder and under the
Registration Rights Agreement, the Repricing Warrants, and any other
agreements and instruments entered into or delivered by the Company in
connection herewith and (b) is a publicly traded corporation whose Common
Stock is listed for trading on the New York Stock Exchange, Inc., the
American Stock Exchange, or the NASDAQ National Market.
SECTION 4.10 TRANSACTIONS WITH AFFILIATES. So long as (a) any
Repricing Warrants are outstanding or (b) any Purchaser owns Repricing Shares
with a market value equal to or greater than $200,000, the Company shall not,
and shall cause each of its subsidiaries not to, enter into, amend, modify,
or supplement, or permit any subsidiary to enter into, amend, modify, or
supplement any agreement, transaction, commitment, or arrangement with any of
its or any subsidiary's officers, directors, persons who were officers or
directors at any time during the previous two years, stockholders who
beneficially own 5% or more of the Common Stock or affiliates, or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a 5% or more
beneficial interest (each a "RELATED PARTY"), except for (i) customary
employment arrangements and benefit programs on reasonable terms, (ii) any
agreement, transaction, commitment, or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (iii) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the
disinterested directors of the Company, for purposes hereof, any director who
is also an officer of the Company or any subsidiary of the Company shall not
be disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. "AFFILIATE" for purposes hereof means, with
respect to any person or entity, another person or entity that, directly or
indirectly, (1) has a 5% or more equity interest in that person or entity,
(2) has 5% or more common ownership with that person or entity, (3) controls
that person or entity, or (4) share common control with that person or
entity. "CONTROL" or "CONTROLS" for
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purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
SECTION 4.11 TRANSFER AGENTS. The Company covenants and agrees that,
in the event that the Company's agency relationship with the transfer agent
should be terminated for any reason prior to a date which is two (2) years
after the Closing Date, the Company shall immediately appoint a new transfer
agent and shall require that the transfer agent execute and agree to be bound
by the terms of the Irrevocable Instructions to Transfer Agent.
SECTION 4.12 SHAREHOLDER APPROVAL. The Company covenants to submit to
its shareholders at its next shareholder meeting a proposal for ratification of
the issuance of the Securities, if and as required by the rules of the National
Association of Securities Dealers, Inc. (the "NASD") applicable to the
transaction. To the best of the Company's knowledge and belief, no Shareholder
approval is required.
SECTION 4.13 TRANSFER AGENT INSTRUCTIONS. The Company shall issue
the Irrevocable Transfer Agent Instructions to its transfer agent or any
successor transfer agent appointed pursuant to Section 4.11, above, to issue
certificates, registered in the name of each Purchaser or its respective
nominee(s), for the Repricing Shares in such amounts as specified from time
to time by the Purchaser to the Company upon conversion of the Repricing
Warrants. Prior to registration of the Purchased Common Shares and Repricing
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2.7 of this Agreement. The Company warrants that
no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 4.13, and stop transfer instructions to give
effect to Section 2.6 hereof (in the case of the Repricing Shares, prior to
registration of such shares under the 0000 Xxx) will be given by the Company
to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 4.13 shall affect in any way the Purchaser's obligations and
agreement to comply with all applicable securities laws upon resale of the
Purchased Common Shares or Repricing Shares. If the Purchaser provides the
Company with an opinion of counsel, reasonably satisfactory in form, and
substance to the Company, that registration of a resale by any Purchaser of
any of the Purchased Common Shares or Repricing Shares is not required under
the 1933 Act, the Company shall permit the transfer, and, in the case of the
Repricing Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to Purchasers by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under
this Section 4.13 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 4.13, that
Purchasers shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or other security being required.
SECTION 5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Purchased
Common Shares to Purchasers at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, PROVIDED that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) The Purchaser shall have executed Purchaser Signature Pages
to this Agreement, the Registration Rights Agreement, and the Escrow
Agreement and delivered the same to the
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Company.
(b) Purchasers shall have delivered to the Company the Purchase
Price for the Purchased Common Shares being purchased by the Purchaser at
the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.
(c) The representations and warranties of the Purchaser shall
be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Purchaser shall have performed, satisfied, and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied, or complied with by the Purchaser
at or prior to the Closing Date.
SECTION 6. CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE.
The obligation of Purchasers hereunder to purchase the Purchased Common
Shares at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, PROVIDED that these conditions are
for the Purchasers' sole benefit and may be waived by Purchasers at any time in
their sole discretion:
(a) The Company shall have executed this Agreement and the
other applicable Transaction Agreements and delivered the same to
Purchasers.
(b) The Common Stock shall be authorized for quotation on the
electronic bulletin board, over-the-counter market, AMEX, the NASDAQ
National Market, or The New York Stock Exchange, Inc., trading in the
Common Stock shall not have been suspended for any reason, and all of the
Repricing Shares issuable upon conversion of the Repricing Warrants shall
be approved for listing on the electronic bulletin board,
over-the-counter market, AMEX, the NASDAQ National Market, or The New
York Stock Exchange, Inc.
(c) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any
of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied, and complied in
all material respects with the covenants, agreements, and conditions
required by this Agreement to be performed, satisfied, or complied with
by the Company at or prior to the Closing Date. Purchasers shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by Purchasers
including, without limitation an update as of the Closing Date regarding
the representation contained in Section 3.3 above.
(d) The Purchaser shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form, scope, and
substance reasonably satisfactory to the Purchaser and in substantially
the form of EXHIBIT E attached hereto.
(e) The Company shall have executed and delivered to the
Purchaser the Certificates (in such denominations as the Purchaser shall
request) for the Purchased Common Shares being purchased by the Purchaser
at the Closing.
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(f) The Board of Directors of the Company shall have authorized
and adopted the resolutions in substantially the form attached to the
Secretary Certificate delivered herewith.
(g) As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Repricing Warrants, such number of shares
of Common Stock equal to or greater than 200% of the number of shares of
Common Stock for which are issuable upon conversion of all of the
Repricing Warrants which could be issued at any time under this
Agreement.
(h) The Irrevocable Transfer Agent Instructions, in
substantially the form of EXHIBIT F attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(i) Purchaser shall have received a certificate of the
Secretary or an Assistant Secretary of the Company dated the Closing Date
and certifying: (A) that attached thereto is a true and complete copy of
the Articles of Incorporation as then in effect, certified or bearing
evidence of filing by the Department of State of the State of Utah, and
(B) a certificate of said Department of State, dated as of a recent date
as to the due incorporation and good standing of the Company, the payment
of all franchise taxes by the Company, and listing all documents of the
Company on file with said Department of State; (C) that attached thereto
is a true and complete copy of the Bylaws of the Company as in effect on
the date of such certification; (D) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors or the
shareholders of the Company authorizing the execution, delivery, and
performance of this Agreement and the issuance, sale, and delivery of the
Purchased Common Shares, the issuance and delivery of the Repricing
Shares issuable upon conversion of the Repricing Warrants, and that all
such resolutions are in full force and effect and are all the resolutions
adopted in connection with the foregoing agreements and the transactions
contemplated thereby; (E) that the Charter has not been amended since the
date of the last amendment referred to in the certificate delivered
pursuant to clause (A) above; and (F) to the incumbency and specimen
signature of each officer of the Company executing this Agreement, the
other Transaction Agreements, and any certificate or instrument furnished
pursuant hereto and thereto, and a certification by another officer of
the Company as to the incumbency and signature of the officer signing the
certificate.
SECTION 7. INDEMNIFICATION.
In consideration of the Purchaser's execution and delivery of this
Agreement and acquiring the Securities hereunder and in addition to all of
the Company's other obligations under this Agreement, the Company shall
defend, protect, indemnify, and hold harmless the Purchaser and each other
holder of the Securities and all of their officers, directors, employees, and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities, and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "INDEMNIFIED
LIABILITIES"), incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the other
Transaction Agreements or any other certificate, instrument, or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement, or
obligation of the Company contained in this
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Agreement, the other Transaction Agreements or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit, or claim brought or made against such Indemnitee and arising
out of or resulting from the execution, delivery, performance, or enforcement
of this Agreement or any other instrument, document, or agreement executed
pursuant hereto by any of the Indemnities, any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Purchased Common Shares, or the status of the Purchaser
or holder of the Purchased Common Shares or the Repricing Shares, as a
Purchaser in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
SECTION 8. GOVERNING LAW; MISCELLANEOUS.
SECTION 8.1 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado without
regard to the principles of conflict of laws. Any dispute or controversy
between the parties arising in connection with this agreement or the subject
matter contemplated by this agreement shall be resolved by arbitration before
a three-member panel of the American Arbitration Association in accordance
with the commercial arbitration rules of said forum and the Federal
Arbitration Act, 9 U.S.C. 1 ET SEQ., with the resulting award being final and
conclusive. Said arbitrators shall be empowered to award all forms of relief
and damages claimed, including, but not limited to, attorney's fees, expenses
of litigation and arbitration, exemplary damages, and pre-judgment interest.
Notwithstanding the foregoing, Purchaser may at any time and at its option,
whether or not an arbitration action is then pending, initiate a civil action
for temporary and permanent injunctive and other equitable relief against
Company. Company acknowledges that upon any breach of Purchaser's conversion
rights hereunder, Purchaser's resulting injury may not be adequately
compensated by a remedy at law. Accordingly, upon such breach, Purchaser, at
its election and without limitation of its other remedies, shall be entitled
to pursue a claim for specific performance of this Agreement, and Company
hereby waives the right to assert any defense thereto that Purchaser has an
adequate remedy at law. The parties further agree that any arbitration
action between them shall be heard in Littleton, Colorado, and expressly
consent to the jurisdiction and venue of the Superior Court of Arapahoe
County, Colorado, and the United States District Court for the District of
Colorado, Denver Division, for the adjudication of any civil action asserted
pursuant to this Paragraph.
SECTION 8.2 COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. In the event any signature
page is delivered by facsimile transmission, the party using such means of
delivery shall cause four (4) additional original executed signature pages to
be physically delivered to the other party within five (5) days of the
execution and delivery hereof.
SECTION 8.3 HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
SECTION 8.4 SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
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SECTION 8.5 ENTIRE AGREEMENT. AMENDMENTS. This Agreement supersedes
all other prior oral or written agreements between the Purchaser, the
Company, their affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as specifically
set forth herein or therein, neither the Company nor any Purchaser makes any
representation, warranty, covenant, or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than
by an instrument in writing signed by the party to be charged with
enforcement.
SECTION 8.6 NOTICES. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (a) upon
receipt, when delivered personally, (b) upon receipt, when sent by facsimile,
PROVIDED a copy is mailed by U.S. certified mail, return receipt requested, (c)
three (3) days after being sent by U.S. certified mail, return receipt
requested, or (d) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
if to the Company:
Telecom Wireless Corporation
0000 XXX Xxxxxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxx X. Xxxxxx, Esq.
0000 Xxxxx Xxxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Transfer Agent:
Corporate Stock Transfer, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Compliance Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to any Purchaser, to the address and facsimile number on its
Purchaser signature page attached hereto, with copies to such Purchaser's
counsel as set forth on such Purchaser's signature page. Each party shall
provide five (5) day's prior written notice to the other party of any change
in address or facsimile number.
SECTION 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns. The Company shall not assign this
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Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers. Any Purchaser may assign its rights hereunder
without the consent of the Company, PROVIDED HOWEVER, that any such
assignment shall not release such Purchaser from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption.
SECTION 8.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
SECTION 8.9 SURVIVAL. Unless this Agreement is terminated under
Section 8.12, the representations and warranties of the Company and the
Purchaser contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4, 5, and 6, and the indemnification provisions set forth in Section
7, shall survive the Closing. The Purchaser shall be responsible only for its
own representations, warranties, agreements, and covenants hereunder.
SECTION 8.10 PUBLICITY. The Company and Purchasers shall have the right
to approve, before issuance, any press releases or any other public statements
with respect to the transactions contemplated hereby; PROVIDED HOWEVER, that the
Company shall be entitled, without the prior approval of Purchasers, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although the Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
SECTION 8.11 FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments, and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
SECTION 8.12 TERMINATION. In the event that the Closing shall not have
occurred with respect to the Purchaser on or before five (5) business days from
the date hereof due to the Company's or Purchasers' failure to satisfy the
conditions set forth in Sections 5 and 6 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party.
SECTION 8.13 FINDER. The Company acknowledges that it has engaged a
finder in connection with the sale of the Purchased Common Shares, which finder
may have formally or informally engaged other agents on its behalf. The Company
shall be responsible for the payment of any finder's fees (which includes cash
and warrants to purchase Common Stock) relating to or arising out of the
transactions contemplated hereby.
SECTION 8.14 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
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COMPANY SIGNATURE PAGE
TO
COMMON STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, Purchasers and the Company have caused this Common
Stock Purchase Agreement to be duly executed as of the date first written above.
COMPANY
TELECOM WIRELESS CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Xxxxx X. Xxxxxxx, President
[SIGNATURES OF PURCHASERS ON FOLLOWING PAGES.]
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PURCHASER SIGNATURE PAGE
TO
COMMON STOCK PURCHASE AGREEMENT
PURCHASER
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
===============================================================================
PURCHASER NAME
("PURCHASER")
ADDRESS AND
FACSIMILE NUMBER
-------------------------------------------------------------------------------
SECURITIES PURCHASED
-------------------------------------------------------------------------------
PURCHASE PRICE
-------------------------------------------------------------------------------
PURCHASER'S LEGAL COUNSEL
ADDRESS AND
FACSIMILE NUMBER
-------------------------------------------------------------------------------
===============================================================================
-1-
PURCHASER SIGNATURE PAGE
TO
COMMON STOCK PURCHASE AGREEMENT
PURCHASER
----------------------------------
[Individual Purchaser Name]
===============================================================================
PURCHASER NAME
("PURCHASER")
ADDRESS AND
FACSIMILE NUMBER
-------------------------------------------------------------------------------
SECURITIES PURCHASED
-------------------------------------------------------------------------------
PURCHASE PRICE
-------------------------------------------------------------------------------
PURCHASER'S LEGAL COUNSEL
ADDRESS AND
FACSIMILE NUMBER
-------------------------------------------------------------------------------
===============================================================================
-1-
SCHEDULE 1
DISCLOSURE SCHEDULE
TO
COMMON STOCK
PURCHASE AGREEMENT
SECTION 3.3 CAPITALIZATION.
SECTION 3.5 CONFLICTS.
SECTION 3.6 FINANCIAL STATEMENTS.
SECTION 3.8 LITIGATION
SECTION 3.14 INTELLECTUAL PROPERTY
SECTION 3.16 LIENS
SECTION 3.21 TAX STATUS
SECTION 3.22 CERTAIN TRANSACTIONS
SECTION 4.4 USE OF PROCEEDS
-1-
EXHIBIT A
TO
COMMON STOCK
PURCHASE AGREEMENT
FORM OF REPRICING WARRANT
-1-
EXHIBIT B
TO
COMMON STOCK
PURCHASE AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
-1-
EXHIBIT C
TO
COMMON STOCK
PURCHASE AGREEMENT
FORM OF ESCROW AGREEMENT
-1-
EXHIBIT D
TO
COMMON STOCK
PURCHASE AGREEMENT
FORM OF PLACEMENT AGENT AGREEMENT
-1-
EXHIBIT E
TO
COMMON STOCK
PURCHASE AGREEMENT
OPINION OF COMPANY COUNSEL
-2-
EXHIBIT F
TO
COMMON STOCK
PURCHASE AGREEMENT
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
-1-
Schedule to Common Stock Purchase Agreement
Dated May 25, 1999
Identifying Purchasers
Purchaser Date No. of Shares
--------- ---- -------------
Anglo Irish Nominees (Trusts) Ltd. A/C GRC241 May 1999 10,000
Xxxxxx Xxx May 25, 1999 35,000
Chelverton Fund Ltd. May 25, 1999 15,000
Thomson Kernaghan & Co., Ltd., As Agent June 9, 1999 180,000
Xxxxxxx X. Xxxxxxxxx July 2, 1999 2,000
Xxxxxx X. Xxxxx July 2, 1999 6,000
Xxxxxx X. Xxxxx July 2, 1999 2,000
Xxxx X. Xxxxx, Xx. July 2, 1999 2,000
Arab Commerce Bank Ltd. July 2, 1999 14,285
Xxxxx Xxxx July 16, 1999 1,000
Xxxxxx X. Xxxxxx July 16, 1999 1,000
Xxxxxxx X. Xxxxxxxxx, Xx. July 16, 1999 7,000
Xxxx Xxxxxxxx July 16, 1999 5,000
Xxxxxxx Xxxxxxxx July 16, 1999 5,000
Xxxxxx Xxxxxxxx July 16, 1999 2,000
Xxxxxx X. XxXxxx July 16, 1999 6,000
Xxxxx Family Trust July 16, 1999 3,500
Xxxxx and Xxxxxx Xxxxxx July 16, 1999 1,000