EX-4.25
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of April
5, 2006, by and among 5G Wireless Communications, Inc., a Nevada
corporation (the "Company"), and the subscribers identified on the
signature page hereto (each a "Subscriber" and collectively
"Subscribers").
WHEREAS, the Company and the Subscribers are executing and
delivering this Agreement in reliance upon an exemption from
securities registration afforded by the provisions of Section 4(2),
Section 4(6) and/or Regulation D ("Regulation D") as promulgated by
the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act").
WHEREAS, the parties desire that, upon the terms and subject to
the conditions contained herein, the Company shall issue and sell to
the Subscribers, as provided herein, and the Subscribers, in the
aggregate, shall purchase up to Sixty Thousand Dollars ($60,000) (the
"Purchase Price") of principal amount of promissory notes of the
Company ("Note" or "Notes"), a form of which is annexed hereto as
Exhibit A1, convertible into shares of the Company's common stock,
$.001 par value (the "Common Stock") at a per share conversion price
set forth in the Note ("Conversion Price"); and share purchase
warrants (the "Warrants"), in the form attached hereto as Exhibit A2,
to purchase shares of Common Stock (the "Warrant Shares"). Thirty-
Five Thousand Dollars ($35,000) of the Purchase Price ("Initial
Closing Purchase Price") shall be payable on the Initial Closing Date.
Twenty-Five Thousand Dollars ($25,000) of the Purchase Price ("Second
Closing Purchase Price") shall be payable on or before April 10, 2006.
The Notes, shares of Common Stock issuable upon conversion of the
Notes (the "Shares"), the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Notes and the
Warrants contemplated hereby shall be held in escrow pursuant to the
terms of a Funds Escrow Agreement to be executed by the parties
substantially in the form attached hereto as Exhibit B (the "Escrow
Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and
other agreements contained in this Agreement the Company and the
Subscribers hereby agree as follows:
1. Closings.
(a) Initial Closing. Subject to the satisfaction or
waiver of the terms and conditions of this Agreement, on the Initial
Closing Date, each Subscriber shall purchase and the Company shall
sell to each Subscriber a Note in the principal amount designated on
the signature page hereto ("Initial Closing Notes"). The aggregate
amount of the Notes to be purchased by the Subscribers on the Initial
Closing Date shall, in the aggregate, be equal to the Initial Closing
Purchase Price. The "Initial Closing Date" shall be the date that
subscriber funds representing the net amount due the Company from the
Initial Closing Purchase Price of the Offering is transmitted by wire
transfer or otherwise to or for the benefit of the Company. The
consummation of the transactions contemplated herein for all closings
shall take place at the offices of Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, upon the satisfaction of
all conditions to Closing set forth in this Agreement. Each of the
Initial Closing Date and Second Closing Date is referred to as a
"Closing Date".
(b) Second Closing. The closing date in relation to
the Second Closing Purchase Price shall be on or before April 10, 2006
(the "Second Closing Date"). Subject to the satisfaction or waiver of
the terms and conditions of this Agreement on the Second Closing Date,
each Subscriber shall purchase and the Company shall sell to each
Subscriber a Note in the principal amount designated on the signature
page hereto ("Second Closing Notes") and Warrants as described in
Section 2 of this Agreement ("Second Closing Warrants"). The
aggregate Purchase Price of the Second Closing Notes for all
Subscribers shall be equal to the Second Closing Purchase Price. The
Second Closing Note shall be identical to the Note issuable on the
Initial Closing Date and have the same maturity date as the Notes
issued on the Initial Closing Date. The Conversion Price (defined in
Section 2.1 (b) of the Note) shall be equitably adjusted to offset the
effect of stock splits, stock dividends, pro rata distributions of
property or equity interests to the Company's shareholders after the
Initial Closing Date.
(c) Conditions to Second Closing. The occurrence of
the Second Closing is expressly contingent on (i) the truth and
accuracy on the Second Closing Date of the representations and
warranties of the Company and Subscriber contained in this Agreement,
(ii) continued compliance with the covenants of the Company set forth
in this Agreement, (iii) the non-occurrence of any Event of Default
(as defined in the Note) or other default by the Company of its
obligations and undertakings contained in this Agreement, (iv) the
delivery on the Second Closing Date of Second Closing Notes for which
the Company Shares issuable upon conversion will be included in the
Registration Statement, and (v) the delivery of the Second Closing
Warrants for which the Warrant Shares issuable upon exercise will be
included in the Registration Statement. The exercise prices of the
Warrants issuable on the Second Closing Date shall be adjusted to
offset the effect of stock splits, stock dividends, pro rata
distributions of property or equity interests to the Company's
shareholders after the Initial Closing Date.
(d) Second Closing Deliveries. On the Second Closing
Date, the Company will deliver the Second Closing Notes and Second
Closing Warrants to the Escrow Agent and each Subscriber will deliver
his portion of the Purchase Price to the Escrow Agent. On the Second
Closing Date, the Company will deliver a certificate ("Second Closing
Certificate") signed by its chief executive officer or chief financial
officer (i) representing the truth and accuracy of all the
representations and warranties made by the Company contained in this
Agreement, as of the Initial Closing Date, and the Second Closing
Date, as if such representations and warranties were made and given on
all such dates, (ii) certifying that the information contained in the
schedules and exhibits hereto is substantially accurate as of the
Second Closing Date, (iii) adopting and renewing the covenants and
conditions set forth in Sections 4, 6, 7, 8, 8, 10, and 11 of this
Agreement in relation to the Second Closing Date, Second Closing Notes
and Second Closing Warrants, and (iv) certifying that an Event of
Default has not occurred. A legal opinion nearly identical to the
legal opinion referred to in Section 5 of this Agreement shall be
delivered to each Subscriber at the Second Closing in relation to the
Company, Second Closing Notes, and Second Closing Warrants ("Second
Closing Legal Opinion"). The Second Closing Legal Opinion must also
state that all of the Registrable Securities have been included for
registration in the registration statement filed as of the Actual
Filing Date.
2. Warrants. On each Closing Date, the Company will issue
and deliver Class A Warrants to the Subscribers. One Class A Warrant
will be issued for each one Share which would be issued on the Closing
Date assuming the complete conversion of the Notes issued on each
Closing Date at the Conversion Price in effect on the Initial Closing
Date assuming such Closing Date were a Conversion Date. The per
Warrant Share exercise price to acquire a Warrant Share upon exercise
of a Class A Warrant shall be equal to $0.50. The Class A Warrants
shall be exercisable until five (5) years after each Closing Date.
3. Subscriber's Representations and Warranties. Each
Subscriber hereby represents and warrants to and agrees with the
Company only as to such Subscriber that:
(a) Organization and Standing of the Subscribers. If
the Subscriber is an entity, such Subscriber is a corporation,
partnership or other entity duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or organization.
(b) Authorization and Power. Each Subscriber has the
requisite power and authority to enter into and perform this Agreement
and to purchase the Notes and Warrants being sold to it hereunder.
The execution, delivery and performance of this Agreement by such
Subscriber and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
corporate or partnership action, and no further consent or
authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, as the case may be, is required.
This Agreement has been duly authorized, executed and delivered by
such Subscriber and constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Subscriber
enforceable against the Subscriber in accordance with the terms thereof.
(c) No Conflicts. The execution, delivery and
performance of this Agreement and the consummation by such Subscriber
of the transactions contemplated hereby or relating hereto do not and
will not (i) result in a violation of such Subscriber's charter
documents or bylaws or other organizational documents or (ii) conflict
with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of any
agreement, indenture or instrument or obligation to which such
Subscriber is a party or by which its properties or assets are bound,
or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such
conflicts, defaults and violations as would not, individually or in
the aggregate, have a material adverse effect on such Subscriber).
Such Subscriber is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Notes or
acquire the Warrants in accordance with the terms hereof, provided
that for purposes of the representation made in this sentence, such
Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Information on Company. The Subscriber has been
furnished with or has had access at the ▇▇▇▇▇ website of the
Commission to the Company's Form 10-KSB for the year ended December
31, 2004 and all periodic reports as filed with the Commission
(hereinafter referred to as the "Reports"). In addition, the
Subscriber has received in writing from the Company such other
information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing (such other
information is collectively, the "Other Written Information"), and
considered all factors the Subscriber deems material in deciding on
the advisability of investing in the Securities.
(e) Information on Subscriber. The Subscriber is, and
will be at the time of the conversion of the Notes and exercise of the
Warrants, an "accredited investor", as such term is defined in
Regulation D promulgated by the Commission under the 1933 Act, is
experienced in investments and business matters, has made investments
of a speculative nature and has purchased securities of United States
publicly-owned companies in private placements in the past and, with
its representatives, has such knowledge and experience in financial,
tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits
and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment.
The Subscriber has the authority and is duly and legally qualified to
purchase and own the Securities. The Subscriber is able to bear the
risk of such investment for an indefinite period and to afford a
complete loss thereof. The information set forth on the signature
page hereto regarding the Subscriber is accurate.
(f) Purchase of Notes and Warrants. On each Closing
Date, the Subscriber will purchase the Notes and Warrants as principal
for its own account for investment only and not with a view toward, or
for resale in connection with, the public sale or any distribution
thereof.
(g) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered
under the 1933 Act or any applicable state securities laws, by reason
of their issuance in a transaction that does not require registration
under the 1933 Act (based in part on the accuracy of the
representations and warranties of Subscriber contained herein), and
that such Securities must be held indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration.
(h) Shares Legend. The Shares and the Warrant Shares
shall bear the following or similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO 5G WIRELESS COMMUNICATIONS, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(i) Warrants Legend. The Warrants shall bear the
following or similar legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO 5G WIRELESS COMMUNICATIONS, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(j) Note Legend. The Note shall bear the following
legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO 5G WIRELESS
COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(k) Communication of Offer. The offer to sell the
Securities was directly communicated to the Subscriber by the Company.
At no time was the Subscriber presented with or solicited by any
leaflet, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or solicited
or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.
(l) Authority; Enforceability. This Agreement and
other agreements delivered together with this Agreement or in
connection herewith have been duly authorized, executed and delivered
by the Subscriber and are valid and binding agreements enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and Subscriber has full
corporate power and authority necessary to enter into this Agreement
and such other agreements and to perform its obligations hereunder and
under all other agreements entered into by the Subscriber relating hereto.
(m) Restricted Securities. Subscriber understands
that the Securities have not been registered under the 1933 Act and
such Subscriber will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Securities unless
pursuant to an effective registration statement under the 1933 Act.
Notwithstanding anything to the contrary contained in this Agreement,
such Subscriber may transfer (without restriction and without the need
for an opinion of counsel) the Securities to its Affiliates (as
defined below) provided that each such Affiliate is an "accredited
investor" under Regulation D and such Affiliate agrees to be bound by
the terms and conditions of this Agreement. For the purposes of this
Agreement, an "Affiliate" of any person or entity means any other
person or entity directly or indirectly controlling, controlled by or
under direct or indirect common control with such person or entity.
Affiliate includes each subsidiary of the Company. For purposes of
this definition, "control" means the power to direct the management
and policies of such person or firm, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
(n) No Governmental Review. Each Subscriber
understands that no United States federal or state agency or any other
governmental or state agency has passed on or made recommendations or
endorsement of the Securities or the suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the
merits of the offering of the Securities.
(o) Correctness of Representations. Each Subscriber
represents as to such Subscriber that the foregoing representations
and warranties are true and correct as of the date hereof and, unless
a Subscriber otherwise notifies the Company prior to each Closing Date
shall be true and correct as of each Closing Date.
(p) Survival. The foregoing representations and
warranties shall survive each Closing Date until three years after the
latest Closing Date.
4. Company Representations and Warranties. The Company
represents and warrants to and agrees with each Subscriber that except
as set forth in the Reports and as otherwise qualified in the
Transaction Documents:
(a) Due Incorporation. The Company is a corporation
duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite
corporate power to own its properties and to carry on its business is
disclosed in the Reports. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property
owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect. For purpose of this Agreement, a "Material
Adverse Effect" shall mean a material adverse effect on the financial
condition, results of operations, properties or business of the
Company taken as a whole. For purposes of this Agreement,
"Subsidiary" means, with respect to any entity at any date, any
corporation, limited or general partnership, limited liability
company, trust, estate, association, joint venture or other business
entity) of which more than 50% of (i) the outstanding capital stock
having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of
such entity, (ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership or
limited liability company or (iii) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in
such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly
through one or more intermediaries, by such entity. All the Company's
Subsidiaries as of the Closing Date are set forth on Schedule 4(a) hereto.
(b) Outstanding Stock. All issued and outstanding
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable.
(c) Authority; Enforceability. This Agreement, the
Note, the Warrants, the Escrow Agreement, Security Agreements and
Collateral Agent Agreement, and any other agreements delivered
together with this Agreement or in connection herewith (collectively
"Transaction Documents") have been duly authorized, executed and
delivered by the Company and are valid and binding agreements
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity. The
Company has full corporate power and authority necessary to enter into
and deliver the Transaction Documents and to perform its obligations
thereunder.
(d) Additional Issuances. There are no outstanding
agreements or preemptive or similar rights affecting the Company's
common stock or equity and no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of
any shares of common stock or equity of the Company or other equity
interest in any of the Subsidiaries of the Company except as described
on Schedule 4(d).
(e) Consents. No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator having
jurisdiction over the Company, or any of its Affiliates, the OTC
Bulletin Board ("Bulletin Board"), any Principal Market (as defined in
Section 8(b) of this Agreement), nor the Company's shareholders is
required for the execution by the Company of the Transaction Documents
and compliance and performance by the Company of its obligations under
the Transaction Documents, including, without limitation, the issuance
and sale of the Securities.
(f) No Violation or Conflict. Assuming the
representations and warranties of the Subscribers in Section 3 are
true and correct, neither the issuance and sale of the Securities nor
the performance of the Company's obligations under this Agreement and
all other agreements entered into by the Company relating thereto by
the Company will:
(i) violate, conflict with, result in a breach
of, or constitute a default (or an event which with the giving of
notice or the lapse of time or both would be reasonably likely to
constitute a default in any material respect) of a material nature
under (A) the articles or certificate of incorporation, charter or
bylaws of the Company, (B) to the Company's knowledge, any decree,
judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body,
or arbitrator having jurisdiction over the Company or over the
properties or assets of the Company or any of its Affiliates, (C) the
terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to
which the Company or any of its Affiliates is a party, by which the
Company or any of its Affiliates is bound, or to which any of the
properties of the Company or any of its Affiliates is subject, or (D)
the terms of any "lock-up" or similar provision of any underwriting
or similar agreement to which the Company, or any of its Affiliates
is a party except the violation, conflict, breach, or default of
which would not have a Material Adverse Effect; or
(ii) result in the creation or imposition of any
lien, charge or encumbrance upon the Securities or any of the assets
of the Company or any of its Affiliates; or
(iii) except as described on Schedule 4(d),
result in the activation of any anti-dilution rights or a reset or
repricing of any debt or security instrument of any other creditor or
equity holder of the Company, nor result in the acceleration of the
due date of any obligation of the Company; or
(iv) result in the activation of any piggy-back
registration rights of any person or entity holding securities or debt
of the Company or having the right to receive securities of the Company.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances, subject to
restrictions upon transfer under the 1933 Act and any applicable state
securities laws;
(ii) have been, or will be, duly and validly
authorized and on the date of issuance of the Shares and upon exercise
of the Warrants, the Shares and Warrant Shares will be duly and
validly issued, fully paid and nonassessable or if registered pursuant
to the 1933 Act, and resold pursuant to an effective registration
statement will be free trading and unrestricted);
(iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of
any securities of the Company;
(iv) will not subject the holders thereof to
personal liability by reason of being such holders provided
Subscriber's representations herein are true and accurate and
Subscribers take no actions or fail to take any actions required for
their purchase of the Securities to be in compliance with all
applicable laws and regulations; and
(v) will not result in a violation of Section 5
under the 1933 Act.
(h) Litigation. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its
Affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under the Transaction
Documents. Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, basis for or threatened
action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over
the Company, or any of its Affiliates which litigation if adversely
determined would have a Material Adverse Effect.
(i) Reporting Company. The Company is a publicly-held
company subject to reporting obligations pursuant to Section 13 of the
1934 Act and has a class of common shares registered pursuant to
Section 12(g) of the 1934 Act. Pursuant to the provisions of the 1934
Act, the Company has filed all reports and other materials required to
be filed thereunder with the Commission during the preceding twelve months.
(j) No Market Manipulation. The Company and its
Affiliates have not taken, and will not take, directly or indirectly,
any action designed to, or that might reasonably be expected to, cause
or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Securities or affect the
price at which the Securities may be issued or resold, provided,
however, that this provision shall not prevent the Company from
engaging in normal investor relations/public relations activities.
(k) Information Concerning Company. The Reports
contain all material information relating to the Company and its
operations and financial condition as of their respective dates and
all the information required to be disclosed therein. Since the date
of the most recent audited financial statements included in the
Reports ("Latest Financial Date"), and except as modified in the Other
Written Information or in the Schedules hereto, there has been no
Material Adverse Event relating to the Company's business, financial
condition or affairs not disclosed in the Reports. The Reports do not
contain any 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 light of the circumstances when made.
(l) Stop Transfer. The Company will not issue any
stop transfer order or other order impeding the sale, resale or
delivery of any of the Securities, except as may be required by any
applicable federal or state securities laws and unless contemporaneous
notice of such instruction is given to the Subscriber.
(m) Defaults. The Company is not in violation of its
articles of incorporation or bylaws. The Company is (i) not in
default under or in violation of any other material agreement or
instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would
have a Material Adverse Effect, (ii) not in default with respect to
any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental authority arising
out of any action, suit or proceeding under any statute or other law
respecting antitrust, monopoly, restraint of trade, unfair competition
or similar matters, or (iii) to the Company's knowledge not in
violation of any statute, rule or regulation of any governmental
authority which violation would have a Material Adverse Effect.
(n) Not an 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 cause the offer of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and
regulations of the Pink Sheets or any Principal Market which would
impair the exemptions relied upon in this Offering [as defined in
Section 7(b)] or the Company's ability to timely comply with its
obligations hereunder. Nor will the Company or any of its Affiliates
take any action or steps that would cause the offer or issuance of the
Securities to be integrated with other offerings which would impair
the exemptions relied upon in this Offering or the Company's ability
to timely comply with its obligations hereunder. The Company will not
conduct any offering other than the transactions contemplated hereby
that will be integrated with the offer or issuance of the Securities,
which would impair the exemptions relied upon in this Offering or the
Company's ability to timely comply with its obligations hereunder.
(o) No General Solicitation. Neither the Company, nor
any of its Affiliates, nor to its knowledge, 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.
(p) Listing. The Company's common stock is quoted on
the Bulletin Board. The Company has not received any oral or written
notice that its common stock is not eligible nor will become
ineligible for quotation on the Bulletin Board nor that its common
stock does not meet all requirements for the continuation of such
quotation and the Company satisfies all the requirements for the
continued quotation of its common stock on the Bulletin Board.
(q) No Undisclosed Liabilities. The Company has no
liabilities or obligations which are material, individually or in the
aggregate, which are not disclosed in the Reports and Other Written
Information, other than those incurred in the ordinary course of the
Company's businesses since Latest Financial Date and which,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect, except as disclosed on Schedule 4(q).
(r) No Undisclosed Events or Circumstances. Since the
Latest Financial Date, no event or circumstance has occurred or exists
with respect to the Company or its businesses, properties, operations
or financial condition, that, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the
date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding
capital stock of the Company as of the date of this Agreement and the
Initial Closing Date (not including the Securities) are set forth on
Schedule 4(d). Except as set forth on Schedule 4(d), there are no
options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right
to subscribe for any shares of capital stock of the Company or any of
its Subsidiaries. All of the outstanding shares of Common Stock of
the Company have been duly and validly authorized and issued and are
fully paid and nonassessable.
(t) Dilution. The Company's executive officers and
directors understand the nature of the Securities being sold hereby
and recognize that the issuance of the Securities will have a
potential dilutive effect on the equity holdings of other holders of
the Company's equity or rights to receive equity of the Company. The
board of directors of the Company has concluded, in its good faith
business judgment that the issuance of the Securities is in the best
interests of the Company. The Company specifically acknowledges that
its obligation to issue the Shares upon conversion of the Notes, and
the Warrant Shares upon exercise of the Warrants is binding upon the
Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company
or parties entitled to receive equity of the Company.
(u) No Disagreements with Accountants and Lawyers.
There are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the Company
and the accountants and lawyers formerly or presently employed by the
Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers.
(v) DTC Status. The Company's transfer agent is a
participant in and the Common Stock is not eligible for transfer
pursuant to the Depository Trust Company Automated Securities Transfer
Program.
(w) Investment Company. Neither the Company nor any
Affiliate is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(x) Subsidiary Representations. The Company makes
each of the representations contained in Sections 4(a), (b), (d), (e),
(f), (h), (k), (m), (q), (r), (s), (u) and (w) of this Agreement, as
same relate to each Subsidiary of the Company.
(y) Company Predecessor. All representations made by
or relating to the Company of a historical or prospective nature and
all undertaking described in Sections 8(g) through 8(l) shall relate
and refer to the Company, its predecessors, and the Subsidiaries.
(z) Correctness of Representations. The Company
represents that the foregoing representations and warranties are true
and correct as of the date hereof in all material respects, and,
unless the Company otherwise notifies the Subscribers prior to each
Closing Date, shall be true and correct in all material respects as of
each Closing Date.
(AA) Survival. The foregoing representations and
warranties shall survive each Closing Date until three years after the
latest Closing Date.
5. Regulation D Offering. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption
from the registration provisions of the 1933 Act afforded by Section
4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D
promulgated thereunder. On the Closing Date, the Company will provide
an opinion reasonably acceptable to Subscriber from the Company's
legal counsel opining on the availability of an exemption from
registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers. A form of the legal opinion is annexed hereto as Exhibit
C. The Company will provide, at the Company's expense, such other
legal opinions in the future as are reasonably necessary for the
issuance and resale of the Common Stock issuable upon conversion of
the Notes and exercise of the Warrants pursuant to an effective
registration statement. Subscriber agrees that any legal opinions
required hereunder or under any other Transaction Documents may be
supplied by the Company's in house General Counsel.
6.1. Conversion of Note.
(a) Upon the conversion of a Note or part thereof, the
Company shall, at its own cost and expense, take all necessary action,
including obtaining and delivering, an opinion of counsel to assure
that the Company's transfer agent shall issue stock certificates in
the name of Subscriber (or its nominee) or such other persons as
designated by Subscriber and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable
upon such conversion. The Company warrants that no instructions other
than these instructions have been or will be given to the transfer
agent of the Company's Common Stock and that, unless waived by the
Subscriber, the Shares will be free-trading, and freely transferable,
and will not contain a legend restricting the resale or
transferability of the Shares provided the Shares are being sold
pursuant to an effective registration statement covering the Shares or
are otherwise exempt from registration.
(b) Subscriber will give notice of its decision to
exercise its right to convert the Note, interest, any sum due to the
Subscriber under the Transaction Documents including Liquidated
Damages, or part thereof by telecopying an executed and completed
Notice of Conversion (a form of which is annexed as Exhibit A to the
Note) to the Company via confirmed telecopier transmission or
otherwise pursuant to Section 13(a) of this Agreement. The Subscriber
will not be required to surrender the Note until the Note has been
fully converted or satisfied. Each date on which a Notice of
Conversion is telecopied to the Company in accordance with the
provisions hereof shall be deemed a Conversion Date. The Company will
itself or cause the Company's transfer agent to transmit the Company's
Common Stock certificates representing the Shares issuable upon
conversion of the Note to the Subscriber via express courier for
receipt by such Subscriber within three (3) business days after
receipt by the Company of the Notice of Conversion (such third day
being the "Delivery Date"). In the event the Shares are
electronically transferable, then delivery of the Shares must be made
by electronic transfer provided request for such electronic transfer
has been made by the Subscriber and the Subscriber has complied with
all applicable securities laws in connection with the sale of the
Common Stock, including, without limitation, the prospectus delivery
requirements. A Note representing the balance of the Note not so
converted will be provided by the Company to the Subscriber if
requested by Subscriber, provided the Subscriber delivers the original
Note to the Company. In the event that a Subscriber elects not to
surrender a Note for reissuance upon partial payment or conversion,
the Subscriber hereby indemnifies the Company against any and all loss
or damage attributable to a third-party claim in an amount in excess
of the actual amount then due under the Note. The Company will obtain
from the Company's transfer agent a signed letter in the form annexed
hereto as Exhibit D, and deliver such letter to the Subscribers on the
Closing Date. "Business day" and "trading day" as employed in the
Transaction Documents is a day that the New York Stock Exchange is
open for trading for three or more hours.
(c) The Company understands that a delay in the
delivery of the Shares in the form required pursuant to Section 6.1
hereof, or the Mandatory Redemption Amount described in Section 6.2
hereof, respectively after the Delivery Date or the Mandatory
Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber
for such loss, the Company agrees to pay (as liquidated damages and
not as a penalty) to the Subscriber for late issuance of Shares in the
form required pursuant to Section 6.1 hereof upon Conversion of the
Note in the amount of $100 per business day after the Delivery Date
for each $10,000 of Note principal amount being converted of the
corresponding Shares which are not timely delivered. The Company
shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other
remedies which may be available to the Subscriber, in the event that
the Company fails for any reason to effect delivery of the Shares by
the Delivery Date or make payment by the Mandatory Redemption Payment
Date, the Subscriber may revoke all or part of the relevant Notice of
Conversion or rescind all or part of the notice of Mandatory
Redemption by delivery of a notice to such effect to the Company
whereupon the Company and the Subscriber shall each be restored to
their respective positions immediately prior to the delivery of such
notice, except that the liquidated damages described above shall be
payable through the date notice of revocation or rescission is given
to the Company.
(d) Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed
to establish or require the payment of a rate of interest or other
charges in excess of the maximum permitted by applicable law. In the
event that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum permitted by such law, any
payments in excess of such maximum shall be credited against amounts
owed by the Company to the Subscriber and thus refunded to the Company.
6.2. Mandatory Redemption at Subscriber's Election. In the
event (i) the Company is prohibited from issuing Shares, (ii) the
Company fails to timely deliver Shares on a Delivery Date, (iii) upon
the occurrence of any other Event of Default (as defined in the Note
or in this Agreement), (iv) of the liquidation, dissolution or winding
up of the Company, or (v) a Change of Control (as defined below) that
continues for more than ten days, then at the Subscriber's election,
the Company must pay to the Subscriber ten (10) business days after
request by the Subscriber, at the Subscriber's election, a sum of
money determined by (y) multiplying up to the outstanding principal
amount of the Note designated by the Subscriber by 130%, or (z)
multiplying the number of Shares otherwise deliverable upon conversion
of an amount of Note principal and/or interest designated by the
Subscriber (with the date of giving of such designation being a
"Deemed Conversion Date") at the Conversion Price that would be in
effect on the Deemed Conversion Date by the highest closing price of
the Common Stock on the Principal Market for the period commencing on
the Deemed Conversion Date until the day prior to the receipt by the
Subscriber of the Mandatory Redemption Payment, whichever is greater,
together with accrued but unpaid interest thereon ("Mandatory
Redemption Payment"). The Mandatory Redemption Payment must be
received by the Subscriber on the same date as the Company Shares
otherwise deliverable or within ten (10) business days after request,
whichever is sooner ("Mandatory Redemption Payment Date"). Upon
receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding.
Liquidated damages calculated pursuant to Section 6.1(c) hereof, that
have been paid or accrued for the twenty day period prior to the
actual receipt of the Mandatory Redemption Payment by the Subscriber
shall be credited against the Mandatory Redemption Payment. For
purposes of this Section 6.2, "Change in Control" shall mean (i) the
Company no longer having a class of shares publicly traded or listed
on a Principal Market, (ii) the Company becoming a Subsidiary of
another entity, (iii) a majority of the board of directors of the
Company as of the Closing Date no longer serving as directors of the
Company except due to natural causes, (iv) if the holders of the
Company's Common Stock as of the Closing Date beneficially own at any
time after the Closing Date less than forty percent of the Common
stock owned by them on the Closing Date, and (v) the sale, lease or
transfer of substantially all the assets of the Company or Subsidiaries.
6.3. Maximum Conversion. The Subscriber shall not be
entitled to convert on a Conversion Date that amount of the Note in
connection with that number of shares of Common Stock which would be
in excess of the sum of (i) the number of shares of common stock
beneficially owned by the Subscriber and its Affiliates on a
Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the
determination of this provision is being made on a Conversion Date,
which would result in beneficial ownership by the Subscriber and its
Affiliates of more than 4.99% of the outstanding shares of common
stock of the Company on such Conversion Date. For the purposes of the
provision to the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to
aggregate conversions of only 4.99% and aggregate conversions by the
Subscriber may exceed 4.99%. The Subscriber may waive the conversion
limitation described in this Section 6.3, in whole or in part, upon
and effective after 61 days prior written notice to the Company. The
Subscriber may allocate which of the equity of the Company deemed
beneficially owned by the Subscriber shall be included in the 4.99%
amount described above and which shall be allocated to the excess
above 4.99%.
6.4. Injunction Posting of Bond. In the event a Subscriber
shall elect to convert a Note or part thereof or exercise the Warrant
in whole or in part, the Company may not refuse conversion or exercise
based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of
law, or for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining conversion of all or part of such
Note or exercise of all or part of such Warrant shall have been sought
and obtained by the Company and the Company has posted a surety bond
for the benefit of such Subscriber in the amount of 130% of the
outstanding principal and interest of the Note, or aggregate purchase
price of the Warrant Shares which are sought to be subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall
be payable to such Subscriber to the extent Subscriber obtains
judgment. Notwithstanding the foregoing, if the Company receives an
order restraining it from converting from a court or administration
agency of competent jurisdiction, it shall comply without a bond
requirement.
6.5. Buy-In. In addition to any other rights available to
the Subscriber, if the Company fails to deliver to the Subscriber such
shares issuable upon conversion of a Note by the Delivery Date and if
after seven (7) business days after the Delivery Date the Subscriber
purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Subscriber
of the Common Stock which the Subscriber was entitled to receive upon
such conversion (a "Buy-In"), then the Company shall pay in cash to
the Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) the Subscriber's total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate
principal and/or interest amount of the Note for which such conversion
was not timely honored, together with interest thereon at a rate of
15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated
damages and not as a penalty). For example, if the Subscriber
purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of
$10,000 of note principal and/or interest, the Company shall be
required to pay the Subscriber $1,000, plus interest. The Subscriber
shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In.
6.6 Adjustments. The Conversion Price, Warrant exercise
price and amount of Shares issuable upon conversion of the Notes and
exercise of the Warrants shall be adjusted as described in this
Agreement, the Notes and Warrants.
6.7. Redemption. The Note and Warrants shall not be
redeemable or callable except as described in the Note and Warrants.
7. Finder's Fee/Legal Fees.
(a) Finder's Fee. The Company agrees to indemnify,
reimburse, make whole and hold harmless the Subscribers and their
agents and representatives from any and all liabilities to any
persons claiming commissions, finder's fees or similar payments on
account of services purported to have been rendered in connection
with this Agreement, the transactions contemplated hereby, or in
connection with any investment in the Company, whether or not such
investment was consummated. The Company agrees that the Subscribers
have no liability to the Company or any other party, directly or
indirectly for any finder's fees, commissions, or similar payments.
The Company represents that there are no parties entitled to receive
finder's fees, commissions, or similar payments from the Company in
connection with the transactions described in this Agreement.
(b) Legal Fees. The Company shall pay to Grushko &
▇▇▇▇▇▇▇, P.C., a legal fee of $9,000 ("Legal Fees") as reimbursement
for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Notes and Warrants (the
"Offering"). The Legal Fees will be payable on the Initial Closing
Date out of funds held pursuant to the Escrow Agreement.
8. Covenants of the Company. The Company covenants and
agrees with the Subscribers as follows:
(a) Stop Orders. The Company will advise the
Subscribers, within two hours after the Company receives notice of
issuance by the Commission, any state securities commission or any
other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock
of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
(b) Listing. The Company shall promptly secure the
listing of the shares of Common Stock and the Warrant Shares upon each
national securities exchange, or electronic or automated quotation
system upon which they are or become eligible for listing and shall
maintain such listing so long as any Notes or Warrants are
outstanding. The Company will maintain the listing of its Common
Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq
National Market System, OTC Bulletin Board, Pink Sheets or New York
Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock (the
"Principal Market")), and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or
rules of the Principal Market, as applicable. The Company will provide
the Subscribers copies of all notices it receives notifying the
Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the
Closing Date, the Bulletin Board is and will be the Principal Market.
(c) Market Regulations. The Company shall notify the
Commission, the Principal Market and applicable state authorities, in
accordance with their requirements, of the transactions contemplated
by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to
the Subscribers and promptly provide copies thereof to Subscriber.
(d) Filing Requirements. From the date of this
Agreement and until the sooner of (i) three (3) years after the Second
Closing Date, or (ii) until all the Shares and Warrant Shares have
been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitation, the Company will (A) cause its Common Stock to
continue to be registered under Section 12(b) or 12(g) of the 1934
Act, (B) comply in all respects with its reporting and filing
obligations including permissible extensions under the 1934 Act, (C)
comply with all reporting requirements that are applicable to an
issuer with a class of shares registered pursuant to Section 12(b) or
12(g) of the 1934 Act, as applicable, and (D) comply with all filing
requirements related to any registration statement filed pursuant to
this Agreement. The Company will use its best efforts not to take any
action or file any document (whether or not permitted by the 1933 Act
or the 1934 Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under said acts until three (3) years after the Second
Closing Date. Until the earlier of the resale of the Shares, and
Warrant Shares by each Subscriber or until three (3) years after the
Warrants have been exercised, the Company will use its best efforts to
continue the listing or quotation of the Common Stock on a Principal
Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the
Principal Market. The Company agrees to timely file a Form D with
respect to the Securities if required under Regulation D and to
provide a copy thereof to each Subscriber promptly after such filing.
(e) Use of Proceeds. The proceeds of the Offering
will be employed by the Company for the purposes set forth on Schedule
8(e) hereto. Except as set forth on Schedule 8(e), the Purchase Price
may not and will not be used for accrued and unpaid officer and
director salaries, payment of financing related debt, redemption of
outstanding notes or equity instruments of the Company, litigation
related expenses or settlements, brokerage fees, nor non-trade
obligations outstanding on the Closing Date. For so long as any Notes
are outstanding, the Company will not prepay any financing related
debt obligations nor redeem any equity instruments of the Company.
(f) Reservation. Prior to the Closing Date, the
Company undertakes to reserve, pro rata, on behalf of the Subscribers
from its authorized but unissued common stock, a number of common
shares equal to 200% of the amount of Common Stock necessary to allow
each Subscriber to be able to convert all Notes issuable pursuant to
this Agreement and interest thereon and reserve 100% of the amount of
Warrant Shares issuable upon exercise of the Warrants. Failure to
have sufficient shares reserved pursuant to this Section 8(f) for five
(5) consecutive business days or fifteen (15) days in the aggregate
shall be a material default of the Company's obligations under this
Agreement and an Event of Default under the Note.
(g) Taxes. From the date of this Agreement and until
the sooner of (i) two (2) years after the Second Closing Date, or (ii)
until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will promptly pay and discharge, or cause to
be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided,
however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company shall have set
aside on its books adequate reserves with respect thereto, and
provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.
(h) Insurance. From the date of this Agreement and
until the sooner of (i) two (2) years after the Second Closing Date,
or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will keep its assets which are of an
insurable character insured by financially sound and reputable
insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of
business, in amounts sufficient to prevent the Company from becoming a
co-insurer and not in any event less than one hundred percent (100%)
of the insurable value of the property insured; and the Company will
maintain, with financially sound and reputable insurers, insurance
against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar
businesses similarly situated and to the extent available on
commercially reasonable terms.
(i) Books and Records. From the date of this
Agreement and until the sooner of (i) two (2) years after the Second
Closing Date, or (ii) until all the Shares and Warrant Shares have
been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitations, the Company will keep true records and books of
account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in
accordance with generally accepted accounting principles applied on a
consistent basis.
(j) Governmental Authorities. From the date of this
Agreement and until the sooner of (i) two (2) years after the Second
Closing Date, or (ii) until all the Shares and Warrant Shares have
been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitations, the Company shall duly observe and conform in all
material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its
properties or assets.
(k) Intellectual Property. From the date of this
Agreement and until the sooner of (i) two (2) years after the Second
Closing Date, or (ii) until all the Shares and Warrant Shares have
been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitations, the Company shall maintain in full force and
effect its corporate existence, rights and franchises and all licenses
and other rights to use intellectual property owned or possessed by it
and reasonably deemed to be necessary to the conduct of its business,
unless it is sold for value.
(l) Properties. From the date of this Agreement and
until the sooner of (i) two (2) years after the Second Closing Date,
or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration
Statement (as defined in Section 10.1(iv) hereof) or pursuant to Rule
144, without regard to volume limitations, the Company will keep its
properties in good repair, working order and condition, reasonable
wear and tear excepted, and from time to time make all necessary and
proper repairs, renewals, replacements, additions and improvements
thereto; and the Company will at all times comply with each provision
of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected
to have a Material Adverse Effect.
(m) Confidentiality/Public Announcement. From the
date of this Agreement and until the sooner of (i) two (2) years after
the Second Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company agrees that except in connection
with a Form 8-K or the Registration Statement or as otherwise required
in any other Commission filing, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed to
in writing by a Subscriber, only to the extent required by law and
then only upon five days prior notice to Subscriber. In any event and
subject to the foregoing, the Company shall make a public announcement
describing the Offering not later than the first business day after
the Closing Date. In the public announcement, the Company will
specifically disclose the amount of common stock outstanding
immediately after the Closing. A form of the proposed public
announcement to be employed in connection with the Closing is annexed
hereto as Exhibit E.
(n) Further Registration Statements. Except for a
registration statement filed on behalf of the Subscribers pursuant to
Section 10 of this Agreement and as set forth on Schedule 10.1 hereto,
the Company will not file any registration statements or amend any
already filed registration statement, including but not limited to
Forms S-8, with the Commission or with state regulatory authorities
without the consent of the Subscriber until the sooner of (i) the
Registration Statement shall have been current and available for use
in connection with the resale of the Registrable Securities (as
defined in Section 10.1(i) for a period of 365 days, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by the
Subscribers pursuant to the Registration Statement or Rule 144,
without regard to volume limitations ("Exclusion Period"). The
Exclusion Period will be tolled during the pendency of an Event of
Default as defined in the Note.
(o) Blackout. The Company undertakes and covenants
that until the end of the Exclusion Period, the Company will not enter
into any acquisition, merger, exchange or sale or other transaction
that could have the effect of delaying the effectiveness of any
pending registration statement or causing an already effective
registration statement to no longer be effective or current for a
period fifteen (15) or more consecutive days nor more than thirty (30)
days during any consecutive three hundred and sixty-five (365) day period.
(p) Non-Public Information. The Company covenants and
agrees that neither it nor any other person acting on its behalf will
provide any Subscriber or its agents or counsel with any information
that the Company believes constitutes material non-public information,
unless prior thereto such Subscriber shall have agreed in writing to
receive such information. The Company understands and confirms that
each Subscriber shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
(q) Limited Standstill. The Company will deliver to
the Subscribers on or before the Closing Date and enforce the
provisions of irrevocable standstill agreements ("Limited Standstill
Agreements") in the form annexed hereto as Exhibit F, with the parties
identified on Schedule 8(q) hereto.
9. Covenants of the Company and Subscriber Regarding
Indemnification.
(a) The Company agrees to indemnify, hold harmless,
reimburse and defend the Subscribers, the Subscribers' officers,
directors, agents, Affiliates, control persons, and principal
shareholders, against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material
misrepresentation by Company or material breach of any warranty by
Company in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after
any applicable notice and/or cure periods, any material breach or
default in performance by the Company of any covenant or undertaking
to be performed by the Company hereunder, or any other agreement
entered into by the Company and Subscriber relating hereto.
(b) Each Subscriber agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's
officers, directors, agents, Affiliates, control persons against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the
Company or any such person which results, arises out of or is based
upon (i) any material misrepresentation by such Subscriber in this
Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable
notice and/or cure periods, any material breach or default in
performance by such Subscriber of any covenant or undertaking to be
performed by such Subscriber hereunder, or any other agreement entered
into by the Company and Subscribers, relating hereto.
(c) In no event shall the liability of any Subscriber
or permitted successor hereunder or under any Transaction Document or
other agreement delivered in connection herewith be greater in amount
than the dollar amount of the net proceeds actually received by such
Subscriber upon the sale of Registrable Securities (as defined herein).
(d) The procedures set forth in Section 10.6 shall
apply to the indemnification set forth in Sections 9(a) and 9(b) above.
10.1. Registration Rights. The Company hereby grants
the following registration rights to holders of the Securities.
(i) On one occasion, for a period commencing
ninety-one (91) days after the Initial Closing Date, but not
later than two (2) years after the Second Closing Date, upon a
written request therefor from any record holder or holders of
more than 50% of the Shares issued and issuable upon
conversion of the outstanding Notes and outstanding Warrant
Shares, the Company shall prepare and file with the Commission
a registration statement under the 1933 Act registering the
Registrable Securities, as defined in Section 10.1(iv) hereof,
which are the subject of such request for unrestricted public
resale by the holder thereof. For purposes of Sections
10.1(i) and 10.1(ii), Registrable Securities shall not include
Securities which are (A) registered for resale in an effective
registration statement, (B) included for registration in a
pending registration statement, or (C) which have been issued
without further transfer restrictions after a sale or transfer
pursuant to Rule 144 under the 1933 Act. Upon the receipt of
such request, the Company shall promptly give written notice
to all other record holders of the Registrable Securities that
such registration statement is to be filed and shall include
in such registration statement Registrable Securities for
which it has received written requests within ten (10) days
after the Company gives such written notice. Such other
requesting record holders shall be deemed to have exercised
their demand registration right under this Section 10.1(i).
(ii) If the Company at any time proposes to
register any of its securities under the 1933 Act for sale to
the public, whether for its own account or for the account of
other security holders or both, except with respect to
registration statements on Forms ▇-▇, ▇-▇ or another form not
available for registering the Registrable Securities for sale
to the public, provided the Registrable Securities are not
otherwise registered for resale by the Subscribers or Holder
pursuant to an effective registration statement, each such
time it will give at least fifteen (15) days' prior written
notice to the record holder of the Registrable Securities of
its intention so to do. Upon the written request of the
holder, received by the Company within ten (10) days after the
giving of any such notice by the Company, to register any of
the Registrable Securities not previously registered, the
Company will cause such Registrable Securities as to which
registration shall have been so requested to be included with
the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the
Registrable Securities so registered by the holder of such
Registrable Securities (the "Seller" or "Sellers"). In the
event that any registration pursuant to this Section 10.1(ii)
shall be, in whole or in part, an underwritten public offering
of common stock of the Company, the number of shares of
Registrable Securities to be included in such an underwriting
may be reduced by the managing underwriter if and to the
extent that the Company and the underwriter shall reasonably
be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the
foregoing provisions, or Section 10.4 hereof, the Company may
withdraw or delay or suffer a delay of any registration
statement referred to in this Section 10.1(ii) without thereby
incurring any liability to the Seller.
(iii) If, at the time any written request for
registration is received by the Company pursuant to Section
10.1(i), the Company has determined to proceed with the actual
preparation and filing of a registration statement under the
1933 Act in connection with the proposed offer and sale for
cash of any of its securities for the Company's own account
and the Company actually does file such other registration
statement, such written request shall be deemed to have been
given pursuant to Section 10.1(ii) rather than Section
10.1(i), and the rights of the holders of Registrable
Securities covered by such written request shall be governed
by Section 10.1(ii).
(iv) The Company shall file with the
Commission a Form SB-2 registration statement (the
"Registration Statement") (or such other form that it is
eligible to use) in order to register the Registrable
Securities for resale and distribution under the 1933 Act
within thirty (30) days of the Initial Closing Date (the
"Filing Date"), and cause to be declared effective not later
than ninety (90) calendar days after the Initial Closing Date
(the "Effective Date"). The Company will register not less
than a number of shares of common stock in the aforedescribed
registration statement that is equal to 200% of the Shares
issuable upon conversion of all of the Notes issuable to the
Subscribers, 100% of the Warrant Shares issuable pursuant to
this Agreement upon exercise of the Class A Warrants
(collectively the "Registrable Securities"). The Registrable
Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber and Warrant holder, pro rata, and
not issued, employed or reserved for anyone other than each
such Subscriber and Warrant holder. The Registration
Statement will immediately be amended or additional
registration statements will be immediately filed by the
Company as necessary to register additional shares of Common
Stock to allow the public resale of all Common Stock included
in and issuable by virtue of the Registrable Securities.
Except with the written consent of the Subscriber, or as
described on Schedule 10.1 hereto, no securities of the
Company other than the Registrable Securities will be included
in the Registration Statement. It shall be deemed a Non-
Registration Event if at any time after the date the
Registration Statement is declared effective by the Commission
("Actual Effective Date") the Company has registered for
unrestricted resale on behalf of the Sellers fewer than 125%
of the amount of Common Shares issuable upon full conversion
of all sums due under the Notes and 100% of the Warrant Shares
issuable upon exercise of the Warrants.
10.2. Registration Procedures. If and whenever the
Company is required by the provisions of Section 10.1(i), 10.1(ii), or
(iv) to effect the registration of any Registrable Securities under
the 1933 Act, the Company will, as expeditiously as possible:
(a) subject to the timelines provided in this
Agreement, prepare and file with the Commission a registration
statement required by Section 10, with respect to such securities and
use its best efforts to cause such registration statement to become
and remain effective for the period of the distribution contemplated
thereby (determined as herein provided), promptly provide to the
holders of the Registrable Securities copies of all filings and
Commission letters of comment and notify Subscribers (by telecopier
and by e-mail addresses provided by Subscribers) and Grushko &
▇▇▇▇▇▇▇, P.C. (by telecopier and by email to ▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇) on or
before 6:00 PM EST on the first business day that the Company receives
notice that (i) the Commission has no comments or no further comments
on the Registration Statement, and (ii) the registration statement has
been declared effective (failure to timely provide notice as required
by this Section 10.2(a) shall be a material breach of the Company's
obligation and an Event of Default as defined in the Notes and a Non-
Registration Event as defined in Section 9.4 of this Agreement);
(b) 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 until such registration
statement has been effective for a period of two (2) years, and comply
with the provisions of the 1933 Act with respect to the disposition of
all of the Registrable Securities covered by such registration
statement in accordance with the Sellers' intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Sellers, at the Company's expense,
such number of copies of the registration statement and the prospectus
included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale
or their disposition of the securities covered by such registration
statement or make them electronically available;
(d) use its commercially reasonable best efforts to
register or qualify the Registrable Securities covered by such
registration statement under the securities or "blue sky" laws of New
York and such jurisdictions as the Sellers shall request in writing,
provided, however, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) if applicable, list the Registrable Securities
covered by such registration statement with any securities exchange on
which the Common Stock of the Company is then listed;
(f) notify the Subscribers within two hours of the
Company's becoming aware that a prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any
event of which the Company has knowledge as a result of which the
prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing or which becomes subject to a Commission,
state or other governmental order suspending the effectiveness of the
registration statement covering any of the Shares; and
(g) provided same would not be in violation of the
provision of Regulation FD under the 1934 Act, make available for
inspection by the Sellers, and any attorney, accountant or other
agent retained by the Seller or underwriter, all publicly available,
non-confidential financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration
statement.
10.3. Provision of Documents. In connection with each
registration described in this Section 11, each Seller will furnish to
the Company in writing such information and representation letters
with respect to itself and the proposed distribution by it as
reasonably shall be necessary in order to assure compliance with
federal and applicable state securities laws.
10.4. Non-Registration Events. The Company and the
Subscribers agree that the Sellers will suffer damages if the
Registration Statement is not filed by the Filing Date and not
declared effective by the Commission by the Effective Date, and any
registration statement required under Section 10.1(i) or 10.1(ii) is
not filed within 60 days after written request and declared effective
by the Commission within 120 days after such request, and maintained
in the manner and within the time periods contemplated by Section 11
hereof, and it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, if (A) the Registration
Statement is not filed on or before the Filing Date, (B) is not
declared effective on or before the Effective Date, (C) due to the
action or inaction of the Company the Registration Statement is not
declared effective within three (3) business days after receipt by the
Company or its attorneys of a written or oral communication from the
Commission that the Registration Statement will not be reviewed or
that the Commission has no further comments, (D) if the registration
statement described in Sections 10.1(i) or 10.1(ii) is not filed
within 60 days after such written request, or is not declared
effective within 120 days after such written request, or (E) any
registration statement described in Sections 10.1(i), 10.1(ii) or
10.1(iv) is filed and declared effective but shall thereafter cease to
be effective without being succeeded within fifteen (15) business days
by an effective replacement or amended registration statement or for a
period of time which shall exceed 30 days in the aggregate per year
(defined as a period of 365 days commencing on the Actual Effective
Date (each such event referred to in clauses A through E of this
Section 10.4 is referred to herein as a "Non-Registration Event"),
then the Company shall deliver to the holder of Registrable
Securities, as Liquidated Damages, an amount equal to two percent (2%)
for each thirty (30) days or part thereof of the Purchase Price of the
Notes remaining unconverted and purchase price of Shares issued upon
conversion of the Notes owned of record by such holder which are
subject to such Non-Registration Event. The Company must pay the
Liquidated Damages in cash or at the Company's election with
registered shares of Common stock valued at the Conversion Price in
effect on the first trading day of each thirty day or shorter period
for which liquidated damages are payable. The Liquidated Damages must
be paid within ten (10) days after the end of each thirty (30) day
period or shorter part thereof for which Liquidated Damages are
payable. In the event a Registration Statement is filed by the Filing
Date but is withdrawn prior to being declared effective by the
Commission, then such Registration Statement will be deemed to have
not been filed. All oral or written comments received from the
Commission relating to the Registration Statement must be
satisfactorily responded to within ten (10) business days after
receipt of comments from the Commission. Failure to timely respond to
Commission comments is a Non-Registration Event for which Liquidated
Damages shall accrue and be payable by the Company to the holders of
Registrable Securities at the same rate set forth above.
Notwithstanding the foregoing, the Company shall not be liable to the
Subscriber under this Section 10.4 for any events or delays occurring
as a consequence of the acts or omissions of the Subscribers contrary
to the obligations undertaken by Subscribers in this Agreement.
Liquidated Damages will not accrue nor be payable pursuant to this
Section 10.4 nor will a Non-Registration Event be deemed to have
occurred for times during which Registrable Securities are
transferable by the holder of Registrable Securities pursuant to Rule
144(k) under the 1933 Act.
10.5. Expenses. All expenses incurred by the Company in
complying with Section 10, including, without limitation, all
registration and filing fees, printing expenses (if required), fees
and disbursements of counsel and independent public accountants for
the Company, fees and expenses (including reasonable counsel fees)
incurred in connection with complying with state securities or "blue
sky" laws, fees of the National Association of Securities Dealers,
Inc., transfer taxes, and fees of transfer agents and registrars, are
called "Registration Expenses." All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are
called "Selling Expenses." The Company will pay all Registration
Expenses in connection with the registration statement under Section
10. Selling Expenses in connection with each registration statement
under Section 10 shall be borne by the Seller and may be apportioned
among the Sellers in proportion to the number of shares sold by the
Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable
Securities under the 1933 Act pursuant to Section 10, the Company
will, to the extent permitted by law, indemnify and hold harmless the
Seller, each officer of the Seller, each director of the Seller, each
underwriter of such Registrable Securities thereunder and each other
person, if any, who controls such Seller or underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or
liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions 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
Registrable Securities was registered under the 1933 Act pursuant to
Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when
made, and will subject to the provisions of Section 10.6(c) reimburse
the Seller, each such underwriter and each such controlling person for
any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be
liable to the Seller to the extent that any such damages arise out of
or are based upon an untrue statement or omission made in any
preliminary prospectus if (i) the Seller failed to send or deliver a
copy of the final prospectus delivered by the Company to the Seller
with or prior to the delivery of written confirmation of the sale by
the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue
statement or alleged untrue statement or such omission or alleged
omission, or (iii) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by any such Seller, or any such
controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the
Registrable Securities under the 1933 Act pursuant to Section 10, each
Seller severally but not jointly will, to the extent permitted by law,
indemnify and hold harmless the Company, and each person, if any, who
controls the Company within the meaning of the 1933 Act, each officer
of the Company who signs the registration statement, each director of
the Company, each underwriter and each person who controls any
underwriter within the meaning of the 1933 Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may
become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the 1933
Act pursuant to Section 10, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the 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 will
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Seller
will be liable hereunder in any such case if and only to the extent
that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with
information pertaining to such Seller, as such, furnished in writing
to the Company by such Seller specifically for use in such
registration statement or prospectus, and provided, further, however,
that the liability of the Seller hereunder shall be limited to the net
proceeds actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying
party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it
may have to such indemnified party other than under this Section
10.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 10.6(c), except and only
if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to
such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 10.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, provided, however, that, if the
defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which
are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified parties, as a group, shall have
the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action,
with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the 1933 Act in any
case in which either (i) a Seller, or any controlling person of a
Seller, makes a claim for indemnification pursuant to this Section
10.6 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the
fact that this Section 10.6 provides for indemnification in such case,
or (ii) contribution under the 1933 Act may be required on the part of
the Seller or controlling person of the Seller in circumstances for
which indemnification is not provided under this Section 10.6; then,
and in each such case, the Company and the Seller will contribute to
the aggregate losses, claims, damages or liabilities to which they may
be subject (after contribution from others) in such proportion so that
the Seller is responsible only for the portion represented by the
percentage that the public offering price of its securities offered by
the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however,
that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all
such securities sold by it pursuant to such registration statement;
and (z) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) will be entitled
to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
10.7. Delivery of Unlegended Shares.
(a) Within three (3) business days (such third
business day being the "Unlegended Shares Delivery Date") after the
business day on which the Company has received (i) a notice that
Shares or Warrant Shares or any other Common Stock held by a
Subscriber have been sold pursuant to the Registration Statement or
Rule 144 under the 1933 Act, (ii) a representation that the prospectus
delivery requirements, or the requirements of Rule 144, as applicable
and if required, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been
sold, and (iv) in the case of sales under Rule 144, customary
representation letters of the Subscriber and/or Subscriber's broker
regarding compliance with the requirements of Rule 144, the Company at
its expense, (y) shall deliver, and shall cause legal counsel selected
by the Company to deliver to its transfer agent (with copies to
Subscriber) an appropriate instruction and opinion of such counsel,
directing the delivery of shares of Common Stock without any legends
including the legend set forth in Section 3(h) above, reissuable
pursuant to any effective and current Registration Statement described
in Section 11 of this Agreement or pursuant to Rule 144 under the 1933
Act (the "Unlegended Shares"); and (z) cause the transmission of the
certificates representing the Unlegended Shares together with a
legended certificate representing the balance of the submitted Shares
certificate, if any, to the Subscriber at the address specified in the
notice of sale, via express courier, by electronic transfer or
otherwise on or before the Unlegended Shares Delivery Date. Transfer
fees shall be the responsibility of the Seller.
(b) In lieu of delivering physical certificates
representing the Unlegended Shares, if the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of a Subscriber, so long as
the certificates therefor do not bear a legend and the Subscriber is
not obligated to return such certificate for the placement of a legend
thereon, the Company shall cause its transfer agent to electronically
transmit the Unlegended Shares by crediting the account of
Subscriber's prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. Such delivery must be made on or before the
Unlegended Shares Delivery Date.
(c) The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 10 hereof later
than two business days after the Unlegended Shares Delivery Date could
result in economic loss to a Subscriber. As compensation to a
Subscriber for such loss, the Company agrees to pay late payment fees
(as liquidated damages and not as a penalty) to the Subscriber for
late delivery of Unlegended Shares in the amount of $100 per business
day after the Delivery Date for each $10,000 of purchase price of the
Unlegended Shares subject to the delivery default. If during any 360
day period, the Company fails to deliver Unlegended Shares as required
by this Section 10.7 for an aggregate of thirty (30) days, then each
Subscriber or assignee holding Securities subject to such default may,
at its option, require the Company to redeem all or any portion of the
Shares and Warrant Shares subject to such default at a price per share
equal to 130% of the Purchase Price of such Common Stock and Warrant
Shares ("Unlegended Redemption Amount"). The amount of the
aforedescribed liquidated damages that have accrued or been paid for
the twenty day period prior to the receipt by the Subscriber of the
Unlegended Redemption Amount shall be credited against the Unlegended
Redemption Amount. The Company shall pay any payments incurred under
this Section in immediately available funds upon demand.
(d) In addition to any other rights available to a
Subscriber, if the Company fails to deliver to a Subscriber Unlegended
Shares as required pursuant to this Agreement, within seven (7)
business days after the Unlegended Shares Delivery Date and the
Subscriber purchases (in an open market transaction or otherwise)
shares of common stock to deliver in satisfaction of a sale by such
Subscriber of the shares of Common Stock which the Subscriber was
entitled to receive from the Company (a "Buy-In"), then the Company
shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if
any) for the shares of common stock so purchased exceeds (B) the
aggregate purchase price of the shares of Common Stock delivered to
the Company for reissuance as Unlegended Shares together with
interest thereon at a rate of 15% per annum, accruing until such
amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to
$10,000 of purchase price of shares of Common Stock delivered to the
Company for reissuance as Unlegended Shares, the Company shall be
required to pay the Subscriber $1,000, plus interest. The Subscriber
shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In.
(e) In the event a Subscriber shall request delivery
of Unlegended Shares as described in Section 10.7 and the Company is
required to deliver such Unlegended Shares pursuant to Section 10.7,
the Company may not refuse to deliver Unlegended Shares based on any
claim that such Subscriber or any one associated or affiliated with
such Subscriber has been engaged in any violation of law, or for any
other reason, unless, an injunction or temporary restraining order
from a court, on notice, restraining and or enjoining delivery of such
Unlegended Shares or exercise of all or part of said Warrant shall
have been sought and obtained and the Company has posted a surety bond
for the benefit of such Subscriber in the amount of 130% of the amount
of the aggregate purchase price of the Common Stock and Warrant Shares
which are subject to the injunction or temporary restraining order,
which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall
be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber's favor.
11.(a) Right of First Refusal. Until the end of the
Exclusion Period, the Subscribers shall be given not less than seven
(7) business days prior written notice of any proposed sale by the
Company of its common stock or other securities or debt obligations,
except in connection with (i) full or partial consideration in
connection with a strategic merger, acquisition, consolidation or
purchase of substantially all of the securities or assets of
corporation or other entity which holders of such securities or debt
are not granted registration rights, (ii) the Company's issuance of
securities in connection with strategic license agreements and other
partnering arrangements so long as such issuances are not for the
purpose of raising capital which holders of such securities or debt
are not granted registration rights, (iii) the Company's issuance of
Common Stock or the issuances or grants of options to purchase Common
Stock pursuant to stock option plans and employee stock purchase plans
described on Schedule 4(d) hereto, (iv) as a result of the exercise of
Warrants or conversion of Notes which are granted or issued pursuant
to this Agreement, (v) the payment of any interest on the Notes and
Liquidated Damages, (vi) as has been described in the Reports or Other
Written Information filed with the Commission or delivered to the
Subscribers prior to the Closing Date, and (vii) as described on
Schedule 10.1 (collectively the foregoing are "Excepted Issuances").
The Subscribers who exercise their rights pursuant to this Section
11(a) shall have the right during the seven (7) business days
following receipt of the notice to purchase such offered common stock,
debt or other securities in accordance with the terms and conditions
set forth in the notice of sale in the same proportion to each other
as their purchase of Notes in the Offering. In the event such terms
and conditions are modified during the notice period, the Subscribers
shall be given prompt notice of such modification and shall have the
right during the seven (7) business days following the notice of
modification to exercise such right.
(b) Offering Restrictions. Until the expiration of
the Exclusion Period and during the pendency of an Event of Default,
except for the Excepted Issuances, the Company will not enter into an
agreement to nor issue any equity, convertible debt or other
securities convertible into common stock or equity of the Company nor
modify any of the foregoing which may be outstanding at anytime,
without the prior written consent of the Subscriber, which consent may
be withheld for any reason. For so long as the Notes are
outstanding, the Company will not enter into any equity line of credit
or similar agreement, nor issue or agree to issue any floating or
variable priced equity linked instruments nor any of the foregoing or
equity with price reset rights.
(c) Favored Nations Provision. Other than in
connection with the Excepted Issuances, if at any time Notes or
Warrants are outstanding the Company shall offer, issue or agree to
issue any common stock or securities convertible into or exercisable
for shares of common stock (or modify any of the foregoing which may
be outstanding) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than the
Conversion Price in respect of the Shares, or if less than the Warrant
exercise price in respect of the Warrant Shares, without the consent
of each Subscriber holding Notes, Shares, Warrants, or Warrant Shares,
then the Company shall issue, for each such occasion, additional
shares of Common Stock to each Subscriber so that the average per
share purchase price of the shares of Common Stock issued to the
Subscriber (of only the Common Stock or Warrant Shares still owned by
the Subscriber) is equal to such other lower price per share and the
Conversion Price and Warrant exercise price shall automatically be
adjusted as provided in the Notes and the Warrants. The average
Purchase Price of the Shares and average exercise price in relation to
the Warrant Shares shall be calculated separately for the Shares and
Warrant Shares. The foregoing calculation and issuance shall be made
separately for Shares received upon conversion and separately for
Warrant Shares. The delivery to the Subscriber of the additional
shares of Common Stock shall be not later than the closing date of the
transaction giving rise to the requirement to issue additional shares
of Common Stock. The Subscriber is granted the registration rights
described in Section 10 hereof in relation to such additional shares
of Common Stock except that the Filing Date and Effective Date vis-.-
vis such additional common shares shall be, respectively, the
thirtieth (30th) and sixtieth (60th) date after the closing date giving
rise to the requirement to issue the additional shares of Common
Stock. For purposes of the issuance and adjustment described in this
paragraph, the issuance of any security of the Company carrying the
right to convert such security into shares of Common Stock or of any
warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the sooner of
the agreement to or actual issuance of such convertible security,
warrant, right or option and again at any time upon any subsequent
issuances of shares of Common Stock upon exercise of such conversion
or purchase rights if such issuance is at a price lower than the
Conversion Price or Warrant exercise price in effect upon such
issuance. The rights of the Subscriber set forth in this Section 11
are in addition to any other rights the Subscriber has pursuant to
this Agreement, the Note, any Transaction Document, and any other
agreement referred to or entered into in connection herewith.
(d) Paid In Kind. The Subscriber may demand that
some or all of the sums payable to the Subscriber pursuant to Sections
6.1(c), 6.2, 6.5, 10.4, 10.7(c), 10.7(d) and 10.7(e) that are not paid
within ten business days of the required payment date be paid in
shares of Common Stock valued at the Conversion Price in effect at the
time Subscriber makes such demand or, at the Subscriber's election, at
such other valuation described in the Transaction Documents. In
addition to any other rights granted to the Subscriber herein, the
Subscriber is also granted the registration rights set forth in
Section 10.1(ii) hereof in relation to the aforedescribed shares of
Common Stock.
(e) Maximum Exercise of Rights. In the event the
exercise of the rights described in Sections 11(a), 11c) and 11d)
would result in the issuance of an amount of common stock of the
Company that would exceed the maximum amount that may be issued to a
Subscriber calculated in the manner described in Section 6.3 of this
Agreement, then the issuance of such additional shares of common stock
of the Company to such Subscriber will be deferred in whole or in part
until such time as such Subscriber is able to beneficially own such
common stock without exceeding the maximum amount set forth calculated
in the manner described in Section 6.3 of this Agreement. The
determination of when such common stock may be issued shall be made by
each Subscriber as to only such Subscriber.
12. Miscellaneous.
(a) Notices. All notices, demands, requests,
consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified herein,
shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
(i) if to the Company, to: 5G Wireless Communications, Inc., ▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇, Chairman/CEO,
telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy by telecopier only to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Attorney at Law, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇, and
(ii) if to the Subscribers, to: the one or more addresses and
telecopier numbers indicated on the signature pages hereto, with an
additional copy by telecopier only to: Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier number:
(▇▇▇) ▇▇▇-▇▇▇▇.
(b) Entire Agreement; Assignment. This Agreement and
other documents delivered in connection herewith represent the entire
agreement between the parties hereto with respect to the subject
matter hereof and may be amended only by a writing executed by both
parties. Neither the Company nor the Subscribers have relied on any
representations not contained or referred to in this Agreement and the
documents delivered herewith. No right or obligation of the Company
shall be assigned without prior notice to and the written consent of
the Subscribers.
(c) Counterparts/Execution. This Agreement may be
executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument. This Agreement may be
executed by facsimile signature and delivered by facsimile transmission.
(
(d) Law Governing this Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of laws principles that
would result in the application of the substantive laws of another
jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be
brought only in the civil or state courts of New York or in the
federal courts located in New York County. The parties and the
individuals executing this Agreement and other agreements referred to
herein or delivered in connection herewith on behalf of the Company
agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs. In the event
that any provision of this Agreement or any other agreement delivered
in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision of
any agreement.
(e) Specific Enforcement, Consent to Jurisdiction.
The Company and Subscriber acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to one or more preliminary and final injunctions to
prevent or cure breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which any of them may be entitled by
law or equity. Subject to Section 12(d) hereof, each of the Company,
Subscriber and any signator hereto in his personal capacity hereby
waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction in New York of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner
permitted by law.
(f) Independent Nature of Subscribers. The Company
acknowledges that the obligations of each Subscriber under the
Transaction Documents are several and not joint with the obligations
of any other Subscriber, and no Subscriber shall be responsible in any
way for the performance of the obligations of any other Subscriber
under the Transaction Documents. The Company acknowledges that each
Subscriber has represented that the decision of each Subscriber to
purchase Securities has been made by such Subscriber independently of
any other Subscriber and independently of any information, materials,
statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have
been made or given by any other Subscriber or by any agent or employee
of any other Subscriber, and no Subscriber or any of its agents or
employees shall have any liability to any Subscriber (or any other
person) relating to or arising from any such information, materials,
statements or opinions. The Company acknowledges that nothing
contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to,
the (i) inclusion of a Subscriber in the Registration Statement and
(ii) review by, and consent to, such Registration Statement by a
Subscriber) shall be deemed to constitute the Subscribers as a
partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Subscribers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to
independently protect and enforce its rights, including without
limitation, the rights arising out of the Transaction Documents, and
it shall not be necessary for any other Subscriber to be joined as an
additional party in any proceeding for such purpose. The Company
acknowledges that it has elected to provide all Subscribers with the
same terms and Transaction Documents for the convenience of the
Company and not because Company was required or requested to do so by
the Subscribers. The Company acknowledges that such procedure with
respect to the Transaction Documents in no way creates a presumption
that the Subscribers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions
contemplated thereby.
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon
it shall become a binding agreement between us.
5G WIRELESS COMMUNICATIONS, INC.
a Nevada corporation
By: /s/ ▇▇▇▇▇ ▇▇▇
Name: ▇▇▇▇▇ ▇▇▇
Title: Chief Executive Officer
Dated: April 5. 2006
SUBSCRIBER INITIAL CLOSING SECOND CLOSING
PURCHASE PRICE PURCHASE PRICE
LONGVIEW FUND, LP $35,000.00 $25,000.00
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
(Signature)
▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
Print Name and Title
EXHIBIT A1
CONVERTIBLE NOTE
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER
SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
5G WIRELESS COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, 5G WIRELESS COMMUNICATIONS, INC., a Nevada
corporation (hereinafter called "Borrower"), hereby promises to pay to
LONGVIEW FUND, LP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇ (the "Holder") or order, without demand,
the sum of Thirty-Five Thousand Dollars ($35,000.00), with simple
interest accruing on April 5, 2007 (the "Maturity Date"), if not paid sooner.
This Note has been entered into pursuant to the terms of a
subscription agreement between the Borrower and the Holder, dated of
even date herewith (the "Subscription Agreement"), and shall be
governed by the terms of such Subscription Agreement. Unless
otherwise separately defined herein, all capitalized terms used in
this Note shall have the same meaning as is set forth in the
Subscription Agreement. The following terms shall apply to this Note:
ARTICLE I
GENERAL PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a ten (10)
day grace period to pay any monetary amounts due under this Note,
after which grace period a default interest rate of fifteen percent
(15%) per annum shall apply to the amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth
in Article II shall remain in full force and effect immediately from
the date hereof and until the Note is paid in full regardless of the
occurrence of an Event of Default. The Note shall be payable in full
on the Maturity Date, unless previously converted into Common Stock in
accordance with Article II hereof; provided, that if an Event of
Default has occurred, the Borrower may not pay this Note, without the
consent of the Holder, until one year after the later of the date the
Event of Default has been cured or one year after the Maturity Date.
1.3 Interest Rate. Simple interest payable on this Note shall
accrue at the annual rate of twelve percent (12%) and be payable upon
each Conversion, June 1, 2006 and semi-annually thereafter, and on the
Maturity Date, accelerated or otherwise, when the principal and
remaining accrued but unpaid interest shall be due and payable, or
sooner as described below.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal due
under this Note into Shares of the Borrower's Common Stock, $.001 par
value per share ("Common Stock") as set forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the date
of the issuance of this Note and then at any time until this Note is
fully paid, to convert any outstanding and unpaid principal portion of
this Note, and accrued interest, at the election of the Holder (the
date of giving of such notice of conversion being a "Conversion Date")
into fully paid and nonassessable shares of Common Stock as such stock
exists on the date of issuance of this Note, or any shares of capital
stock of Borrower into which such Common Stock shall hereafter be
changed or reclassified, at the conversion price as defined in Section
2.1(b) hereof (the "Conversion Price"), determined as provided herein.
Upon delivery to the Borrower of a completed Notice of Conversion, a
form of which is annexed hereto, Borrower shall issue and deliver to
the Holder within three (3) business days from the Conversion Date
(such third day being the "Delivery Date") that number of shares of
Common Stock for the portion of the Note converted in accordance with
the foregoing. At the election of the Holder, the Borrower will
deliver accrued but unpaid interest on the Note in the manner provided
in Section 1.3 through the Conversion Date directly to the Holder on
or before the Delivery Date (as defined in the Subscription
Agreement). The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that
portion of the principal of the Note and interest to be converted, by
the Conversion Price.
Subject to adjustment as provided in Section 2.1(c) hereof,
the Conversion Price per share shall be the lower of (i) $0.50, or
(ii) fifty percent (50%) of the lowest five day weighted average
volume price of the Common Stock using the AQR function ("VWAP") as
reported by Bloomberg L.P. for the Principal Market for the twenty
trading days preceding a Conversion Date.
(c) The Conversion Price and number and kind of shares or
other securities to be issued upon conversion determined pursuant to
Section 2.1(a), shall be subject to adjustment from time to time upon
the happening of certain events while this conversion right remains
outstanding, as follows:
A. Merger, Sale of Assets, etc. If the Borrower at
any time shall consolidate with or merge into or sell or convey all or
substantially all its assets to any other corporation, this Note, as
to the unpaid principal portion thereof and accrued interest thereon,
shall thereafter be deemed to evidence the right to purchase such
number and kind of shares or other securities and property as would
have been issuable or distributable on account of such consolidation,
merger, sale or conveyance, upon or with respect to the securities
subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision
shall similarly apply to successive transactions of a similar nature
by any such successor or purchaser. Without limiting the generality
of the foregoing, the anti-dilution provisions of this Section shall
apply to such securities of such successor or purchaser after any such
consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any
time shall, by reclassification or otherwise, change the Common Stock
into the same or a different number of securities of any class or
classes that may be issued or outstanding, this Note, as to the unpaid
principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted
number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend is paid on
the Common Stock in shares of Common Stock, the Conversion Price shall
be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of
shares, in each such case by the ratio which the total number of
shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately
prior to such event..
D. Share Issuance. So long as this Note is
outstanding, if the Borrower shall issue or agree to issue any shares
of Common Stock except for the Excepted Issuances (as defined in the
Subscription Agreement) for a consideration less than the Conversion
Price [determined as being the lesser of the Conversion Price set
forth in Sections 2.1(b)(i) and 2.1(b)(ii) above, without regard to
the last sentence of Section 2.1(b)] in effect at the time of such
issue, then, and thereafter successively upon each such issue, the
Maximum Base Price shall be reduced to such other lower issue price.
For purposes of this adjustment, the issuance of any security carrying
the right to convert such security into shares of Common Stock or of
any warrant, right or option to purchase Common Stock shall result in
an adjustment to the Conversion Price upon the issuance of the above-
described security and again upon the issuance of shares of Common
Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the then applicable Maximum Base
Price. The reduction of the Conversion Price described in this
paragraph is in addition to other rights of the Holder described in
this Note and the Subscription Agreement.
(d) Whenever the Conversion Price is adjusted pursuant to
Section 2.1(c) above, the Borrower shall promptly mail to the Holder a
notice setting forth the Conversion Price after such adjustment and
setting forth a statement of the facts requiring such adjustment.
(e) During the period the conversion right exists, Borrower
will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common
Stock issuable upon the full conversion of this Note. Borrower
represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. Borrower agrees that its
issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing
and issuing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the conversion of this Note.
2.2 Method of Conversion. This Note may be converted by
the Holder in whole or in part as described in Section 2.1(a) hereof
and the Subscription Agreement. Upon partial conversion of this Note,
a new Note containing the same date and provisions of this Note shall,
at the request of the Holder, be issued by the Borrower to the Holder
for the principal balance of this Note and interest which shall not
have been converted or paid.
2.3 Maximum Conversion. The Holder shall not be entitled
to convert on a Conversion Date that amount of the Note in connection
with that number of shares of Common Stock which would be in excess of
the sum of (i) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates on a Conversion Date, (ii) any Common
Stock issuable in connection with the unconverted portion of the Note,
and (iii) the number of shares of Common Stock issuable upon the
conversion of the Note with respect to which the determination of this
provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than
4.99% of the outstanding shares of Common Stock of the Borrower on
such Conversion Date. For the purposes of the provision to the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate
conversions of only 4.99% and aggregate conversion by the Holder may
exceed 4.99%. The Holder shall have the authority and obligation to
determine whether the restriction contained in this Section 2.3 will
limit any conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be
the responsibility and obligation of the Holder. The Holder may waive
the conversion limitation described in this Section 2.3, in whole or
in part, upon and effective after 61 days prior written notice to the
Borrower. The Holder may allocate which of the equity of the Borrower
deemed beneficially owned by the Holder shall be included in the 4.99%
amount described above and which shall be allocated to the excess
above 4.99%.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default
("Event of Default") shall, at the option of the Holder hereof, make
all sums of principal and interest then remaining unpaid hereon and
all other amounts payable hereunder immediately due and payable, upon
demand, without presentment, or grace period, all of which hereby are
expressly waived, except as set forth below:
3.1 Failure to Pay Principal or Interest. The Borrower
fails to pay any installment of principal, interest or other sum due
under this Note when due and such failure continues for a period of
ten (10) days after the due date. The ten (10) day period described
in this Section 3.1 is the same ten (10) day period described in
Section 1.1 hereof.
3.2 Breach of Covenant. The Borrower breaches any material
covenant or other term or condition of the Subscription Agreement or
this Note in any material respect and such breach, if subject to cure,
continues for a period of ten (10) business days after written notice
to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the
Subscription Agreement, or in any agreement, statement or certificate
given in writing pursuant hereto or in connection therewith shall be
false or misleading in any material respect as of the date made and
the Closing Date.
3.4 Receiver or Trustee. The Borrower shall make an
assignment for the benefit of creditors, or apply for or consent to
the appointment of a receiver or trustee for it or for a substantial
part of its property or business; or such a receiver or trustee shall
otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final
process shall be entered or filed against Borrower or any of its
property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any
bankruptcy law or any law, or the issuance of any notice in relation
to such event, for the relief of debtors shall be instituted by or
against the Borrower and if instituted against Borrower are not
dismissed within 45 days of initiation.
3.7 Delisting. Delisting of the Common Stock from the OTC
Bulletin Board ("Bulletin Board") or Principal Market; failure to
comply with the requirements for continued listing on the Bulletin
Board for a period of five consecutive trading days; or notification
from the Bulletin Board or any Principal Market that the Borrower is
not in compliance with the conditions for such continued listing on
the Bulletin Board or other Principal Market.
3.8 Non-Payment. A default by the Borrower under any one
or more obligations in an aggregate monetary amount in excess of
$75,000 for more than twenty days after the due date, unless the
Borrower is contesting the validity of such obligation in good faith.
3.9 Stop Trade. An SEC or judicial stop trade order or
Principal Market trading suspension that lasts for five or more
consecutive trading days.
3.10 Failure to Deliver Common Stock or Replacement Note.
Borrower's failure to timely deliver Common Stock to the Holder
pursuant to and in the form required by this Note and Sections 7 and
11 of the Subscription Agreement, or, if required, a replacement Note.
3.11 Non-Registration Event. The occurrence of a Non-
Registration Event as described in Section 11.4 of the Subscription
Agreement.
3.12 Reservation Default. Failure by the Borrower to have
reserved for issuance upon conversion of the Note the amount of Common
stock as set forth in this Note and the Subscription Agreement.
3.13 Cross Default. A default by the Borrower of a material
term, covenant, warranty or undertaking of any other agreement to
which the Borrower and Holder are parties, or the occurrence of a
material event of default under any such other agreement which is not
cured after any required notice and/or cure period.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay
on the part of Holder hereof in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
4.2 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be
(i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered
by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set
forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
(i) if to the Borrower to: 5G Wireless Communications, Inc., ▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇, Chairman/CEO,
telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy by telecopier only to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Attorney at Law, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇, and
(ii) if to the Holder, to the name, address and telecopy number set
forth on the front page of this Note, with a copy by telecopier only
to Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇.
4.3 Amendment Provision. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the
Borrower and its successors and assigns, and shall inure to the
benefit of the Holder and its successors and assigns.
4.5 Cost of Collection. If default is made in the payment
of this Note, Borrower shall pay the Holder hereof reasonable costs of
collection, including reasonable attorneys' fees.
4.6 Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York. Any
action brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only in
the state courts of New York or in the federal courts located in the
state of New York. Both parties and the individual signing this
Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs.
4.7 Maximum Payments. Nothing contained herein shall be
deemed to establish or require the payment of a rate of interest or
other charges in excess of the maximum permitted by applicable law.
In the event that the rate of interest required to be paid or other
charges hereunder exceed the maximum permitted by such law, any
payments in excess of such maximum shall be credited against amounts
owed by the Borrower to the Holder and thus refunded to the Borrower.
4.8 Shareholder Status. The Holder shall not have rights
as a shareholder of the Borrower with respect to unconverted portions
of this Note. However, the Holder will have all the rights of a
shareholder of the Borrower with respect to the shares of Common Stock
to be received by Holder after delivery by the Holder of a Conversion
Notice to the Borrower.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in
its name by an authorized officer as of the 5th day of April, 2006.
5G WIRELESS COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇
Name: ▇▇▇▇▇ ▇▇▇
Title: Chief Executive Officer
WITNESS:
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the
principal and $_________ of the interest due on the Note issued by 5G
WIRELESS COMMUNICATIONS, INC. on April ___, 2006 into Shares of Common
Stock of 5G WIRELESS COMMUNICATIONS, INC. (the "Borrower") according
to the conditions set forth in such Note, as of the date written below.
Date of
Conversion:___________________________________________________________
Conversion
Price:________________________________________________________________
Shares To Be
Delivered:____________________________________________________________
Signature:____________________________________________________________
Print
Name:_________________________________________________________________
Address:______________________________________________________________
______________________________________________________________________
EXHIBIT A2
CLASS A WARRANT
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO 5G
WIRELESS COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase __________ shares of
Common Stock of 5G Wireless
Communications, Inc. (subject to
adjustment as provided herein)
CLASS A COMMON STOCK PURCHASE WARRANT
No. 2006-A-001 Issue Date: April 5, 2006
5G WIRELESS COMMUNICATIONS, INC., a corporation organized under
the laws of the State of Nevada (the "Company"), hereby certifies
that, for value received, LONGVIEW FUND, LP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇, or its
assigns (the "Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company at any time after the Issue Date
until 5:00 p.m., E.S.T on the fifth (5th) anniversary of the Issue
Date (the "Expiration Date"), up to _______ fully paid and
nonassessable shares of Common Stock at a per share purchase price of
$0.50. The aforedescribed purchase price per share, as adjusted from
time to time as herein provided, is referred to herein as the
"Purchase Price." The number and character of such shares of Common
Stock and the Purchase Price are subject to adjustment as provided
herein. The Company may reduce the Purchase Price without the consent
of the Holder. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Subscription
Agreement (the "Subscription Agreement"), dated April 5, 2006, entered
into by the Company and Holders of the Class A Warrants.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include 5G Wireless Communications,
Inc. and any corporation which shall succeed or assume the obligations
of 5G Wireless Communications, Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common
Stock, $.001 par value per share, as authorized on the date of the
Subscription Agreement, and (b) any other securities into which or for
which any of the securities described in (a) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for
or in replacement of Common Stock or Other Securities pursuant to
Section 5 or otherwise.
(d) The term "Warrant Shares" shall mean the Common Stock
issuable upon exercise of this Warrant.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and
after the Issue Date through and including the Expiration Date, the
Holder hereof shall be entitled to receive, upon exercise of this
Warrant in whole in accordance with the terms of subsection 1.2 or
upon exercise of this Warrant in part in accordance with
subsection 1.3, shares of Common Stock of the Company, subject to
adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full
by the Holder hereof by delivery of an original or facsimile copy of
the form of subscription attached as Exhibit A hereto (the
"Subscription Form") duly executed by such Holder and surrender of the
original Warrant within four (4) days of exercise, to the Company at
its principal office or at the office of its Warrant Agent (as
provided hereinafter), accompanied by payment, in cash, wire transfer
or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
1.3. Partial Exercise. This Warrant may be exercised in
part (but not for a fractional share) by surrender of this Warrant in
the manner and at the place provided in subsection 1.2 except that the
amount payable by the Holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of whole shares of
Common Stock designated by the Holder in the Subscription Form by
(b) the Purchase Price then in effect. On any such partial exercise,
the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in
the name of the Holder hereof or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may request, the whole number
of shares of Common Stock for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of
Common Stock as of a particular date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ"), National Market System,
the NASDAQ SmallCap Market or the American Stock Exchange, LLC, then
the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date;
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ SmallCap
Market or the American Stock Exchange, Inc., but is traded in the
over-the-counter market, then the average of the closing bid and ask
prices reported for the last business day immediately preceding the
Determination Date;
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and
the Company agree, or in the absence of such an agreement, by
arbitration in accordance with the rules then standing of the American
Arbitration Association, before a single arbitrator to be chosen from
a panel of persons qualified by education and training to pass on the
matter to be decided; or
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company's
charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter,
assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are
outstanding at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time
of the exercise of the Warrant, upon the request of the Holder hereof
acknowledge in writing its continuing obligation to afford to such
Holder any rights to which such Holder shall continue to be entitled
after such exercise in accordance with the provisions of this Warrant.
If the Holder shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford to such
Holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank
or trust company shall have been appointed as trustee for the Holder
of the Warrants pursuant to Subsection 3.2, such bank or trust company
shall have all the powers and duties of a warrant agent (as
hereinafter described) and shall accept, in its own name for the
account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to
this Section 1.
1.7 Delivery of Stock Certificates, etc. on Exercise. The
Company agrees that the shares of Common Stock purchased upon exercise
of this Warrant shall be deemed to be issued to the Holder hereof as
the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment
made for such shares as aforesaid. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within
three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the Holder hereof, or as
such Holder (upon payment by such Holder of any applicable transfer
taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued,
fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the
then Fair Market Value of one full share of Common Stock, together
with any other stock or other securities and property (including cash,
where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
2. Cashless Exercise.
(a) Except as described below, if a Registration Statement
(as defined in the Subscription Agreement) ("Registration Statement")
is effective and the Holder may sell its shares of Common Stock upon
exercise hereof pursuant to the Registration Statement, this Warrant
may be exercisable in whole or in part for cash only as set forth in
Section 1 above. If no such Registration Statement is available
during the time that such Registration Statement is required to be
effective pursuant to the terms of the Subscription Agreement, then
payment upon exercise may be made at the option of the Holder either
in (i) cash, wire transfer or by certified or official bank check
payable to the order of the Company equal to the applicable aggregate
Purchase Price, (ii) by delivery of Common Stock issuable upon
exercise of the Warrants in accordance with Section (b) below or
(iii) by a combination of any of the foregoing methods, for the number
of Common Stock specified in such form (as such exercise number shall
be adjusted to reflect any adjustment in the total number of shares of
Common Stock issuable to the holder per the terms of this Warrant) and
the holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully-paid and non-assessable shares of
Common Stock (or Other Securities) determined as provided herein.
(b) If the Fair Market Value of one share of Common Stock
is greater than the Purchase Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the holder
may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being cancelled) by surrender
of this Warrant at the principal office of the Company together with
the properly endorsed Subscription Form in which event the Company
shall issue to the holder a number of shares of Common Stock computed
using the following formula:
X=Y (A-B)
A
Where X= the number of shares of Common Stock to be
issued to the holder
Y= the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being exercised (at the date of such
calculation)
A= the Fair Market Value of one share of the
Company's Common Stock (at the date of such
calculation)
B= Purchase Price (as adjusted to the date of such
calculation)
The Holder may employ the cashless exercise feature
described in Section (b) above only during the pendency of a Non-
Registration Event as described in Section 11 of the Subscription
Agreement. For purposes of Rule 144 promulgated under the 1933 Act,
it is intended, understood and acknowledged that the Warrant Shares
issued in a cashless exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares
shall be deemed to have commenced, on the date this Warrant was
originally issued pursuant to the Subscription Agreement.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person or
(c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, as a condition to
the consummation of such a transaction, proper and adequate provision
shall be made by the Company whereby the Holder of this Warrant, on
the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive,
in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock
and other securities and property (including cash) to which such
Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder
had so exercised this Warrant, immediately prior thereto, all subject
to further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution, shall at
its expense deliver or cause to be delivered the stock and other
securities and property (including cash, where applicable) receivable
by the Holder of the Warrants after the effective date of such
dissolution pursuant to this Section 3 to a bank or trust company (a
"Trustee") having its principal office in New York, NY, as trustee for
the Holder of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 3, this Warrant shall continue
in full force and effect and the terms hereof shall be applicable to
the Other Securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation
or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of
any Other Securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets
of the Company, whether or not such person shall have expressly
assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after
the consummation of the transaction described in this Section 3, then
only in such event will the Company's securities and property
(including cash, where applicable) receivable by the Holder of the
Warrants be delivered to the Trustee as contemplated by Section 3.2.
3.4 Share Issuance. Until the Expiration Date, if the
Company shall issue any Common Stock except for the Excepted Issuances
(as defined in the Subscription Agreement), prior to the complete
exercise of this Warrant for a consideration less than the Purchase
Price that would be in effect at the time of such issue, then, and
thereafter successively upon each such issue, the Purchase Price shall
be reduced to such other lower issue price. For purposes of this
adjustment, the issuance of any security or debt instrument of the
Company carrying the right to convert such security or debt instrument
into Common Stock or of any warrant, right or option to purchase
Common Stock shall result in an adjustment to the Purchase Price upon
the issuance of the above-described security, debt instrument,
warrant, right, or option and again at any time upon any subsequent
issuances of shares of Common Stock upon exercise of such conversion
or purchase rights if such issuance is at a price lower than the
Purchase Price in effect upon such issuance. The reduction of the
Purchase Price described in this Section 3.4 is in addition to the
other rights of the Holder described in the Subscription Agreement.
4. Extraordinary Events Regarding Common Stock. In the event
that the Company shall (a) issue additional shares of the Common Stock
as a dividend or other distribution on outstanding Common Stock,
(b) subdivide its outstanding shares of Common Stock, or (c) combine
its outstanding shares of the Common Stock into a smaller number of
shares of the Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of
which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price,
as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this
Section 4. The number of shares of Common Stock that the Holder of
this Warrant shall thereafter, on the exercise hereof as provided in
Section 1, be entitled to receive shall be adjusted to a number
determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this Section 4) be issuable
on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price
in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrants, the Company at
its expense will promptly cause its Chief Financial Officer or other
appropriate designee to compute such adjustment or readjustment in
accordance with the terms of the Warrant and prepare a certificate
setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable
by the Company for any additional shares of Common Stock (or Other
Securities) issued or sold or deemed to have been issued or sold,
(b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise
of this Warrant, in effect immediately prior to such adjustment or
readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such
certificate to the Holder of the Warrant and any Warrant Agent of the
Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep
available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock (or Other Securities) from time
to time issuable on the exercise of the Warrant. This Warrant
entitles the Holder hereof to receive copies of all financial and
other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced
hereby, may be transferred by any registered holder hereof (a
"Transferor"). On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with an opinion of counsel
reasonably satisfactory to the Company that the transfer of this
Warrant will be in compliance with applicable securities laws, the
Company at its expense, twice, only, but with payment by the
Transferor of any applicable transfer taxes, will issue and deliver to
or on the order of the Transferor thereof a new Warrant or Warrants of
like tenor, in the name of the Transferor and/or the transferee(s)
specified in such Transferor Endorsement Form (each a "Transferee"),
calling in the aggregate on the face or faces thereof for the number
of shares of Common Stock called for on the face or faces of the
Warrant so surrendered by the Transferor. No such transfers shall
result in a public distribution of the Warrant.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company or,
in the case of any such mutilation, on surrender and cancellation of
this Warrant, the Company at its expense, twice only, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder of this Warrant has been
granted certain registration rights by the Company. These
registration rights are set forth in the Subscription Agreement. The
terms of the Subscription Agreement are incorporated herein by this
reference.
10. Maximum Exercise. The Holder shall not be entitled to
exercise this Warrant on an exercise date, in connection with that
number of shares of Common Stock which would be in excess of the sum
of (i) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates on an exercise date, and (ii) the number of
shares of Common Stock issuable upon the exercise of this Warrant with
respect to which the determination of this limitation is being made on
an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares
of Common Stock on such date. For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended, and Regulation 13d-3 thereunder. Subject to the
foregoing, the Holder shall not be limited to aggregate exercises
which would result in the issuance of more than 4.99%. The
restriction described in this paragraph may be waived, in whole or in
part, upon sixty-one (61) days prior notice from the Holder to the
Company. The Holder may allocate which of the equity of the Company
deemed beneficially owned by the Subscriber shall be included in the
4.99% amount described above and which shall be allocated to the
excess above 4.99%.
11. Warrant Agent. The Company may, by written notice to the
Holder of the Warrant, appoint an agent (a "Warrant Agent") for the
purpose of issuing Common Stock (or Other Securities) on the exercise
of this Warrant pursuant to Section 1, exchanging this Warrant
pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.
12. Transfer on the Company's Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the
registered holder hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
13. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be
(i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered
by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set
forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
(i) if to the Company to: 5G Wireless Communications, Inc., ▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇, Chairman/CEO,
telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy by telecopier only to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Attorney at Law, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇; and
(ii) if to the Holder, to the address and telecopier number listed on
the first paragraph of this Warrant, with an additional copy by
telecopier only to: Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇.
15. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change,
waiver, discharge or termination is sought. This Warrant shall be
construed and enforced in accordance with and governed by the laws of
New York. Any dispute relating to this Warrant shall be adjudicated
in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the
validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant as of
the date first written above.
5G WIRELESS COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇
Name: ▇▇▇▇▇ ▇▇▇
Title: Chief Executive Officer
Witness:
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: 5G WIRELESS COMMUNICATIONS, INC.
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check
applicable box):
_________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned herewith makes payment of the full purchase price for
such shares at the price per share provided for in such Warrant, which
is $___________. Such payment takes the form of (check applicable box
or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock (using a
Fair Market Value of $_______ per share for purposes of this
calculation); and/or
___ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2, to
exercise this Warrant with respect to the maximum number of shares of
Common Stock purchasable pursuant to the cashless exercise procedure
set forth in Section 2.
The undersigned requests that the certificates for such shares be
issued in the name of, and delivered to
_____________________________________________________ whose address is
______________________________________________________________________
______________________________________________________________________
Number of Shares of Common Stock Beneficially Owned on the date of
exercise: Less than five percent (5%) of the outstanding Common Stock
of 5G Wireless Communications, Inc..
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable upon exercise of the within
Warrant shall be made pursuant to registration of the Common Stock
under the Securities Act of 1933, as amended (the "Securities Act"),
or pursuant to an exemption from registration under the Securities Act.
Dated:___________________
(Signature must conform to name
of holder as specified on the
face of the Warrant)
(Address)
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading
"Transferees" the right represented by the within Warrant to purchase
the percentage and number of shares of Common Stock of 5G WIRELESS
COMMUNICATIONS, INC. to which the within Warrant relates specified
under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each
such person Attorney to transfer its respective right on the books of
5G WIRELESS COMMUNICATIONS, INC. with full power of substitution in
the premises.
Transferees Percentage Transferred Number Transferred
Dated: ______________,
Signed in the presence of:
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name)
(Signature must conform to name of
holder as specified on the face of
the warrant)
(address)
(address)
EXHIBIT B
FUNDS ESCROW AGREEMENT
FUNDS ESCROW AGREEMENT
This Agreement is dated as of the 5th day of April, 2006 among 5G
Wireless Communications, Inc., a Nevada corporation (the "Company"),
the parties identified on Schedule A hereto (each a "Subscriber", and
collectively "Subscribers"), and Grushko & ▇▇▇▇▇▇▇, P.C. (the "Escrow
Agent"):
WITNESSETH:
WHEREAS, the Company and Subscribers have entered into a
Subscription Agreement calling for the sale by the Company to the
Subscriber of Promissory Notes and Warrants for an aggregate purchase
price of up to $60,000; and
WHEREAS, the parties hereto require the Company to deliver the
Notes and Warrants against payment therefor, with such Notes, Warrants
and the Escrowed Funds to be delivered to the Escrow Agent to be held
in escrow and released by the Escrow Agent in accordance with the
terms and conditions of this Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent
pursuant to the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1. Definitions. Capitalized terms used and not otherwise
defined herein that are defined in the Subscription Agreement shall
have the meanings given to such terms in the Subscription Agreement.
Whenever used in this Agreement, the following terms shall have the
following respective meanings:
(a) "Agreement" means this Agreement and all amendments
made hereto and thereto by written agreement between the parties;
(b) "Escrowed Payment" means an aggregate cash payment of
up to $60,000 which is, collectively, the Initial Closing Purchase
Price and Second Closing Purchase Price;
(c) "Initial Closing Date" shall have the meaning set forth
in Section 1 of the Subscription Agreement;
(d) "Initial Closing Legal Opinion" means the original
signed legal opinion referred to in Section 5 of the Subscription
Agreement;
(e) "Initial Closing Notes" shall have the meaning set
forth in Section 1(a) of the Subscription Agreement;
(f) "Initial Closing Purchase Price" shall mean up to
$35,000;
(g) "Legal Fees" shall have the meaning set forth in
Section 7(b) of the Subscription Agreement;
(h) "Second Closing Certificate" shall have the meaning set
forth in Section 1(d) of the Subscription Agreement;
(i) "Second Closing Date" shall have the meaning set forth
in Section 1(b) of the Subscription Agreement;
(j) "Second Closing Legal Opinion" shall have the meaning
set forth in Section 1(d) of the Subscription Agreement;
(k) "Second Closing Notes" shall have the meaning set forth
in Section 1(b) of the Subscription Agreement;
(l) "Second Closing Purchase Price" shall mean up to
$25,000;
(m) "Subscription Agreement" means the Subscription
Agreement (and the exhibits thereto) entered into or to be entered
into by the parties in reference to the sale and purchase of the
Initial Closing Notes, Second Closing Notes, Third Closing Notes and
Warrants;
(n) "Warrants" " shall have the meaning set forth in
Section 2 of the Subscription Agreement;
(o) Collectively, the executed Subscription Agreement,
Initial Closing Notes, Initial Closing Legal Opinion, Second Closing
Notes, Second Closing Legal Opinion, Second Closing Certificates, and
Warrants are referred to as "Company Documents"; and
(p) Collectively, the Escrowed Payment and the executed
Subscription Agreement are referred to as "Subscriber Documents".
1.2. Entire Agreement. This Agreement along with the Company
Documents and the Subscriber Documents constitute the entire agreement
between the parties hereto pertaining to the Company Documents and
Subscriber Documents and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written,
of the parties. There are no warranties, representations and other
agreements made by the parties in connection with the subject matter
hereof except as specifically set forth in this Agreement, the Company
Documents and the Subscriber Documents.
1.3. Extended Meanings. In this Agreement words importing the
singular number include the plural and vice versa; words importing the
masculine gender include the feminine and neuter genders. The word
"person" includes an individual, body corporate, partnership, trustee
or trust or unincorporated association, executor, administrator or
legal representative.
1.4. Waivers and Amendments. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms
and conditions hereof may be waived, only by a written instrument
signed by all parties, or, in the case of a waiver, by the party
waiving compliance. Except as expressly stated herein, no delay on
the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder
preclude any other or future exercise of any other right, power or
privilege hereunder.
1.5. Headings. The division of this Agreement into articles,
sections, subsections and paragraphs and the insertion of headings are
for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.6. Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only in
the state courts of New York or in the federal courts located in the
state of New York. Both parties and the individuals executing this
Agreement and other agreements on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury.
The prevailing party (which shall be the party which receives an award
most closely resembling the remedy or action sought) shall be entitled
to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any other
agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall
be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law.
Any such provision which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of any other
provision of any agreement.
1.7. Specific Enforcement, Consent to Jurisdiction. The Company
and Subscriber acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injuction or injunctions to prevent or cure breaches
of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any
other remedy to which any of them may be entitled by law or equity.
Subject to Section 1.6 hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action
or proceeding is improper. Nothing in this Section shall affect or
limit any right to serve process in any other manner permitted by law.
ARTICLE II
DELIVERIES TO THE ESCROW AGENT
2.1. Initial Closing Company Deliveries. On or about the date
hereof, the Company shall deliver to the Escrow Agent the executed
Subscription Agreement, the Initial Closing Notes, Warrants, Initial
Closing and Legal Opinion (collectively, the "Initial Closing Company
Documents").
2.2. Second Closing Company Deliveries. On or prior to the
Second Closing Date the Company will deliver to the Escrow Agent the
Second Closing Notes, Warrants, Second Closing Certificate, and Second
Closing Legal Opinion (collectively, the "Second Closing Company
Documents").
2.3. Subscriber Deliveries. On or before the Initial Closing
Date, each Subscriber shall deliver to the Escrow Agent such
Subscriber's portion of the Initial Closing Purchase Price and the
executed Subscription Agreement. On or before the Second Closing
Date, each Subscriber will deliver such Subscriber's portion of the
Second Closing Purchase Price to the Escrow Agent. The Escrowed
Payment will be delivered pursuant to the following wire transfer
instructions:
Citibank, N.A.
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇
ABA Number: 0210-00089
For Credit to: Grushko & ▇▇▇▇▇▇▇, ▇▇▇▇ Trust Account
Account Number: ▇▇▇▇▇▇▇▇
2.4. Intention to Create Escrow Over Company Documents and
Subscriber Documents. The Subscriber and Company intend that the
Company Documents and Subscriber Documents shall be held in escrow by
the Escrow Agent pursuant to this Agreement for their benefit as set
forth herein.
2.5. Escrow Agent to Deliver Company Documents and Subscriber
Documents. The Escrow Agent shall hold and release the Company
Documents and Subscriber Documents only in accordance with the terms
and conditions of this Agreement.
ARTICLE III
RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS
3.1. Release of Escrow. Subject to the provisions of Section
4.2, the Escrow Agent shall release the Company Documents and
Subscriber Documents as follows:
(a) On the Initial Closing Date, the Escrow Agent will
simultaneously release the Initial Closing Company Documents to the
Subscriber and release the Subscription Agreement and the Initial
Closing Purchase Price to the Company except that the Legal Fees will
be released to the Subscriber's attorneys.
(b) On the Second Closing Date, the Escrow Agent will
simultaneously release the Second Closing Company Documents to the
Subscriber and release the Second Closing Purchase Price to the Company.
(c) All funds to be delivered to the Company shall be
delivered pursuant to the wire instructions to be provided in writing
by the Company to the Escrow Agent.
(d) Notwithstanding the above, upon receipt by the Escrow
Agent of joint written instructions ("Joint Instructions") signed by
the Company and the Subscriber, it shall deliver the Company Documents
and Subscriber Documents in accordance with the terms of the Joint
Instructions.
(e) Notwithstanding the above, upon receipt by the Escrow
Agent of a final and non-appealable judgment, order, decree or award
of a court of competent jurisdiction (a "Court Order"), the Escrow
Agent shall deliver the Company Documents and Subscriber Documents in
accordance with the Court Order. Any Court Order shall be accompanied
by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which opinion shall be satisfactory to the Escrow
Agent) to the effect that the court issuing the Court Order has
competent jurisdiction and that the Court Order is final and non-appealable.
3.2. Acknowledgement of Company and Subscriber; Disputes. The
Company and the Subscriber acknowledge that the only terms and
conditions upon which the Company Documents and Subscriber Documents
are to be released are set forth in Sections 3 and 4 of this
Agreement. The Company and the Subscriber reaffirm their agreement to
abide by the terms and conditions of this Agreement with respect to
the release of the Company Documents and Subscriber Documents. Any
dispute with respect to the release of the Company Documents and
Subscriber Documents shall be resolved pursuant to Section 4.2 or by
agreement between the Company and Subscriber.
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1. Duties and Responsibilities of the Escrow Agent. The Escrow
Agent's duties and responsibilities shall be subject to the following
terms and conditions:
(a) The Subscriber and Company acknowledge and agree that
the Escrow Agent (i) shall not be responsible for or bound by, and
shall not be required to inquire into whether either the Subscriber or
Company is entitled to receipt of the Company Documents and Subscriber
Documents pursuant to, any other agreement or otherwise; (ii) shall be
obligated only for the performance of such duties as are specifically
assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely
on and shall be protected in acting or refraining from acting upon any
written notice, instruction, instrument, statement, request or
document furnished to it hereunder and believed by the Escrow Agent in
good faith to be genuine and to have been signed or presented by the
proper person or party, without being required to determine the
authenticity or correctness of any fact stated therein or the
propriety or validity or the service thereof; (iv) may assume that any
person believed by the Escrow Agent in good faith to be authorized to
give notice or make any statement or execute any document in
connection with the provisions hereof is so authorized; (v) shall not
be under any duty to give the property held by Escrow Agent hereunder
any greater degree of care than Escrow Agent gives its own similar
property; and (vi) may consult counsel satisfactory to Escrow Agent,
the opinion of such counsel to be full and complete authorization and
protection in respect of any action taken, suffered or omitted by
Escrow Agent hereunder in good faith and in accordance with the
opinion of such counsel.
(b) The Subscriber and Company acknowledge that the Escrow
Agent is acting solely as a stakeholder at their request and that the
Escrow Agent shall not be liable for any action taken by Escrow Agent
in good faith and believed by Escrow Agent to be authorized or within
the rights or powers conferred upon Escrow Agent by this Agreement.
The Subscriber and Company, jointly and severally, agree to indemnify
and hold harmless the Escrow Agent and any of Escrow Agent's partners,
employees, agents and representatives for any action taken or omitted
to be taken by Escrow Agent or any of them hereunder, including the
fees of outside counsel and other costs and expenses of defending
itself against any claim or liability under this Agreement, except in
the case of gross negligence or willful misconduct on Escrow Agent's
part committed in its capacity as Escrow Agent under this Agreement.
The Escrow Agent shall owe a duty only to the Subscriber and Company
under this Agreement and to no other person.
(c) The Subscriber and Company jointly and severally agree
to reimburse the Escrow Agent for outside counsel fees, to the extent
authorized hereunder and incurred in connection with the performance
of its duties and responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent
hereunder by giving five (5) days prior written notice of resignation
to the Subscriber and the Company. Prior to the effective date of the
resignation as specified in such notice, the Subscriber and Company
will issue to the Escrow Agent a Joint Instruction authorizing
delivery of the Company Documents and Subscriber Documents to a
substitute Escrow Agent selected by the Subscriber and Company. If no
successor Escrow Agent is named by the Subscriber and Company, the
Escrow Agent may apply to a court of competent jurisdiction in the
State of New York for appointment of a successor Escrow Agent, and to
deposit the Company Documents and Subscriber Documents with the clerk
of any such court.
(e) The Escrow Agent does not have and will not have any
interest in the Company Documents and Subscriber Documents, but is
serving only as escrow agent, having only possession thereof. The
Escrow Agent shall not be liable for any loss resulting from the
making or retention of any investment in accordance with this Escrow
Agreement.
(f) This Agreement sets forth exclusively the duties of the
Escrow Agent with respect to any and all matters pertinent thereto and
no implied duties or obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel
for the Subscriber in any dispute as to the disposition of the Company
Documents and Subscriber Documents, in any other dispute between the
Subscriber and Company, whether or not the Escrow Agent is then
holding the Company Documents and Subscriber Documents and continues
to act as the Escrow Agent hereunder.
(h) The provisions of this Section 4.1 shall survive the
resignation of the Escrow Agent or the termination of this Agreement.
4.2. Dispute Resolution: Judgments. Resolution of disputes
arising under this Agreement shall be subject to the following terms
and conditions:
(a) If any dispute shall arise with respect to the
delivery, ownership, right of possession or disposition of the Company
Documents and Subscriber Documents, or if the Escrow Agent shall in
good faith be uncertain as to its duties or rights hereunder, the
Escrow Agent shall be authorized, without liability to anyone, to (i)
refrain from taking any action other than to continue to hold the
Company Documents and Subscriber Documents pending receipt of a Joint
Instruction from the Subscriber and Company, or (ii) deposit the
Company Documents and Subscriber Documents with any court of competent
jurisdiction in the State of New York, in which event the Escrow Agent
shall give written notice thereof to the Subscriber and the Company
and shall thereupon be relieved and discharged from all further
obligations pursuant to this Agreement. The Escrow Agent may, but
shall be under no duty to, institute or defend any legal proceedings
which relate to the Company Documents and Subscriber Documents. The
Escrow Agent shall have the right to retain counsel if it becomes
involved in any disagreement, dispute or litigation on account of this
Agreement or otherwise determines that it is necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to
comply with and obey any Court Order. In case the Escrow Agent obeys
or complies with a Court Order, the Escrow Agent shall not be liable
to the Subscriber and Company or to any other person, firm,
corporation or entity by reason of such compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon the release
of all of the Company Documents and Subscriber Documents or at any
time upon the agreement in writing of the Subscriber and Company.
5.2. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be
(i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered
by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set
forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
(a) If to the Company, to:
5G Wireless Communications, Inc.
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▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇, Chairman/CEO
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy by telecopier only to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Attorney at Law
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Subscriber, to: the addresses and fax numbers
listed on Schedule A hereto.
(c) If to the Escrow Agent, to:
Grushko & ▇▇▇▇▇▇▇, P.C.
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Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as any of them shall give to the others by
notice made pursuant to this Section 5.2.
5.3. Interest. The Escrowed Payment shall not be held in an
interest bearing account nor will interest be payable in connection
therewith. In the event the Escrowed Payment is deposited in an
interest bearing account, the Subscriber shall be entitled to receive
any accrued interest thereon, but only if the Escrow Agent receives
from the Subscriber the Subscriber's United States taxpayer
identification number and other requested information and forms.
5.4. Assignment; Binding Agreement. Neither this Agreement nor
any right or obligation hereunder shall be assignable by any party
without the prior written consent of the other parties hereto. This
Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors
and assigns.
5.5. Invalidity. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal, or unenforceable in any
respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
5.6. Counterparts/Execution. This Agreement may be executed in
any number of counterparts and by different signatories hereto on
separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute but one
and the same instrument. This Agreement may be executed by facsimile
transmission and delivered by facsimile transmission.
5.7. Agreement. Each of the undersigned states that he has read
the foregoing Funds Escrow Agreement and understands and agrees to it.
5G WIRELESS COMMUNICATIONS, INC.
"Company"
By: /s/ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, CEO
LONGVIEW FUND, LP
"Subscriber"
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
ESCROW AGENT:
Grushko & ▇▇▇▇▇▇▇, P.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SCHEDULE A TO FUNDS ESCROW AGREEMENT
SUBSCRIBER INITIAL CLOSING CLASS A SECOND CLOSING
PURCHASE PRICE WARRANTS PURCHASE PRICE
LONGVIEW FUND, LP $35,000.00 $25,000.00
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇