Exhibit 2.1
AMENDMENT AGREEMENT
This Amendment Agreement ("Amendment"), dated January 26, 2006, is made
(i) that certain Securities Purchase Agreement ("2003 Purchase Agreement") dated
as of July 14, 2003 by and between WaveRider Communications Inc. (the "Company")
and Crescent International Ltd. ("Crescent") for the purchase of the Convertible
Debenture due July 14, 2006 (the "2003 Debenture") and the Common Stock Purchase
Warrants issued to Crescent in connection therewith (the "2003 Warrant"), (ii)
that certain Securities Purchase Agreement ("April 2004 Purchase Agreement")
dated as of April 23, 2004 by and between the Company and Crescent for the
purchase of the Convertible Debenture due April 23, 2007 (the "April 2004
Debenture") and the Common Stock Purchase Warrants issued to Crescent in
connection therewith (the "April ▇▇▇▇ ▇▇▇▇▇▇▇") and (iii) that certain
Securities Purchase Agreement ("November 2004 Purchase Agreement") dated as of
November 12, 2004 by and between the Company and Crescent for the purchase of
the Convertible Debenture due November 12, 2006 (the "November 2004 Debenture")
and the Common Stock Purchase Warrants issued to Crescent in connection
therewith (the "November ▇▇▇▇ ▇▇▇▇▇▇▇"). All such documents hereinafter
collectively referred to as the "Transaction Documents", the 2003 Purchase
Agreement, the April 2004 Purchase Agreement and the November 2004 Purchase
Agreement collectively referred to as the "Purchase Agreements", the 2003
Debenture, the April ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the November 2004 Debenture collectively
referred to as the "Debentures" and the 2003 Warrant, the April ▇▇▇▇ ▇▇▇▇▇▇▇ and
the November 2004 Warrant collectively referred to as the "Warrants".
Capitalized terms used and not otherwise defined herein that are defined in the
November 2004 Purchase Agreement shall have the meanings given such terms in the
November 2004 Purchase Agreement.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Consent to Merger. Crescent hereby consents to the merger (the
"Merger") of the Company into Wave Acquisition Corporation, a Nevada
corporation ("Wave Acquisition"), a wholly owned subsidiary of Wave
Wireless Corporation ("Wave Wireless") and waives any events of default
under the Debentures that resulted solely from the Merger being deemed
a Change of Control Transaction thereunder.
2. Issuance of Shares of Preferred Stock. The Company hereby issues to
Crescent 350 shares of preferred stock (the "Series D Preferred Stock")
of the Company having the rights, preferences and privileges set forth
in the Certificate of Designation filed, or to be filed promptly
hereafter, by the Company with the Secretary of State of Nevada, in the
form of Exhibit A attached hereto.
3. Proviso to Fundamental Transaction Provision in Debentures. The
following proviso is hereby added to Section 4(c)(ix) of the 2003
Debenture and April 2004 Debenture and Section 5(d) of the November
2004 Debenture: "Notwithstanding anything herein to the contrary, upon
the closing of the merger of the Company into Wave Acquisition
Corporation, a Nevada corporation ("Wave Acquisition"), a wholly owned
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subsidiary of Wave Wireless Corporation ("Wave Wireless"), provided
such closing occurs on or before June 30, 2006, the Holder shall
exchange the principal amount outstanding on the Debentures for
securities of Wave Wireless on the terms and conditions set forth in
the term sheet dated January 26, 2006 regarding the issuance of Wave
Wireless Series H Convertible Preferred Stock, Series H Warrants and
Common Stock, delivered to the Holders on January 26, 2006, or such
terms as are less favorable to Wave Wireless if agreed to by the other
participants and Wave Wireless (the "WW Securities"), except that, for
each $1 principal amount outstanding of the Debentures exchanged by
the Holder, the Holder shall receive $1.4591 of WW Securities,
otherwise on the same terms and conditions as any other participant
purchasing WW Securities, which shall include, but not be limited to,
the right to include all shares of common stock underlying the WW
Securities included on the Wave Wireless registration to be filed on
Form S-4 with the Commission relating to the Merger. By way of
example, if $1,000,000 principal amount outstanding of the Debentures
is exchanged upon the consummation of the Merger, the Holder shall
receive an amount of WW Securities equal to the amount of WW
Securities issuable to an investor that had paid cash consideration of
$1,459,100 for WW Securities. This proviso shall be conditioned upon
the Holder's approval and satisfaction of the final documentation
relating to the issuance of the WW Securities."
4. Increase in Beneficial Ownership Savings Clauses. The parties hereby
agree to amend Section 4(a)(ii) of the 2003 Debenture and Section 3(c)
of the 2003 Warrant such that the maximum beneficial ownership of
Crescent permitted thereunder is 9.99%.
5. Limitations on Conversions. Until the earlier of (a) June 30, 2006, (b)
the date of the consummation of the Merger and (c) the date the
agreement to effect the Merger is terminated, Crescent hereby agrees
not to voluntarily convert more than $100,000, in the aggregate, of the
Debentures into Common Stock pursuant to the terms thereof.
6. Right to Exchange Common Stock for Convertible Securities of Wave
Wireless. To the extent that, immediately following the Merger,
Crescent would otherwise beneficially own more than 9.9% of the common
stock of Wave Wireless (calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder),
Crescent shall have the right to require Wave Wireless to exchange such
shares of common stock that cause Crescent's beneficial ownership to
exceed 9.9% for shares of convertible preferred stock of Wave Wireless
issued to Crescent in partial exchange for the Debentures in connection
with the Merger.
7. Agreement to Vote in Favor of the Merger. Crescent agrees to vote all
Common Stock and Series D Preferred Stock over which it has direct
voting control in favor of the resolution presented to the shareholders
of the Company to approve the Merger.
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8. Documents. The rights and obligations of Crescent and of the Company
with respect to the shares of Series D Preferred Stock and the shares
of Common Stock issuable thereunder (the "Additional Underlying
Shares") shall be identical in all respects to the rights and
obligations of Crescent and of the Company with respect to the
Debentures, the Warrants and the Underlying Shares issued and issuable
pursuant to the November 2004 Purchase Agreement. Any rights of
Crescent or covenants of the Company which are dependant on Crescent
holding securities of the Company or which are determined in magnitude
by such Crescent's purchase of securities pursuant to the November
2004 Purchase Agreement shall be deemed to include any securities
purchased or issuable hereunder. The November 2004 Purchase Agreement
is hereby amended so that the term "Debentures" includes the Series D
Preferred Stock issued hereunder and "Underlying Shares" includes the
Additional Underlying Shares. Additionally, the Registration Rights
Agreement entered into in connection with the November 2004 Purchase
Agreement is hereby amended so that the term "Registrable Securities"
includes in the calculation thereof the Additional Underlying Shares;
provided, however, as to the Additional Underlying Shares only, "date
hereof" where used shall be deemed the date hereof.
9. Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules attached to
the Purchase Agreement and the Security Agreement and except as set
forth on Schedule 9 attached hereto, if any, all representations and
warranties of the Company contained in the November 2004 Purchase
Agreement were true and correct when made and remain true and correct
as of the date hereof, as though made at and as of the date hereof.
Except as set forth on Schedule 6 attached hereto, the Company has
performed all of the covenants of the Company contained in the
Transaction Documents to be performed by the Company through the date
hereof.
10. Representations and Warranties of Crescent. Crescent hereby represents
and warrants to the Company that its representations and warranties
listed in Section 3.2 of the November 2004 Purchase Agreement are true
and correct as of the date hereof.
11. Delivery of Opinions. Concurrently herewith, the Company shall deliver
to Crescent an opinion of outside counsel in form and substance
substantially similar to the opinion delivered at the closing pursuant
the November 2004 Purchaser Agreement reasonably acceptable to
Crescent. Additionally, the Company shall deliver to Crescent an
opinion of outside counsel opining that, following the execution of
this Amendment and issuance of the Series D Preferred Stock, the
resale of the Conversion Shares underlying the 2003 Debenture by
Crescent is permitted pursuant to Rule 144(k) under the Securities Act
and, upon conversion of the 2003 Debenture, such Conversion Shares may
be issued to the Crescent without any restrictive legend.
12. Incorporation by Reference. Except as set forth in this Amendment, each
of the Purchase Agreements and the Registration Rights Agreements (with
all exhibits attached thereto) are hereby incorporated by reference and
made a part hereof.
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13. Public Disclosure. The Company shall, on the Trading Day following the
date hereof, issue a Current Report on Form 8-K, reasonably acceptable
to Crescent, disclosing the material terms of the transactions
contemplated hereby, and shall attach this Amendment thereto. The
Company shall consult with Crescent in issuing any other press releases
with respect to the transactions contemplated hereby.
14. Effect on Purchase Agreement. Except as expressly set forth above, all
of the terms and conditions of the Purchase Agreements, the Debentures
and the Warrants shall continue in full force and effect after the
execution of this Amendment, and shall not be in any way changed,
modified or superseded by the terms set forth herein, including but not
limited to, any other obligations the Company may have to Crescent
under the Transaction Documents (such as anti-dilution rights). By
entering into this Amendment, Crescent does not agree to waive, or
release the Company in any way from, any existing defaults, events of
defaults or any other breaches under the Transaction Documents.
15. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been
signed by each party and delivered to the other parties hereto, it
being understood that all parties need not sign the same counterpart.
Execution of this Amendment may be made by delivery by facsimile.
16. Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Executed as of January 26, 2006 by the undersigned duly authorized
representatives of the Company and Crescent:
WAVERIDER COMMUNICATIONS INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:Chief Executive Officer
CRESCENT INTERNATIONAL LTD.
Signature of Authorized Signatory of Crescent: /s/ ▇▇▇ ▇▇▇▇ /s/ Maxi Brezzi
------------------------------
Name of Authorized Signatory: ▇▇▇ ▇▇▇▇ Maxi Brezzi
------------------------------
Title of Authorized Signatory: Authorized Signatory
----------------------------------------------
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EXHIBIT A
WAVERIDER COMMUNICATIONS INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 78.1955 OF THE
NEVADA GENERAL CORPORATION LAW
The undersigned, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, do hereby
certify that:
1. They are the Chief Executive Officer and Secretary,
respectively, of, WaveRider Communications Inc., a Nevada corporation (the
"Corporation").
2. The Corporation is authorized to issue 5,000,000 shares of
preferred stock, none of which have been issued.
3. The following resolutions were duly adopted by the Board of
Directors:
WHEREAS, the Certificate of Incorporation of the Corporation provides
for a class of its authorized stock known as preferred stock, comprised of
5,000,000 shares, $0.01 par value, issuable from time to time in one or more
series;
WHEREAS, the Board of Directors of the Corporation is authorized to fix
the dividend rights, dividend rate, voting rights, conversion rights, rights and
terms of redemption and liquidation preferences of any wholly unissued series of
preferred stock and the number of shares constituting any series and the
designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the preferred stock,
which shall consist of up to 1,000 shares of the preferred stock which the
corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or exchange of
other securities, rights or property and does hereby fix and determine the
rights, preferences, restrictions and other matters relating to such series of
preferred stock as follows:
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TERMS OF PREFERRED STOCK
Section 1. Definitions. Capitalized terms used and not
otherwise defined herein that are defined in the Purchase Agreement shall have
the meanings given such terms in the Purchase Agreement. For the purposes
hereof, the following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in
Section 7(e).
"Amendment Agreement" shall mean the Amendment Agreement,
dated January 26, 2006, between the Corporation and the Holders.
"Bankruptcy Event" means any of the following events: (a) the
Corporation or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) thereof commences a case or other
proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the
Corporation or any Significant Subsidiary thereof; (b) there is
commenced against the Corporation or any Significant Subsidiary thereof
any such case or proceeding that is not dismissed within 60 days after
commencement; (c) the Corporation or any Significant Subsidiary thereof
is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the
Corporation or any Significant Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part
of its property that is not discharged or stayed within 60 days; (e)
the Corporation or any Significant Subsidiary thereof makes a general
assignment for the benefit of creditors; (f) the Corporation or any
Significant Subsidiary thereof calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its
debts; or (g) the Corporation or any Significant Subsidiary thereof, by
any act or failure to act, expressly indicates its consent to, approval
of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.
"Base Conversion Price" shall have the meaning set forth in
Section 7(b).
"Buy-In" shall have the meaning set forth in Section
6(e)(iii).
"Change of Control Transaction" means the occurrence after the
date hereof of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the
Corporation, by contract or otherwise) of in excess of 33% of the
voting securities of the Corporation (other than by means of conversion
or exercise of Preferred Stock and the Securities issued together with
the Preferred Stock), or (ii) the Corporation merges into or
consolidates with any other Person, or any Person merges into or
consolidates with the Corporation and, after giving effect to such
transaction, the stockholders of the Corporation immediately prior to
such transaction own less than 66% of the aggregate voting power of the
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Corporation or the successor entity of such transaction, or (iii) the
Corporation sells or transfers its assets, as an entirety or
substantially as an entirety, to another Person and the stockholders of
the Corporation immediately prior to such transaction own less than 66%
of the aggregate voting power of the acquiring entity immediately after
the transaction, (iv) a replacement at one time or within a one year
period of more than one-half of the members of the Corporation's board
of directors which is not approved by a majority of those individuals
who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors
on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on
the date hereof), or (v) the execution by the Corporation of an
agreement to which the Corporation is a party or by which it is bound,
providing for any of the events set forth above in (i) through (iv).
Notwithstanding anything herein to the contrary, the Merger shall not
be deemed a Change of Control Transaction for purposes of this
Certificate of Designation.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Corporation's common stock, par value
$0.001 per share, and stock of any other class of securities into which
such securities may hereafter have been reclassified or changed into.
"Common Stock Equivalents" means any securities of the
Corporation or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including, without limitation, any
debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
"Conversion Amount" means the sum of the Stated Value at
issue.
"Conversion Date" shall have the meaning set forth in Section
6(a).
"Conversion Price" shall have the meaning set forth in Section
6(b).
"Conversion Shares" means, collectively, the shares of Common
Stock into which the shares of Preferred Stock are convertible in
accordance with the terms hereof.
"Dilutive Issuance" shall have the meaning set forth in
Section 7(b).
"Dilutive Issuance Notice" shall have the meaning set forth in
Section 7(b).
"Effective Date" means the date that a registration statement
registering for resale all of the Conversion Shares is declared
effective by the Commission.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Corporation
pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Corporation or a
majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise of or
conversion of any securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the Original Issue Date, provided that
such securities have not been amended since the Original Issue Date to
increase the number of such securities or to decrease the exercise or
conversion price of any such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions approved by a
majority of the disinterested directors, provided any such issuance
shall only be to a Person which is, itself or through its subsidiaries,
an operating company in a business synergistic with the business of the
Corporation and in which the Corporation receives benefits in addition
to the investment of funds, but shall not include a transaction in
which the Corporation is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing
in securities.
"Fundamental Transaction" shall have the meaning set forth in
Section 7(e).
"Holder" shall have the meaning given such term in Section 2.
"Junior Securities" means the Common Stock and all other
Common Stock Equivalents of the Corporation other than those securities
which are explicitly senior or pari passu in dividend rights or
liquidation preference to the Preferred Stock.
"Liquidation" shall have the meaning given such term in
Section 5.
"Merger" the merger of the Corporation into Wave Acquisition.
"New York Courts" shall have the meaning given such term in
Section 11(d).
"Notice of Conversion" shall have the meaning given such term
in Section 6(a).
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Preferred Stock regardless of the number
of transfers of any particular shares of Preferred Stock and regardless
of the number of certificates which may be issued to evidence such
Preferred Stock.
"Preferred Stock" shall have the meaning given such term in
Section 2.
"Purchase Agreement" shall mean the Securities Purchase
Agreement, dated November 12, 2004, between the Corporation and the
Holders.
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"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Share Delivery Date" shall have the meaning given such term
in Section 6(d).
"Stated Value" shall have the meaning given such term in
Section 2.
"Subsidiary" shall mean a direct or indirect subsidiary of the
Corporation.
"Trading Day" means a day on which the Common Stock is traded
on a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq Capital Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Triggering Event" shall have the meaning set forth in Section
9(a).
"Triggering Redemption Amount" for each share of Preferred
Stock means the sum of (i) the greater of (A) 120% of the Stated Value
and (B) the product of (a) the VWAP on the Trading Day immediately
preceding the date of the Triggering Event and (b) the Stated Value
divided by the then Conversion Price, (ii) all accrued but unpaid
dividends thereon and (iii) all liquidated damages and other costs,
expenses or amounts due in respect of the Preferred Stock.
"Triggering Redemption Payment Date" shall have the meaning
set forth in Section 9(b).
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a Trading Day
from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the OTC
Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the OTC Bulletin Board; (c) if the Common Stock is not then listed
or quoted on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the "Pink Sheets" published by Pink Sheets, LLC
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(or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common
Stock so reported; or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by the Purchasers and reasonably acceptable to
the Corporation.
"Wave Acquisition" shall mean Wave Acquisition Corporation,
a wholly owned subsidiary of Wave Wireless.
"Wave Wireless" shall mean Wave Wireless Corporation, a
company duly incorporated in the State of Nevada.
Section 2. Designation, Amount and Par Value. The series of
preferred stock shall be designated as its Series D Convertible
Preferred Stock (the "Preferred Stock") and the number of shares so
designated shall be up to 1,000 (which shall not be subject to increase
without the consent of all of the holders of the Preferred Stock (each,
a "Holder" and collectively, the "Holders")). Each share of Preferred
Stock shall have a par value of $0.01 per share and a stated value
equal to $1,000 subject to increase set forth in Section 3(a) below
(the "Stated Value").
Section 3. Dividends.
--------- ---------
a) No dividends shall be paid in respect of the Preferred Stock.
b) So long as any Preferred Stock shall remain outstanding, neither
the Corporation nor any Subsidiary thereof shall redeem, purchase
or otherwise acquire directly or indirectly any Junior Securities
except as expressly permitted by Section 9(a)(vi). So long as any
Preferred Stock shall remain outstanding, neither the Corporation
nor any Subsidiary thereof shall directly or indirectly pay or
declare any dividend or make any distribution (other than a
dividend or distribution described in Section 7 or dividends due
and paid in the ordinary course on preferred stock of the
Corporation at such times when the Corporation is in compliance
with its payment and other obligations hereunder) upon, nor shall
any distribution be made in respect of, any Junior Securities so
long as any dividends due on the Preferred Stock remain unpaid,
nor shall any monies be set aside for or applied to the purchase
or redemption (through a sinking fund or otherwise) of any Junior
Securities or shares pari passu with the Preferred Stock.
Section 4. Voting Rights. Other than in connection with the
approval of the Merger, the Preferred Stock shall have no voting
rights. Solely in connection with the approval of the Merger, the
Preferred Stock shall have voting rights equal to one vote for each
Conversion Share underlying such share of Preferred Stock.
Accordingly, as of the Original Issue Date, each share of Preferred
Stock shall have the right to vote as if such Holder held 20,000
shares of Common Stock (subject to adjustment as per Section 7
herein). Additionally, so long as any shares of Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote
of the Holders of a majority of the shares of the Preferred Stock then
outstanding, (a) alter or change adversely the powers, preferences or
rights given to the Preferred Stock or
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alter or amend this Certificate of Designation, (b) authorize or
create any class of stock ranking as to dividends, redemption or
distribution of assets upon a Liquidation (as defined in Section 5)
senior to or otherwise pari passu with the Preferred Stock, (c) amend
its certificate of incorporation or other charter documents so as to
affect adversely any rights of the Holders, (d) increase the
authorized number of shares of Preferred Stock, or (e) enter into any
agreement with respect to the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), the Holders shall be entitled to receive out of the
assets of the Corporation, whether such assets are capital or surplus,
for each share of Preferred Stock an amount equal to the Stated Value
per share plus any accrued and unpaid dividends thereon and any other
fees or liquidated damages owing thereon before any distribution or
payment shall be made to the holders of any Junior Securities, and if
the assets of the Corporation shall be insufficient to pay in full
such amounts, then the entire assets to be distributed to the Holders
shall be distributed among the Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts
payable thereon were paid in full. A Fundamental Transaction or Change
of Control Transaction shall not be treated as a Liquidation. The
Corporation shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each
record Holder.
Section 6. Conversion.
--------- ----------
a) Conversions at Option of Holder. At any time following
(i) the termination of the Merger or (ii) June 30, 2006, each
share of Preferred Stock shall be convertible at the option of
the Holder, at any time and from time to time from and after the
Original Issue Date into that number of shares of Common Stock
(subject to the limitations set forth in Section 6(c) determined
by dividing the Stated Value of such share of Preferred Stock by
the Conversion Price. Holders shall effect conversions by
providing the Corporation with the form of conversion notice
attached hereto as Annex A (a "Notice of Conversion"). Each
Notice of Conversion shall specify the number of shares of
Preferred Stock to be converted, the number of shares of
Preferred Stock owned prior to the conversion at issue, the
number of shares of Preferred Stock owned subsequent to the
conversion at issue and the date on which such conversion is to
be effected, which date may not be prior to the date the Holder
delivers such Notice of Conversion to the Corporation by
facsimile (the "Conversion Date"). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be
the date that such Notice of Conversion to the Corporation is
deemed delivered hereunder. The calculations and entries set
forth in the Notice of Conversion shall control in the absence of
manifest or mathematical error. To effect conversions, as the
case may be, of shares of Preferred Stock, a Holder shall not be
required to surrender the certificate(s) representing such shares
of Preferred Stock to the Corporation unless all of the shares of
Preferred Stock represented thereby are so converted, in which
case the Holder shall deliver the certificate representing such
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shares of Preferred Stock promptly following the Conversion Date
at issue. Shares of Preferred Stock converted into Common Stock
or redeemed in accordance with the terms hereof shall be canceled
and may not be reissued.
b) Conversion Price. The conversion price for the Preferred
Stock shall equal $0.05, subject to adjustment as per Section 7
herein (the "Conversion Price").
c) Beneficial Ownership Limitation. The Corporation shall
not effect any conversion of the Preferred Stock, and a Holder
shall not have the right to convert any portion of the Preferred
Stock to the extent that after giving effect to such conversion,
as set forth on the applicable Notice of Conversion, such Holder
(together with such Holder's Affiliates, and any other person or
entity acting as a group together with such Holder or any of such
Holder's Affiliates) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock
beneficially owned by such Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such
determination is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A)
conversion of the remaining, nonconverted Stated Value of
Preferred Stock beneficially owned by such Holder or any of its
affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Corporation
subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by such Holder
or any of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 6(c), beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 6(c) applies, the determination of whether the Preferred
Stock is convertible (in relation to other securities owned by
such Holder together with any Affiliates) and of which shares of
Preferred Stock is convertible shall be in the sole discretion of
such Holder, and the submission of a Notice of Conversion shall
12
be deemed to be such Holder's determination of whether the shares
of Preferred Stock may be converted (in relation to other
securities owned by such Holder) and which shares of the
Preferred Stock is convertible, in each case subject to such
aggregate percentage limitations. To ensure compliance with this
restriction, each Holder will be deemed to represent to the
Corporation each time it delivers a Notice of Conversion that
such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Corporation shall have no
obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance
with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section
6(c), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of
Common Stock as reflected in the most recent of the following:
(A) the Corporation's most recent Form 10-QSB or Form 10-KSB, as
the case may be, (B) a more recent public announcement by the
Corporation or (C) any other notice by the Corporation or the
Corporation's transfer agent setting forth the number of shares
of Common Stock outstanding. Upon the written or oral request of
a Holder, the Corporation shall within two Trading Days confirm
orally and in writing to such Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the
Corporation, including the Preferred Stock, by such Holder or its
affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The "Beneficial Ownership
Limitation" shall be 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon conversion of Preferred
Stock held by the Holder. The Beneficial Ownership Limitation
provisions of this Section 6(c) may be waived by such Holder, at
the election of such Holder, upon not less than 61 days' prior
notice to the Corporation to change the Beneficial Ownership
Limitation to 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of Preferred Stock held by
the Holder, and the provisions of this Section 6(c) shall
continue to apply. Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to
such 9.99% limitation, the Beneficial Ownership Limitation may
not be further waived by such Holder. The provisions of this
paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this
Section 6(c) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of Preferred Stock.
d) Mechanics of Conversion
i. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after each Conversion Date (the "Share Delivery Date"),
the Corporation shall deliver or cause to be delivered to the Holder a
certificate or certificates which, after the Effective Date, shall be
free of restrictive legends and trading restrictions (other than those
required by the Purchase Agreement) representing the number of shares
of Common Stock being acquired upon the conversion of shares of
Preferred Stock. If in the case of any Notice of Conversion such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after the Conversion Date,
13
the Holder shall be entitled to elect by written notice to the
Corporation at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion, in which event
the Corporation shall immediately return the certificates representing
the shares of Preferred Stock tendered for conversion.
ii. Obligation Absolute; Partial Liquidated Damages. The
Corporation's obligations to issue and deliver the Conversion Shares
upon conversion of Preferred Stock in accordance with the terms hereof
are absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach
by the Holder or any other Person of any obligation to the Corporation
or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Corporation to the Holder in
connection with the issuance of such Conversion Shares. In the event a
Holder shall elect to convert any or all of the Stated Value of its
Preferred Stock, the Corporation may not refuse conversion based on
any claim that such Holder or any one associated or affiliated with
the Holder of has been engaged in any violation of law, agreement or
for any other reason, unless an injunction from a court, on notice to
Holder, restraining and or enjoining conversion of all or part of this
Preferred Stock shall have been sought and obtained. In the absence of
an injunction precluding the same, the Corporation shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed
conversion. If the Corporation fails to deliver to the Holder such
certificate or certificates pursuant to Section 6(d)(i) within two
Trading Days of the Share Delivery Date applicable to such conversion,
the Corporation shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $5,000 of Stated Value of
Preferred Stock being converted, $50 per Trading Day (increasing to
$100 per Trading Day after 3 Trading Days and increasing to $200 per
Trading Day six Trading Days after such damages begin to accrue) for
each Trading Day after such second Trading Day after the Share
Delivery Date until such certificates are delivered. Nothing herein
shall limit a Holder's right to pursue actual damages for the
Corporation's failure to deliver certificates representing shares of
Common Stock upon conversion within the period specified herein and
such Holder shall have the right to pursue all remedies available to
it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.
iii. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. If the Corporation fails to deliver to
the Holder such certificate or certificates pursuant to Section
6(e)(i) by a Share Delivery Date, and if after such Share Delivery
Date the Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which
14
the Holder was entitled to receive upon the conversion relating to
such Share Delivery Date (a "Buy-In"), then the Corporation shall pay
in cash to the Holder (in addition to any other remedies available to
or elected by the Holder) the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled to
receive from the conversion at issue multiplied by (2) the price at
which the sell order giving rise to such purchase obligation was
executed (including brokerage commissions, if any). For example, if
the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of
shares of Preferred Stock with respect to which the aggregate sale
price giving rise to such purchase obligation is $10,000, the
Corporation shall be required to pay the Holder $1,000. The Holder
shall provide the Corporation written notice indicating the amounts
payable to the Holder in respect of the Buy-In, together with
applicable confirmations and other evidence reasonably requested by
the Corporation. Nothing herein shall limit a Holder's right to pursue
any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Corporation's failure to timely
deliver certificates representing shares of Common Stock upon
conversion of the shares of Preferred Stock as required pursuant to
the terms hereof.
iv. Reservation of Shares Issuable Upon Conversion. The
Corporation covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock
solely for the purpose of issuance upon conversion of the Preferred
Stock and payment of dividends on the Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holders of the Preferred
Stock, not less than such number of shares of the Common Stock as
shall be issuable (taking into account the adjustments and
restrictions of Section 7) upon the conversion of all outstanding
shares of Preferred Stock. The Corporation covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid and nonassessable.
v. Fractional Shares. Upon a conversion hereunder, the
Corporation shall not be required to issue stock certificates
representing fractions of shares of Common Stock, but may if otherwise
permitted, make a cash payment in respect of any final fraction of a
share based on the VWAP at such time. If the Corporation elects not,
or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
vi. Transfer Taxes. The issuance of certificates for shares of
the Common Stock on conversion of this Preferred Stock shall be made
without charge to the Holder hereof for any documentary stamp or
15
similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Corporation shall not be
required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such shares of
Preferred Stock so converted and the Corporation shall not be required
to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.
Section 7. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Corporation, at any time
while this Preferred Stock is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common
Stock or any other Common Stock Equivalents payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of or as a dividend
on this Preferred Sock), (B) subdivides outstanding shares of Common Stock
into a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of
shares, or (D) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Corporation, then the Conversion Price shall
be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 7(a) shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Corporation or any Subsidiary
thereof, as applicable, at any time while this Preferred Stock is
outstanding, shall sell, grant any option to purchase or sell or grant any
right to reprice its securities, or otherwise dispose of or issue (or
announce any sale, grant or any option to purchase or other disposition)
any Common Stock or Common Stock Equivalents entitling any Person to
acquire shares of Common Stock, at an effective price per share less than
the then Conversion Price (such lower price, the "Base Conversion Price"
and such issuances collectively, a "Dilutive Issuance") (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion
Price on such date of the Dilutive Issuance), then the Conversion Price
shall be reduced to equal the Base Conversion Price. Notwithstanding the
foregoing, no adjustment will be made under this Section 7(b) in respect of
16
an Exempt Issuance. The Corporation shall notify the Holder in writing, no
later than the Business Day following the issuance of any Common Stock or
Common Stock Equivalents subject to this section, indicating therein the
applicable issuance price, or applicable reset price, exchange price,
conversion price and other pricing terms (such notice the "Dilutive
Issuance Notice"). For purposes of clarification, whether or not the
Corporation provides a Dilutive Issuance Notice pursuant to this Section
7(b), upon the occurrence of any Dilutive Issuance, after the date of such
Dilutive Issuance the Holder is entitled to receive a number of Conversion
Shares based upon the Base Conversion Price regardless of whether the
Holder accurately refers to the Base Conversion Price in the Notice of
Conversion.
c) Subsequent Rights Offerings. If the Corporation, at any time while
the Preferred Stock is outstanding, shall issue rights, options or warrants
to all holders of Common Stock (and not to Holders) entitling them to
subscribe for or purchase shares of Common Stock at a price per share less
than the VWAP at the record date mentioned below, then the Conversion Price
shall be multiplied by a fraction, of which the denominator shall be the
number of shares of the Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common
Stock offered for subscription or purchase, and of which the numerator
shall be the number of shares of the Common Stock outstanding on the date
of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered (assuming
receipt by the Corporation in full of all consideration payable upon
exercise of such rights, options or warrants) would purchase at such VWAP.
Such adjustment shall be made whenever such rights or warrants are issued,
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.
d) Pro Rata Distributions. If the Corporation, at any time while
Preferred Stock is outstanding, shall distribute to all holders of Common
Stock (and not to Holders) evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for
or purchase any security (other than Common Stock, which shall be subject
to Section 7(b)), then in each such case the Conversion Price shall be
adjusted by multiplying such Conversion Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be
the VWAP determined as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date less the then fair market
value at such record date of the portion of such assets, evidence of
indebtedness or rights or warrants so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described
in a statement provided to the Holder of the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable to
one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
17
e) Fundamental Transaction. If, at any time while this Preferred Stock
is outstanding, (A) the Corporation effects any merger or consolidation of
the Corporation with or into another Person, (B) the Corporation effects
any sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether by
the Corporation or another Person) is completed pursuant to which holders
of Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (D) the Corporation effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then upon any subsequent conversion of this
Preferred Stock, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the
same kind and amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if
it had been, immediately prior to such Fundamental Transaction, the holder
of one share of Common Stock (the "Alternate Consideration"). For purposes
of any such conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based on
the amount of Alternate Consideration issuable in respect of one share of
Common Stock in such Fundamental Transaction, and the Corporation shall
apportion the Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this
Preferred Stock following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to the
Corporation or surviving entity in such Fundamental Transaction shall file
a new Certificate of Designation with the same terms and conditions and
issue to the Holder new preferred stock consistent with the foregoing
provisions and evidencing the Holder's right to convert such preferred
stock into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring
any such successor or surviving entity to comply with the provisions of
this Section 7(e) and insuring that this Preferred Stock (or any such
replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction. Notwithstanding
anything herein to the contrary, upon the closing of the Merger, provided
such closing occurs on or before June 30, 2006, each Holder shall exchange
all outstanding shares of Preferred Stock for securities of Wave Wireless
on the terms and conditions referenced in the Amendment Agreement, or such
terms as are less favorable to Wave Wireless if agreed to by the other
participants and Wave Wireless (the "WW Securities"), except that, for each
$1 Stated Value of outstanding Preferred Stock exchanged by the Holder, the
Holder shall receive $1.4591 of WW Securities, otherwise on the same terms
and conditions as any other participant purchasing WW Securities, which
shall include but not be limited to, the right to include all shares of
common stock underlying the WW Securities included on the Wave Wireless
registration to be filed on Form S-4 with the Commission relating to the
18
Merger. By way of example, if $1,000,000 Stated Value of outstanding
Preferred Stock is exchanged upon the consummation of the Merger, the
Holder shall receive an amount of WW Securities equal to the amount of WW
Securities issuable to an investor that had paid cash consideration of
$1,459,100 for WW Securities. This proviso shall be conditioned upon the
Holder's approval and satisfaction of the final documentation relating to
the issuance of the WW Securities.
f) Calculations. All calculations under this Section 7 shall be
made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 7, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
g) Notice to Holders.
i. Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to any provision of this Section 7,
the Corporation shall promptly mail to each Holder a notice
setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Conversion by Holder. If (A) the
Corporation shall declare a dividend (or any other distribution
in whatever form) on the Common Stock; (B) the Corporation shall
declare a special nonrecurring cash dividend on or a redemption
of the Common Stock; (C) the Corporation shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of
the Corporation shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which the Corporation is a party, any sale or transfer of all
or substantially all of the assets of the Corporation, of any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property; (E) the Corporation
shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation;
then, in each case, the Corporation shall cause to be filed at
each office or agency maintained for the purpose of conversion of
this Preferred Stock, and shall cause to be mailed to the Holder
at its last address as it shall appear upon the stock books of
the Corporation, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is
19
expected to become effective or close, and the date as of which
it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder is entitled to convert the Conversion Amount
of this Preferred Stock (or any part hereof) during the 20-day
period commencing the date of such notice to the effective date
of the event triggering such notice.
Section 8. [RESERVED].
Section 9. Redemption Upon Triggering Events.
a) "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order
of any court, or any order, rule or regulation of any administrative or
governmental body):
i. the failure of the Corporation to cause the Conversion Shares
to be included on a registration statement filed with the Commission
and declared effective by the Commission on or prior to the 180th day
after the Original Issue Date;
ii. if, after the 180th day after the Original Issue Date, the
effectiveness of a registration statement registering for resale the
Conversion Shares lapses for any reason for more than an aggregate of
60 calendar days (which need not be consecutive days) during any 12
month period;
iii. the Corporation shall fail to deliver certificates
representing Conversion Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the fifth Trading Day
after such shares are required to be delivered hereunder, or the
Corporation shall provide written notice to any Holder, including by
way of public announcement, at any time, of its intention not to
comply with requests for conversion of any shares of Preferred Stock
in accordance with the terms hereof;
iv. the Corporation shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue to
such Holder upon a conversion hereunder;
v. unless specifically addressed elsewhere in this Certificate of
Designation as a Triggering Event, the Corporation shall fail to
observe or perform any other covenant, agreement or warranty contained
in, or otherwise commit any breach of the Transaction Documents, and
such failure or breach shall not, if subject to the possibility of a
cure by the Corporation, have been remedied within 30 calendar days
after the date on which written notice of such failure or breach shall
have been given;
20
vi. the Corporation shall redeem more than a de minimis number of
Junior Securities other than as to repurchases of Common Stock or
Common Stock Equivalents of departing officers and directors of the
Corporation; provided that such repurchases shall not exceed $100,000
in the aggregate for all officers and directors while any of the
Preferred Stock remains outstanding;
vii. with the exception of the Merger, the Corporation shall be
party to a Change of Control Transaction;
viii. there shall have occurred a Bankruptcy Event;
ix. the Common Stock shall fail to be listed or quoted for
trading on a Trading Market for more than five Trading Days, which
need not be consecutive Trading Days; or
x. any monetary judgment, writ or similar final process shall be
entered or filed against the Corporation, any Subsidiary or any of
their respective property or other assets for more than $250,000, and
shall remain unvacated, unbonded or unstayed for a period of 45
calendar days.
b) Upon the occurrence of a Triggering Event, each Holder shall
(in addition to all other rights it may have hereunder or under
applicable law) have the right, exercisable at the sole option of such
Holder, to require the Corporation to redeem all of the Preferred
Stock then held by such Holder for a redemption price, in cash, equal
to the Triggering Redemption Amount. The Triggering Redemption Amount,
in cash or in shares, shall be due and payable or issuable, as the
case may be, within five Trading Days of the date on which the notice
for the payment therefor is provided by a Holder (the "Triggering
Redemption Payment Date"). If the Corporation fails to pay the
Triggering Redemption Amount hereunder in full pursuant to this
Section on the date such amount is due in accordance with this Section
(whether in cash or shares of Common Stock), the Corporation will pay
interest thereon at a rate of 18% per annum (or such lesser amount
permitted by applicable law), accruing daily from such date until the
Triggering Redemption Amount, plus all such interest thereon, is paid
in full. For purposes of this Section, a share of Preferred Stock is
outstanding until such date as the Holder shall have received
Conversion Shares upon a conversion (or attempted conversion) thereof
that meets the requirements hereof or has been paid the Triggering
Redemption Amount in cash.
Section 10. [RESERVED].
Section 11. Miscellaneous.
21
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized
overnight courier service, addressed to the Corporation, at the
address set forth above, facsimile number ▇▇▇-▇▇▇-▇▇▇▇, Attn: T. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, Vice President and CFO or such other address or facsimile
number as the Corporation may specify for such purposes by notice to
the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the
Corporation hereunder shall be in writing and delivered personally, by
facsimile, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile telephone number or
address of such Holder appearing on the books of the Corporation, or
if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (New
York City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date
of mailing, if sent by nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice
is required to be given.
b) Absolute Obligation. Except as expressly provided herein, no
provision of this Certificate of Designation shall alter or impair the
obligation of the Corporation, which is absolute and unconditional, to
pay the liquidated damages and accrued interest (if any) on, the
shares of Preferred Stock at the time, place, and rate, and in the
coin or currency, herein prescribed.
c) Lost or Mutilated Preferred Stock Certificate. If a Holder's
Preferred Stock certificate shall be mutilated, lost, stolen or
destroyed, the Corporation shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated certificate, or
in lieu of or in substitution for a lost, stolen or destroyed
certificate, a new certificate for the shares of Preferred Stock so
mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such certificate, and
of the ownership hereof reasonably satisfactory to the Corporation.
d) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Certificate of
Designation shall be governed by and construed and enforced in
accordance with the internal laws of the State of [name of state of
22
incorporation], without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the
state and federal courts sitting in the City of New York, Borough of
Manhattan (the "New York Courts"). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York
Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not
to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or such New
York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Certificate of
Designation and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out
of or relating to this Certificate of Designation or the transactions
contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Certificate of
Designation, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
e) Waiver. Any waiver by the Corporation or the Holder of a
breach of any provision of this Certificate of Designation shall not
operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Certificate
of Designation. The failure of the Corporation or the Holder to insist
upon strict adherence to any term of this Certificate of Designation
on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Certificate of Designation. Any
waiver must be in writing.
f) Severability. If any provision of this Certificate of
Designation is invalid, illegal or unenforceable, the balance of this
Certificate of Designation shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall
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nevertheless remain applicable to all other persons and circumstances.
If it shall be found that any interest or other amount deemed interest
due hereunder violates applicable laws governing usury, the applicable
rate of interest due hereunder shall automatically be lowered to equal
the maximum permitted rate of interest.
g) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day.
h) Headings. The headings contained herein are for
convenience only, do not constitute a part of this Certificate of
Designation and shall not be deemed to
limit or affect any of the provisions hereof.
i) Status of Converted or Redeemed Preferred Stock. Shares of
Preferred Stock may only be issued to the Holders of Preferred Stock
on the Original Issue Date. In case any shares of Preferred Stock
shall be converted, redeemed or reacquired by the Corporation, such
shares shall resume the status of authorized but unissued shares of
preferred stock and shall no longer be designated as Series D
Convertible Preferred Stock.
*********************
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RESOLVED, FURTHER, that the Chairman, the Chief Executive Officer or
any vice-president, and the secretary or any assistant secretary, of the
Corporation be and they hereby are authorized and directed to prepare and file a
Certificate of Designation of Preferences, Rights and Limitations in accordance
with the foregoing resolution and the provisions of Nevada law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
27th day of January 2006.
------------------------------- ---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer Title: Secretary
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ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series D
Convertible Preferred Stock indicated below, into shares of common stock, par
value $0.001 per share (the "Common Stock"), of WaveRider Communications, Inc.,
a Nevada corporation (the "Corporation"), according to the conditions hereof, as
of the date written below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and opinions
as may be required by the Corporation in accordance with the Purchase Agreement.
No fee will be charged to the Holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion: _____________________________________________
Number of shares of Preferred Stock owned prior to Conversion: _________
Number of shares of Preferred Stock to be Converted: ___________________
Stated Value of shares of Preferred Stock to be Converted: _____________
Number of shares of Common Stock to be Issued: _________________________
Applicable Conversion Price:____________________________________________
Number of shares of Preferred Stock subsequent to Conversion: __________
[HOLDER]
By:___________________________________
Name:
Title:
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