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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 B
Dated as of July 28, 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 Representations and Warranties.. . . . . . . . .3
Section 2.1 Investment Purpose.. . . . . . . . . . . . . . . . . . . . .3
Section 2.2 Accredited Investor 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.. . . . . . . . . . . . . . . . . . . . .3
Section 2.7 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 2.8 Authorization Enforcement. . . . . . . . . . . . . . . . . .4
Section 2.9 Residence. . . . . . . . . . . . . . . . . . . . . . . . . .4
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.. . . . . . . . . . . . . . . . . . . . . . .5
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.. . . . . . . . . . . . . . . . .7
Section 3.8 Absence of Litigation. . . . . . . . . . . . . . . . . . . .7
Section 3.9 Purchase of Purchased Common Shares. . . . . . . . . . . . .7
Section 3.10 No Undisclosed Events, Liabilities, Developments, or
Circumstances. . . . . . . . . . . . . . . . . . . . . . . .8
Section 3.11 No General Solicitation. . . . . . . . . . . . . . . . . . .8
Section 3.12 No Integrated Offering.. . . . . . . . . . . . . . . . . . .8
Section 3.13 Employee Relations.. . . . . . . . . . . . . . . . . . . . .8
Section 3.14 Intellectual Property Rights.. . . . . . . . . . . . . . . .8
Section 3.15 Environmental Laws.. . . . . . . . . . . . . . . . . . . . .9
Section 3.16 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 3.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 3.18 Regulatory Permits.. . . . . . . . . . . . . . . . . . . . .9
Section 3.19 Internal Accounting Controls.. . . . . . . . . . . . . . . .9
Section 3.20 No Materially Adverse Contracts, Etc.. . . . . . . . . . . .9
Section 3.21 Tax Status.. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.22 Certain Transactions.. . . . . . . . . . . . . . . . . . . 10
Section 3.23 Dilutive Effect. . . . . . . . . . . . . . . . . . . . . . 10
Section 3.24 Fees and Rights of First Refusal.. . . . . . . . . . . . . 10
Section 4. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.1 Best Efforts.. . . . . . . . . . . . . . . . . . . . . . . 10
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Section 4.2 Form D.. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.3 Reporting Status.. . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . 11
Section 4.5 Financial Information. . . . . . . . . . . . . . . . . . . 11
Section 4.6 Listings.. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.7 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.8 Authorized Shares of Common Stock, Reservation of Shares.. 12
Section 4.9 Corporate Existence. . . . . . . . . . . . . . . . . . . . 12
Section 4.10 Transactions With Affiliates.. . . . . . . . . . . . . . . 12
Section 4.11 Transfer Agents. . . . . . . . . . . . . . . . . . . . . . 12
Section 4.12 Shareholder Approval.. . . . . . . . . . . . . . . . . . . 13
Section 4.13 Transfer Agent Instructions. . . . . . . . . . . . . . . . 13
Section 5. Conditions To The Company's Obligation To Sell.. . . . . . 13
Section 6. Conditions To The Purchasers' Obligation To Purchase.. . . 14
Section 7. Indemnification. . . . . . . . . . . . . . . . . . . . . . 15
Section 8. Governing Law; Miscellaneous.. . . . . . . . . . . . . . . 16
Section 8.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.2 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.3 Headings.. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.4 Severability.. . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.5 Entire Agreement. Amendments.. . . . . . . . . . . . . . . 16
Section 8.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.7 Successors and Assigns.. . . . . . . . . . . . . . . . . . 17
Section 8.8 No Third Party Beneficiaries.. . . . . . . . . . . . . . . 18
Section 8.9 Survival.. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.10 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.11 Further Assurances.. . . . . . . . . . . . . . . . . . . . 18
Section 8.12 Termination. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.13 Finder.. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.14 No Strict Construction.. . . . . . . . . . . . . . . . . . 18
SCHEDULES AND EXHIBITS
Schedule 1 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.: ▇▇▇▇▇▇▇▇▇
Center: 008
Account No.: 9088000008
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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 ▇▇▇▇▇▇▇ Law Group LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇. ▇▇▇▇▇▇, 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 registered under the 1933 Act
or any state securities laws, and may not be offered for sale, sold,
assigned, or transferred until;
(i) subsequently registered thereunder; or
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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 ▇▇▇▇ ▇▇▇) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC
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 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.
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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.
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
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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.
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, 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
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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
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
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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 ▇▇▇▇ ▇▇▇) 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 ▇▇▇▇ 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 ▇▇▇▇ registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets, or other intellectual 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 ▇▇▇▇ 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 ▇▇▇▇ 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.
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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)
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,
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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.
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
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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 ▇▇▇▇ ▇▇▇. 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 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
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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 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.
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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 ▇▇▇▇ ▇▇▇) 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 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
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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.
(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
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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 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
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 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.
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
-16-
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
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Transfer Agent:
Corporate Stock Transfer, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Compliance Department
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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 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.
-17-
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.
-18-
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:
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, 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
-1-
EXHIBIT F
TO
COMMON STOCK
PURCHASE AGREEMENT
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
-1-
Schedule to Common Stock Purchase Agreement
Dated July 28, 1999
Identifying Purchasers
Purchaser Date No. of Shares
--------- ---- -------------
▇▇▇▇▇▇ ▇▇▇ July 28, 1999 22,000
Caribbean Investors Group, Ltd. July 28, 1999 14,285
Princeton Insurance August 20, 1999 2,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ August 20, 1999 1,000
▇▇▇▇▇ ▇▇▇▇▇ Loughlin August 20, 1999 13,000
JHS Assoc., Ltd. Retirement Account August 1999 53,000