EX-4 SUBSCRIPTIOIN AGREEMENT
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of
September 22, 2004, 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 Two Million Dollars ($2,000,000) (the
"Purchase Price") of principal amount of 5% promissory notes of the
Company ("Note" or "Notes") convertible into shares of the Company's
common stock, $.001 par value (the "Common Stock") at a per share
conversion price equal to the lesser of (i) seventy-five percent
(75%) of the average of the five lowest closing bid prices of the
Common Stock as reported by the OTC Bulletin Board ("Bulletin Board")
for the ninety (90) trading days preceding the Conversion Date (as
defined in Section 7(b) below) ("Conversion Price"), or (ii) $0.05;
and Class A and Class B share purchase warrants (collectively the
"Warrants"), in the forms attached hereto as Exhibit A1 and Exhibit
A2, to purchase shares of Common Stock (the "Warrant Shares"). One
Million Dollars ($1,000,000) of the Purchase Price shall be payable
on the Initial Closing Date as defined in Section 1 hereof ("Initial
Closing Purchase Price"). One Million Dollars ($1,000,000) of the
Purchase Price ("Second Closing Purchase Price") will be payable
within five (5) business days after the sooner of (i) the actual
effectiveness ("Actual Effective Date") of the Registration Statement
as defined in Section 11.1(iv) of this Agreement, or (ii) the date
upon which the Company is able to issue to the Subscribers free
trading unrestricted Common Stock as a Business Development Company
as defined in Rule 602(a) under Regulation E of the General Rules and
Regulations under the Securities Act of 1933 ("Regulation E") (each
event a "Second Closing Event"). 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. 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") and the amount of
Warrants determined pursuant to Section 3 below ("Initial Closing
Warrants"). The aggregate principal 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.
2. Second Closing.
(a) Second Closing. The closing date in relation to
the Second Closing Purchase Price shall be the fifth (5th) business
day after the occurrence of a Second Closing Event (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 the amount of Warrants
determined pursuant to Section 3 below ("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 except that the maturity date of such Notes
shall be three (3) years after the Second Closing Date. The
Conversion Price for the Second Closing Notes shall be the same
Conversion Price in effect for the Initial Closing Notes which 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
(b) Conditions to Second Closing. The occurrence of
the Second Closing is expressly contingent on (i) the truth and
accuracy, on the Effective Date, Second Closing Event date and 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 have been included in the
Registration Statement, which must be effective as of the Second
Closing Date, or are issuable upon conversion into free trading
shares of Common Stock the resale of which is exempt from
registration under the 1933 Act, and (v) the delivery of the Second
Closing Warrants for which the Warrant Shares issuable upon exercise
of the Class A Warrants have been included in the Registration
Statement which must be effective as of the Second Closing Date or
are issuable upon conversion into free trading shares of Common Stock
the resale of which is exempt from registration under the 1933 Act.
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.
(c) 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 respective 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, the Second Closing Event date, and the Second Closing Date, as
if such representations and warranties were made and given on all
such dates, (ii) adopting the covenants and conditions set forth in
Sections 9, 10, 11, and 12 of this Agreement in relation to the
Second Closing Notes and Second Closing Warrants, (iii) representing
the timely compliance by the Company with the Company's registration
requirements set forth in Section 11 of this Agreement, and (iv)
certifying that an Event of Default, as defined in the Note and this
Agreement, has not occurred. A legal opinion nearly identical to the
legal opinion referred to in Section 6 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 an effective registration statement effective as of
the Actual Effective Date and Second Closing Date or are issuable
upon conversion into free trading shares of Common Stock the resale
of which is exempt from registration under the 1933 Act.
3. Warrants. On each Closing Date (as defined in
Section 13(b) hereof), the Company will issue and deliver Warrants to
the Subscribers. Thirty (30) Class A Warrants will be issued for
each one hundred (100) Shares which would be issued on each Closing
Date assuming the complete conversion of the Notes issued on each
such Closing Date at the Conversion Price in effect on each such
Closing Date. The per Warrant Share exercise price to acquire a
Warrant Share upon exercise of a Class A Warrant shall be 120% of the
closing bid price of the Common Stock on the trading day immediately
preceding the Initial Closing Date. The Class A Warrants shall be
exercisable until five (5) years after the Issue Date of the Class A
Warrants. On each Closing Date, the Company will issue and deliver
one hundred and twenty-five (125) Class B Warrants to the Subscribers
for each one dollar ($1.00) of Purchase Price invested on each
Closing Date. The per Warrant Share exercise price to acquire a
Warrant Share upon exercise of a Class B Warrant shall be two cents
($0.02). The Class B Warrants will be exercisable until three (3)
years after the Issue Date of the Class B Warrant.
4. Subscriber's Representations and Warranties. Each
Subscriber hereby represents and warrants to and agrees with the
Company only as to such Subscriber that:
(a) Information on Company. The Subscriber has been
furnished with or has had access at the EDGAR Website of the
Commission to the Company's Form 10-KSB for the year ended December
31, 2003 as filed with the Commission, together with all subsequently
filed Forms 10-QSB, 8-K, and filings made with the Commission
available at the EDGAR website (hereinafter referred to collectively
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.
(b) Information on Subscriber. The Subscriber is,
and will be at the time of the conversion of the Notes and exercise
of any 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.
(c) Purchase of Common Stock 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.
(d) 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. In any event,
and subject to compliance with applicable securities laws, the
Subscriber may enter into lawful hedging transactions with third
parties, which may in turn engage in short sales of the Securities in
the course of hedging the position they assume and the Subscriber may
also enter into short positions or other derivative transactions
relating to the Securities, or interests in the Securities, and
deliver the Securities, or interests in the Securities, to close out
their short or other positions or otherwise settle short sales or
other transactions, or loan or pledge the Securities, or interests in
the Securities, to third parties that in turn may dispose of these
Securities.
(e) 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."
(f) 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."
(g) 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."
(h) 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.
(i) 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.
(j) 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 (i)
pursuant to an effective registration statement under the 1933 Act or
exemption under Regulation E, (ii) such Subscriber provides the
Company with an opinion of counsel, in a form reasonably acceptable
to the Company, to the effect that a sale, assignment or transfer of
the Securities may be made without registration under the 1933 Act,
or (iii) Subscriber provides the Company with reasonable assurances
(in the form of seller and broker representation letters) that the
Shares or the Warrant Shares, as the case may be, can be sold
pursuant to (A) Rule 144 promulgated under the 1933 Act, or (B) Rule
144(k) promulgated under the 1933 Act, in each case following the
applicable holding period set forth therein. 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. 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.
(k) 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.
(l) 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.
(m) Survival. The foregoing representations and
warranties shall survive the Second Closing Date for a period of two years.
5. Company Representations and Warranties. Except as set
forth in the Disclosure Schedule (attached hereto as Attachment 1)
and the Reports the Company represents and warrants to and agrees
with each Subscriber that:
(a) Due Incorporation. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the respective jurisdictions of their
incorporation and have the requisite corporate power to own their
properties and to carry on their business as now being conducted.
The Company and each of its subsidiaries 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.
(b) Outstanding Stock. All issued and outstanding
shares of capital stock of the Company and each of its subsidiaries
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 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 5(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 Bulletin
Board 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 4 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) 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
any of its subsidiaries 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 or subsidiaries is a party, by which the
Company or any of its Affiliates or subsidiaries is bound, or to
which any of the properties of the Company or any of its Affiliates
or subsidiaries 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 or subsidiaries is a party
except the violation, conflict, breach, or default of which would not
have a Material Adverse Effect on the Company; 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, its subsidiaries or any of its Affiliates; or
(iii) 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 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 conversion of the Notes and upon
exercise of the Warrants, the Shares and Warrant Shares will be duly
and validly issued, fully paid and nonassessable (and if issued
pursuant to Regulation E 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; and
(iv) will not subject the holders thereof to
personal liability by reason of being such holders.
(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 on the Company.
(i) Reporting Company. The Company is a publicly-
held company subject to reporting obligations pursuant to Section 13
of the Securities Exchange Act of 1934, as amended (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 timely 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 has 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 of the
Company to facilitate the sale or resale of the Securities or affect
the price at which the Securities may be issued or resold.
(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 which
information is required to be disclosed therein. Since the date of
the financial statements included in the Reports, and except as
modified in the Other Written Information or in the Schedules hereto,
there has been no material adverse change in 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 Securities, when issued, will
be restricted securities. 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 on the Company, (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 its
knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a Material Adverse
Effect on the Company.
(n) No Integrated Offering. Neither the Company, nor
any of its Affiliates, nor any person acting on its or their behalf,
has directly or indirectly made any offers or sales of any security
or solicited any offers to buy any security under circumstances that
would 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
Bulletin Board. Nor will the Company or any of its Affiliates or
subsidiaries take any action or steps that would cause the offer or
issuance of the Securities to be integrated with other offerings.
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.
(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
1933 Act) 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 December 31, 2003 and which, individually
or in the aggregate, would reasonably be expected to have a Material
Adverse Effect other than as set forth in Schedule 5(q).
(r) No Undisclosed Events or Circumstances. Since
December 31, 2003, 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
Closing Date are set forth on Schedule 5(s). Except as set forth on
Schedule 5(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. 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) 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.
(w) Survival. The foregoing representations and
warranties shall survive the Second Closing Date for a period of two
years.
6. 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 or Regulation E.
7.1. 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,
were issued pursuant to Regulation E, or are otherwise exempt from
registration.
(b) Subscriber will give notice of its decision to
exercise its right to convert the Note 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. 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 an original Note to the Company. To
the extent 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.
(c) The Company understands that a delay in the
delivery of the Shares in the form required pursuant to Section 7
hereof, or the Mandatory Redemption Amount described in Section 7.2
hereof, later than two business days after the Delivery Date or later
than 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 7 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 will be
entitled to 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.
7.2. Mandatory Redemption at Subscriber's Election. In the
event the Company is prohibited from issuing Shares, or fails to
timely deliver Shares on a Delivery Date, or upon the occurrence of
any other Event of Default (as defined in the Note or in this
Agreement) or for any reason other than pursuant to the limitations
set forth in Section 7.3 hereof, 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 (i) multiplying up to the outstanding principal
amount of the Note designated by the Subscriber by 120%, or (ii)
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 then 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 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 7.1(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.
7.3. 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 3.99% 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 3.99% and aggregate
conversions by the Subscriber may exceed 3.99%. The Subscriber may
void the conversion limitation described in this Section 7.3 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 3.99%
amount described above and which shall be allocated to the excess
above 3.99%.
7.4. 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 said Note or exercise of all or part of said 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 amount of the Note, or aggregate purchase price
of the Warrant Shares which are 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.
7.5. 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 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.
7.6 Adjustments. The Conversion Price, Warrant exercise
price and amount of Shares issuable upon conversion of the Notes and
exercise of the Warrants shall be equitably adjusted to offset the
effect of stock splits, stock dividends, pro rata distributions of
property or equity interests to the Company's shareholders.
7.7. Automatic Conversion. On the 30th day after the
Second Closing Date and each 30th day thereafter until the 360th day
after the Second Closing Date (each such date an "Automatic
Conversion Date"), provided an Event of Default under the Note or
this Agreement has not occurred, one-twelfth (1/12th) of the principal
amount of the Notes (each an "Automatic Conversion Amount") shall
automatically be converted into Shares at the Conversion Price in
effect on the respective Automatic Conversion Dates ("Automatic
Conversions"). The Company is required to deliver Shares in the same
manner and timeframe as if the Automatic Conversion Date were a
Conversion Date. The Subscribers are granted the same rights and
privileges vis-.-vis Automatic Conversion Dates as if such dates were
Conversion Dates. Automatic Conversions will be limited to the
maximum conversion amounts described in Section 7.3 of this
Subscription Agreement. Automatic Conversions, when made, shall
first be made on the Second Closing Notes and then the Initial
Closing Notes. Amounts of Automatic Conversions will be reduced by
up to the amounts of all Conversions voluntarily made by the
Subscriber prior to an Automatic Conversion Date. Under no event may
an Automatic Conversion take place unless the Company may deliver
free trading Shares and actually delivers free trading Shares on a
Delivery Date.
7.8. Shares Deposit. The Company will deposit in escrow
pursuant to a Shares Escrow Agreement (a form of which is annexed
hereto as Exhibit E), 200% of the amount of Shares necessary to allow
conversion of the Initial Closing Notes and Second Closing Notes at
the Conversion Price in effect on the Closing Date ("Escrow Shares").
From time to time, the amount of Escrow Shares will be increased
within ten (10) business days after each reduction in the Conversion
Price so that the number of Escrow Shares always equals 200% of the
amount of Shares necessary to allow conversion of Note principal and
accrued interest. The Escrow Shares will be held for release to the
Subscribers at the Alternative Conversion Price (as defined in the
Note). The Alternative Conversion Price may be elected in writing by
the Subscriber in connection with Automatic Conversion Amounts which
would otherwise be automatically convertible pursuant to Section 7.7
of this Agreement but for the Company's failure to comply with the
conditions for Automatic Conversion. The Subscriber will exercise
its rights pursuant to this Section 7.8 by delivery of a Conversion
Notice to the escrow agent appointed pursuant to the Shares Escrow
Agreement ("Shares Escrow Agent"). Such Conversion Notice may be
given at Subscriber's election within ten (10) trading days after an
Automatic Conversion Date in connection with which the Company did
not effect a required Automatic Conversion due to the occurrence of
an Event of Default. Any Escrow Shares held by the Escrow Agent
after the 360th day after the Second Closing Date shall be returned to
the Company.
8. Finder/Legal Fees.
(a) Finder's Fee. The Company on the one hand, and
each Subscriber (for himself only) on the other hand, agree to
indemnify the other against and hold the other harmless from any and
all liabilities to any persons claiming brokerage commissions or
finder's fees on account of services purported to have been rendered
on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby and arising out of such
party's actions. The Company represents that there are no parties
entitled to receive fees, commissions, or similar payments in
connection with the Offering.
(b) Legal Fees. The Company shall pay to Grushko &
Mittman, P.C., a fee of $25,000 ("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") and acting as Escrow Agent for the Offering. Twenty
Thousand Dollars ($20,000) will be payable on the Initial Closing
Date and $5,000 shall be payable on the Second Closing Date. The
Legal Fees will be payable out of funds held pursuant to the Escrow
Agreement.
9. Covenants of the Company. The Company covenants and
agrees with the Subscribers as follows:
(a) Stop Orders. The Company will advise the
Subscribers, promptly after it 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 automated quotation system upon
which they are or become eligible for listing (subject to official
notice of issuance) and shall maintain such listing so long as any
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, Bulletin Board, 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) Reporting Requirements. 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 limitation, the Company will (v) cause its Common Stock to
continue to be registered under Section 12(b) or 12(g) of the 1934
Act, (x) comply in all respects with its reporting and filing
obligations under the 1934 Act, (y) 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 (z) comply with all 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 two (2) years after the Second Closing Date. Until the
earlier of the resale of the Common Stock and the Warrant Shares by
each Subscriber or two (2) 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 the Principal Market or
other market with the reasonable consent of Subscribers holding a
majority of the Shares and Warrant Shares, 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. Except as set forth on Schedule
9(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 nor non-trade obligations outstanding on a Closing Date.
(f) Reservation. Prior to the Closing Date, the
Company undertakes to reserve, pro rata, on behalf of each holder of
a Note or Warrant, from its authorized but unissued common stock, a
number of common shares equal to 150% of the amount of Common Stock
necessary to allow each holder of a Note to be able to convert all
such outstanding Notes and interest and reserve the amount of Warrant
Shares issuable upon exercise of the Warrants. Failure to have
sufficient shares reserved pursuant to this Section 9(f) for three
(3) consecutive business days or ten (10) days in the aggregate shall
be a material default of the Company's obligations under this
Agreement.
(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.
(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 11.1(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, it will
not disclose publicly or privately the identity of the Subscribers
unless expressly agreed to in writing by a Subscriber or 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
undertakes to file a Form 8-K or make a public announcement
describing the Offering not later than the first business day after
each Closing Date. In the Form 8-K or public announcement, the
Company will specifically disclose the amount of common stock
outstanding immediately after each Closing. A form of the proposed
Form 8-K or public announcement to be employed in connection with
each Closing Date is annexed hereto as Exhibit D.
(n) Further Registration Statements. Except for a
registration statement filed on behalf of the Subscribers pursuant to
Section 11 of this Agreement or in connection with the securities
identified on Schedule 11.1 hereto, the Company will not file any
registration statements, including but not limited to Form S-8, with
the Commission or with state regulatory authorities without the
consent of the Subscriber until one hundred and eighty (180) days
after the Second Closing Date during which such Registration
Statement shall have been current and available for use in connection
with the public resale of the Shares and Warrant Shares ("Exclusion Period").
(o) Blackout. The Company undertakes and covenants
that until the first to occur of (i) the end of the Exclusion Period,
or (ii) until all the Shares and Warrant Shares have been resold
pursuant to a registration statement or Rule 144, 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 of fifteen (15) or more days.
(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 lockup agreements ("Limited Standstill
Agreements") in the forms annexed hereto as Exhibit F, with the
parties identified on Schedule 9(q) hereto.
10. 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 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 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 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 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 11.6 shall
apply to the indemnification set forth in Sections 10(a) and 10(b) above.
11.1. Registration Rights. The Company hereby grants
the following registration rights to holders of the Securities.
(i) On one occasion, for a period commencing seventy-
two (72) days after the Initial Closing Date, but not later than two
(2) years after the Second Closing Date ("Request 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
Notes and Warrant Shares actually issued upon exercise of the
Warrants, the Company shall prepare and file with the Commission a
registration statement under the 1933 Act registering the Shares,
Warrant Shares issuable upon exercise of the Class A Warrants and
Warrant Shares actually issued upon exercise of the Class B Warrants
(collectively "Registrable Securities") which are the subject of such
request for unrestricted public resale by the holder thereof. For
purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities
shall not include Securities which are registered for resale in an
effective registration statement or included for registration in a
pending registration statement, or which have been issued without
further transfer restrictions after a sale or transfer pursuant to
Rule 144 under the 1933 Act or which are issuable as free trading
unrestricted Shares pursuant to Regulation E. 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 11.1(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 S-4, S-8 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 11.1(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 11.4 hereof, the Company may
withdraw or delay or suffer a delay of any registration statement
referred to in this Section 11.1(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 11.1(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 11.1(ii) rather than Section
11.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section 11.1(ii).
(iv) The Company shall file with the Commission not
later than sixty (60) days after the Initial Closing Date (the
"Filing Date"), and cause to be declared effective within ninety (90)
days after the Initial Closing Date (the "Effective Date"), 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. 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 the Notes and
all of the Warrant Shares issuable pursuant to this Agreement upon
exercise of the Class A Warrants.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. Without the written consent
of the Subscriber, no securities of the Company other than the
Registrable Securities will be included in the Registration Statement
except as disclosed on Schedule 11.1. It shall be deemed a Non-
Registration Event if at any time after the Actual Effective Date the
Company has registered for unrestricted resale on behalf of the
Subscriber fewer than 150% 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 Class A Warrants and
Warrant Shares actually issued upon exercise of the Class B Warrants.
For purposes of Section 11.1(iv), Registrable Securities shall not
include Securities which may be issued to the Subscriber upon
conversion pursuant to Regulation E, which Securities must be at all
times free trading and freely transferable by the Subscriber without
restrictions on further transfer.
11.2. Registration Procedures. If and whenever the
Company is required by the provisions of Section 11.1(i), 11.1(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 11, 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), and promptly provide to the
holders of the Registrable Securities copies of all filings and
Commission letters of comment and notify Subscribers and Grushko &
Mittman, P.C. (by telecopier and by email to Counslers@aol.com)
within one (1) business day of (i) notice that the Commission has no
comments or no further comments on the Registration Statement, and
(ii) the declaration of effectiveness of the registration statement,
(failure to timely provide notice as required by this Section 11.2(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 10.4 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;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under
the securities or "blue sky" laws of 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) immediately notify the Sellers when 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; 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.
11.3. 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.
11.4. 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 11.1(i) or 11.1(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 (i) the Registration
Statement is not filed on or before the Filing Date, (ii) is not
declared effective on or before the Effective Date, (iii) 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, (iv) if the registration statement described
in Sections 11.1(i) or 11.1(ii) is not filed within 60 days after
such written request, or is not declared effective within 120 days
after such written request, or (v) any registration statement
described in Sections 11.1(i), 11.1(ii) or 11.1(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) 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 date the Registration
Statement is declared effective) or more than 20 consecutive days
(each such event referred to in clauses (i), (ii), (iii), (iv) and
(v) of this Section 11.4 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, thereafter 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. Liquidated
Damages payable in connection with an Effective Date related Non-
Registration Event described in Section 11.4(ii) above will be waived
if the Actual Effective Date occurs within eleven (11) days after the
Effective Date. The Company must pay the Liquidated Damages in cash
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 and accounting comments received from the
Commission relating to the Registration Statement must be responded
to within ten (10) business days. Failure to timely respond 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 11.4
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
or be payable pursuant to this Section 11.4 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.
11.5. Expenses. All expenses incurred by the Company
in complying with Section 11, including, without limitation, all
registration and filing fees, printing expenses, 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, fees of transfer agents and registrars, costs
of insurance and fee of one counsel for all Sellers are called
"Registration Expenses." All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities,
including any fees and disbursements of any additional counsel to the
Seller, are called "Selling Expenses." The Company will pay all
Registration Expenses in connection with the registration statement
under Section 11. Selling Expenses in connection with each
registration statement under Section 11 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.
11.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable
Securities under the 1933 Act pursuant to Section 11, 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 11, 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 11.6(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 11,
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 11, 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
11.6(c) and shall only relieve it from any liability which it may
have to such indemnified party under this Section 11.6(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 11.6(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
11.6 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 11.6 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 11.6; 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 1933 Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent
misrepresentation.
11.7. Delivery of Unlegended Shares.
(a) Within three (3) business days (such third (3rd)
business day being the "Unlegended Shares Delivery Date") after the
business day on which the Company has received (i) a notice that
Registrable Securities have been sold either pursuant to the
Registration Statement or Rule 144 under the 1933 Act or at a time
when the Company is able to issue Shares pursuant to Regulation E,
(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, or which
are being submitted for unlegended reissuance pursuant to Regulation
E, 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 4(e) above,
issuable pursuant to any effective and current Registration Statement
described in Section 11 of this Agreement or pursuant to Rule 144
under the 1933 Act or Regulation E (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 11 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 11.7 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 120% 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
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 11.7(e) and the Company
is required to deliver such Unlegended Shares pursuant to Section
11.7(e), 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 120% 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.
11.8. Regulation E. Notwithstanding anything to the
contrary under this Section 11 of this Agreement, or any other clause
of this Agreement or any of the other Transaction Documents, the
Company shall be deemed to be in compliance with its registration
obligations hereunder pursuant to the 1933 Act in relation to any
Shares and Warrant Shares provided the Company has become a "Business
Development Company" (or successor type entity) within 60 days of the
Closing Date and such Shares are freely tradable and transferable
without further restrictions on transfer as a result of having been
issued pursuant to Regulation E within 11 days thereafter.
12. (a) Right of First Refusal. Until the Notes have
been fully converted and for so long as Warrants remain outstanding,
the Subscribers shall be given not less than five (5) 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) employee or company counsel stock options or
compensation plans and issuances of up to 3.0 million shares of
Series A Preferred Stock to members of management who are identified
on Schedule 9(q) hereto (ii) as full or partial consideration in
connection with any merger, consolidation or purchase of
substantially all of the securities or assets of any corporation or
other entity, (iii) 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; (iv) the issuance of shares of
common stock or warrants in connection with bona fide strategic
license agreements or other partnering arrangements so long as such
issuances are not for the purpose of raising capital, (v) shares,
options or warrants issued to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings,
or similar arms-length transactions with non-affiliates of the
Company, (vi) underwritten public offerings (with respect to Section
12(a)(iv) through 12(a)(vi) provided the issue price of the Common
Stock component of such issuance is higher than the Conversion Price
in effect at the time of issuance of such Common Stock component),
and (viii) Common Stock issuable upon the exchange, exercise or
conversion of securities issued pursuant to any of the foregoing
subsections (i) through (vii) or pursuant to the Transaction
Documents (collectively the foregoing are "Excepted Issuances").
The Subscribers who exercise their rights pursuant to this Section
12(a) shall have the right during the five (5) 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, but not in
excess of each such Subscriber's portion of the Purchase Price. 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 five (5) business
days following the notice of modification, whichever is longer, to
exercise such right. The Subscriber's exercise of their rights
pursuant to subsection 12(a) shall be limited to the actual dollar
amount invested by such Subscriber pursuant to this Agreement.
(b) Offering Restrictions. Except as disclosed in
the Reports or Other Written Information filed with the Commission or
made available to the Subscriber prior to the Closing Date, or in
connection with Excepted Issuances, the Company will not issue any
equity, convertible debt or other securities convertible into common
stock on any terms more favorable to such other investor than any of
the terms of the Offering, until after the Exclusion Period without
the prior written consent of the Subscriber, which consent may be
withheld for any reason.
(c) Favored Nations Provision. Other than the
Excepted Issuances, if at any time Notes 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, without the consent of
each Subscriber holding Notes and/or 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 shall
automatically be reduced to such other lower price per share. 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 11 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 sixtieth (60th)
and one hundred and twentieth (120th) 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 issuance of such convertible security, warrant, right or
option and again 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 then Conversion Price. The
rights of the Subscriber set forth in this Section 12 are in addition
to any other rights the Subscriber has pursuant to this Agreement and
any other agreement referred to or entered into in connection herewith.
(d) Maximum Exercise of Rights. In the event the
exercise of the rights described in Sections 12(a) and 12(c) 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 7.3 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 7.3 of this Agreement.
The determination of when such common stock may be issued shall be
made by each Subscriber as to only such Subscriber.
13. Security Interest. The Subscribers will be granted a
security interest in all the assets of the Company to be memorialized
in a Security Agreement, a form of which is annexed hereto as Exhibit
G. The Company will execute such other agreements, documents and
financing statements to be filed at the Company's expense with such
jurisdictions, states and counties designated by the Subscribers.
The Company will also execute all such documents reasonably necessary
in the opinion of Subscriber to memorialize and further protect the
security interest described herein. The Subscribers will appoint a
Collateral Agent to represent them collectively in connection with
the security interest to be granted in the Company's assets. The
appointment will be pursuant to a Collateral Agent Agreement, a form
of which is annexed hereto as Exhibit H.
14. 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., 4136 Del Rey Avenue,
Marina Del Rey, CA 90292, Attn: Jerry Dix, Chairman/CEO, telecopier
number: (310) 823-0981, with a copy by telecopier only to: Ryan S.
Hong, Esq., Richardson & Patel LLP, 10900 Wilshire Blvd., Suite 500,
Los Angeles, California 90024, telecopier number: (310) 208-1154, 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 & Mittman, P.C., 551
Fifth Avenue, Suite 1601, New York, New York 10176, telecopier
number: (212) 697-3575.
(b) Closing. The consummation of the transactions
contemplated herein shall take place at the offices of Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York
10176, 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".
(c) 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.
(d) 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.
(e) 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. 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.
(f) 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 injunction or 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 14(e) 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.
(g) 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 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 (A)
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/ Jerry Dix
Name: Jerry Dix
Title: Chief Executive Officer
Dated: September 22, 2004
SUBSCRIBER INITIAL CLOSING SECOND CLOSING
NOTE (INITIAL NOTE (SECOND
CLOSING PURCHASE CLOSING PURCHASE
PRICE) PRICE)
LONGVIEW EQUITY FUND, LP
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
/s/ Wayne Coleson
(Signature)
Wayne Colson, Chief Executive
Officer
Print Name and Title
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
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/ Jerry Dix
Name: Jerry Dix
Title: Chief Executive Officer
Dated: September 22, 2004
SUBSCRIBER INITIAL CLOSING SECOND CLOSING
NOTE (INITIAL NOTE (SECOND
CLOSING PURCHASE CLOSING PURCHASE
PRICE) PRICE)
LONGVIEW FUND, LP
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
/s/ Michael Rudolph
(Signature)
Michael Rudolph, Chief
Financial Officer
Print Name and Title
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
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/ Jerry Dix
Name: Jerry Dix
Title: Chief Executive Officer
Dated: September 22, 2004
SUBSCRIBER INITIAL CLOSING SECOND CLOSING
NOTE (INITIAL NOTE (SECOND
CLOSING PURCHASE CLOSING PURCHASE
PRICE) PRICE)
LONGVIEW INTERNATIONAL EQUITY
FUND, LP
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
/s/ Wayne Coleson
(Signature)
Wayne Coleson, Chief
Executive Officer
Print Name and Title
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.
FORM OF CONVERTIBLE NOTE
FOR VALUE RECEIVED, 5G WIRELESS COMMUNICATIONS, INC., a Nevada
corporation (hereinafter called "Borrower"), hereby promises to pay
to ___________________, 600 Montgomery Street, 44th Floor, San
Francisco, CA 94111, Fax: (415) 981-5302, (the "Holder") or order,
without demand, the sum of ______________________________ Dollars
($_____________), with simple interest accruing at the annual rate of
5%, on September 22, 2007 (the "Maturity Date").
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 five (5)
business 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 (whether or not such Event of Default is
continuing), the Borrower may not pay this Note on or after the
Maturity Date, without the consent of the Holder.
1.3 Interest Rate. Simple interest payable on this Note shall
accrue at the annual rate of five percent (5%) and be payable upon
each Conversion, January 1, 2005 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
Notice of Conversion as described in Section 7 of the Subscription
Agreement of the Holder's written request for conversion, Borrower
shall issue and deliver to the Holder within three (3) business days
from the Conversion Date ("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.
(b) Subject to adjustment as provided in Section 2.1(c)
hereof, the Conversion Price per share shall be the lower of (i)
$0.05 ("Maximum Base Price") or (ii) seventy-five percent (75%) of
the average of the five lowest closing bid prices for the Common
Stock for the ninety (90) trading days prior to but not including the
Conversion Date for the Common Stock on the OTC Pink Sheets, NASD OTC
Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market
System, American Stock Exchange, or New York Stock Exchange, as
applicable, or if not then trading on any of the foregoing, such
other principal market or exchange where the Common Stock is listed
or traded (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock, the "Principal
Market"). Closing bid price shall mean the closing bid price as
reported by the OTC Bulletin Board, NASDAQ or the stock exchange, as
applicable. In the event the Holder is eligible and elects to
exercise its rights pursuant to Section 7.8 of the Subscription
Agreement and accept restricted Common Stock upon conversion, then
the Conversion Price to be employed when determining the number of
Shares issuable upon conversion shall be the "Alternative Conversion
Price" which shall be one-half of the Conversion Price as calculated above.
(c) The Maximum Base 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, 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 any Common Stock except for
the Excepted Issuances (as defined in the Subscription Agreement),
prior to the complete conversion of this Note for a consideration
less than the Conversion Price that would be in effect at the time of
such issue, then, and thereafter successively upon each such issue,
the Conversion 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 Borrower 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 Conversion Price upon the issuance of the above-
described security, debt instrument, warrant, right, or option. The
reduction of the Conversion Price described in this paragraph is in
addition to the other rights of the Holder described in the
Subscription Agreement.
E. For purposes of Section 2.1(c)(D) above, Fair
Market Value of a share of Common Stock as of a particular date (the
"Determination Date") shall mean the Fair Market Value of a share of
the Borrower's Common Stock. Fair Market Value of a share of Common
Stock as of a Determination Date shall mean:
(i) If the Borrower'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, Inc., then the closing or last sale
price, respectively, reported for the last business day
immediately preceding the Determination Date.
(ii) If the Borrower'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 mean
of the closing bid and asked prices reported for the last
business day immediately preceding the Determination Date.
(iii) Except as provided in clause (d) below,
if the Borrower's Common Stock is not publicly traded, then
as the Holder and the Borrower agree or in the absence of
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.
(iv) 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 Borrower'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.
(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 brief 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 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 3.99% 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 3.99% and aggregate
conversion by the Holder may exceed 3.99%. 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 void the conversion
limitation described in this Section 2.3 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 3.99% amount described above and
which shall be allocated to the excess above 3.99%.
2.4 Automatic Conversion. This Note shall automatically
convert in the manner set forth in Section 7.7 of the Subscription
Agreement.
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 five
(5) business days after the due date. The five (5) business day
period described in this Section 3.1 is the same five (5) business
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 a
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 such other principal exchange on
which the Common Stock is listed for trading; failure to comply with
the requirements for continued listing on the Bulletin Board for a
period of seven 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 Stop Trade. An SEC or judicial stop trade order or
Principal Market trading suspension that lasts for five or more
consecutive trading days.
3.9 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.
3.10 Non-Registration Event. The occurrence of a Non-
Registration Event as described in the Subscription Agreement that is
not cured within five (5) business days after notice from Holder.
3.11 Reverse Splits. The Borrower effectuates a reverse split
of its Common Stock without the prior written consent of the Holder.
3.12 Security Agreement. An "Event of Default" as defined in
the Security Agreement dated at or about the date of this Note
delivered by Borrower to Holder (the "Security Agreement") which is
not cured within the cure period, if any, allowed therefore, in the
Security 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
SECURITY INTEREST
4. Security Interest/Waiver of Automatic Stay. This Note is
secured by a security interest granted to the Collateral Agent for
the benefit of the Holder pursuant to the Security Agreement, as
delivered by Borrower to Holder. The Borrower acknowledges and
agrees that should a proceeding under any bankruptcy or insolvency
law be commenced by or against the Borrower, or if any of the
Collateral (as defined in the Security Agreement) should become the
subject of any bankruptcy or insolvency proceeding, then the Holder
should be entitled to, among other relief to which the Holder may be
entitled under the Note, Security Agreement, Subscription Agreement
and any other agreement to which the Borrower and Holder are parties
(collectively, "Loan Documents") and/or applicable law, an order from
the court granting immediate relief from the automatic stay pursuant
to 11 U.S.C. Section 362 to permit the Holder to exercise all of its
rights and remedies pursuant to the Loan Documents and/or applicable
law. THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, THE BORROWER
EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362
NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE
(INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE
HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN
DOCUMENTS AND/OR APPLICABLE LAW. The Borrower hereby consents to any
motion for relief from stay that may be filed by the Holder in any
bankruptcy or insolvency proceeding initiated by or against the
Borrower and, further, agrees not to file any opposition to any
motion for relief from stay filed by the Holder. The Borrower
represents, acknowledges and agrees that this provision is a specific
and material aspect of the Loan Documents, and that the Holder would
not agree to the terms of the Loan Documents if this waiver were not
a part of this Note. The Borrower further represents, acknowledges
and agrees that this waiver is knowingly, intelligently and
voluntarily made, that neither the Holder nor any person acting on
behalf of the Holder has made any representations to induce this
waiver, that the Borrower has been represented (or has had the
opportunity to he represented) in the signing of this Note and the
Loan Documents and in the making of this waiver by independent legal
counsel selected by the Borrower and that the Borrower has discussed
this waiver with counsel.
ARTICLE V
MISCELLANEOUS
5.1 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.
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: (i) if to the Borrower to: 5G Wireless
Communications, Inc., 4136 Del Rey Avenue, Marina Del Rey, CA 90292,
Attn: Jerry Dix, Chairman/CEO, telecopier number: (310) 823-0981,
with a copy by telecopier only to: Ryan S. Hong, Esq., Richardson &
Patel LLP, 10900 Wilshire Blvd., Suite 500, Los Angeles, California
90024, telecopier number: (310) 208-1154, 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 & Mittman,
P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
telecopier number: (212) 697-3575.
5.3 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.
5.4 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.
5.5 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.
5.6 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.
5.7 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.
5.8 Redemption. This Note may not be redeemed or called
without the consent of the Holder.
5.9 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 the right of a shareholder
of the Borrower with respect to the Shares of Common Stock to be
received 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 22nd day of September, 2004.
5G WIRELESS COMMUNICATIONS, INC.
By: ________________________________
Name:
Title:
WITNESS:
______________________________________
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 September ____, 2004 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:_____________________________________________________________
_____________________________________________________________________
LIST OF EXHIBITS AND SCHEDULES
Attachment 1 Disclosure Schedule
Exhibit A1 Form of A Warrant
Exhibit A2 Form of B Warrant
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Exhibit D Form of Public Announcement or Form 8-K
Exhibit E Shares Escrow Agreement
Exhibit F Limited Standstill Agreement
Exhibit G Security Agreement
Exhibit H Collateral Agent Agreement
Schedule 5(d) Additional Issuances
Schedule 5(q) Undisclosed Liabilities
Schedule 5(s) Capitalization
Schedule 9(e) Use of Proceeds
Schedule 9(q) Limited Standstill Providers
Schedule 11.1 Other Securities to be Registered
EXHIBIT A1
FORM OF 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)
FORM OF COMMON STOCK PURCHASE WARRANT CLASS A
No. ___________ Issue Date: September 22, 2004
5G WIRELESS COMMUNICATIONS, INC., a corporation organized under
the laws of the State of Nevada (the "Company"), hereby certifies
that, for value received, ______________________, 600 Montgomery
Street, 44th Floor, San Francisco, CA 94111, Fax: (415) 981-5302, 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 anniversary after the Closing
Date (as defined in the Subscription Agreement) (the "Expiration
Date"), up to __________________ fully paid and nonassessable shares
of the Common Stock of the Company (the "Warrant Shares"), at a per
share purchase price of $0.0135 in lawful money of the United States.
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 September 22, 2004, entered into
by the Company and the Holder.
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 4 or otherwise.
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 five (5) trading 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. 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.
1.6. 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) trading 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.
1.7. Common Stock Legend. The Holder acknowledges and agrees
that the shares of Common Stock of the Company, and, until such time
as the Common Stock has been registered under the 1933 Act and sold in
accordance with an effective Registration Statement, or exemption from
registration, certificates and other instruments representing any of
the Common Stock shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against
transfer of any such Securities):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
APPLICABLE STATE SECURITIES LAWS. 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."
2. Cashless Exercise.
(a) If a Registration Statement as defined in the
Subscription Agreement ("Registration Statement") is effective or the
issuance of the Warrant Shares is exempt from registration and the
Holder may sell its shares of Common Stock upon exercise hereof,
without subject to any further restrictions on transfer on volume
limitations, then this Warrant may be exercisable in whole or in part
for cash only as set forth in Section 1 above, otherwise 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 ("Cashless Exercise") 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 nonassessable 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) and no Registration Statement relating to the shares of
Common Stock underlying this Warrant is effective, 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)
(c) The Holder may employ the cashless exercise feature
described 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 Commission currently
has interpreted Rule 144 to mean 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 Price Adjustment.
(a) 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.
(b) Other Reductions. The adjustments to the
Purchase Price described in this Section 3.4 are 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 for the shares underlying this
Warrant 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 3.99% 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 3.99%. The
restriction described in this paragraph may be revoked 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 3.99% amount described
above and which shall be allocated to the excess above 3.99%.
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., 4136 Del
Rey Avenue, Marina Del Rey, CA 90292, Attn: Jerry Dix, Chairman/CEO,
telecopier number: (310) 823-0981, with a copy by telecopier only to:
Ryan S. Hong, Esq., Richardson & Patel LLP, 10900 Wilshire Blvd.,
Suite 500, Los Angeles, California 90024, telecopier number: (310)
208-1154, and (ii) if to the Holder, to the address and telecopier
number listed on the first paragraph of this Warrant, with a copy by
telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, telecopier number: (212) 697-3575.
14. 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.
15. No rights as Stockholder. Until the Holder has exercised
this Warrant, Holder shall have no rights as a stockholder of the
Company in respect to the Warrants until the Holder has exercise its
rights to receive Warrant Shares.
IN WITNESS WHEREOF, the Company has executed this Warrant as of
the date first written above.
5G WIRELESS COMMUNICATIONS, INC.
By:
Name:
Title:
Witness:
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 (which sum
reflects the concession amount described in Section 14 of the
Warrant; 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
_________________________________________________
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: ______________, ___________
(Signature must conform to name of
holder as specified on the face of
the warrant)
Signed in the presence of:
(Name) (address)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name) (address)
EXHIBIT A2
FORM OF CLASS B 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)
FORM OF COMMON STOCK PURCHASE WARRANT CLASS B
No. ___________ Issue Date: September 22, 2004
5G WIRELESS COMMUNICATIONS, INC., a corporation organized under
the laws of the State of Nevada (the "Company"), hereby certifies
that, for value received, _________________________, 600 Montgomery
Street, 44th Floor, San Francisco, CA 94111, Fax: (415) 981-5302, 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 third anniversary after the Closing
Date (as defined in the Subscription Agreement) (the "Expiration
Date"), up to __________________ fully paid and nonassessable shares
of the Common Stock of the Company (the "Warrant Shares"), at a per
share purchase price of $0.02 in lawful money of the United States.
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 September 22, 2004, entered into
by the Company and the Holder.
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 4 or otherwise.
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 five (5) trading 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. 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.
1.6. 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) trading 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.
1.7. Common Stock Legend. The Holder acknowledges and agrees
that the shares of Common Stock of the Company, and, until such time
as the Common Stock has been registered under the 1933 Act and sold in
accordance with an effective Registration Statement, or exemption from
registration, certificates and other instruments representing any of
the Common Stock shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against
transfer of any such Securities):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
APPLICABLE STATE SECURITIES LAWS. 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."
2. Adjustment for Reorganization, Consolidation, Merger, etc.
2.1. 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.
2.2. 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 2 to a bank or trust company (a
"Trustee") having its principal office in New York, NY, as trustee for
the Holder of the Warrants.
2.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 2, 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 2, 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 2.2.
2.4 Price Adjustment.
(a) 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.
(b) Other Reductions. The adjustments to the
Purchase Price described in this Section 2.4 are in addition to the
other rights of the Holder described in the Subscription Agreement.
3. 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 3. 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 3) be in effect, and (b) the denominator is the Purchase Price
in effect on the date of such exercise.
4. 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).
5. 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.
6. 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.
7. 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.
8. Registration Rights. The Holder of this Warrant has been
granted the following registration rights by the Company. The Company
shall include the Common Stock issuable upon exercise of this Warrant
on the next registration statement the Company files with the
Securities and Exchange Commission (the "SEC") that relates to shares
of Common Stock; provided, however, that the availability of a
registration statement hereunder may not be negated or delayed by a
commitment the Company undertaken to a third party after the date
hereof. The Company shall use best efforts to cause such registration
statement to be declared effective by the SEC and to remain effective
until the earlier of (a) the date on which Holder has sold all of the
Warrant Shares, or (b) the date on which this Warrant expires.
Notwithstanding the foregoing, Company shall have no registration
obligation under this Section 8 if the Warrant Shares are exempt under
Regulation E (or equivalent exemption).
9. Maximum Exercise. The Holder shall not be entitled to
exercise this Warrant on an exercise date nor may the Company exercise
its right to give a Call Notice (as defined in Section 11) in
connection with that number 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 or Call
Date as a result of prior exercises of Class B Warrants, 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 or Call Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 1%
of the outstanding 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 1%. The restriction
described in this paragraph may be revoked 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 1% amount described above and
which shall be allocated to the excess above 1%.
10. Call. The Company shall have the option to "call" the
Warrants (the "Warrant Call"), one or more times, in accordance with
and governed by the following:
(a) The Company shall exercise the Warrant Call by giving
to the Warrant Holder a written notice of call (the "Call Notice")
during the period in which the Warrant Call may be exercised. The
effective date of each Call Notice (the "Call Date") is the date on
which notice is effective under the notice provision of Section 13 of
this Warrant.
(b) The Company's right to exercise the Warrant Call shall
commence thirty trading days after the Shares issuable upon exercise
of the Warrants are or will be immediately upon exercise be free-
trading pursuant to an effective Registration Statement or pursuant to
Regulation E under the 1933 Act.
(c) The number of shares of Common Stock to be issued upon
exercise of the Warrant which are subject to a Call Notice must be
registered in a Registration Statement effective or be exempt from
registration and issuable without restriction on retransfer pursuant
to Regulation E under the 1933 Act from twenty-two trading days prior
to the Call Date and through the Delivery Date.
(d) A Call Notice may be given not sooner than ten (10)
trading days after the prior Call Date.
(e) A Call Notice may be given by the Company only if the
exercise price of the Warrants is not more than 85% of the average
closing bid price of the Company's Common Stock as reported on the
Amex, Nasdaq SmallCap Market, Nasdaq National Market System, Bulletin
Board, 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") for twenty (20) consecutive trading
days prior to the Call Date ("Lookback Period").
(f) The Common Stock must be listed on the Principal Market
for the Lookback Period and through the Delivery Date.
(g) The Company shall not have received a notice from the
Principal Market during the sixty (60) calendar days prior to the Call
Date that the Company or the Common Stock does not meet the
requirements for continued quotation, listing or trading on the
Principal Market.
(h) The Company and the Common Stock shall meet the
requirements for continued quotation, listing or trading on the
Principal Market for the Lookback Period and through the Delivery Date.
(i) The Warrant Holder shall exercise his Warrant rights
and purchase the Called Common Stock and pay for same within thirty
(30) days after the Call Date. If the Warrant Holder fails to timely
pay the amount required by the Warrant Call, the Company's sole remedy
shall be to cancel a corresponding amount of this Warrant.
(j) The Company may not exercise the right to Call this
Warrant after the occurrence of a default by the Company of a material
term of this Warrant.
(k) The Holder of this Warrant may cancel a Notice of Call
if a Material Adverse Event (as defined in the Subscription Agreement)
occurs within ten (10) business days after the Call Date.
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., 4136 Del
Rey Avenue, Marina Del Rey, CA 90292, Attn: Jerry Dix, Chairman/CEO,
telecopier number: (310) 823-0981, with a copy by telecopier only to:
Ryan S. Hong, Esq., Richardson & Patel LLP, 10900 Wilshire Blvd.,
Suite 500, Los Angeles, California 90024, telecopier number: (310)
208-1154, and (ii) if to the Holder, to the address and telecopier
number listed on the first paragraph of this Warrant, with a copy by
telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, telecopier number: (212) 697-3575.
14. 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.
15. No rights as Stockholder. Until the Holder has exercised
this Warrant, Holder shall have no rights as a stockholder of the
Company in respect to the Warrants until the Holder has exercise its
rights to receive Warrant Shares.
IN WITNESS WHEREOF, the Company has executed this Warrant as of
the date first written above.
5G WIRELESS COMMUNICATIONS, INC.
By:
Name:
Title:
Witness:
Exhibit A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: 5G WIRELESS COMMUNICATIONS, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder,
____________ shares of Common Stock of 5G WIRELESS COMMUNICATIONS,
INC. for an aggregate Purchase Price of $___________, and herewith
makes payment of $_________ therefore (which sum reflects the
concession amount described in Section 13 of the Warrant, and
requests that the certificates for such shares be issued in the name
of, and delivered to ____________________ whose
address is _________________________________________________
____________________________________________________________
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: ______________, ___________
(Signature must conform to name of
holder as specified on the face of
the warrant)
Signed in the presence of:
(Name) (address)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name) (address)
EXHIBIT B
FUNDS ESCROW AGREEMENT
This Agreement is dated as of the 22nd day of September, 2004
among 5G Wireless Communications, Inc., a Nevada corporation (the
"Company"), the Subscribers identified on Schedule A hereto (each a
"Subscriber" and collectively "Subscribers"), and Grushko & Mittman,
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 5% secured promissory notes ("Notes") and Warrants for
an aggregate purchase price of up to $2,000,000 in the amounts set
forth on Schedule A hereto; 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) "Closing Date" shall have the meaning set forth in
Section 14(b) of the Subscription Agreement;
(c) "Collateral Agent Agreement" shall have the meaning
set forth in Section 13 of the Subscription Agreement;
(d) "Due Diligence Fee" shall have the meaning set forth
in Section 8(a) of the Subscription Agreement;
(e) "Escrowed Payment" means an aggregate cash payment of
up to $2,000,000 which is, collectively, the Initial Closing Purchase
Price and Second Closing Purchase Price;
(f) "Escrowed Stock" shall have the meaning set forth in
Section 1.1(b) of the Shares Escrow Agreement;
(g) "Initial Closing Date" shall have the meaning set
forth in Section 1 of the Subscription Agreement;
(h) "Initial Closing Legal Opinion" means the original
signed legal opinion referred to in Section 6 of the Subscription
Agreement;
(i) "Initial Closing Notes" shall have the meaning set
forth in Section 1 of the Subscription Agreement;
(j) "Initial Closing Purchase Price" shall mean up to
$1,000,000;
(k) "Initial Closing Warrants" shall have the meaning set
forth in Section 1 of the Subscription Agreement;
(l) "Legal Fees" shall have the meaning set forth in
Section 8(b) of the Subscription Agreement;
(m) "Second Closing Certificate" shall have the meaning
set forth in Section 2(c) of the Subscription Agreement;
(n) "Second Closing Date" shall have the meaning set forth
in Section 2(a) of the Subscription Agreement;
(o) "Second Closing Legal Opinion" shall have the meaning
set forth in Section 2(c) of the Subscription Agreement;
(p) "Second Closing Notes" shall have the meaning set
forth in Section 2(a) of the Subscription Agreement;
(q) "Second Closing Purchase Price" shall mean up to $1,000,000;
(r) "Second Closing Warrants" shall have the meaning set
forth in Section 2(a) of the Subscription Agreement;
(s) "Security Agreement" shall have the meaning set forth
in Section 13 of the Subscription Agreement;
(t) "Shares Escrow Agreement" shall have the meaning set
forth in Section 7.8 of the Subscription Agreement;
(u) "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 and Warrants;
(v) Collectively, the executed Subscription Agreement,
Initial Closing Notes, Shares Escrow Agreement, Security Agreement,
Collateral Agent Agreement, Initial Closing Legal Opinion, Second
Closing Notes, Second Closing Legal Opinion, Second Closing
Certificate, Warrants and Escrowed Stock are referred to as "Company
Documents"; and
(w) Collectively, the Escrowed Payment and the executed
Subscription Agreement, Security Agreement, Collateral Agent
Agreement and Shares Escrow 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, Initial Closing
Warrants, Security Agreement and Collateral Agent Agreement and
Initial Closing 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, Second Closing 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, Security Agreement and Collateral
Agent 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.
1155 6th Avenue
New York, NY 10036, USA
ABA Number: 0210-00089
For Credit to: Grushko & Mittman, IOLA Trust Account
Account Number: 45208884
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. The Security Agreement and
Collateral Agent Agreement will also be released to the Collateral
Agent identified therein. The Shares Escrow Agreement and Escrowed
Stock will be released to the Escrow Agent identified in the Shares
Escrow Agreement. The Legal Fees will be released to the
Subscriber's attorneys and the Due Diligence Fee in connection with
the Initial Closing Purchase Price will be released to the entity
identified in Section 8(a) of the Subscription Agreement.
(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 except that the Legal Fees will be released to the
Subscriber's attorneys and Due Diligence Fee in connection with the
Second Closing Purchase Price will be delivered to the entity
identified in Section 8(a) of the Subscription Agreement.
(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.
4136 Del Rey Avenue
Marina Del Rey, CA 90292
Attn: Jerry Dix, Chairman/Chief Executive Officer
Fax: (310) 823-0981
With a copy by telecopier only to:
Ryan S. Hong, Esq.
Richardson & Patel LLP
10900 Wilshire Blvd., Suite 500
Los Angeles, CA 90024
Fax: (310) 208-1154
(b) If to the Subscribers, to: the addresses and fax numbers
listed on Schedule A hereto
(c) If to the Escrow Agent, to:
Grushko & Mittman, P.C.
551 Fifth Avenue, Suite 1601
New York, New York 10176
Fax: 212-697-3575
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.
the "Company"
By: /s/ Jerry Dix
Jerry Dix, Chief Executive Officer
LONGVIEW EQUITY FUND, LP LONGVIEW FUND, LP
"Subscriber" "Subscriber"
By: /s/ Wayne Coleson By: /s/ Michael Rudolph
Name: Wayne Coleson Name: Michael Rudolph
Its: Chief Executive Officer Its: Chief Financial Officer
LONGVIEW INTERNATIONAL EQUITY FUND, LP
"Subscriber"
By: /s/ Wayne Coleson
Name: Wayne Coleson
Its: Chief Executive Officer
ESCROW AGENT:
/s/ Grushko & Mittman, P.C.
Grushko & Mittman, P.C.
SCHEDULE A
SUBSCRIBER INITIAL CLOSING SECOND CLOSING
NOTE (INITIAL NOTE (SECOND
CLOSING PURCHASE CLOSING PURCHASE
PRICE) PRICE)
LONGVIEW EQUITY FUND, LP $350,000.00 $350,000.00
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
LONGVIEW FUND, LP $487,500.00 $487,500.00
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
LONGVIEW INTERNATIONAL EQUITY $162,500.00 $162,500.00
FUND, LP
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
TOTAL $1,000,000.00 $1,000,000.00
EXHIBIT E
SHARES ESCROW AGREEMENT
THIS AGREEMENT dated the 22nd day of September, 2004, between 5G
Wireless Communications, Inc., a Nevada corporation (the "Company"),
the Subscribers identified on Schedule A hereto (the "Holder" or
"Holders") and Grushko & Mittman (the "Escrow Agent"):
WITNESSETH:
WHEREAS, the Company and the Holders have entered into a
Subscription Agreement dated at or about the date hereof (together
with all exhibits thereto, the "Subscription Agreement") calling for
the issuance and sale to the Holders of the Company's Convertible
Notes; and
WHEREAS, Section 7.8 of the Subscription Agreement requires the
Company to deposit the Escrowed Stock (as hereinafter defined) with
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 1
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 Stock" means the 177,777,781 shares of
Common Stock of the Company, $.001 par value, represented by
certificates in denominations of 8,888,889, 8,666,667 and 7,222,222
shares of Common Stock registered in the names of the Holders, and
allocated among the Holders as set forth on Schedule A hereto, to be
delivered to the Escrow Agent on or before the Initial Closing Date,
as the term is defined in the Subscription Agreement, and to be held
in escrow by the Escrow Agent.
1.2. Entire Agreement. This Agreement together with the
Subscription Agreement and Convertible Note constitute the entire
agreement between the parties hereto pertaining to the Escrowed Stock
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.
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 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 injunction 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.
1.8. Fees. Within three (3) business days after telecopier
transmission of a copy of the first Conversion Notice received by the
Escrow Agent, the Company shall pay the Escrow Agent a fee of $5,000
by wire transfer.
ARTICLE 2
STOCK TO BE DELIVERED TO THE ESCROW AGENT
2.1. Delivery of Company's Stock to Escrow Agent. As required
under Section 7.8 of the Subscription Agreement, the Company shall
deliver to the Escrow Agent the Escrowed Stock prior to the Closing
Date. Such additional common stock of the Company as is required to
be delivered to the Escrow Agent pursuant to Section 7.8 of the
Subscription Agreement shall be delivered to the Escrow Agent and
shall be Escrowed Stock.
2.2. Intention to Create Escrow Over Escrowed Stock. The Holder
and Company intend that the Escrowed Stock shall be held in escrow by
the Escrow Agent pursuant to this Agreement for their respective
benefits as set forth herein.
2.3. Escrow Agent to Hold Escrowed Stock. The Escrow Agent
shall hold and release the Escrowed Stock only in accordance with the
terms and conditions of this Agreement.
ARTICLE 3
RELEASE OF ESCROWED STOCK
3.1. Subject to the provisions of Section 4.2, the Escrow Agent
shall release the Escrowed Stock as follows:
(a) Upon receipt by the Escrow Agent of a notice ("Notice
of Conversion") signed by a Holder, reciting that the Holder is
converting a Note or part thereof in accordance with the terms of the
Subscription Agreement, and stating the terms of said conversion, the
Escrow Agent shall transmit to the Holder that number of shares of
Escrowed Stock as is called for in the Notice of Conversion on the
third (3rd) business day after telecopier transmission of a copy of
such Notice of Conversion to the Company. The date of receipt of
such Notice of Conversion by the Escrow Agent is a Conversion Date.
The Holder will not be required to surrender the original Note as a
condition of conversion. After conversion or payment of all sums due
under the Note, the Holder will surrender the original Note to the
Company. A form of Notice of Conversion is annexed hereto as Exhibit B.
(b) Upon receipt by the Escrow Agent of a notice ("Notice
of Return") signed by the Company stating that the Company is
entitled to receipt of the Escrowed Stock or any portion thereof, in
accordance with the provisions of the Subscription Agreement, and
stating the reasons therefor, the Escrow Agent shall promptly send a
copy of such Notice of Return to the Holder. If the Escrow Agent
does not receive from the Holder within three (3) business days after
notice is given to the Holder by the Escrow Agent, a written Notice
of Objection stating the reasons for the objection in accordance with
the terms of the Subscription Agreement signed by the Holder, or if
the Escrow Agent shall within such period receive a written consent
signed by the Holder, then the Escrow Agent shall deliver the
Escrowed Stock or such portion thereof to the Company in accordance
with the Notice of Return. If the Escrow Agent receives a Notice of
Objection from the Holder within such three (3) day period, then the
Escrow Agent shall continue to hold the Escrowed Stock until
otherwise authorized and directed to distribute the same pursuant to
the provision of Sections 3.1(c) or 3.1(d).
(c) Upon receipt by the Escrow Agent of a joint written
instruction (a "Joint Instruction") signed by the Company and the
Holder, it shall deliver the Escrowed Stock in accordance with the
terms of the Joint Instruction.
(d) 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
Escrowed Stock 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 Holder; Disputes. The
Company and the Holder acknowledge that the only terms and conditions
upon which the Escrowed Stock are to be released are set forth in
Section 3 and 4 of this Agreement. The Company and the Holder
reaffirm their agreement to abide by the terms and conditions of this
Agreement with respect to the release of the Escrowed Stock. Any
dispute with respect to the release of the Escrowed Stock shall be
resolved pursuant to Section 4.2 or by agreement between the Company
and Holder.
ARTICLE 4
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 Holder 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 Holder or Company
is entitled to receipt of the Escrowed Stock pursuant to, the
Subscription 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 it 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 purporting to
give notice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do
so; (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
reasonably 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 Holder 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 right or powers conferred upon Escrow Agent by this Agreement.
The Holder 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
reasonable fees and costs of outside counsel in 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 Holder and Company under
this Agreement and to no other person.
(c) The Holder and Company jointly and severally agree to
reimburse the Escrow Agent for its reasonable out-of-pocket expenses
(including reasonable counsel fees) 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 Holder and the Company. Prior to the effective
date of the resignation as specified in such notice, the Holder and
Company will issue to the Escrow Agent a Joint Instruction
authorizing delivery of the Escrowed Stock to a substitute Escrow
Agent selected by the Holder and Company. If no successor Escrow
Agent is named by the Holder and Company, the Escrow Agent may apply
to a court of competent jurisdiction in the state of New York or any
federal court located in the state of New York for appointment of a
successor Escrow Agent.
(e) The Escrow Agent does not have and will not have any
interest in the Escrowed Stock, but is serving only as escrow holder,
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 Holder or the Company, as the case may be, in any dispute as
to the disbursement of the Escrowed Stock or in any other dispute
between the Holder and Company, whether or not the Escrow Agent is
then holding the Escrowed Stock 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
Escrowed Stock, 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 Escrowed Stock
pending receipt of a Joint Instruction from the Holder and Company,
or (ii) deposit the Escrowed Stock 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 Holder 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 Escrowed Stock. The Escrow Agent shall have the
right to retain counsel if Escrow Agent 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 Holder and Company or to any other person, firm, corporation
or entity by reason of such compliance.
ARTICLE 5
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon the release
of all of the Escrowed Stock or at any time upon the agreement in
writing of the Holder and Company.
5.2. Notices. Any notice herein required or permitted to be
given shall be in writing and may be personally delivered or sent by
fax transmission (with copy sent by regular, certified or registered
mail or by overnight courier).
(a) If to the Company, to:
5G Wireless Communications, Inc.
4136 Del Rey Avenue
Marina Del Rey, CA 90292
Attn: Jerry Dix, Chairman/Chief Executive Officer
Fax: (310) 823-0981
With a copy by telecopier only to:
Richardson & Patel LLP
10900 Wilshire Blvd., Suite 500
Los Angeles, CA 90024
Attn: Ryan S. Hong, Esq.
Fax: (310) 208-1154
(b) If to the Holder to: the addresses and fax numbers
set forth on Schedule A hereto.
(c) If to the Escrow Agent, to:
Grushko & Mittman, P.C.
Attorneys at Law
551 Fifth Avenue, Suite 1601
New York, New York 10176
Fax: (212) 697-3575
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 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.
5.4 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 transmission.
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. Agreement. Each of the undersigned states that he has
read the foregoing Shares Escrow Agreement and understands and agrees
to it.
5G WIRELESS COMMUNICATIONS, INC.
"Company"
By: /s/ Jerry Dix
Jerry Dix, Chief Executive Officer
LONGVIEW EQUITY FUND, LP LONGVIEW FUND, LP
"Subscriber" "Subscriber"
By: /s/ Wayne Coleson By: /s/ Michael Rudolph
Name: Wayne Coleson Name: Michael Rudolph
Its: Chief Executive Officer Its: Chief Financial Officer
LONGVIEW INTERNATIONAL EQUITY FUND, LP
"Subscriber"
By: /s/ Wayne Coleson
Name: Wayne Coleson
Its: Chief Executive Officer
ESCROW AGENT:
/s/ Grushko & Mittman, P.C.
Grushko & Mittman, P.C.
SCHEDULE A
SUBSCRIBER PRINCIPAL NOTE ESCROWED
AMOUNT STOCK
LONGVIEW EQUITY FUND, LP $487,500.00 8,666,667 x 10 =
600 Montgomery Street, 44th Floor 86,666,670
San Francisco, CA 94111
Fax: (415) 981-5300
LONGVIEW FUND, LP $350,000.00 8,888,889 x 7 =
600 Montgomery Street, 44th Floor 62,222,223
San Francisco, CA 94111
Fax: (415) 981-5300
LONGVIEW INTERNATIONAL EQUITY $162,500.00 7,222,222 x 4 =
FUND, LP 28,888,888
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5300
TOTAL $1,000,000.00 177,777,781
SCHEDULE B
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 ____________________ into Shares of
Common Stock of 5G Wireless Communications, Inc. (the "Company")
according to the conditions set forth in such Note, as of the date
written below. A copy of the closing bid prices employed in
determining the Conversion Price as reported by
_________________________________________
_________________________________ is annexed hereto.
Date of
Conversion:__________________________________________________________
Applicable Conversion
Price:_______________________________________________________________
Shares To Be
Delivered:___________________________________________________________
Signature:___________________________________________________________
Print
Name:________________________________________________________________
Address:_____________________________________________________________
_____________________________________________________________________
EXHIBIT F
FORM OF LIMITED STANDSTILL AGREEMENT
This AGREEMENT (the "Agreement") is made as of the ____ day of
September, 2004, by the signators hereto (each a "Holder"), in
connection with his ownership of shares of 5G Wireless Communications,
Inc., a Nevada corporation (the "Company").
NOW, THEREFORE, for good and valuable consideration, the
sufficiency and receipt of which consideration are hereby acknowledged,
Holder agrees as follows:
1. Background.
a. Holder is the beneficial owner of the amount of shares
of the Common Stock, $.001 par value, of the Company ("Common Stock")
designated on the signature page hereto.
b. Holder acknowledges that the Company has entered into or
will enter into agreements with subscribers to the Company's Common
Stock and Warrants (the "Subscribers"), for the sale of an aggregate of
up to $2,000,000 of Common Stock and Warrants to the Subscribers (the
"Offering"). Holder understands that, as a condition to proceeding
with the Offering, the Subscribers have required, and the Company has
agreed to assist the Subscribers in obtaining, an agreement from the
Holder to refrain from selling any securities of the Company from the
date of the Subscription Agreement until the end of the Exclusion
Period as defined in the Subscription Agreement (the "Restriction Period").
2. Share Restriction.
a. Holder hereby agrees that during the Restriction Period,
the Holder will not sell or otherwise dispose of any shares of Common
Stock or any options, warrants or other rights to purchase shares of
Common Stock or any other security of the Company which Holder owns or
has a right to acquire as of the date hereof, other than (i) in
connection with an offer made to all shareholders of the Company or any
merger, consolidation or similar transaction involving the Company, or
(ii) with the prior written consent of the Subscribers and Company,
which shall not be unreasonably withheld. Holder further agrees that
the Company is authorized to and the Company agrees to place "stop
orders" on its books to prevent any transfer of shares of Common Stock
or other securities of the Company held by Holder in violation of this
Agreement.
b. Any subsequent issuance to and/or acquisition of shares
by Holder will be subject to the provisions of this Agreement.
c. Notwithstanding the foregoing restrictions on
transfer, the Holder may, at any time and from time to time during
the Restriction Period, transfer the Common Stock (i) as bona fide
gifts or transfers by will or intestacy, (ii) to any trust for the
direct or indirect benefit of the undersigned or the immediate family
of the Holder, provided that any such transfer shall not involve a
disposition for value, (iii) to a partnership which is the general
partner of a partnership of which the Holder is a general partner,
provided, that, in the case of any gift or transfer described in
clauses (i), (ii) or (iii), each donee or transferee agrees in
writing to be bound by the terms and conditions contained herein in
the same manner as such terms and conditions apply to the
undersigned. For purposes hereof, "immediate family" means any
relationship by blood, marriage or adoption, not more remote than
first cousin.
3. Miscellaneous.
a. At any time, and from time to time, after the signing
of this Agreement Holder will execute such additional instruments and
take such action as may be reasonably requested by the Subscribers to
carry out the intent and purposes of this Agreement.
b. This Agreement shall be governed, construed and enforced
in accordance with the laws of the State of New York, except to the
extent that the securities laws of the state in which Holder resides
and federal securities laws may apply.
c. This Agreement contains the entire agreement of the
Holder with respect to the subject matter hereof.
d. This Agreement shall be binding upon Holder, its legal
representatives, successors and assigns.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Holder has executed this Agreement as of the day and year first above
written.
HOLDER:
________________________________
(Signature of Holder)
________________________________
(Print Name of Holder)
________________________________
Number of Shares of Common Stock
Beneficially Owned
COMPANY:
5G WIRELESS COMMUNICATIONS, INC.
By:______________________________
Name:
Title:
EXHIBIT G
SECURITY AGREEMENT
1. Identification.
This Security Agreement (the "Agreement"), dated as of September
22, 2004, is entered into by and between 5G Wireless Communications,
Inc., a Nevada corporation ("5G" or "Debtor"), and Barbara Mittman,
as collateral agent acting in the manner and to the extent described
in the Collateral Agent Agreement defined below (the "Collateral
Agent"), for the benefit of the parties identified on Schedule A
hereto (collectively, the "Lenders").
2. Recitals.
2.1 The Lenders have made or are making loans and will make
additional loans to 5G (the "Loans"). It is beneficial to 5G that
the Loans were made, are being made and will be made.
2.2 The Loans are evidenced by certain 5% convertible
promissory notes (each a "Convertible Note") issued by 5G on or about
the date of this Agreement and issuable after the date of this
Agreement, pursuant to subscription agreements (each a "Subscription
Agreement") to which 5G and Lenders are parties. The Notes are
further identified on Schedule A hereto and were and will be executed
by 5G as "Borrower" or "Debtor" for the benefit of each Lender as the
"Holder" or "Lender" thereof.
2.3 In consideration of the Loans made by Lenders to 5G and for
other good and valuable consideration, and as security for the
performance by 5G of its obligations under the Notes and as security
for the repayment of the Loans and all other sums due from Debtor to
Lenders arising under the Notes presently outstanding or to be
outstanding in the future, Subscription Agreements, and any other
agreement between or among them (collectively, the "Obligations"),
5G, for good and valuable consideration, receipt of which is
acknowledged, has agreed to grant to the Collateral Agent, for the
benefit of the Lenders, a security interest in the Collateral (as
such term is hereinafter defined), on the terms and conditions
hereinafter set forth. Obligations includes all future advances by
Lenders to 5G.
2.4 The Lenders have appointed Barbara Mittman as Collateral
Agent pursuant to that certain Collateral Agent Agreement dated at or
about September 22, 2004 ("Collateral Agent Agreement"), among the
Lenders and Collateral Agent.
2.5 The following defined terms which are defined in the
Uniform Commercial Code in effect in the State of New York on the
date hereof are used herein as so defined: Accounts, Chattel Paper,
Documents, Equipment, General Intangibles, Instruments, Inventory and
Proceeds.
3. Grant of General Security Interest in Collateral.
3.1 As security for the Obligations of Debtor, 5G hereby grants
the Collateral Agent, for the benefit of the Lenders, a security
interest in the Collateral.
3.2 "Collateral" shall mean all of the following property of 5G:
All now owned and hereafter acquired right, title and interest
of 5G in, to and in respect of all accounts, goods, real or personal
property, all present and future books and records relating to the
foregoing and all products and proceeds of the foregoing, as each is
set forth below:
(i) Accounts: All now owned and hereafter acquired right,
title and interest of 5G in, to and in respect of all: Accounts,
interests in goods represented by Accounts, returned, reclaimed or
repossessed goods with respect thereto and rights as an unpaid
vendor; contract rights; Chattel Paper; investment property; General
Intangibles (including but not limited to, tax and duty claims and
refunds, registered and unregistered patents, trademarks, service
marks, certificates, copyrights trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints,
customer lists, licenses, whether as licensor or licensee, choses in
action and other claims, and existing and future leasehold interests
in equipment, real estate and fixtures); Documents; Instruments;
letters of credit, bankers' acceptances or guaranties; cash moneys,
deposits; securities, bank accounts, deposit accounts, credits and
other property now or hereafter owned or held in any capacity by 5G,
as well as its affiliates, agreements or property securing or
relating to any of the items referred to above;
(ii) Goods: All now owned and hereafter acquired right,
title and interest of 5G in, to and in respect of goods, including,
but not limited to:
(A) All Inventory, wherever located, whether now
owned or hereafter acquired, of whatever kind, nature or description,
including all raw materials, work-in-process, finished goods, and
materials to be used or consumed in 5G' business; and all names or
marks affixed to or to be affixed thereto for purposes of selling
same by the seller, manufacturer, lessor or licensor thereof and all
Inventory which may be returned to 5G by its customers or repossessed
by 5G and all of 5G' right, title and interest in and to the
foregoing (including all of 5G' rights as a seller of goods);
(B) All Equipment and fixtures, wherever located,
whether now owned or hereafter acquired, including, without
limitation, all machinery, motor vehicles, furniture and fixtures,
and any and all additions, substitutions, replacements (including
spare parts), and accessions thereof and thereto (including, but not
limited to 5G' rights to acquire any of the foregoing, whether by
exercise of a purchase option or otherwise);
(iii) Property: All now owned and hereafter acquired
right, title and interests of 5G in, to and in respect of any real or
other personal property in or upon which 5G has or may hereafter have
a security interest, lien or right of setoff;
(iv) Books and Records: All present and future books and
records relating to any of the above including, without limitation,
all computer programs, printed output and computer readable data in
the possession or control of the 5G, any computer service bureau or
other third party; and
(v) Products and Proceeds: All products and Proceeds of
the foregoing in whatever form and wherever located, including,
without limitation, all insurance proceeds and all claims against
third parties for loss or destruction of or damage to any of the
foregoing.
3.3 The Collateral Agent is hereby specifically authorized,
after an Event of Default (as defined herein) and the expiration of
any applicable cure period, to transfer any Collateral into the name
of the Collateral Agent and to take any and all action deemed
advisable to the Collateral Agent to remove any transfer restrictions
affecting the Collateral.
4. Perfection of Security Interest.
5G shall execute and/or deliver to the Collateral Agent UCC-1
Financing Statements. The Collateral Agent is instructed to prepare
and file at 5G's cost and expense, Financing Statements in such
jurisdictions deemed advisable to the Collateral Agent, including but
not limited to Nevada and California. The Financing Statements are
deemed to have been filed for the benefit of the Collateral Agent and
Lenders identified on Schedule A hereto.
5. Distribution on Liquidation.
5.1 If any sum is paid as a liquidating distribution on or with
respect to the Collateral, 5G shall deliver same to the Collateral
Agent to be applied to the Obligations, then due, in accordance with
the terms of the Notes.
5.2 Prior to any Event of Default, 5G shall be entitled to
exercise all voting power pertaining to any of the Collateral,
provided such exercise is not contrary to the interests of the
Lenders and does not impair the Collateral.
6. Further Action By 5G; Covenants and Warranties.
6.1 Collateral Agent at all times shall have a perfected
security interest in the Collateral. Subject to the security
interests described herein, 5G has and will continue to have full
title to the Collateral free from any liens, leases, encumbrances,
judgments or other claims. Collateral Agent's security interest in
the Collateral constitutes and will continue to constitute a first,
prior and indefeasible security interest in favor of Collateral
Agent. 5G will do all acts and things, and will execute and file all
instruments (including, but not limited to, security agreements,
financing statements, continuation statements, etc.) reasonably
requested by Collateral Agent to establish, maintain and continue the
perfected security interest of Collateral Agent in the Collateral,
and will promptly on demand, pay all costs and expenses of filing and
recording, including the costs of any searches reasonably deemed
necessary by Collateral Agent from time to time to establish and
determine the validity and the continuing priority of the security
interest of Collateral Agent, and also pay all other claims and
charges that, in the opinion of Collateral Agent, exercised in good
faith, is reasonably likely to materially prejudice, imperil or
otherwise affect the Collateral or their security interests therein.
6.2 Other than in the ordinary course of business, and except
for Collateral which is substituted by assets of identical or greater
value or which has become obsolete or is of inconsequential in value,
5G will not sell, transfer, assign or pledge those items of
Collateral (or allow any such items to be sold, transferred, assigned
or pledged), without the prior written consent of Collateral Agent
other than a transfer of the Collateral to a wholly-owned subsidiary
on prior notice to Collateral Agent, and provided the Collateral
remains subject to the security interest herein described. Although
Proceeds of Collateral are covered by this Agreement, this shall not
be construed to mean that Collateral Agent consents to any sale of
the Collateral, except as provided herein. Sales of Collateral in
the ordinary course of business shall be free of the security
interest of Lenders and Collateral Agent and Lenders and Collateral
Agent shall promptly execute such documents (including without
limitation releases and termination statements) as may be required by
Debtor to evidence or effectuate the same.
6.3 5G will, at all reasonable times and upon reasonable
notice, allow Collateral Agent or its representatives free and
complete access to the Collateral and all of 5G's records which in
any way relate to the Collateral, for such inspection and examination
as Collateral Agent reasonably deems necessary.
6.4 5G, at its sole cost and expense, will protect and defend
this Security Agreement, all of the rights of Collateral Agent and
Lenders hereunder, and the Collateral against the claims and demands
of all other persons.
6.5 5G will promptly notify Collateral Agent of any levy,
distraint or other seizure by legal process or otherwise of any part
of the Collateral, and of any threatened or filed claims or
proceedings that are reasonably likely to affect or impair any of the
rights of Collateral Agent under this Security Agreement in any
material respect.
6.6 5G, at its own expense, will obtain and maintain in force
insurance policies covering losses or damage to those items of
Collateral which constitute physical personal property. The
insurance policies to be obtained by 5G shall be in form and amounts
reasonably acceptable to Collateral Agent. 5G shall make the
Collateral Agent a loss payee thereon to the extent of its interest.
Collateral Agent is hereby irrevocably (until the Obligations are
paid in full) appointed 5G' attorney-in-fact to endorse any check or
draft that may be payable to 5G so that Collateral Agent may collect
the proceeds payable for any loss under such insurance. The proceeds
of such insurance (subject to the rights of senior secured parties),
less any costs and expenses incurred or paid by Collateral Agent in
the collection thereof, shall be applied either toward the cost of
the repair or replacement of the items damaged or destroyed, or on
account of any sums secured hereby, whether or not then due or payable.
6.7 Collateral Agent may, at its option, and without any
obligation to do so, pay, perform and discharge any and all amounts,
costs, expenses and liabilities herein agreed to be paid or performed
by 5G, upon 5G' failure to do so, and all amounts expended by
Collateral Agent in so doing shall become part of the Obligations
secured hereby, and shall be immediately due and payable by 5G to
Collateral Agent upon demand and shall bear interest at the lesser of
18% per annum or the highest legal amount from the dates of such
expenditures until paid.
6.8 Upon the request of Collateral Agent, 5G will furnish
within five (5) business days thereafter to Collateral Agent, or to
any proposed assignee of this Security Agreement, a written statement
in form reasonably satisfactory to Collateral Agent, duly
acknowledged, certifying the amount of the principal and interest and
any other sum then owing under the Obligations, whether to its
knowledge any claims, offsets or defenses exist against the
Obligations or against this Security Agreement, or any of the terms
and provisions of any other agreement of 5G securing the Obligations.
In connection with any assignment by Collateral Agent of this
Security Agreement, 5G hereby agrees to cause the insurance policies
required hereby to be carried by 5G, if any, to be endorsed in form
satisfactory to Collateral Agent or to such assignee, with loss
payable clauses in favor of such assignee, and to cause such
endorsements to be delivered to Collateral Agent within ten (10)
calendar days after request therefor by Collateral Agent.
6.9 5G will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to
time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other reasonable assurances or
instruments and take further steps relating to the Collateral and
other property or rights covered by the security interest hereby
granted, as the Collateral Agent may reasonably require to perfect
its security interest hereunder.
6.10 5G represents and warrants that it is the true and lawful
exclusive owner of the Collateral, free and clear of any liens and
encumbrances.
6.11 5G hereby agrees not to divest itself of any right under
the Collateral except as permitted herein absent prior written
approval of the Collateral Agent, except to a subsidiary on prior
notice to Collateral Agent provided the Collateral remains subject to
the security interest herein described.
7. Power of Attorney.
After the occurrence and during the uncured continuation of an
Event of Default as defined in Section 9 below, 5G hereby irrevocably
constitutes and appoints the Collateral Agent as the true and lawful
attorney of 5G, with full power of substitution, in the place and
stead of 5G and in the name of 5G or otherwise, at any time or times,
in the discretion of the Collateral Agent, to take any action and to
execute any instrument or document which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this
Agreement. This power of attorney is coupled with an interest and is
irrevocable until the Obligations are satisfied.
8. Performance By The Collateral Agent.
If 5G fails to perform any material covenant, agreement, duty or
obligation of 5G under this Agreement, the Collateral Agent may,
after any applicable cure period, at any time or times in its
discretion, take action to effect performance of such obligation.
All reasonable expenses of the Collateral Agent incurred in
connection with the foregoing authorization shall be payable by 5G as
provided in Paragraph 12.1 hereof. No discretionary right, remedy or
power granted to the Collateral Agent under any part of this
Agreement shall be deemed to impose any obligation whatsoever on the
Collateral Agent with respect thereto, such rights, remedies and
powers being solely for the protection of the Collateral Agent.
9. Event of Default.
An event of default ("Event of Default") shall be deemed to have
occurred hereunder upon the occurrence of any event of default as
defined in the Notes, Subscription Agreement, and any other agreement
to which 5G and a Lender are parties. Upon and after any Event of
Default, after the applicable cure period, if any, any or all of the
Obligations shall become immediately due and payable at the option of
the Collateral Agent, for the benefit of the Lenders, and the
Collateral Agent may dispose of Collateral as provided below. A
default by 5G of any of its material obligations pursuant to this
Agreement shall be an Event of Default hereunder and an event of
default as defined in the Notes, and Subscription Agreement.
10. Disposition of Collateral.
Upon and after any Event of Default which is then continuing,
10.1 The Collateral Agent may exercise its rights with respect
to each and every component of the Collateral, without regard to the
existence of any other security or source of payment for the
Obligations. In addition to other rights and remedies provided for
herein or otherwise available to it, the Collateral Agent shall have
all of the rights and remedies of a lender on default under the
Uniform Commercial Code then in effect in the State of New York.
10.2 If any notice to 5G of the sale or other disposition of
Collateral is required by then applicable law, five business (5) days
prior written notice (which 5G agrees is reasonable notice within the
meaning of Article 9 of the Uniform Commercial Code) to 5G of the
time and place of any sale of Collateral which 5G hereby agrees may
be by private sale. The rights granted in this Section are in
addition to any and all rights available to Collateral Agent under
the Uniform Commercial Code.
10.3 The Collateral Agent is authorized, at any such sale, if
the Collateral Agent deems it advisable to do so, in order to comply
with any applicable securities laws, to restrict the prospective
bidders or purchasers to persons who will represent and agree, among
other things, that they are purchasing the Collateral for their own
account for investment, and not with a view to the distribution or
resale thereof, or otherwise to restrict such sale in such other
manner as the Collateral Agent deems advisable to ensure such
compliance. Sales made subject to such restrictions shall be deemed
to have been made in a commercially reasonable manner.
10.4 All proceeds received by the Collateral Agent for the
benefit of the Lenders in respect of any sale, collection or other
enforcement or disposition of Collateral, shall be applied (after
deduction of any amounts payable to the Collateral Agent pursuant to
Paragraph 12.1 hereof) against the Obligations pro rata among the
Lenders in proportion to their interests in the Obligations. Upon
payment in full of all Obligations, 5G shall be entitled to the
return of all Collateral, including cash, which has not been used or
applied toward the payment of Obligations or used or applied to any
and all costs or expenses of the Collateral Agent incurred in
connection with the liquidation of the Collateral (unless another
person is legally entitled thereto). Any assignment of Collateral by
the Collateral Agent to 5G shall be without representation or
warranty of any nature whatsoever and wholly without recourse. To
the extent allowed by law, each Lender may purchase the Collateral
and pay for such purchase by offsetting up to its pro rata portion of
the proceeds with sums owed to such Lender by 5G arising under the
Obligations or any other source.
11. Waiver of Automatic Stay. 5G acknowledges and agrees that
should a proceeding under any bankruptcy or insolvency law be
commenced by or against 5G, or if any of the Collateral should become
the subject of any bankruptcy or insolvency proceeding, then the
Collateral Agent should be entitled to, among other relief to which
the Collateral Agent or Lenders may be entitled under the Note,
Subscription Agreement and any other agreement to which the Debtor,
Lenders or Collateral Agent are parties, (collectively "Loan
Documents") and/or applicable law, an order from the court granting
immediate relief from the automatic stay pursuant to 11 U.S.C.
Section 362 to permit the Collateral Agent to exercise all of its
rights and remedies pursuant to the Loan Documents and/or applicable
law. 5G EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED
BY 11 U.S.C. SECTION 362. FURTHERMORE, 5G EXPRESSLY ACKNOWLEDGES AND
AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF
THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT
LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION,
REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE COLLATERAL AGENT TO
ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS
AND/OR APPLICABLE LAW. 5G hereby consents to any motion for relief
from stay which may be filed by the Collateral Agent in any
bankruptcy or insolvency proceeding initiated by or against 5G, and
further agrees not to file any opposition to any motion for relief
from stay filed by the Collateral Agent. 5G represents, acknowledges
and agrees that this provision is a specific and material aspect of
this Agreement, and that the Collateral Agent would not agree to the
terms of this Agreement if this waiver were not a part of this
Agreement. 5G further represents, acknowledges and agrees that this
waiver is knowingly, intelligently and voluntarily made, that neither
the Collateral Agent nor any person acting on behalf of the
Collateral Agent has made any representations to induce this waiver,
that 5G has been represented (or has had the opportunity to be
represented) in the signing of this Agreement and in the making of
this waiver by independent legal counsel selected by 5G and that 5G
has had the opportunity to discuss this waiver with counsel. 5G
further agrees that any bankruptcy or insolvency proceeding initiated
by 5G will only be brought in the Federal Court within the Southern
District of New York.
12. Miscellaneous.
12.1 Expenses. 5G shall pay to the Collateral Agent, on demand,
the amount of any and all reasonable expenses, including, without
limitation, attorneys' fees, legal expenses and brokers' fees, which
the Collateral Agent may incur in connection with (a) sale,
collection or other enforcement or disposition of Collateral; (b)
exercise or enforcement of any the rights, remedies or powers of the
Collateral Agent hereunder or with respect to any or all of the
Obligations upon breach or threatened breach; or (c) failure by 5G to
perform and observe any agreements of 5G contained herein which are
performed by the Collateral Agent.
12.2 Waivers, Amendment and Remedies. No course of dealing by
the Collateral Agent and no failure by the Collateral Agent to
exercise, or delay by the Collateral Agent in exercising, any right,
remedy or power hereunder shall operate as a waiver thereof, and no
single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right, remedy
or power of the Collateral Agent. No amendment, modification or
waiver of any provision of this Agreement and no consent to any
departure by 5G therefrom, shall, in any event, be effective unless
contained in a writing signed by the Collateral Agent, and then such
waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. The rights, remedies
and powers of the Collateral Agent, not only hereunder, but also
under any instruments and agreements evidencing or securing the
Obligations and under applicable law are cumulative, and may be
exercised by the Collateral Agent from time to time in such order as
the Collateral Agent may elect.
12.3 Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or
deemed delivered the first business day after being faxed (provided
that a copy is delivered by first class mail) to the party to receive
the same at its address set forth below or to such other address as
either party shall hereafter give to the other by notice duly made
under this Section:
To 5G:
5G Wireless Communications, Inc.
4136 Del Rey Avenue
Marina Del Rey, CA 90292
Attn: Jerry Dix, Chairman/Chief Executive Officer
Fax: (310) 823-0981
With a copy to:
Ryan S. Hong, Esq.
Richardson & Patel LLP
10900 Wilshire Blvd., Suite 500
Los Angeles, California 90024
Fax: (310) 208-1154
To Lenders:
To the addresses and telecopier numbers set forth on Schedule A
To the Collateral Agent:
Barbara R. Mittman
Grushko & Mittman, P.C.
551 Fifth Avenue, Suite 1601
New York, New York 10176
Fax: (212) 697-3575
Any party may change its address by written notice in accordance with
this paragraph.
12.4 Term; Binding Effect. This Agreement shall (a) remain in
full force and effect until payment and satisfaction in full of all
of the Obligations; (b) be binding upon 5G, and its successors and
permitted assigns; and (c) inure to the benefit of the Collateral
Agent, for the benefit of the Lenders and their respective successors
and assigns. All the rights and benefits granted by Debtor to the
Collateral Agent and Lenders in the Loan Documents and other
agreements and documents delivered in connection therewith are deemed
granted to both the Collateral Agent and Lenders.
12.5 Captions. The captions of Paragraphs, Articles and
Sections in this Agreement have been included for convenience of
reference only, and shall not define or limit the provisions hereof
and have no legal or other significance whatsoever.
12.6 Governing Law; Venue; Severability. 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 or choice of
law, except to the extent that the perfection of the security
interest granted hereby in respect of any item of Collateral may be
governed by the law of another jurisdiction. Any legal action or
proceeding against 5G with respect to this Agreement may be brought
in the courts in the State of New York or of the United States for
the Southern District of New York, and, by execution and delivery of
this Agreement, 5G hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. 5G hereby irrevocably waives
any objection which they may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising out of
or in connection with this Agreement brought in the aforesaid courts
and hereby further irrevocably waives and agrees not to plead or
claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum. If any
provision of this Agreement, or the application thereof to any person
or circumstance, is held invalid, such invalidity shall not affect
any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall
be severable and the remaining, valid provisions shall remain of full
force and effect.
12.7 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.
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Security Agreement, as of the date first written above.
"DEBTOR" "THE COLLATERAL AGENT"
5G WIRELESS COMMUNICATIONS, INC. BARBARA R. MITTMAN
a Nevada corporation
By: /s/ Jerry Dix /s/ Barbara R. Mittman
Jerry Dix, Chief Executive Officer Barbara R. Mittman
APPROVED BY "LENDERS":
LONGVIEW EQUITY FUND, LP LONGVIEW FUND, LP
By: /s/ Wayne Coleson By: /s/ Michael Rudolph
Name: Wayne Coleson Name: Michael Rudolph
Its: Chief Executive Officer Its: Chief Financial Officer
LONGVIEW INTERNATIONAL EQUITY FUND, LP
By: /s/ Wayne Coleson
Name: Wayne Coleson
Its: Chief Executive Officer
This Security Agreement may be signed by facsimile signature and
delivered by confirmed facsimile transmission.
SCHEDULE A TO SECURITY AGREEMENT
LENDER INITIAL CLOSING SECOND CLOSING
NOTE (INITIAL CLOSING NOTE (SECOND CLOSING
PURCHASE PRICE) PURCHASE PRICE)
LONGVIEW EQUITY FUND, LP $487,500 $487,500
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5302
LONGVIEW FUND, LP $350,000 $350,000
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
LONGVIEW INTERNATIONAL EQUITY $162,500 $162,500
FUND, LP
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
TOTALS $1,000,000.00 $1,000,000.00
EXHIBIT H
COLLATERAL AGENT AGREEMENT
COLLATERAL AGENT AGREEMENT (this "Agreement") dated as of
September 22, 2004, among Barbara R. Mittman (the "Collateral
Agent"), and the parties identified on Schedule A hereto (each,
individually, a "Lender" and collectively, the "Lenders"), who hold
or will acquire 5% convertible promissory notes issued or to be
issued by 5G Wireless Communications, Inc. ("5G"), a Nevada
corporation, at or about the date of this Agreement as described in
the Security Agreement referred to in Section 1(a) below
(collectively herein the "Notes").
WHEREAS, the Lenders have made, are making and will be making
loans to 5G to be secured by certain collateral; and
WHEREAS, it is desirable to provide for the orderly
administration of such collateral by requiring each Lender to appoint
the Collateral Agent, and the Collateral Agent has agreed to accept
such appointment and to receive, hold and deliver such collateral,
all upon the terms and subject to the conditions hereinafter set
forth; and
WHEREAS, it is desirable to allocate the enforcement of certain
rights of the Lenders under the Notes for the orderly administration
thereof.
NOW, THEREFORE, in consideration of the premises set forth
herein and for other good and valuable consideration, the parties
hereto agree as follows:
1. Collateral.
(a) Contemporaneously with the execution and delivery of
this Agreement by the Collateral Agent and the Lenders, (i) the
Collateral Agent has or will have entered into a Security Agreement
between the Collateral Agent and 5G (the "Security Agreement"),
regarding the grant of a security interest in assets owned by 5G
(such assets are referred to herein and in the Security Agreement as
the "Collateral") to the Collateral Agent, for the benefit of the
Lenders and (ii) 5G is issuing the Notes to the Lenders and in the
future will issue additional Notes to the Lenders.
(b) For purposes solely of perfection of the security
interests granted to the Collateral Agent, as agent on behalf of the
Lenders, and on its own behalf under the Security Agreement, the
Collateral Agent hereby acknowledges that any Collateral held by the
Collateral Agent is held for the benefit of the Lenders in accordance
with this Agreement and the Security Agreement. No reference to the
Security Agreement or any other instrument or document shall be
deemed to incorporate any term or provision thereof into this
Agreement unless expressly so provided.
(c) The Collateral Agent is to distribute in accordance
with the Security Agreement any proceeds received from the Collateral
which are distributable to the Lenders in proportion to their
respective interests in the Obligations as defined in the Security
Agreement.
2. Appointment of the Collateral Agent.
The Lenders hereby appoint the Collateral Agent (and the
Collateral Agent hereby accepts such appointment) to take any action
including, without limitation, the registration of any Collateral in
the name of the Collateral Agent or its nominees prior to or during
the continuance of an Event of Default (as defined in the Security
Agreement), the exercise of voting rights upon the occurrence and
during the continuance of an Event of Default, the application of any
cash collateral received by the Collateral Agent to the payment of
the Obligations, the exercise of any remedies given to the Collateral
Agent pursuant to the Security Agreement and the exercise of any
authority pursuant to the appointment of the Collateral Agent as an
attorney-in-fact pursuant to the Security Agreement that the
Collateral Agent deems necessary or proper for the administration of
the Collateral pursuant to the Security Agreement. Upon disposition
of the Collateral in accordance with the Security Agreement, the
Collateral Agent shall promptly distribute any cash or Collateral in
accordance with Section 10.4 of the Security Agreement. Lenders must
notify Collateral Agent in writing of the issuance of Notes to
Lenders by 5G. The Collateral Agent will not be required to act
hereunder in connection with Notes not disclosed in writing to the
Collateral Agent.
3. Action by the Majority in Interest.
(a) Certain Actions. Each of the Lenders covenants and
agrees that only a Majority in Interest shall have the right, but not
the obligation, to undertake the following actions (it being
expressly understood that less than a Majority in Interest hereby
expressly waive the following rights that they may otherwise have
under the Notes, but only insofar as such waiver affects their right
to receive proceeds from the Collateral):
(i) Acceleration. If an Event of Default occurs,
after the applicable cure period, if any, a Majority in Interest may,
on behalf of all the Lenders, instruct the Collateral Agent to
provide to 5G notice to cure such default and/or declare the unpaid
principal amount of the Notes to be due and payable, together with
any and all accrued interest thereon and all costs payable pursuant
to such Notes;
(ii) Enforcement. Upon the occurrence of any Event of
Default after the applicable cure period, if any, a Majority in
Interest may instruct the Collateral Agent to proceed to protect,
exercise and enforce, on behalf of all the Lenders, their rights and
remedies under the Notes against 5G, and such other rights and
remedies as are provided by law or equity;
(iii) Waiver of Past Defaults. A Majority in
Interest may instruct the Collateral Agent to waive any Event of
Default by written notice to 5G, and the other Lenders; and
(iv) Amendment. A Majority in Interest may instruct
the Collateral Agent to waive, amend, supplement or modify any term,
condition or other provision in the Notes or Security Agreement in
accordance with the terms of the Notes or Security Agreement so long
as such waiver, amendment, supplement or modification is made with
respect to all of the Notes and with the same force and effect with
respect to each of the Notes.
(b) Permitted Subordination. A Majority in Interest may
instruct the Collateral Agent to agree to subordinate any Collateral
to any claim and may enter into any agreement with 5G to evidence
such subordination; provided, however, that subsequent to any such
subordination, each Note shall remain pari passu with the other Notes
held by the Lenders.
(c) Further Actions. A Majority in Interest may instruct
the Collateral Agent to take any action that it may take under this
Agreement by instructing the Collateral Agent in writing to take such
action on behalf of all the Lenders.
(d) Majority in Interest. For so long as any obligations
remain outstanding on the Notes, Majority in Interest shall mean
Lenders who hold not less than seventy-five percent (75%) of the
outstanding principal amount of the Notes.
4. Power of Attorney.
(a) To effectuate the terms and provisions hereof, the
Lenders hereby appoint the Collateral Agent as their attorney-in-fact
(and the Collateral Agent hereby accepts such appointment) for the
purpose of carrying out the provisions of this Agreement including,
without limitation, taking any action on behalf of, or at the
instruction of, the Majority in Interest at the written direction of
the Majority in Interest and executing any consent authorized
pursuant to this Agreement and taking any action and executing any
instrument that the Collateral Agent may deem necessary or advisable
(and lawful) to accomplish the purposes hereof.
(b) All acts done under the foregoing authorization are
hereby ratified and approved and neither the Collateral Agent nor any
designee nor agent thereof shall be liable for any acts of commission
or omission, for any error of judgment, for any mistake of fact or
law except for acts of gross negligence or willful misconduct.
(c) This power of attorney, being coupled with an
interest, is irrevocable while this Agreement remains in effect.
5. Expenses of the Collateral Agent. The Lenders shall pay
any and all costs and expenses incurred by the Collateral Agent, all
waivers, releases, discharges, satisfactions, modifications and
amendments of this Agreement, the administration and holding of the
Collateral, insurance expenses, and the enforcement, protection and
adjudication of the parties' rights hereunder by the Collateral
Agent, including, without limitation, the reasonable disbursements,
expenses and fees of the attorneys the Collateral Agent may retain,
if any, each of the foregoing in proportion to their holdings of the Notes.
6. Reliance on Documents and Experts. The Collateral Agent
shall be entitled to rely upon any notice, consent, certificate,
affidavit, statement, paper, document, writing or communication
(which may be by telegram, cable, telex, telecopier, or telephone)
reasonably believed by it to be genuine and to have been signed, sent
or made by the proper person or persons, and upon opinions and advice
of its own legal counsel, independent public accountants and other
experts selected by the Collateral Agent.
7. Duties of the Collateral Agent; Standard of Care.
(a) The Collateral Agent's only duties are those expressly
set forth in this Agreement, and the Collateral Agent hereby is
authorized to perform those duties in accordance with commercially
reasonable practices. The Collateral Agent may exercise or otherwise
enforce any of its rights, powers, privileges, remedies and interests
under this Agreement and applicable law or perform any of its duties
under this Agreement by or through its officers, employees,
attorneys, or agents.
(b) The Collateral Agent shall act in good faith and with
that degree of care that an ordinarily prudent person in a like
position would use under similar circumstances.
(c) Any funds held by the Collateral Agent hereunder need
not be segregated from other funds except to the extent required by
law. The Collateral Agent shall be under no liability for interest
on any funds received by it hereunder.
8. Resignation. The Collateral Agent may resign and be
discharged of its duties hereunder at any time by giving written
notice of such resignation to the other parties hereto, stating the
date such resignation is to take effect. Within five (5) days of the
giving of such notice, a successor collateral agent shall be
appointed by the Majority in Interest; provided, however, that if the
Lenders are unable so to agree upon a successor within such time
period, and notify the Collateral Agent during such period of the
identity of the successor collateral agent, the successor collateral
agent may be a person designated by the Collateral Agent, and any and
all fees of such successor collateral agent shall be the joint and
several obligation of the Lenders. The Collateral Agent shall
continue to serve until the effective date of the resignation or
until its successor accepts the appointment and receives the
Collateral held by the Collateral Agent but shall not be obligated to
take any action hereunder. The Collateral Agent may deposit any
Collateral with the Supreme Court of the State of New York for New
York County or any such other court in New York State that accepts
such Collateral.
9. Exculpation. The Collateral Agent and its officers,
employees, attorneys and agents, shall not incur any liability
whatsoever for the holding or delivery of documents or the taking of
any other action in accordance with the terms and provisions of this
Agreement, for any mistake or error in judgment, for compliance with
any applicable law or any attachment, order or other directive of any
court or other authority (irrespective of any conflicting term or
provision of this Agreement), or for any act or omission of any other
person engaged by the Collateral Agent in connection with this
Agreement, unless occasioned by the exculpated person's own gross
negligence or willful misconduct; and each party hereto hereby waives
any and all claims and actions whatsoever against the Collateral
Agent and its officers, employees, attorneys and agents, arising out
of or related directly or indirectly to any or all of the foregoing
acts, omissions and circumstances.
10. Indemnification. The Lenders hereby agree to indemnify,
reimburse and hold harmless the Collateral Agent and its directors,
officers, employees, attorneys and agents, jointly and severally,
from and against any and all claims, liabilities, losses and expenses
that may be imposed upon, incurred by, or asserted against any of
them, arising out of or related directly or indirectly to this
Agreement or the Collateral, except such as are occasioned by the
indemnified person's own gross negligence or willful misconduct.
11. Miscellaneous.
(a) Rights and Remedies Not Waived. No act, omission or
delay by the Collateral Agent shall constitute a waiver of the
Collateral Agent's rights and remedies hereunder or otherwise. No
single or partial waiver by the Collateral Agent of any default
hereunder or right or remedy that it may have shall operate as a
waiver of any other default, right or remedy or of the same default,
right or remedy on a future occasion.
(b) Governing Law. 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 or choice of law (or any
other law that would make any substantive laws of any state other
than the State of New York applicable hereto).
(c) Waiver of Jury Trial and Setoff; Consent to
Jurisdiction; Etc.
(i) In any litigation in any court with respect to,
in connection with, or arising out of this Agreement or any
instrument or document delivered pursuant to this Agreement, or the
validity, protection, interpretation, collection or enforcement
hereof or thereof, or any other claim or dispute howsoever arising,
between the Collateral Agent and the Lenders or any Lender, then each
Lender, to the fullest extent it may legally do so, (i) waives the
right to interpose any setoff, recoupment, counterclaim or
cross-claim in connection with any such litigation, irrespective of
the nature of such setoff, recoupment, counterclaim or cross-claim,
unless such setoff, recoupment, counterclaim or cross-claim could
not, by reason of any applicable federal or state procedural laws, be
interposed, pleaded or alleged in any other action; and (ii) WAIVES
TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH LENDER AGREES THAT
THIS SECTION 11(c) IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND ACKNOWLEDGE THAT THE COLLATERAL AGENT WOULD NOT ENTER
THIS AGREEMENT IF THIS SECTION 11(c) WERE NOT PART OF THIS AGREEMENT.
(ii) Each Lender irrevocably consents to the exclusive
jurisdiction of any State or Federal Court located within the County
of New York, State of New York, in connection with any action or
proceeding arising out of or relating to this Agreement or any
document or instrument delivered pursuant to this Agreement or
otherwise. In any such litigation, each Lender waives, to the
fullest extent it may effectively do so, personal service of any
summons, complaint or other process and agree that the service
thereof may be made by certified or registered mail directed to such
Lender at its address for notice determined in accordance with
Section 11(e) hereof. Each Lender hereby waives, to the fullest
extent it may effectively do so, the defenses of forum non conveniens
and improper venue.
(d) Admissibility of this Agreement. Each of the Lenders
agrees that any copy of this Agreement signed by it and transmitted
by telecopier for delivery to the Collateral Agent shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence.
(e) Address for Notices. Any notice or other communication
under the provisions of this Agreement shall be given in writing and
delivered in person, by reputable overnight courier or delivery
service, by facsimile machine (receipt confirmed) with a copy sent by
first class mail on the date of transmissions, or by registered or
certified mail, return receipt requested, directed to its addresses
set forth below (or to any new address of which any party hereto
shall have informed the others by the giving of notice in the manner
provided herein):
In the case of the Collateral Agent, to it at:
Barbara R. Mittman
551 Fifth Avenue, Suite 1601
New York, New York 10176
Fax: (212) 697-3575
In the case of the Lenders, to:
To the address and telecopier number set forth on
Schedule A hereto.
In the case of 5G, to:
5G Wireless Communications, Inc.
4136 Del Rey Avenue
Marina Del Rey, CA 90292
Attn: Jerry Dix, Chairman/Chief Executive Officer
Fax: (310) 823-0981
With a copy by email, fax, or first class mail only to:
Ryan S. Hong, Esq.
Richardson & Patel LLP
10900 Wilshire Blvd., Suite 500
Los Angeles, California 90024
Fax: (310) 208-1154
(f) Amendments and Modification; Additional Lender. No
provision hereof shall be modified, altered, waived or limited except
by written instrument expressly referring to this Agreement and to
such provision, and executed by the parties hereto. Any transferee
of a Note who acquires a Note after the date hereof will become a
party hereto by signing the signature page and sending an executed
copy of this Agreement to the Collateral Agent and receiving a signed
acknowledgement from the Collateral Agent.
(g) Fee. Upon the occurrence of an Event of Default, the
Lenders collectively shall pay the Collateral Agent the sum of
$10,000 to apply against an hourly fee of $350 to be paid to the
Collateral Agent by the Lenders for services rendered pursuant to
this Agreement. All payments due to the Collateral Agent under this
Agreement including reimbursements must be paid when billed. The
Collateral Agent may refuse to act on behalf of or make a
distribution to any Lender who is not current in payments to the
Collateral Agent. Payments required pursuant to this Agreement shall
be pari passu to the Lenders' interests in the Notes. The Collateral
Agent is hereby authorized to deduct any sums due the Collateral
Agent from Collateral in the Collateral Agent's possession.
(h) 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.
(i) Successors and Assigns. Whenever in this Agreement
reference is made to any party, such reference shall be deemed to
include the successors, assigns, heirs and legal representatives of
such party. No party hereto may transfer any rights under this
Agreement, unless the transferee agrees to be bound by, and comply
with all of the terms and provisions of this Agreement, as if an
original signatory hereto on the date hereof.
(j) Captions: Certain Definitions. The captions of the
various sections and paragraphs of this Agreement have been inserted
only for the purposes of convenience; such captions are not a part of
this Agreement and shall not be deemed in any manner to modify,
explain, enlarge or restrict any of the provisions of this Agreement.
As used in this Agreement the term "person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.
(k) Severability. In the event that any term or provision
of this Agreement shall be finally determined to be superseded,
invalid, illegal or otherwise unenforceable pursuant to applicable
law by an authority having jurisdiction and venue, that determination
shall not impair or otherwise affect the validity, legality or
enforceability (i) by or before that authority of the remaining terms
and provisions of this Agreement, which shall be enforced as if the
unenforceable term or provision were deleted, or (ii) by or before
any other authority of any of the terms and provisions of this Agreement.
(l) Entire Agreement. This Agreement contains the entire
agreement of the parties and supersedes all other agreements and
understandings, oral or written, with respect to the matters
contained herein.
(m) Schedules. The Collateral Agent is authorized to
annex hereto any schedules referred to herein.
IN WITNESS WHEREOF, the parties hereto have caused this
Collateral Agent Agreement to be signed, by their respective duly
authorized officers or directly, as of the date first written above.
"LENDERS"
LONGVIEW EQUITY FUND, LP LONGVIEW FUND, LP
By: /s/ Wayne Coleson By: /s/ Michael Rudolph
Name: Wayne Coleson Name: Michael Rudolph
Its: Chief Executive Officer Its: Chief Financial Officer
LONGVIEW INTERNATIONAL EQUITY FUND, LP
By: /s/ Wayne Coleson
Name: Wayne Coleson
Its: Chief Executive Officer
/s/ Barbara R. Mittman
Barbara R. Mittman - Collateral Agent
Acknowledged:
5G WIRELESS COMMUNICATIONS, INC.
By: /s/ Jerry Dix
Name: Jerry Dix
Title: Chief Executive Officer
SCHEDULE A
LENDER INITIAL CLOSING SECOND CLOSING
NOTE (INITIAL CLOSING NOTE (SECOND
PURCHASE PRICE) CLOSING PURCHASE PRICE)
LONGVIEW EQUITY FUND, LP $487,500 $487,500
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
LONGVIEW FUND, LP $350,000 $350,000
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
LONGVIEW INTERNATIONAL EQUITY $162,500 $162,500
FUND, LP
600 Montgomery Street, 44th
Floor
San Francisco, CA 94111
Fax: (415) 981-5302
TOTALS $1,000,000.00 $1,000,000.00