Exhibit 10.03
EXHIBIT B
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
DATED AS OF
SEPTEMBER ___, 2005
BY AND BETWEEN
ERF WIRELESS, INC.,
AND
GLOBAL CAPITAL FUNDING GROUP, L.P.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September
___, 2005, between ERF Wireless, Inc., a Nevada corporation (the "Company"), and
Global Capital Funding Group, L.P. (the "Fund").
1. INTRODUCTION.
1.1 SECURITIES PURCHASE AGREEMENT. The Company and the Fund
have today executed that certain Securities Purchase Agreement (the "Securities
Purchase Agreement"), pursuant to which the Company has agreed, among other
things, to issue up to One Million Two Hundred Eighty-five Thousand Dollars
($1,285,000.00) (U.S.) principal amount Convertible Note of the Company (the
"Note") to the Fund or its successors, assigns or transferees (collectively, the
"Holders"). The Note is convertible into an indeterminable number of shares (the
"Note Conversion Shares") of the Company's common stock par value, $0.001 per
share (the "Common Stock") pursuant to the terms of the Note. In addition,
pursuant to the terms of the Securities Purchase Agreement and the transaction
contemplated thereby, the Company has agreed to issue to the Fund Common Stock
Purchase Warrants exercisable for shares of the Company's Common Stock equal to
300,000 Common Shares (the "Warrant Shares"). The number of Note Conversion
Shares and Warrant Shares is subject to adjustment upon the occurrence of stock
splits, recapitalizations and similar events occurring after the date hereof.
1.2 DEFINITION OF SECURITIES. The Note Conversion Shares and
the Warrant Shares are herein referred to as the "Securities."
1.3 REPRESENTATION. The Company represents and warrants that
the Company's Common Stock is currently eligible for trading on the
Over-the-Counter Bulletin Board Market under the symbol "ERFW." Certain
capitalized terms used in this Agreement are defined in Section 3 hereof;
references to sections shall be to sections of this Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 MANDATORY REGISTRATION.
(a) REGISTRATION OF REGISTRABLE SECURITIES. The
Company shall prepare and file on or before the 90th day following the date
hereof (the "Filing Date") a registration statement (the "Registration
Statement") covering the resale of the Registrable Securities. The Company shall
use its best efforts to cause the Registration Statement to be declared
effective by the Commission on the earlier of (i) 135 days following the date
hereof, (ii) twenty (20) days following the receipt of a "No Review" or similar
letter from the Commission or (iii) the first business day following the day the
Commission determines the Registration Statement eligible to be declared
effective (the "Required Effectiveness Date"). Nothing contained herein shall be
deemed to limit the number of Registrable Securities to be registered by the
Company hereunder. As a result, should the Registration Statement not relate to
the maximum number of Registrable Securities acquired by (or potentially
acquirable by) the Holders thereof upon conversion of the Notes, or exercise of
the Common Stock Purchase Warrants described in Section 1 above, the Company
shall be required to promptly file a separate registration statement (utilizing
Rule 462 promulgated under the Securities Act, where applicable) relating to
such Registrable Securities which then remain unregistered. The provisions of
this Agreement shall relate to any such Registration Statement and any such
separate registration statement as if it were an amendment to the Registration
Statement.
(b) REGISTRATION STATEMENT FORM. Registrations under
this Section 2.1 shall be on Form ▇-▇, ▇-▇, ▇▇▇ or such other appropriate
successor registration form of the Commission as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods of
disposition specified by the Fund; provided, however, such intended method of
deposition shall not include an underwritten offering of the Registrable
Securities.
(c) EXPENSES. The Company will pay all Registration
Expenses in connection with any registration required by this Section 2.1.
(d) EFFECTIVE REGISTRATION STATEMENT. A registration
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective within
the time period specified herein, provided that a registration which does not
become effective after the Company filed a registration statement with respect
thereto solely by reason of the refusal to proceed of any holder of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel in
the form of a letter signed by such counsel and provided to the Company relating
to a disclosure matter unrelated to such holder) shall be deemed to have been
effected by the Company unless the Holders of the Registrable Securities shall
have elected to pay all Registration Expenses in connection with such
registration, (ii) if, after it has become effective, such registration becomes
subject to any stop order, injunction or other order or extraordinary
requirement of the Commission or other governmental agency or court for any
reason or (iii) if, after it has become effective, such registration ceases to
be effective for more than an aggregate of twenty (20) days.
(e) PLAN OF DISTRIBUTION. The Company hereby agrees
that the Registration Statement shall include a plan of distribution section
reasonably acceptable to the Fund; provided, however, such plan of distribution
section shall be modified by the Company so as to not provide for the
disposition of the Registrable Securities on the basis of an underwritten
offering.
2.2 INCIDENTAL REGISTRATION.
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(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If at
any time after the date hereof but before the third anniversary of the date
hereof, the Company proposes to register any of its securities under the
Securities Act (other than by a registration in connection with an acquisition
in a manner which would not permit registration of Registrable Securities for
sale to the public, on Form S-8, or any successor form thereto, on Form S-4, or
any successor form thereto and other than pursuant to Section 2.1), on an
underwritten basis (either best-efforts or firm-commitment), then, the Company
will each such time give prompt written notice to all Holders of Registrable
Securities of its intention to do so and of such Holders' rights under this
Section 2.2. Upon the written request of any such holder made within twenty (20)
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will, subject to the terms
of this Agreement, use its commercially reasonable best efforts to effect the
registration under the Securities Act of the Registrable Securities, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of such Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register,
provided that if, at any time after written notice of its intention to register
any securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason either not to register or to delay registration of such securities, the
Company may, at its election, give written notice of such determination to each
holder and, thereupon, (i) in the case of a determination not to register, shall
be relieved of this obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 2.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 2.1, nor shall any such registration hereunder be deemed to have been
effected pursuant to Section 2.1. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 2.2. The right provided the Holders of the Registrable
Securities pursuant to this Section shall be exercisable at their sole
discretion and will in no way limit any of the Company's obligations to pay the
Securities according to their terms.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If the
managing underwriter of the underwritten offering contemplated by this Section
2.2 shall inform the Company and Holders of the Registrable Securities
requesting such registration by letter of its belief that the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, (i) first securities proposed by the Company to be sold
for its own account, and (ii) second Registrable Securities and securities of
other selling security Holders requested to be included in such registration pro
rata on the basis of the number of shares of such securities so proposed to be
sold and so requested to be included; provided, however, the Holders of
Registrable Securities shall have priority to all shares sought to be included
by officers and directors of the Company as well as Holders of ten percent (10%)
or more of the Company's Common Stock.
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2.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 2.1 and, as applicable, 2.2, the Company
shall, as expeditiously as possible:
(a) prepare and file with the Commission the
Registration Statement or amendments thereto, to effect such registration
(including such audited financial statements as may be required by the
Securities Act or the rules and regulations promulgated thereunder) and
thereafter use its commercially reasonable best efforts to cause such
registration statement to be declared effective by the Commission, as soon as
practicable, but in any event no later than the Required Effectiveness Date
(with respect to a registration pursuant to Section 2.1); provided, however,
that before filing such registration statement or any amendments thereto, the
Company will furnish to the counsel selected by the Holders of Registrable
Securities which are to be included in such registration, copies of all such
documents proposed to be filed;
(b) with respect to any registration statement
pursuant to Section 2.1, prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such registration
statement until the earlier to occur of five (5) years after the date of this
Agreement (subject to the right of the Company to suspend the effectiveness
thereof for not more than 10 consecutive days or an aggregate of 30 days in such
five (5) years period) or such time as all of the securities which are the
subject of such registration statement cease to be Registrable Securities (such
period, in each case, the "Registration Maintenance Period");
(c) furnish to each seller of Registrable Securities
covered by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
(d) use its commercially reasonable best efforts to
register or qualify all Registrable Securities and other securities covered by
such registration statement under such other securities laws or blue sky laws as
any seller thereof shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary to enable
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such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (d) be obligated to be so qualified or to consent to general service
of process in any such jurisdiction;
(e) use its commercially reasonable best efforts to
cause all Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(f) furnish to each seller of Registrable Securities
a signed counterpart, addressed to such seller, and the underwriters, if any,
of:
(1) an opinion of counsel for the Company,
dated the effective date of such registration statement (or, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement), reasonably satisfactory in
form and substance to such seller including that the prospectus and any
prospectus supplement forming a part of the Registration Statement does not
contain an untrue statement of a material fact or omits a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
(2) a "comfort" letter (or, in the case of
any Person which does not satisfy the conditions for receipt of a "comfort"
letter specified in Statement on Auditing Standards No. 72, an "agreed upon
procedures" letter), dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter of
like kind dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the Company's
financial statement included in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to the underwriters in underwritten public offerings of
securities (with, in the case of an "agreed upon procedures" letter, such
modifications or deletions as may be required under Statement on Auditing
Standards No. 35) and, in the case of the accountants' letter, such other
financial matters, and, in the case of the legal opinion, such other legal
matters, as such seller (or the underwriters, if any) may reasonably request;
(g) notify the Sellers' Representative and its
counsel promptly and confirm such advice in writing promptly after the Company
has knowledge thereof:
(1) when the Registration Statement, the
prospectus or any prospectus supplement related thereto or post-effective
amendment to the Registration Statement has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when the same
has become effective;
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(2) of any request by the Commission for
amendments or supplements to the Registration Statement or the prospectus or for
additional information;
(3) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings by any Person for that purpose; and
(4) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for such purpose;
(h) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material facts required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such seller
promptly prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing;
(i) use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(j) otherwise use its commercially reasonable best
efforts to comply with all applicable rules and regulations of the Commission,
and make available to its security Holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months, but not
more than eighteen months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(k) enter into such agreements and take such other
actions as the Sellers' Representative shall reasonably request in writing (at
the expense of the requesting or benefiting seller) in order to expedite or
facilitate the disposition of such Registrable Securities; and
(l) use its commercially reasonable best efforts to
list all Registrable Securities covered by such registration statement on any
securities exchange on which any of the Registrable Securities are then listed.
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The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to
Section 2.1, or amendment thereto or any prospectus or any supplement thereto
(including such documents incorporated by reference and proposed to be filed
after the initial filing of the Registration Statement) to which the Sellers'
Representative shall reasonably object, provided that the Company may file such
documents in a form required by law or upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Securities Purchase Agreement.
The Fund agrees that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in subdivision (h) of this
Section 2.3, the Fund will forthwith discontinue the Fund's disposition of
Registrable Securities pursuant to the Registration Statement relating to such
Registrable Securities until such Fund's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (h) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in the
Fund's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
2.4 UNDERWRITTEN OFFERINGS.
(a) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company
at any time proposes to register any of its securities under the Securities Act
as contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 2.2 and subject to the
provisions of Section 2.2(a), use its commercially reasonable best efforts to
arrange for such underwriters to include all the Registrable Securities to be
offered and sold by such holder among the securities to be distributed by such
underwriters.
(b) HOLDBACK AGREEMENTS. Subject to such other
reasonable requirements as may be imposed by the underwriter as a condition of
inclusion of holder's Registrable Securities in the registration statement, each
holder agrees by acquisition of Registrable Securities, if so required by the
managing underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of, except as part of such underwritten registration, any
equity securities of the Company, during such reasonable period of time
requested by the underwriter; provided however, such period shall not exceed the
150 day period commencing 30 days prior to the commencement of such underwritten
offering and ending 120 days following the completion of such underwritten
offering.
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(c) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No
holder of Registrable Securities may participate in any underwritten offering
under Section 2.2 unless such holder of Registrable Securities (i) agrees to
sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
Holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make any representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related
registration statement or representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the Holders of Registrable
Securities registered under such registration statement, and their respective
counsel and accountants for Sellers' Representative, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the reasonable opinion of such Holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.6 REGISTRATION DEFAULT FEE. If the Registration Statement
contemplated in Section 2.1 is (x) not declared effective by the Required
Effectiveness Date or (y) such effectiveness is not maintained for the
Registration Maintenance Period, then the Company shall pay to the Fund the
liquidated damages specified in Section 10.4 of the Securities Purchase
Agreement.
2.7 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of
any registration of any securities of the Company under the Securities Act, the
Company will, and hereby does agree to indemnify and hold harmless the holder of
any Registrable Securities covered by such registration statement, its directors
and officers, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who controls
such holder or any such underwriter within the meaning of the Securities Act
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against any losses, claims, damages or liabilities, joint or several, to which
such holder or any such director or officer or underwriter or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability, (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such holder or underwriter stating that it is for use in the
preparation thereof and, provided further that the Company shall not be liable
to any Person who participates as an underwriter in the offering or sale of
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
within the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus or an amendment or supplement thereto. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or any such director, officer, underwriter
or controlling person and shall survive the transfer of such securities by such
holder.
(b) INDEMNIFICATION BY THE SELLERS. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to this Agreement, that the Company shall
have received an undertaking satisfactory to it from the prospective seller of
such Registrable Securities, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in subdivision (a) of this Section 2.7) the
Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
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written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by
an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in the
opinion of the indemnified party's counsel a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to ▇▇▇, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) OTHER INDEMNIFICATION. Indemnification similar to
that specified in the preceding subdivisions of this Section 2.7 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities (but only if and to the extent required pursuant to the
terms of Section 2.7(b)) with respect to any required registration or other
qualification of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification
required by this Section 2.7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
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(f) CONTRIBUTION. If the indemnification provided for
in the preceding subdivision of this Section 2.7 is unavailable to an
indemnified party in respect of any expense, loss, claim, damage or liability
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or liability
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the holder or underwriter, as the
case may be, on the other from the distribution of the Registrable Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the holder or underwriter, as the case may
be, on the other in connection with the statements or omissions which resulted
in such expense, loss, damage or liability, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the holder or underwriter, as the case may be, on the other in
connection with the distribution of the Registrable Securities shall be deemed
to be in the same proportion as the total net proceeds received by the Company
from the initial sale of the Registrable Securities by the Company to the
purchasers bear to the gain, if any, realized by all selling Holders
participating in such offering or the underwriting discounts and commissions
received by the underwriter, as the case may be. The relative fault of the
Company on the one hand and of the holder or underwriter, as the case may be, on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission to state a
material fact relates to information supplied by the Company, by the holder or
by the underwriter and the parties' relative intent, knowledge, access to
information supplied by the Company, by the holder or by the underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such indemnified party by reason of
the provisions contained in the first sentence of subdivision (a) of this
Section 2.7, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivision (b) of this Section 2.7 had been
available under the circumstances.
The Company and the Holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision (f)
were determined by pro rata allocation (even if the Holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth in the preceding sentence and subdivision
(c) of this Section 2.7, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
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Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
allege untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
3. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"AGREEMENT": As defined in Section 1.
"COMMISSION": The Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"COMMON STOCK": As defined in Section 1.
"COMPANY": As defined in the introductory paragraph of this
Agreement.
"EXCHANGE ACT": The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"NOTE CONVERSION SHARES": As defined in Section 1.
"NOTES": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Notes.
"PERSON": A corporation, association, partnership, limited
liability company, trust, organization, business, individual, governmental or
political subdivision thereof or a governmental agency.
"REGISTRABLE SECURITIES": The Securities and any securities
issued or issuable with respect to such Securities by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. Once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred, new
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certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, (d) they shall have ceased to be outstanding,
(e) on the expiration of the applicable Registration Maintenance Period or (f)
any and all legends restricting transfer thereof have been removed in accordance
with the provisions of Rule 144(k) (or any successor provision) under the
Securities Act.
"REGISTRATION EXPENSES": All expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all registration, filing and NASD fees, all stock exchange and OTC
Bulletin Board or other NASD or stock exchange listing fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, the
reasonable fees and disbursements of not more than one law firm (not to exceed
$50,000) retained by the holder or Holders of more than 50% of the Registrable
Securities, premiums and other costs of policies of insurance of the Company
against liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any, provided that, in any case
where Registration Expenses are not to be borne by the Company, such expenses
shall not include salaries of Company personnel or general overhead expenses of
the Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"REGISTRATION MAINTENANCE PERIOD": As defined in Section 2.3.
"REQUIRED EFFECTIVENESS DATE": As defined in Section 2.1.
"SECURITIES": As defined in Section 1.2.
"SECURITIES ACT": The Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"SECURITIES PURCHASE AGREEMENT": As defined in Section 1.
"SELLERS' REPRESENTATIVE": Global Capital Advisors Ltd. or
such Person designated by Global Capital Advisors Ltd. as of the time of
disposition of the last of the Notes held by the Fund (or subsequent Sellers'
Representative).
"WARRANT SHARES": As defined in Section 1.
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4. RULE 144. The Company shall timely file the reports required to be
filed by it under the Securities Act and the Exchange Act (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, will, upon
the request of any holder of Registrable Securities, make publicly available
other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent reasonably
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with the requirements of this Section 4.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
Holders of the sum of 51% or more of the shares of (i) Registrable Securities
issued at such time, plus (ii) Registrable Securities issuable upon exercise or
conversion of the Securities then constituting derivative securities (if such
Securities were not fully exchanged or converted in full as of the date such
consent if sought). Each holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
5, whether or not such Registrable Securities shall have been marked to indicate
such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or Holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by an holder or Holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. NOTICES. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person (a) in the case of a party
hereto other than the Company, addressed to such party in the manner set forth
in the Securities Purchase Agreement or at such other address as such party
shall have furnished to the Company in writing, or (b) in the case of any other
holder of Registrable Securities, at the address that such holder shall have
furnished to the Company in writing, or, until any such other holder so
furnishes to the Company an address, then to and at the address of the last
holder of such Registrable Securities who has furnished an address to the
Company, or (c) in the case of the Company, at the address set forth on the
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signature page hereto, to the attention of its President, or at such other
address, or to the attention of such other officer, as the Company shall have
furnished to each holder of Registrable Securities at the time outstanding. Each
such notice, request or other communication shall be effective (i) if given by
mail, four (4) days after such communication is deposited in the United States
mails with first class postage prepaid, addressed as aforesaid or (ii) if given
by any other means (including, without limitation, by fax or air courier), when
delivered at the address specified above, provided that any such notice, request
or communication shall not be effective until received.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. Each of the Holders of the Registrable Securities
agrees, by accepting any portion of the Registrable Securities after the date
hereof, to the provisions of this Agreement including, without limitation,
appointment of the Sellers' Representative to act on behalf of such holder
pursuant to the terms hereof which such actions shall be made in the good faith
discretion of the Sellers' Representative and be binding on all persons for all
purposes.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF TEXAS WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11. COUNTERPARTS. This Agreement may be executed by facsimile and may
be signed simultaneously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute one and
the same instrument.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supercedes all prior agreements and understandings
relating to such subject matter.
13. SEVERABILITY. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ERF WIRELESS, INC.
By:_______________________
Name:_____________________
Title:____________________
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
Tel.:
GLOBAL CAPITAL FUNDING GROUP, L.P.
By its General Partner, Global Capital
Management Services, Inc.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Tel.: ▇▇▇-▇▇▇-▇▇▇▇
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