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Exhibit 4.1 – Form of Note and Warrant Purchase
Agreement
UNITY WIRELESS CORPORATION
CONVERTIBLE NOTE AND WARRANT
PURCHASE AGREEMENT
This Convertible Note and Warrant Purchase
Agreement (the “ Agreement ”) is made as of
the 11th day of February, 2005 by and between Unity Wireless
Corporation, a Delaware corporation (the “ Company
”) and each of the entities or persons listed on
Exhibit A-1 attached to this Agreement (each a
“ Holder ” and together the “
Holders ”).
RECITALS
The Company desires to issue and sell, and each
person or entity listed on Exhibit A-2 (each a “
Purchaser ” and together the “
Purchasers ”) desires to purchase a secured
convertible promissory note in substantially the form attached
to this Agreement as Exhibit B (the “ Note
”) which shall be convertible on the terms stated therein
into equity securities of the Company.
The Company desires to issue and each Holder
desires to receive a warrant to purchase shares of common stock,
par value $0.001 per share of the Company (the “ Common
Stock ”) in substantially the form attached to this
Agreement as Exhibit C (the “ Warrant
”). The Notes, the Warrants and the Common Stock
issuable upon conversion or exercise thereof are collectively
referred to herein as the “ Securities .”
The parties are entering into an Escrow
Agreement dated on or about the date hereof (the “
Escrow Agreement ”) with Continental Stock Transfer
& Trust Company (the “ Escrow Agent ”),
in substantially the form attached hereto as Exhibit D
.]
AGREEMENT
In consideration of the mutual promises
contained herein and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties to this
Agreement agree as follows:
1.
Purchase and Sale of Notes and
Warrants .
(a)
Sale and Issuance of Notes and
Warrants . Subject to the terms and conditions of
this Agreement, each Purchaser agrees to purchase severally and
not jointly at the Closing (as defined below) and the Company
agrees to sell and issue to each Purchaser a Note in the
principal amount set forth opposite such Purchaser’s name
on Exhibit A-2 . With respect to each Purchaser,
the purchase price of each Note shall be as set forth opposite
such Purchaser’s name on Exhibit A-2 .
Subject to the terms and conditions of this Agreement,
each Holder is receiving a Warrant to purchase the number of
shares of Common Stock (with respect to each Holder, their
“Warrant Shares”) set forth opposite such
Holder’s name on Exhibit A-1 . With respect
to each Holder, the purchase price of each Warrant shall be as
set forth opposite such Holder’s name on Exhibit
A-1 .
(b)
Closing; Delivery .
(i)
The purchase and sale of the Notes and Warrants
shall take place at the offices of Oscar D. Folger, 521 5
th Avenue, New York, NY 10175, at 12:00 p.m., on
February 11, 2005, or at such other time and place as the
Company and the Holders mutually agree upon, orally or in
writing (which time and place are designated as the “
Closing ”).
(ii)
Prior to the Closing, each Purchaser shall wire
an amount equal to their respective purchase prices to the
Escrow Agent.
(iii)
At the Closing, the Company shall deliver to
each Holder the Note and/or Warrant to be purchased or received
by such Holder against (1) release by the Escrow Agent of the
amounts of the respective purchase prices (less expenses and
fees as agreed to by the Company and the Agent (as defined
below)) by wire transfer to a bank designated by the Company,
and (2) delivery of counterpart signature pages to this
Agreement.
(iv)
Each of the Holders hereby designates and
irrevocably appoints Duncan Capital LLC (the “
Agent ”), as its agent to act on its behalf
pursuant to the Escrow Agreement, including without limitation
the release of the Escrow Funds (as defined thereunder) pursuant
to the terms contained therein. Each of the Holders
hereby indemnifies and agrees to defend and hold harmless the
Agent for all actions and inactions taken in good faith under
the Escrow Agreement.
2.
Stock Purchase Agreement .
Each Holder understands and agrees that the conversion of the
Notes into, and exercise of the Warrants for, shares of Common
Stock of the Company will require such Purchaser’s
execution of certain agreements relating to the purchase and
sale of such securities as well as any rights relating to such
equity securities.
3.
Representations and Warranties of the
Company . The Company hereby represents and
warrants to each Holder as follows:
(a)
(a)
Duly Incorporated . The Company and
Unity Wireless Systems Corporation, a British Columbia
corporation which is wholly owned by the Company and is
the Company’s sole subsidiary and which maintains its sole
office in British Columbia (the “ Subsidiary
”), are each corporations duly incorporated, validly
existing and in good standing under the laws of its jurisdiction
of incorporation, with the requisite power and authority to own,
lease and operate its respective properties and conduct its
business as presently conducted or proposed to be conducted, and
is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions where the ownership or
leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a
Material Adverse Effect (as defined below).
(b)
Corporate Power . The execution and
delivery of this Agreement, the Note, the Warrant, the Security
Agreement and any other document or instrument executed in
connection herewith or therewith (the “ Transaction
Documents ”) are within Company’s powers and
have been duly authorized by all necessary corporate and, if
required, stockholder action. The Transaction Documents
have been duly executed and delivered by Company and each
constitutes a legal, valid and binding obligation of Company
enforceable in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of
creditors’ rights generally and general equity principles
(whether considered in a proceeding in equity or at law).
(c)
Capitalization . The capitalization of
the Company is set forth in the Company’s Report on form
10-QSB for the period ending September 30, 2004 (the
“10Q”), such information set forth in the 10Q is
true, correct and complete as of the date hereof. Except
for the Subsidiary, the Company does not own directly or
indirectly more than 5% of any class of capital stock or other
equity or long-term debt securities of or have any equity
interest in excess of 5% of any other person; all of the
outstanding shares of capital stock of the Company and the
Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and were not issued in violation of
any preemptive or similar rights and are owned free and clear of
all liens, encumbrances, equities, and restrictions on
transferability (other than those imposed by the Securities Act
and the state securities or “Blue Sky” laws) or
voting. All of the outstanding shares of capital stock of
the Subsidiaries are owned, directly or indirectly, by the
Company. Except as set forth in the 10Q, no options,
warrants or other rights to purchase from the Company or any
Subsidiary, agreements or other obligations of the Company or
any Subsidiary to issue or other rights to convert any
obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in the Company or any
Subsidiary are outstanding. Except as reflected in the SEC
Reports (as defined below), there is no agreement, understanding
or arrangement among the Company or any Subsidiary and each of
their respective stockholders or any other person relating to
the ownership or disposition of any capital stock of the Company
or any Subsidiary or the election of directors of the Company or
any Subsidiary or the governance of the Company’s or any
Subsidiary’s affairs, and, if any, such agreements,
understandings and arrangements will not be breached or violated
as a result of the execution and delivery of, or the
consummation of the transactions contemplated by, the
Transaction Documents.
(d)
No Consents . The execution and
delivery of the Transaction Documents and the issuance of the
Securities (i) does not require any consent or approval of,
registration or filing with, or any other action by any
governmental authority, (ii) will not violate any applicable law
or regulation applicable to Company or any of its subsidiaries
or the articles of incorporation or bylaws of Company or other
agreement of Company or any of its subsidiaries or any order of
any governmental authority applicable to Company or any of its
subsidiaries, (iii) will not violate any agreement of Company or
any of its subsidiaries or result in a default under any
agreement or instrument evidencing or governing any indebtedness
of Company or any of its subsidiaries or assets of Company or
any of its subsidiaries or give rise to a right thereunder to
require any payment to be made by Company, and (iv) will not
result in the creation or imposition of any lien on any asset of
Company or any of its subsidiaries, except for liens created or
imposed pursuant to this Agreement.
(e)
SEC Reports; Financial Statements;
Sarbanes-Oxley Act Compliance . Company has filed all
reports required to be filed by it under the Securities Act and
the Securities Exchange Act of 1934, as amended (the “
Exchange Act ”), including pursuant to
Section 13(a) or Section 15(d) of the
Exchange Act, for the three (3) years preceding the date hereof
(or such shorter period as Company was required by law to file
such material) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the “
SEC Reports ”). As of their respective dates, the
SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder,
as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since
January 1, 2003, the staff of the Division of Corporation
Finance of the Commission has not provided Company with any
comments on any registration statement, report or other document
filed with the Commission under the Securities Act or the
Exchange Act. The financial statements of Company included in
the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods
involved (“ GAAP ”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of Company and its
consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. KPMG LLP, which have
certified certain financial statements of Company and its
consolidated subsidiaries included in the SEC Reports, are
independent public accountants as required by the Securities
Act, the Exchange Act and the respective rules and regulations
of the Commission thereunder and are registered and in good
standing with the Public Company Accounting Oversight Board in
accordance with the Sarbanes-Oxley Act of 2002. Company is
in compliance with all applicable material requirements of the
Sarbanes-Oxley Act of 2002 and applicable rules and regulations
promulgated by the Commission thereunder in effect as of the
date of this Agreement. Company does not have pending
before the Commission any request for confidential treatment of
information.
(f)
Material Changes . Since the date of the
10Q, and other than as described in registrations statements and
reports filed with the Commission or set forth on Schedule 3(f)
hereof, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) Company has not
incurred any material liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice
and (B) liabilities not required to be reflected in
Company’s financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission,
(iii) Company has not altered its method of accounting,
(iv) Company has not declared or made any dividend or
distribution of cash or other property to its holders of Common
Stock or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock and (v) Company
has not issued any equity securities to any officer, director or
affiliate, except pursuant to existing Company stock option
plans. For purposes herein, a “ Material Adverse
Effect ” shall mean (i) a material adverse effect on
the legality, validity or enforceability of any Transaction
Documents, (ii) a material adverse effect on the results of
operations, assets, business or financial condition of Company
and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on Company’s ability to perform in any
material respect on a timely basis its obligations under the
Transaction Documents.
(g)
Litigation . There is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of Company, threatened against or
likely to materially affect the Company, any Subsidiary or any
of their respective properties before or by any court,
arbitrator, governmental or administrative agency and/or
regulatory authority (federal, state, county, local or foreign),
including, but not limited to, the Commission or any State
Attorney General (collectively, an “ Action
”) which (i) adversely affects or challenges or could
adversely affect or challenge the legality, validity or
enforceability of any of the Transaction Documents or
(ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect.
Neither Company nor any Subsidiary, nor, to the knowledge
of Company, any current director or officer thereof, is or has
been the subject of any Action involving a claim of violation of
or liability under federal or state or province securities laws
or a claim of breach of fiduciary duty. There is not
pending or, to the knowledge of Company, contemplated, any
investigation by the Commission and/or other entity involving
Company or any current directors or officers of Company. The
Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed
by Company or any Subsidiary under the Exchange Act or the
Securities Act.
(h)
Labor Relations . No material labor
dispute exists or, to the knowledge of Company, is imminent with
respect to any of the employees of Company which could
reasonably be expected to result in a Material Adverse
Effect.
(i)
Compliance . Neither Company nor
any Subsidiary (a) is in default under or in violation of
(and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by
Company or any Subsidiary under), nor has Company or any
Subsidiary received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived),
(b) is in violation of any order of any court, arbitrator
or governmental body, or (c) is or has been in violation of
any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and
local laws applicable to its business, except in the case of
clauses (a), (b) and (c) as would not result in a
Material Adverse Effect.
(j)
Regulatory Permits . Company and the
Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such
permits would not have or reasonably be expected to result in a
Material Adverse Effect (“ Material Permits
”), and neither Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or
modification of any Material Permit.
(k)
Title to Assets. All material
property and assets owned by the Company and the Subsidiaries
are owned outright free and clear of mortgages, pledges,
security interests, liens, charges and other encumbrances,
except for (i) liens for current taxes not yet due, (ii) minor
imperfections of title, if any, not material in amount and not
materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations of the
Company or (iii) set forth on Schedule 3(k) hereto.
(l)
Intellectual Property Rights.
(i)
Company and its Subsidiaries own, or possess adequate rights or
licenses to use all trademarks, trademark applications, trade
names, service marks, service mark registrations, service names,
patents, patent applications, patent rights, copyrights, copyright
applications, inventions, licenses, permits, approvals,
governmental authorizations, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary and confidential
information, systems or procedures) and other intellectual property
rights (collectively, “ Intellectual Property Rights
”) necessary to conduct their respective businesses as now
conducted or proposed to be conducted. Company’s
Intellectual Property Rights are valid and enforceable, and no
registration relating thereto has lapsed, expired or been abandoned
or cancelled or is the subject of cancellation or other adversarial
proceedings, or is expected to expire or terminate within three
years from the date of this Agreement, and all applications
therefor are pending and in good standing. Company and its
Subsidiaries do not have any knowledge of any infringement by
Company or its Subsidiaries of Intellectual Property Rights of
others, or of any such development of similar or identical trade
secrets or technical information by others and no claim, action or
proceeding has been made or brought against, or to Company’s
knowledge, has been threatened against, Company or its Subsidiaries
regarding infringement of Intellectual Property Rights. All
personnel, including employees, agents, consultants and
contractors, who have contributed to or participated in the
conception and development of Company’s Intellectual Property
Rights have either (a) been a party to a “work for
hire” arrangement or agreement with Company or a Subsidiary,
in accordance with federal, state or province law, that by its
terms accords to Company or a Subsidiary ownership of all tangible
or intangible property thereby arising, or (b) have executed
appropriate instruments of assignment in favor of Company or a
Subsidiary as assignee that by their terms validly convey to
Company or a Subsidiary complete and sole ownership of all tangible
and intangible property thereby arising, and Company and its
Subsidiaries have taken other reasonable security measures to
protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights.
(ii)
Neither Company nor any Subsidiary is in material default under or
in material violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would
result in a material default by Company or any Subsidiary under),
nor has Company or any Subsidiary received notice of a claim that
it is in material default under or that it is in material violation
of, any license agreement, collaboration agreement, development
agreement or similar agreement relating to their respective
businesses.
(m)
Transactions With Affiliates and
Employees . Other than as described in SEC Reports, and
except as set forth on Schedule 3(m) , none of the
officers, directors, employees and/or affiliates of Company or
the Subsidiaries is a party to any transaction with Company or
any Subsidiary (other than for services as employees, officers
and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director
employee or such affiliate or, to the knowledge of Company, any
entity in which any officer, director, or any such employee has
a substantial interest or is an officer, director, trustee,
partner or affiliate other than (a) for payment of salary
or consulting fees for services rendered, (b) reimbursement
for expenses incurred on behalf of Company and (c) for
other employee benefits, including stock option agreements under
any stock option plan of Company, which in the aggregate (for
the total amount in (a), (b) and (c) combined) does not exceed
the amount of $5,000 for any officer, director, employee or
affiliate.
(n)
Disclosure Controls and Procedures; Internal
Accounting Controls . The management of Company has
(i) designed disclosure controls and procedures to ensure that
material information relating to Company, including its
Subsidiaries, is made known to the management of Company by
others within those entities, and (ii) has disclosed, based on
its most recent evaluation, to Company’s outside auditors
and the audit committee of the Board of Directors (A) any
significant deficiencies in the design or operation of internal
controls which could adversely affect Company’s ability to
record, process, summarize and report financial data and have
identified for Company’s outside auditors any material
weaknesses in internal controls and (B) any fraud, whether or
not material, that involves management or other employees who
have a significant role in Company’s internal controls.
Company and each of its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only
in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(o)
Listing and Maintenance Requirements .
Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all
listing and maintenance requirements of the trading market on
which the Common Stock is traded.
(p)
Tax Status. Company and each of its
Subsidiaries has made or filed all foreign, federal and state
income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, and has
paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on
such returns, reports and declarations or to Company’s
knowledge otherwise due and payable, except those being
contested in good faith and has set aside on its books reserves
in accordance with GAAP reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of Company know
of no basis for any such claim.
(q)
Right of First Refusal; Anti-Dilution
Right. Except as set forth on Schedule 3(q), no person is a
party to any agreement, contract or understanding, written or
oral entitling such party to (i) a right of first refusal or
(ii) purchase or otherwise receive any securities of Company, at
any time, in each case with respect to offerings of securities
by Company.
(r)
Insurance. Each of Company and its
Subsidiaries maintain insurance of the types and in the amounts
deemed adequate for its business, including, but not limited to,
product liability insurance, insurance covering real and
personal property owned or leased by Company and its
subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all
of which insurance is in full force and effect.
(s)
Environmental. Company and each of
its Subsidiaries is, to the best of its knowledge, in material
compliance with all applicable published rules and regulations
(and applicable standards and requirements) of the Unite
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