AIRBEE WIRELESS, INC. DEBENTURE AND WARRANT PURCHASE AGREEMENT
Execution
Copy
January
30, 2008
1.
|
Purchase
and Sale of Debentures; Issuance of Warrants; Security
Interest.
|
1
|
|
1.1
|
Sale
of Debentures.
|
1
|
|
1.2
|
Issuance
of Warrants.
|
1
|
|
1.3
|
Security
Interest. .
|
1
|
|
1.4
|
Closings;
Deliveries.
|
1
|
|
2.
|
Representations
and Warranties of the Company.
|
1
|
|
2.1
|
Organization,
Good Standing and Qualification
|
1
|
|
2.2
|
Authorization
|
1
|
|
2.3
|
Valid
Issuance of the Securities.
|
1
|
|
2.4
|
Governmental
Consents
|
1
|
|
2.5
|
Compliance
with Other Instruments
|
1
|
|
2.6
|
Conversion
Price Adjustments
|
1
|
|
2.7
|
Reporting
Company Status
|
1
|
|
2.8
|
SEC
Reports; Financial Statements
|
1
|
|
2.9
|
Xxxxxxxx-Xxxxx
|
1
|
|
2.10
|
Private
Placement
|
1
|
|
2.11
|
Application
of Takeover Protections
|
1
|
|
2.12
|
No
Integrated Offering
|
1
|
|
2.13
|
Acknowledgment
Regarding Investors’ Purchase of Securities
|
1
|
|
2.14
|
Solvency
|
1
|
|
2.15
|
Patents
and Trademarks
|
1
|
|
2.16
|
Acknowledgment
of Dilution
|
1
|
|
2.17
|
Disclosure
|
1
|
|
3.
|
Representations
and Warranties of the Investors.
|
1
|
|
3.1
|
Authorization
|
1
|
|
3.2
|
Purchase
Entirely for Own Account
|
1
|
|
3.3
|
Disclosure
of Information
|
1
|
|
3.4
|
Investment
Experience; Independent Counsel
|
1
|
|
3.5
|
Accredited
Investor
|
1
|
|
3.6
|
Restricted
Securities
|
1
|
|
3.7
|
Further
Limitations on Disposition.
|
1
|
|
3.8
|
Legends.
|
1
|
|
4.
|
Conditions
to each Closing.
|
1
|
|
4.1
|
Conditions
of Investor’s Obligations at each Closing.
|
1
|
|
4.2
|
Conditions
of the Company’s Obligations at each Closing.
|
1
|
|
5.
|
Registration
Rights.
|
1
|
|
6.
|
Additional
Covenants.
|
1
|
|
6.1
|
1
|
||
6.2
|
1
|
||
6.3
|
1
|
||
6.4
|
Furnishing
of Information
|
1
|
|
6.5
|
Integration
|
1
|
|
6.6
|
Shareholder
Rights Plan
|
1
|
i
6.7
|
Reservation
and Listing of Securities.
|
1
|
|
7.
|
Miscellaneous.
|
1
|
|
7.1
|
Survival
of Warranties
|
1
|
|
7.2
|
Transfer;
Successors and Assigns
|
1
|
|
7.3
|
Governing
Law
|
1
|
|
7.4
|
Counterparts
|
1
|
|
7.5
|
Titles
and Subtitles.
|
1
|
|
7.6
|
Notices.
|
1
|
|
7.7
|
Fees
and Expenses
|
1
|
|
7.8
|
Attorney’s
Fees
|
1
|
|
7.9
|
Amendments
and Waivers.
|
1
|
|
7.10
|
Severability
|
1
|
|
7.11
|
Delays
or Omissions
|
1
|
|
7.12
|
Language
Construction
|
1
|
|
7.13
|
Entire
Agreement
|
1
|
|
7.14
|
Corporate
Securities Law
|
1
|
|
7.15
|
Confidentiality.
|
1
|
|
Exhibit A
|
Form
of Convertible Debenture
|
A-1
|
|
Exhibit
B
|
Form
of Warrant
|
B-1
|
|
Exhibit
C
|
Wire
Instructions (not supplied)
|
C-1
|
ii
This
Debenture and Warrant Purchase Agreement (the “Agreement”)
is
made as of January 30, 2008, by and between Airbee Wireless, Inc., a Delaware
Corporation (the “Company”),
and
each of the persons or entities listed on Schedule
I
attached
hereto, which Schedule I may be updated following the date hereof by mutual
agreement of the parties with respect to the Third Closing (each, an
“Investor”
and
together, the “Investors”).
WHEREAS,
the Company and its subsidiaries are in need of additional working
capital;
WHEREAS,
the Company desires to sell, and the Investors desire to purchase, certain
convertible debentures and warrants to purchase common stock of the Company
upon
the terms and conditions set forth in this Agreement;
WHEREAS,
the Company has issued to BARTFAM, a California limited partnership and one
of
the Investors named herein (“BARTFAM”),
that
certain Convertible Debenture dated January 30, 2007 in the principal
amount of $150,000.00 (the “Prior
Debenture”);
and
WHEREAS,
the Prior Debenture shall be cancelled at the Initial Closing (as hereafter
defined) and in consideration of the cancellation thereof $150,000.00 shall
be
credited to the principal payment due from BARTFAM in connection with the
purchase and sale of the First Tranche Debenture (the “Prior
Debenture Amount”).
The
Company and the Investors hereby agree as follows:
1. Purchase
and Sale of Debentures; Issuance of Warrants; Security
Interest.
1.1 Sale
of Debentures.
Subject
to the terms and conditions of this Agreement, the Investors agree to purchase,
and the Company agrees to sell and issue to the Investors: (i) secured
convertible debentures, substantially in the form attached hereto as
Exhibit A,
in the
aggregate principal amount of Five Hundred Thousand Dollars ($500,000.00) and
in
the individual principal amounts set forth on Schedule I
opposite
each Investor’s name at the Initial Closing (as defined below), against payment
by the Investors to the Company of the principal amount thereunder (the
“First
Tranche Debentures”);
(ii) secured convertible debentures, substantially in the form attached
hereto as Exhibit A,
in the
aggregate principal amount of Five Hundred Thousand Dollars ($500,000.00),
and
in the individual principal amounts as set forth on Schedule I
opposite
each Investor’s name at the Second Closing (as defined below), against payment
by the Investors to the Company of the principal amount thereunder (the
“Second
Tranche Debentures”);
and
(iii) secured convertible debentures, substantially in the form attached
hereto as Exhibit A,
up to
the maximum aggregate principal amount of Four Hundred One Thousand One Hundred
and Fifty Seven Dollars ($401,157.00), and in the individual principal amounts
set forth on Schedule I
opposite
each Investor’s name at the Third Closing (as defined below), against payment by
the Investors to the Company of the principal amount thereunder (the
“Third
Tranche Debentures,”
and
together with the First Tranche Debentures and Second Tranche Debentures, the
“Debentures”).
The
shares of common stock of the Company, par value $0.00004 per share
(“Common
Stock”)
issuable upon conversion of the Debentures are referred to herein as the
“Conversion
Shares.”
1.2 Issuance
of Warrants.
As
additional consideration for the working capital being loaned by the Investors
to the Company, the Company shall issue to each Investor at each Closing,
certain warrants, in the form attached hereto as Exhibit B,
each
evidencing the right to purchase 26.667 shares of Common Stock for each dollar
of the principal amount of the Debentures sold to such Investor at each Closing
(the “Warrants”),
as
set forth on Schedule I
attached
hereto, opposite each Investor’s name. The purchase price of the Common Stock
issuable upon exercise of the Warrants (the “Warrant
Shares”)
issued
to each Investor at each Closing shall be as follows: 33.3333% of the Warrant
Shares shall have a purchase price of $0.10 per share; 33.3333% of the Warrant
Shares shall have a purchase price of $0.20 per share, and 33.333% of the
Warrant Shares shall have a purchase price of $0.30 per share. The Warrants
to
be issued at the Initial Closing with the First Tranche Debentures, as set
forth
on Schedule I
attached
hereto, are referred to herein as the “First
Tranche Warrants.”
The
Warrants to be issued at the Second Closing, with the Second Tranche Debentures,
as set forth on Schedule I
attached
hereto, are referred to herein as the “Second
Tranche Warrants.”
The
Warrants to be issued at the Third Closing, with the Third Tranche Debentures,
as set forth on Schedule I
attached
hereto, are referred to herein as the “Third
Tranche Warrants.”
1.3 Security
Interest.
The
Debentures, and any future secured convertible debentures issued by the Company
to the Investors pursuant to this Agreement or any amendments hereto, shall
be
secured by a security interest in all of the assets of the Company as more
fully
described in that certain Security Agreement executed by and among the parties
hereto as of even date herewith in the form attached hereto as Exhibit D
(the
“Security
Agreement”).
The
Company shall execute and deliver all other security documents, including,
without limitation, any intellectual property security agreements, account
control agreements, irrevocable notices of payment assignment, and such other
instruments as the Investors require to further evidence, effectuate and perfect
any liens and security interests granted under the Security Agreement or any
such other security instrument in order to secure the Company’s obligations
thereunder, under the Debentures, and any related agreements. The Company shall
make (and authorize the Investors or any agent they appoint to make), in each
case at the Company’s sole expense, any filings and record any such security
agreements with any filing office, including without limitation the U.S.
Copyright Office and the United States Patent and Trademark Office, as the
Investors (or any agent appointed by them) may request from time to
time.
1.4 Closings;
Deliveries.
(a) Initial
Closing.
The
purchase and sale of the First Tranche Debentures and the issuance of the First
Tranche Warrants shall take place via exchange of electronic or facsimile
signature pages hereto (with originals to be mailed as soon as practicable
thereafter) on February 6, 2008, or at such other time and place as the parties
hereto mutually agree upon, orally or in writing (which time and place are
designated as the “Initial
Closing”).
At
the Initial Closing, the Company shall deliver to the Investors the First
Tranche Debentures and the First Tranche Warrants, and the Company’s signature
page to this Agreement and the Security Agreement, against (x) payment of
the purchase price therefor (such purchase price to be reduced by the Prior
Debenture Amount) by check payable to the Company or by wire transfer to the
bank and account designated by the Company on Exhibit C
attached
hereto and (y) delivery of counterpart signature pages to this Agreement, and
to
the Security Agreement.
2
(b) Second
Closing.
The
purchase and sale of the Second Tranche Debentures and issuance of the Second
Tranche Warrants shall take place via exchange of electronic or facsimile
signature pages thereto (with originals to be mailed as soon as practicable
thereafter) on a date to be agreed between the parties, upon the satisfactory
settlement or agreement among the Company and its principal corporate creditors;
provided, however, that either Xxxxxx X. Xxxxxxx or Xxxx X. Xxxxxxx may waive
the occurrence thereof on behalf of each of the Investors (the “Second
Closing”):
The
Company shall keep the Investors reasonably informed regarding all such
settlement discussions and agreements with any of its principal corporate
creditors. At the Second Closing, the Company shall deliver to the Investors
the
Second Tranche Debentures and the Second Tranche Warrants against payment of
the
purchase price therefor by check payable to the Company or by wire transfer
to
the bank and account designated by the Company on Exhibit C
attached
hereto.
(c) Third
Closing.
The
Investors may, at their sole option, lend to the Company up to an additional
Four Hundred and One Thousand One Hundred and Fifty Seven Dollars on the same
terms and conditions as the Warrants and Debentures issued at the Initial
Closing and Second Closing (the “Call
Option”),
provided, that the Investors shall notify the Company in writing of their intent
to exercise their Call Option (the “Call
Option Exercise Notice”)
no
later than ten (10) calendar days following the Second Closing, stating the
aggregate amount of funds to be lent to the Company. The purchase and sale
of
the Third Tranche Debentures and issuance of the Third Tranche Warrants shall
take place via exchange of electronic or facsimile signature pages thereto
(with
originals to be mailed as soon as practicable thereafter) no later than five
(5)
business days following the Company’s receipt of the Call Option Exercise Notice
(the “Third
Closing”).
At
the Third Closing, the Company shall deliver to the Investors the Third Tranche
Debentures and the Third Tranche Warrants against payment of the purchase price
therefor by check payable to the Company or by wire transfer to the bank and
account designated by the Company on Exhibit
C
attached
hereto
2. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to each of the Investors
that:
2.1 Organization,
Good Standing and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state of Delaware and has all requisite corporate power
and authority to carry on its business. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business
or
properties.
2.2 Authorization.
All
corporate action on the part of the Company, its officers, directors and
shareholders necessary for the authorization, execution and delivery of this
Agreement and the Security Agreement, the performance of all obligations of
the
Company hereunder and thereunder and the authorization, issuance, sale and
delivery of the Debentures and Warrants has been taken or will be taken prior
to
the Closing, and each of the Agreement, the Security Agreement, the Debentures
and Warrants when executed and delivered by the Company, shall constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their respective terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other laws
of
general application affecting enforcement of creditors’ rights generally and
(b) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
2.3 Valid
Issuance of the Securities.
The
Debentures and Warrants that are being issued to the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued and fully
paid and non-assessable, will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and applicable state and federal
securities laws, will not be subject to any preemptive rights, rights of first
refusal, tag-along rights, drag-along rights or other similar rights, and will
be issued in compliance with applicable state and federal securities laws.
The
Conversion Shares and the Warrant Shares to be issued, sold and delivered upon
conversion of the Debentures or upon exercise of the Warrants, in accordance
with the terms hereof for the consideration expressed herein, will be duly
and
validly issued, fully paid and non-assessable, will be free of restrictions
on
transfer other than restrictions on transfer under this Agreement and applicable
state and federal securities laws, will not be subject to any preemptive rights,
rights of first refusal, tag-along rights, drag-along rights or other similar
rights, and will be issued in compliance with applicable state and federal
securities laws. The Company (i) has duly and validly authorized and
reserved for issuance shares of Common Stock, which is a number sufficient
for
the Conversion Shares and the Warrant Shares and (ii) at all times from and
after the date hereof shall have a sufficient number of shares of Common Stock
duly and validly authorized and reserved for issuance to satisfy the issuance
of
the Conversion Shares and Warrant Shares in full. The Debentures, Warrants,
Conversion Shares and Warrant Shares are collectively referred to herein as
the
“Securities.”
3
2.4 Governmental
Consents.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any United States (federal, state
or
local) or foreign governmental authority on the part of the Company is required
in connection with the consummation of the transactions contemplated by this
Agreement, except for filings pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder, other applicable state securities laws and Regulation D of the
Securities Act of 1933, as amended (the “Securities
Act”).
2.5 Compliance
with Other Instruments.
The
Company is not in violation or default of any provision of its organizational
documents, or of any instrument, judgment, order, writ, decree or material
contract to which it is a party or by which it is bound or, to its knowledge,
of
any provision of any statute, rule or regulation applicable to the Company.
The
execution, delivery and performance of the Agreement and the Security Agreement
and the consummation of the transactions contemplated hereby and thereby will
not result in any such violation or be in conflict with or constitute, with
or
without the passage of time or giving of notice, either a default under any
such
provision, instrument, judgment, order, writ, decree or material contract nor
will it result in an event that results in the creation of any lien, charge
or
encumbrance upon any assets of the Company.
2.6 Conversion
Price Adjustments.
The
Conversion Price (as such term is defined in the Debenture) adjustments provided
for in each Debenture shall remain in effect between each Closing, unless such
Closing is following the Maturity Date (as such term is defined in the
Debenture) of the Debenture and all outstanding amounts under such Debenture
have been paid in full by the Company.
2.7 Reporting
Company Status.
The
Company is subject to the reporting requirements of the Securities Exchange
Act
of 1934, as amended (the “Exchange
Act”)
and
the Company has taken no action designed to, or which to its knowledge is likely
to have the effect of, terminating the registration of the Common Stock under
the Exchange Act nor has the Company received any notification that the
Securities and Exchange Commission is contemplating terminating such
registration. The Common Stock is traded on the OTC Bulletin Board of the
Financial
Industry Regulatory Authority (the “OTCBB”)
and
the Company has not received any notice regarding, and to the Company’s
knowledge there is no threat of, the termination or discontinuance of the
eligibility of the Common Stock for such trading.
4
2.8 SEC
Reports; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof since
December 31, 2005 (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively referred
to
herein as the “SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As
of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act, 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 the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Securities and Exchange 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 the 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.
2.9 Xxxxxxxx-Xxxxx.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 which are applicable to it as of the date hereof.
2.10 Private
Placement.
Assuming the accuracy of the Investors’ representations and warranties set forth
in Section 3 hereof, no registration under the Securities Act is required
for the offer and sale of the Securities by the Company to the Investors as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the OTCBB.
2.11 Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of
incorporation (or similar charter documents) or the laws of the State of
Delaware (including, but not limited to Section 203 of the Delaware General
Corporation Law) that is or could become applicable to the Investors as a result
of the Investors and the Company fulfilling their obligations or exercising
their rights under this Agreement or the Security Agreement, including without
limitation as a result of the Company’s issuance of the Securities and the
Investors’ ownership of the Securities.
2.12 No
Integrated Offering.
Assuming the accuracy of the Investors’ representations and warranties set forth
in Section 3 hereof, 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 this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities
Act which would require the registration of any such securities under the
Securities Act.
5
2.13 Acknowledgment
Regarding Investors’ Purchase of Securities.
The
Company acknowledges and agrees that each of the Investors is acting solely
in
the capacity of an arm’s length purchaser with respect to this Agreement and the
Security Agreement and the transactions contemplated hereby and thereby. The
Company further acknowledges that no Investor is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to such
agreements and the transactions contemplated hereby and thereby and any advice
given by any Investor or any of their respective representatives or agents
in
connection with the such agreements and the transactions contemplated hereby
and
thereby is merely incidental to the Investors’ purchase of the Securities. The
Company further represents to each Investor that the Company’s decision to enter
into this Agreement and the Security Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby and thereby
by
the Company and its representatives.
2.14 Solvency.
After
giving effect to the consummation of the transactions contemplated by this
Agreement, the Company will be solvent, able to pay its indebtedness as it
matures and will have capital sufficient to carry on its business and any other
business in which it is about to engage. This Agreement is being executed and
delivered by to the Investors in good faith and in exchange for fair, equivalent
consideration. The Company does not intend to nor does management believe the
Company will incur debts beyond its ability to pay them as they mature. The
Company does not contemplate filing a petition in bankruptcy or for an
arrangement or reorganization under the bankruptcy laws or any similar law
of
any jurisdiction now or hereafter in effect relating to Company nor does Company
have any knowledge of any threatened bankruptcy or insolvency proceedings
against Company.
2.15 Patents
and Trademarks.
The
Company and its subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or material for use in connection with
their
respective businesses as described in the SEC Reports (collectively, the
“Intellectual
Property Rights”).
Neither the Company nor any subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the Company
or
any subsidiary violates or infringes upon the rights of any person. All such
Intellectual Property Rights are enforceable and there is no existing
infringement by another person of any of the Intellectual Property Rights.
The
Company and its subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties.
2.16 Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its
obligations under this Agreement, including without limitation its obligation
to
issue the Warrant Shares and the Conversion Shares, are unconditional and
absolute and not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any claim the
Company may have against any Investor and regardless of the dilutive effect
that
such issuance may have on the ownership of the other stockholders of the
Company.
6
2.17 Disclosure.
The
Company has fully provided the Investors with all the information that the
Investors have requested for deciding whether to purchase the Debentures and
Warrants and all information that the Company believes is reasonably necessary
to enable the Investors to make such decision. Neither this Agreement, the
exhibits hereto nor any other statements or certificates made or delivered
in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
3. Representations
and Warranties of the Investors.
Each
Investor severally but not jointly hereby represents and warrants to the Company
that:
3.1 Authorization.
Investor has full power and authority to enter into the Agreement. Each of
the
Agreement, the Debentures and Warrants, when executed and delivered by Investor,
will constitute valid and legally binding obligations of Investor, enforceable
in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors’ rights generally and (b) as
limited by laws relating to the availability of a specific performance,
injunctive relief, or other equitable remedies.
3.2 Purchase
Entirely for Own Account.
This
Agreement is made with Investor in reliance upon Investor’s representation to
the Company, which by Investor’s execution of this Agreement, Investor hereby
confirms, that the Debentures and Warrants to be acquired by Investor hereunder,
and the Conversion Shares and Warrant Shares to be issued to such Investor
upon
conversion of the Debentures or upon exercise of the Warrants, will be acquired
for investment for Investor’s own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Investor further represents
that Investor does not presently have any contract, undertaking, agreement
or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to the Debenture.
3.3 Disclosure
of Information.
Investor believes it has received all the information it considers necessary
or
appropriate for deciding whether to purchase the Debentures. Investor further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Debentures and Warrants and the business, properties, prospects and financial
condition of the Company. The foregoing, however, does not limit or modify
the
representations and warranties of the Company in Section 2 of this
Agreement, or the right of Investor to rely thereon.
3.4 Investment
Experience; Independent Counsel.
Investor acknowledges that it can bear the economic risk of its investment,
and
has such knowledge and experience in financial or business matters that it
is
capable of evaluating the merits and risks of the investment in the Debentures
and Warrants. Investor also represents that it has not been organized for the
purpose of acquiring the Debentures and Warrants. Investor is represented by
its
own legal counsel in connection with this Agreement, the related agreements
and
the transactions contemplated hereby, and has not been represented by, or been
provided with any legal advice of the Company’s counsel in connection
herewith.
7
3.5 Accredited
Investor.
Investor is an “accredited investor” within the meaning of Rule 501 of
Regulation D under the Securities Act.
3.6 Restricted
Securities.
Investor understands that the Securities have not been, and will not be,
registered under the Securities Act, by reason of a specific exemption from
the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of
Investor’s representations as expressed herein. Investor understands that the
Securities are “restricted securities” under applicable United States federal
and state securities laws and that, pursuant to these laws, Investor must hold
the Securities indefinitely unless they are registered with the Securities
and
Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. Investor
acknowledges that the Company has no obligation to register or qualify the
Securities for resale. Investor further acknowledges that if an exemption from
registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the
holding period for the applicable Securities, and on requirements relating
to
the Company which are outside of Investor’s control, and which the Company is
under no obligation and may not be able to satisfy.
3.7 Further
Limitations on Disposition.
Without
in any way limiting the representations set forth above, Investor further agrees
not to make any disposition of all or any portion of the Securities, unless
and
until the transferee has agreed in writing for the benefit of the Company to
be
bound by this Section 3, provided and to the extent this Section 3.7 is
then applicable, and:
(a) There
is
then in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement; or
(b) (i) Investor
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances surrounding
the proposed disposition, and (ii) if reasonably requested by the Company,
Investor shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company that such disposition will not require registration
of such shares under the Securities Act.
3.8 Legends.
Investor understands that the Securities may bear one or all of the following
legends:
(a) “THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF
CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR
EXEMPTION THEREFROM. HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.”
8
(b) Any
legend required by the Blue Sky laws of any state to the extent such laws are
applicable to the shares represented by the certificate so
legended.
4. Conditions
to each Closing.
4.1 Conditions
of Investor’s Obligations at each Closing.
The
obligations of the Investors to the Company under this Agreement are subject
to
the fulfillment, on or before each Closing, of each of the following conditions,
unless otherwise waived:
(a) Representations
and Warranties.
The
representations and warranties of the Company contained in Section 2 of
this Agreement shall be true and correct in all material respects on and as
of
the applicable Closing with the same effect as though such representations
and
warranties had been made on and as of the date of each Closing.
(b) Performance.
The
Company shall have performed and complied with all covenants, agreements,
obligations and conditions contained in this Agreement that are required to
be
performed or complied with by it on or before each Closing.
(c) Execution
and Delivery of the Debentures and Warrants.
The
Debentures and Warrants to be executed and delivered at each Closing in
accordance with Section 1.4 hereof, shall have been executed by the Company
and delivered to the Investors.
(d) Execution
and Delivery of the Security Agreement.
The
Security Agreement shall have been executed by the Company and delivered to
the
Investors.
(e) Officer’s
Compliance Certificate.
At each
Closing, the President of the Company shall execute and deliver a certificate
certifying that: (i) the conditions set forth in Section 4.1(a) and
(b) hereof have been met by the Company as of each Closing in all material
respects, and that there have been no material adverse changes to the Company’s
business or financial condition since October 5, 2007; and (ii) the
resolutions adopted by the Company’s Board of Directors authorizing the
execution and delivery of this Agreement and the Security Agreement, the
performance of all obligations of the Company hereunder and thereunder, and
the
authorization, issuance, sale and delivery of the Debentures and
Warrants.
(f) Qualifications.
All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States, any state within the United States or
any
foreign jurisdiction that are required in connection with the lawful issuance
and sale of the Debentures and Warrants pursuant to this Agreement shall be
duly
obtained and effective as of each Closing.
4.2 Conditions
of the Company’s Obligations at each Closing.
The
obligations of the Company to the Investors under this Agreement are subject
to
the fulfillment, on or before each Closing, of each of the following conditions,
unless otherwise waived:
(a) Representations
and Warranties.
The
representations and warranties of each of the Investors contained in
Section 3 of this Agreement shall be true and correct on and as of each
Closing with the same effect as though such representations and warranties
had
been made on and as of such Closing.
9
(b) Payment.
The
Investors shall have delivered to the Company principal amount due under the
Debenture to be delivered at such Closing as set forth in Section 1.4
hereof.
(c) Qualifications.
All
authorizations, approvals, or permits, if any, of any governmental authority
or
regulatory body of the United States, any state within the United States or
any
foreign jurisdiction that are required in connection with the lawful issuance
and sale of the Debentures and Warrants pursuant to this Agreement shall be
duly
obtained and effective as of the Closing.
5. Registration
Rights.
As
promptly as practicable, but in no event later than ten (10) days after the
date
hereof, the Company and the Investors shall enter into a Registration Rights
Agreement that shall provide the Investors customary registration rights for
the
Conversion Shares and Warrant Shares, including demand registration rights
and
piggyback rights. Such Registration Rights Agreement shall contain such other
usual and customary terms and conditions as the parties may agree.
6. Additional
Covenants.
6.1 The
parties hereto shall execute a Voting Agreement following the Third Closing
in a
form to be mutually agreed by the parties, providing for, among other things,
the right of the Investors to appoint two (2) members of the Board of Directors
of the Company, and requiring the approval of such members of the Board of
Directors in matters concerning financial transactions involving the sale,
issuance or repurchase of greater than 1% of the Company’s then issued and
outstanding equity, debt transactions in excess of $100,000.00 in the aggregate
during any applicable fiscal year, the sale of all or substantially all of
the
Company’s assets in a single transaction or series of transactions, incurrence
of capital expenditures in excess of $25,000.00 individually and/or $100,000.00
in the aggregate during any applicable fiscal year, except in those expenses
incurred in the ordinary course of business, and certain chief executive level
hires by the Company.
6.2 The
parties agree to execute, deliver and/or file such other documents or
instruments with the appropriate authorities, and take such other actions as
may
be reasonably necessary to carry out
the
terms and conditions of this Agreement and the Security Agreement and the
transactions contemplated hereby and thereby.
6.3 At
the
Investors’ reasonable request, the Company will cooperate with the Investors and
provide any information necessary to make all filings with the United States
Patent and Trademark Office or other governmental authority that are reasonably
necessary to perfect the security interests of the Investors in the Company’s
patents and trademarks, whether now existing or acquired in the future, pursuant
to that certain Security Agreement executed by and among the parties hereto
as
of even date herewith.
6.4 Furnishing
of Information.
Until
such time as no Investor owns Securities, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act even if the Company is not then subject to the
reporting requirements of the Exchange Act. As long as any Investor owns
Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for
the
Investors to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of the Securities may
reasonably request, to the extent required from time to time, to enable such
person to sell such Securities without registration under the Securities Act
within the requirements of the exemption provided by
Rule 144.
10
6.5 Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities to the
Investors in a manner that would require the registration under the Securities
Act.
6.6 Shareholder
Rights Plan.
No
claim will be made or enforced by the Company or, with the consent of the
Company, any other person, that any Investor is an “Acquiring Person” under any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or
arrangement in effect or hereafter adopted by the Company, or that any Investor
could be deemed to trigger the provisions of any such plan or arrangement,
by
virtue of receiving Securities under this Agreement or under any other agreement
between the Company and Investors.
6.7 Reservation
and Listing of Securities.
(a) The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance of the Conversion Shares and the Warrant Shares.
(b) If,
on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the number of Conversion Shares and Warrant
Shares on such date, then the Company’s Board of Directors shall use
commercially reasonable efforts to amend the Company’s certificate of
incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the amount required for the issuance of the Conversion Shares
and Warrant Shares, as promptly as reasonable practicable.
(c) The
Company shall, if applicable: (i) in the time and manner required by the
principal securities exchange or market on which the Common Stock is listed
or
quoted, (i) prepare and file with such securities exchange or market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Conversion Shares and the Warrant Shares on the
date
of such application, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing on such securities exchange or market
as
soon as possible thereafter, and (iii) provide to the Investors evidence of
such listing.
7. Miscellaneous.
7.1 Survival
of Warranties.
Unless
otherwise set forth in this Agreement, the warranties, representations and
covenants of the Company and the Investors contained in or made pursuant to
this
Agreement shall survive each Closing.
7.2 Transfer;
Successors and Assigns.
Except
The terms and conditions of this Agreement shall inure to the benefit of and
be
binding upon the respective successors and assigns of the parties (including
transferees of the Debentures and Warrants). Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations,
or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
11
7.3 Governing
Law.
This
Agreement and all acts and transactions pursuant hereto and the rights and
obligations of the parties hereto shall be governed by and construed under
the
laws of the State of New York without giving effect to principles of conflicts
of law.
7.4 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one
instrument.
7.5 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
7.6 Notices.
Unless
otherwise expressly provided, any notice required or permitted under this
Agreement shall be in writing and shall be deemed sufficient upon delivery,
when
delivered personally or by overnight courier or sent by telegram or fax, or
five
(5) days after deposit with the United States Postal Service, by certified
or
registered mail, with postage prepaid, addressed to the party to be notified
at
such party’s address as set forth below, or on the signature page, or as
subsequently modified by written notice:
The
Company:
0000
Xxx
Xxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxx Xxxxxx, President
Facsimile:
(000) 000-0000
with
copies to:
Xxxxxxxxx
Xxxxx Xxxxxxx & Xxxxx
0000
Xxxxxxx Xxxxxx Xxxxx Xxxxx 0000
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
Facsimile:
(000) 000-0000
and
Xxxxx
& Associates LLC
00000
Xxxxxxxx Xxxx Xxxxx 0000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
000 000-0000
12
Investors:
Xxxx
X.
Xxxxxxx and Xxxxxx X. Xxxxxxx
00000
Xxx
Xxxxxxx Xxxx Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
000 000-0000
with
copies to:
Xxxxxx
X.
Xxxxxx, Esq.
00000
Xxxxxxxx Xxxx., Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Facsimile:
000 000-0000
and
Xxxxx
& Associates LLC
00000
Xxxxxxxx Xxxx Xxxxx 0000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
000 000-0000
7.7 Fees
and Expenses.
The
Company and Investors shall bear their own expenses in connection with the
transactions contemplated by this Agreement; provided that Company shall pay
Investors’ legal expenses up to a maximum of $15,000.00 in connection with the
transactions contemplated by this Agreement. Company or Xxxxx & Associates
on behalf of the Company, shall pay Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
outstanding legal fees in the amount of $30,000.00 at the Initial
Closing.
7.8 Attorney’s
Fees.
If any
action at law or in equity (including arbitration) is necessary to enforce
or
interpret the terms of the Agreement, the prevailing party shall be entitled
to
reasonable attorney’s fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.9 Amendments
and Waivers.
Any
term of this Agreement may be amended or waived and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively) only with the written consent of
the
Company and the Investors. Any amendment or waiver effected in accordance with
this Section 7.9 shall be binding upon the Investors and each transferee of
the Securities, each future holder of the Securities and the
Company.
7.10 Severability.
If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (a) such provision shall be excluded from
this Agreement, (b) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (c) the balance of the Agreement shall
be enforceable in accordance with its terms.
7.11 Delays
or Omissions.
No
delay or omission to exercise any right, power or remedy accruing to any party
under this Agreement, upon any breach or default of any other party under this
Agreement, shall impair any such right, power or remedy of such non-breaching
or
non-defaulting party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only
to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
13
7.12 Language
Construction.
All of
the terms and provisions (including the final language used and agreed upon
by
the parties) of this Agreement and the schedules and exhibits hereto shall
be
construed, in all cases, according to their fair meaning, and not for or against
either party hereto. The parties acknowledge that each party and its counsel
have had ample time and opportunity to review, negotiate and revise this
Agreement and the schedule and exhibits hereto, and that the normal rule of
construction to the effect that any ambiguities are to be resolved against
the
drafting party shall not be employed in the interpretation of this Agreement
or
any of the schedules or exhibits hereto.
7.13 Entire
Agreement.
This
Agreement, and the documents referred to herein constitute the entire agreement
among the parties hereto pertaining to the subject matter hereof, and no party
shall be liable or bound to any party in any manner by any warranties,
representations, or covenants except as specifically set forth
herein.
7.14 Corporate
Securities Law.
THE
SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA
AND
THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS
THE SALE IS SO EXEMPT.
7.15 Confidentiality.
Each
party hereto agrees that, except with the prior written permission of the other
party or as required by applicable law, it shall at all times keep confidential
and not divulge, furnish or make accessible to anyone any confidential
information, knowledge or data concerning or relating to the business or
financial affairs of the other parties to which such party has been or shall
become privy by reason of this Agreement, discussions or negotiations relating
to this Agreement, the performance of its obligations hereunder or the ownership
of Securities purchased hereunder. The provisions of this Section 7.15
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect
to
the transactions contemplated hereby.
[Remainder
of Page Intentionally Left Blank; Signature Pages Follow]
14
IN
WITNESS WHEREOF, the parties have executed this Debenture and Warrant Purchase
Agreement as of the date first written above.
COMPANY:
|
|
a
Delaware corporation
|
|
By:
|
/s/
E. Xxxxxx Xxxxxx
|
Name:
|
E.
Xxxxxx Xxxxxx
|
Title:
|
President
|
INVESTORS:
|
BARTFAM,
a California limited partnership
|
|
By:
|
/s/
Xxxxxx X. Xxxxxxx
|
Name:
|
Xxxxxx
X. Xxxxxxx
|
Title:
|
General
Partner
|
Xxxxxx
X. Xxxxxxx, Managing Trustee of The
Xxxxxxx
X. Xxxxxxx Marital Trust
|
|
/s/
Xxxxxx X. Xxxxxxx
|
|
Xxxxxx
Xxxxxx Xxxxxxx, Trustee of the Xxxxxx
Xxxxxx
Xxxxxxx Trust
|
|
/s/
Xxxxxx Xxxxxx Xxxxxxx
|
|
Xxxxxx
X. Xxxxxx, Trustee of the Xxxxxx X. Xxxxxx
Trust
dated April 16, 1996
|
|
/s/
Xxxxxx X. Xxxxxx
|
SIGNATURE
PAGE TO DEBENTURE AND WARRANT PURCHASE AGREEMENT
S-1
/s/
Xxxx X. Xxxxxxx
|
Xxxx
X. Xxxxxxx
|
/s/
Xxxxx X. Xxxxxxx
|
Xxxxx
X. Xxxxxxx
|
/s/
Xxxxxxx X. Xxxxxxx
|
Xxxxxxx
X. Xxxxxxx
|
SIGNATURE
PAGE TO DEBENTURE AND WARRANT PURCHASE AGREEMENT
S-2
Schedule
I
List
of Investors
Investor
Name
|
% of
Investment
at each
Closing
|
First Tranche
Debentures
|
First
Tranche
Warrants
|
Second
Tranche
Debentures
|
Second
Tranche
Warrants
|
Third
Tranche
Debentures*
|
Third
Tranche
Warrants*
|
|||||||||||||||
BARTFAM,
a California Limited Partnership
|
33.33
|
%
|
$
|
166,666.67
|
4,444,500
|
$
|
166,666.67
|
4,444,500
|
$
|
133,719.17
|
2,565,889
|
|||||||||||
The
Xxxxxxx X. Xxxxxxx Marital Trust
|
16.67
|
%
|
$
|
83,333.33
|
2,222,250
|
$
|
83,333.33
|
2,222,250
|
$
|
66,859.58
|
1,782,944
|
|||||||||||
Xxxxxx
Xxxxxx Xxxxxxx, Trustee of the Xxxxxx Xxxxxx Xxxxxxx Trust dated
September
26, 2001
|
16.67
|
%
|
$
|
83,333.33
|
2,222,250
|
$
|
83,333.33
|
2,222,250
|
$
|
66,859,58
|
1,782,944
|
|||||||||||
Xxxx
X. Xxxxxxx
|
10.00
|
%
|
$
|
50,000.00
|
1,333,350
|
$
|
50,000.00
|
1,333,350
|
$
|
40,115.75
|
1,069,767
|
|||||||||||
Xxxxx
X. Xxxxxxx
|
6.67
|
%
|
$
|
33,333.33
|
888,900
|
$
|
33,333.33
|
888,900
|
$
|
26,743.83
|
713,178
|
|||||||||||
Xxxxxxx
X. Xxxxxxx
|
6.67
|
%
|
$
|
33,333.33
|
888,900
|
$
|
33,333.33
|
888,900
|
$
|
26,743.83
|
713,178
|
|||||||||||
Xxxxxx
X. Xxxxxx, Trustee of the Xxxxxx X. Xxxxxx Trust dated April 16,
1996
|
10.00
|
%
|
$
|
50,000.00
|
1,333,350
|
$
|
50,000.00
|
1,333,350
|
$
|
40,115.75
|
1,069,767
|
|||||||||||
TOTAL
|
100.00
|
%
|
$
|
500,000.00
|
13,333,500
|
$
|
500,000.00
|
13,333,500
|
$
|
401,157.00
|
10,697,667
|
Schedule
I
*
These
represent the maximum principal amount and warrant coverage with respect to
the
Third Tranche Debentures and Third Tranche Warrants. Schedule I will be updated
upon the Company’s receipt of, and in accordance with, the Call Option Exercise
Notice, with respect to the Third Tranche Debentures and Third Tranche
Warrants.
SIGNATURE
PAGE TO DEBENTURE AND WARRANT PURCHASE AGREEMENT
S-2
EXHIBIT
A
FORM
OF CONVERTIBLE DEBENTURE
THE
SECURITIES REPRESENTED BY THIS DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
ANY
TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT
UNDER THE ACT AND AS REQUIRED BY BLUE SKY LAWS IS IN EFFECT AS TO SUCH TRANSFER
OR IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SUCH REGISTRATION
IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND BLUE SKY
LAWS.
12%
SECURED CONVERTIBLE DEBENTURE
Debenture
No. ABEW2008 - I -
$____________
|
_______________
__, 2008
|
FOR
VALUE
RECEIVED, subject to the terms and conditions of this 12% Secured Convertible
Debenture (the “Debenture”),
AIRBEE
WIRELESS, INC.,
a
Delaware corporation with its principal offices located at 0000 Xxx Xxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxx 00000 (the “Company”),
hereby promises to pay to the order of [___________________] (the “Holder”),
the
principal sum of _________________ U.S. Dollars ($_____________) (the
“Face
Amount”),
or
such lesser amount as below, upon demand made by the Holder at any time on
or
after the date which is two (2) years from the date of this Debenture, in lawful
money of the United States and in immediately available funds (the “Maturity
Date”).
This
Debenture is being issued pursuant to that certain Debenture and Warrant
Purchase Agreement of even date herewith (the “Purchase
Agreement”)
entered into by the Holder with the Company and this Debenture is subject to
that Purchase Agreement, which, together with this Debenture, sets forth the
respective rights and obligations of the Holder and the Company with respect
to
this Debenture.
1. Interest.
Subject
to the terms and conditions of this Debenture, the Company also promises to
pay
to the Holder interest accrued on the outstanding unpaid principal amount hereof
until such principal amount is paid at the rate of twelve percent (12%) per
annum. Accrued but unpaid interest shall be paid in quarter-annual installments,
commencing on the last day of the calendar quarter ending March 31, 2008, and
on
the last day of each calendar quarter thereafter, until this Debenture has
been
paid in full in accordance with the terms hereof. Interest may be paid, at
the
option of the Company, in cash or in shares of common stock of the Company,
par
value $0.00004 per share (“Common
Stock”),
at a
price per share of Common Stock equal to 80% of the average of the volume
weighted average price of the Common Stock for the preceding five (5) days
on
which the Common Stock is traded on the trading market on which the Common
Stock
is then listed or quoted for trading (for example, the OTC Bulletin Board,
Pink
Sheets published by Pink Sheets, LLC, the American Stock Exchange, or the Nasdaq
National Market) as reported by a generally accepted reporting service such
as
Bloomberg, LP. This Debenture is secured by a security interest in all of the
assets of the Company as described more fully in that certain Security Agreement
executed by the Company, the Holder and certain other parties thereto dated
as
of the date hereof.
A-1
2. Prepayment.
The
Company may not prepay the Debenture in whole or in part prior to the Maturity
Date without the prior written consent of the Holder, which may be given or
withheld in Holder’s sole discretion.
3. Conversion.
3.1 Conversion
Mechanics.
Upon
any conversion of this Debenture pursuant to Section 3.2, this Debenture will
convert into the number of shares of Common Stock obtaining by dividing (x)
that
portion of the Face Amount being converted, and all accrued and unpaid interest
thereon as of the date of conversion, by (y) $0.02 (the “Conversion
Price”).
The
Conversion Price shall be subject to adjustment as set forth in Section 4
below.
3.2 Holder’s
Option to Convert.
The
Holder shall have the right, but not the obligation, from time to time to
convert all or any portion of the issued and outstanding Face Amount and accrued
but unpaid interest thereon into fully paid and nonassessable shares of Common
Stock at the Conversion Price.
3.3 Mechanics
of Holder’s Conversion.
In the
event that the Holder elects to convert all or any part of this Debenture into
Common Stock, the Holder shall give notice of such election by delivering an
executed and completed notice of conversion in substantially the form attached
hereto as Exhibit
A (the
“Notice
of Conversion”)
to the
Company on or before each Conversion Date (as defined below) and such Notice
of
Conversion shall provide a breakdown in reasonable detail the Face Amount and
accrued but unpaid interest thereon that are being converted. In addition,
concurrently with providing In addition, concurrently with providing the Notice
of Conversion to the Company, and in accordance with its Notice of Conversion,
the Holder shall make the appropriate reduction to the outstanding Face Amount
and accrued and unpaid interest thereon as entered in its records and shall
provide written notice of such adjustment to the Company. Each date on which
a
Notice of Conversion is delivered or telecopied to the Company in accordance
with the provisions hereof shall be deemed a Conversion Date (the “Conversion
Date”).
Pursuant to the terms of the Notice of Conversion, the Company will issue,
within two (2) business days following a Conversion Date, instructions to the
transfer agent, accompanied by an opinion of counsel, to issue to the Holder
certificates representing the Conversion Shares (as hereinafter defined) and
shall cause the transfer agent to transmit the certificates representing the
Conversion Shares to the Holder within five (5) business days thereafter. In
the
case of the exercise of the conversion rights set forth herein, the conversion
privilege shall be deemed to have been exercised and the Conversion Shares
issuable upon such conversion shall be deemed to have been issued upon the
date
of receipt by the Company of the Notice of Conversion. The Holder shall be
treated for all purposes as the record holder of the Conversion Shares, unless
the Holder provides the Company written instructions to the
contrary.
3.4 Reservation
of Shares.
During
the period the conversion right exists, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the conversion of all or any part of
this
Debenture (the “Conversion
Shares”).
A-2
3.5 No
Fractional Shares.
No
fractional shares of Common Stock will be issued upon conversion of this
Debenture. In lieu of any fractional shares to which the Holder would otherwise
be entitled, the Company will pay the Holder in cash the amount of the
unconverted Face Amount and accrued and unpaid interest, if any, that would
otherwise be converted into such fractional shares.
3.6 Release.
Upon
full conversion of this Debenture and payment of all cash amounts due to the
Holder as provided in this Debenture, if any, the Company will forever be
released from all of its payment obligations relating to the Face Amount of
this
Debenture and any accrued and unpaid interest thereon.
4. Conversion
Price Adjustment.
The
Conversion Price shall be subject to adjustment from time to time as
follows:
4.1 Subdivisions,
Combinations and Other Issuances.
If the
Company shall at any time after the date hereof but prior to the Maturity Date
subdivide its outstanding securities as to which purchase rights under this
Debenture exist, by split-up or otherwise, or combine its outstanding securities
as to which purchase rights under this Debenture exist, or declare a cash
dividend, the number of Shares as to which this Debenture is convertible as
of
the date of such subdivision, split-up or combination shall forthwith be
proportionately increased in the case of a subdivision or payment of a cash
dividend, or proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the purchase price payable per Share, so
that
the aggregate purchase price payable for the total number of shares of Common
Stock purchasable under this Debenture as of such date shall remain the
same.
4.2 Reclassification,
Reorganization, Consolidation, Merger and Other Changes.
In case
of any reclassification, capital reorganization or change in the Common Stock
of
the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 4.1), or consolidation or merger of the Company
with or into another corporation, or the sale of all or substantially all of
its
assets to another corporation shall be effected in such a way that holders
of
the Company’s Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for such Common Stock (a “Change”),
then,
as a condition of Change, lawful provision shall be made, and duly executed
documents evidencing the same from the Company or its successor shall be
delivered to the Holder, so that the Holder shall have the right at any time
prior to the Maturity Date to receive upon conversion of this Debenture, the
kind and amount of shares of stock and other securities and property receivable
in connection with such Change that a holder of Common Stock would be entitled
to receive in such Change. In any such case appropriate provisions shall be
made
with respect to the rights and interest of the Holder so that the provisions
hereof shall thereafter be applicable with respect to any shares of stock or
other securities and property deliverable upon conversion including adjustment
of the Conversion Price.
5. Registration.
Pursuant
to the terms and conditions of the Registration Rights Agreement to be executed
as set forth in the Purchase Agreement, the Holder will have certain
registration rights with respect to the Conversion Shares.
A-3
6. Events
of Default.
6.1 An
“Event
of Default”,
wherever used herein, means any one of the following events:
(a) Any
default in the payment of the principal of, interest on or other charges in
respect of this Debenture, free of any claim of subordination, as and when
the
same shall become due and payable;
(b) The
Company shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Debenture, the Purchase Agreement or the Security Agreement
which is not cured with in the time prescribed;
(c) The
Company shall commence, or there shall be commenced against the Company under
any applicable bankruptcy or insolvency laws, or the Company commences any
other
proceeding under any reorganization, arrangement, adjustment of debt, relief
of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company or there is commenced against the Company
any such bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 31 days; or the Company is adjudicated insolvent or
bankrupt; or the Company makes a general assignment for the benefit of
creditors; or the Company shall fail to pay its debts generally as they become
due;
(d) The
Company shall default in any of its obligations under any other debenture or
any
mortgage, credit agreement or other facility, or other instrument under which
there may be issued, or by which there may be secured or evidenced any
indebtedness for borrowed money or money due under any long term leasing
arrangement of the Company in an amount exceeding $100,000, whether such
indebtedness now exists or shall hereafter be created and such default shall
result in such indebtedness becoming or being declared due and payable prior
to
the date on which it would otherwise become due and payable; or
(e) The
Common Stock shall cease to be quoted for trading or listed for trading on
either the Nasdaq OTC Bulletin Board (“OTC”),
Nasdaq SmallCap Market, New York Stock Exchange, American Stock Exchange or
the
Nasdaq National Market and shall not again be quoted or listed for trading
thereon within ten (10) trading days of such delisting.
6.2 During
the time that any portion of this Debenture is outstanding, if any Event of
Default has occurred, the full principal amount of this Debenture, together
with
interest and other amounts owing in respect thereof, to the date of acceleration
shall become at the Holder’s election, immediately due and payable in cash. In
addition to any other remedies, the Holder shall have the right (but not the
obligation) to convert this Debenture at any time after (x) an Event of
Default or (y) the Maturity Date at the Conversion Price then in-effect.
The Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind.
7. General
Matters.
7.1 Applicable
Law; Venue.
This
Debenture shall be governed by the internal laws (and not the law of conflicts)
of the State of New York.
A-4
7.2 Fees
and Expenses.
In the
event that any suit or action is instituted to enforce any provision under
this
Debenture, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
7.3 Amendment
or Waiver.
Any
term of this Debenture may be amended, and the observance of any term of this
Debenture may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by the written consent of the
Holder.
7.4 Headings.
The
headings in this Debenture are for purposes of convenience of reference only,
and shall not be deemed to constitute a part of this Debenture.
7.5 Notices.
All
notices, requests, consents and other communications required or permitted
hereunder shall be in writing (including telecopy or similar writing) and shall
be sent to the address of the parties set forth below in this Section 7.5.
Any
notice, request, consent or other communication hereunder shall be deemed to
have been given and received on the day on which it is delivered (by any means
including personal delivery, overnight air courier, United States mail) or
telecopied (or, if such day is not a business day or if the notice, request,
consent or communication is not telecopied during business hours of the intended
recipient, at the place of receipt, on the next following business day). Any
of
the parties hereto may, by notice given hereunder, designate any further or
different address and/or number to which subsequent notices or other
communications shall be sent. Unless and until such written notice is received,
the addresses and numbers as provided herein shall be deemed to continue in
effect for all purposes hereunder.
Addresses
for Notices to Company:
0000
Xxx
Xxxx Xxxxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxxx, President
Facsimile:
(301) 517-186
With
copies to:
Xxxxxxxxx
Xxxxx Xxxxxxx & Xxxxx
000
Xxxxxxx Xxxxxx Xxxxx
Xxxxx
0000
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
Facsimile:
(000) 000-0000
and
Xxxxx
& Associates LLC
00000
Xxxxxxxx Xxxx Xxxxx 0000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
310 371-7272
A-5
Address
for Notices to Holder:
Xxxx
X.
Xxxxxxx and Xxxxxx X. Xxxxxxx
00000
Xxx
Xxxxxxx Xxxx Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
000 000-0000
With
copies to:
Xxxxxx
X.
Xxxxxx, Esq.
00000
Xxxxxxxx Xxxx., Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Facsimile:
000 000-0000
and
Xxxxx
& Associates LLC
00000
Xxxxxxxx Xxxx Xxxxx 0000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
000 000-0000
7.6 Usury
Limitation.
In no
event shall the amount paid or agreed to be paid to the Holder for the use
or
forbearance of money to be advanced hereunder exceed the highest lawful rate
permissible under the then applicable usury laws. If it is hereafter determined
by a court of competent jurisdiction that the interest payable hereunder is
in
excess of the amount which the Holder may legally collect under the then
applicable usury laws, such amount which would be excessive interest shall
be
applied to the payment of the unpaid principal balance due hereunder and not
to
the payment of interest or, if all principal shall previously have been paid,
promptly repaid by the Holder to the Company.
7.7 Severability.
Every
provision of this Debenture is intended to be severable. If any term or
provision hereof is declared by a court of competent jurisdiction to be illegal
or invalid, such illegal or invalid term or provision shall not affect the
balance of the terms and provisions hereof, which terms and provisions shall
remain binding and enforceable.
[Remainder
of Page Intentionally Left Blank]
A-6
IN
WITNESS WHEREOF, the Company has caused this Debenture to be executed as of
the
day and year first above written.
a
Delaware corporation
|
|
By:
|
|
Name:
|
E.
Xxxxxx Xxxxxx
|
Title:
|
President
|
A-7
EXHIBIT
A
NOTICE
OF
CONVERSION
(To
be
executed by the Holder in order to convert all or part of the 12% Convertible
Debenture)
0000
Xxx
Xxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxx 00000
Attention:
E. Xxxxxx Xxxxxx, President
The
undersigned hereby converts $ ______________ of the Face Amount and accrued
and
unpaid interest due and payable on January 31, 2010 under that certain 12%
Secured Convertible Debenture dated as of January 31, 2008 (the “Debenture”),
into the number of shares of Common Stock of the Company set forth below
(“Shares”) on and subject to the conditions set forth in the
Debenture.
Date
of Conversion
|
______________________________
|
Shares
to be Delivered
|
______________________________
|
[HOLDER]
|
|
By:
|
|
Name:
|
|
Title:
|
A-8
EXHIBIT
B
FORM
OF WARRANT
AIRBEE
WIRELESS, INC.
WARRANT
TO PURCHASE COMMON STOCK
WC-2008
- I -
THE
OFFER
AND SALE OF THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE “ACT”)
OR
QUALIFIED UNDER STATE SECURITIES LAWS AND SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND EFFECTIVE QUALIFICATION THEREOF OR
IF
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND THE QUALIFICATION
REQUIREMENTS OF THE RELEVANT STATE.
This
certifies that, for good and valuable consideration, receipt of which is hereby
acknowledged, ___________________ (the “Holder”),
and/or its assigns, is entitled to purchase, from time to time and subject
to
the terms and conditions of this Warrant, from AIRBEE WIRELESS, INC., a Delaware
corporation (the “Company”),
fully
paid and nonassessable shares of Common Stock of the Company, par value $0.00004
per share (each, a “Share”
and
collectively, the “Shares”),
in
accordance with the terms hereof, during the period commencing on the date
set
forth on the signature page hereof (the “Commencement
Date”).
Terms
not defined herein shall have the meaning ascribed to them in the Convertible
Debenture and Warrant Purchase Agreement being executed contemporaneously
herewith (the “Purchase
Agreement”).
If
there is any conflict between the terms of the Purchase Agreement and this
Warrant, the Purchase Agreement shall govern. If this Warrant is silent as
to
any term, the terms of the Purchase Agreement shall govern.
1. Number
of
Shares; Vesting; Exercise Price and Expiration Date.
1.1 This
Warrant may be exercised for ____________________ Shares, subject to adjustment
pursuant to the terms hereof.
1.2 The
right
to exercise this Warrant shall fully vest on the Commencement Date.
1.3 The
exercise or purchase price for the Shares shall be $0.10 per Share. Such price
shall be subject to adjustment pursuant to the terms hereof (such price, as
adjusted from time to time, is hereinafter referred to as the “Exercise
Price”).
1.4 The
purchase right represented by this Warrant shall terminate on or before
5 p.m. Pacific standard time, on the fifth (5th) anniversary of the
Commencement Date (the “Expiration
Date”).
B-1
2. Exercise
and Payment.
2.1 Cash
Exercise.
At any
time after the Commencement Date, this Warrant may be exercised in whole or
in
part, from time to time, by the Holder by surrender of this Warrant and the
Notice of Exercise annexed hereto duly completed and executed by the Holder
to
the Company at the principal executive offices of the Company, together with
payment in the amount obtained by multiplying the Exercise Price then in effect
by the number of Shares thereby purchased, as designated in the Notice of
Exercise. Payment may be in cash or by check payable to the order of the
Company.
2.2 Mandatory
Exercise.
Promptly following the first consecutive ten (10) trading day period of time
prior to the Expiration Date during which the closing sale price of the
Company’s Common Stock, as reported by the Nasdaq National Market or other
securities exchange on which the Company’s Common Stock is then listed, is equal
to or greater than 300% of the Exercise Price on each day during such period,
the Company shall deliver to the Holder a Mandatory Exercise Notice, together
with a computation demonstrating the basis for such Mandatory Exercise Notice.
In such event, notwithstanding anything to the contrary in Section 2(a) above,
the Holder agrees to exercise this Warrant in full within ten (10) days
following receipt of the Mandatory Exercise Notice from the Company. To the
extent that this Warrant is not so exercised, it shall expire and be of no
further force or effect. For purposes of this Warrant, “Mandatory Exercise
Notice” shall mean the notice delivered by the Company to the Holder advising
the Holder that the closing sale price of the Company’s Common Stock, as
reported by the Nasdaq National Market or other securities exchange on which
the
Company’s Common Stock is then listed, has been equal to or greater than 300% of
the Exercise Price (as adjusted for splits, reverse splits, stock dividends,
share combinations and the like) for ten (10) consecutive trading
days.
3. Delivery
of Certificates.
Within
a reasonable time after exercise, in whole or in part, of this Warrant, the
Company shall issue in the name of and deliver to the Holder, a certificate
or
certificates for the number of fully paid and nonassessable Shares which the
Holder shall have requested in the Notice of Exercise. If this Warrant is
exercised in part, the Company shall deliver to the Holder a new Warrant for
the
unexercised portion of this Warrant at the time of delivery of such certificate
or certificates.
4. No
Fractional Shares.
No
fractional Shares or scrip representing fractional Shares will be issued upon
exercise of this Warrant. If upon any exercise of this Warrant a fraction of
a
Share results, the Company will pay the Holder the difference between the cash
value of the fractional Share and the portion of the Exercise Price allocable
to
the fractional Share.
5. Charges,
Taxes and Expenses.
The
Holder shall pay all transfer taxes or other incidental charges, if any, in
connection with the transfer of the Shares purchased pursuant to the exercise
hereof from the Company to the Holder.
6. Loss,
Theft, Destruction or Mutilation of Warrant.
Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and in case of loss, theft
or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated,
the
Company will make and deliver a new Warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
B-2
7. Saturdays,
Sundays, Holidays, Etc.
If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday or a Sunday or shall be
a
legal holiday, then such action may be taken or such right may be exercised
on
the next succeeding weekday which is not a legal holiday.
8. Adjustment
of Exercise Price and Number of Shares.
The
number of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
8.1 Subdivisions,
Combinations and Other Issuances.
If the
Company shall at any time after the date hereof but prior to the expiration
of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up or otherwise, or combine its outstanding
securities as to which purchase rights under this Warrant exist, or declare
a
cash dividend, the number of Shares as to which this Warrant is exercisable
as
of the date of such subdivision, split-up or combination shall forthwith be
proportionately increased in the case of a subdivision or payment of a cash
dividend, or proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the purchase price payable per Share, so
that
the aggregate purchase price payable for the total number of Shares purchasable
under this Warrant as of such date shall remain the same.
8.2 Share
Distribution.
If at
any time after the date hereof the Company makes a distribution on the Shares
into which this Warrant is exercisable payable in Shares or other securities
or
rights convertible into Shares (“Share
Equivalents”)
without payment of any consideration by such holder for the additional Shares
or
the Share Equivalents (including the additional Shares issuable upon exercise
or
conversion thereof), then the number of Shares for which this Warrant may be
exercised shall be increased as of the record date (or the if no record date
is
set) for determining which holders of Shares shall be entitled to receive such
distribution, in proportion to the increase in the number of outstanding Shares
(and Shares issuable upon conversion of all such securities convertible into
Shares) of Shares as a result of such distribution, and the Exercise Price
shall
be adjusted so that the aggregate amount payable for the purchase of all the
Shares issuable hereunder immediately after the record date (or on the date
of
such distribution, if applicable), for such distribution shall equal the
aggregate amount so payable immediately before such record date (or on the
date
of such distribution, if applicable).
8.3 Other
Distributions.
If at
any time after the date hereof the Company distributes to holders of the class
of Shares into which this Warrant is exercised, other than as part of its
dissolution or liquidation or the winding up of its affairs, any Shares, any
evidence of indebtedness or any of its assets (other than cash, Shares or
securities convertible into Shares), then the Company may, at its option, either
(i) decrease the per Share Exercise Price of this Warrant by an appropriate
amount based upon the value distributed on each Share as determined in good
faith by the Company’s Board of Directors or (ii) provide by resolution of the
Company’s Board of Directors that on exercise of this Warrant, the Holder hereof
shall thereafter be entitled to receive, in addition to the Shares otherwise
receivable on exercise hereof, the number of Shares or other securities or
property which would have been received had this Warrant at the time been
exercised without the payment by the Holder of any additional
consideration.
8.4 Reclassification,
Etc.
If at
any time after the date hereof there shall be a change or reclassification
of
the securities as to which purchase rights under this Warrant exist into the
same or a different number or type of securities of any other class or classes,
then the Holder shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of the Exercise
Price then in effect, the number of Shares or other securities or property
resulting from such change or reclassification, which would have been received
by Holder for the Shares subject to this Warrant had this Warrant at such time
been exercised.
B-3
8.5 Effect
of Reorganization and Asset Sales.
If any
(i) reorganization of the securities as to which purchase rights under this
Warrant exist, (ii) consolidation or merger of the Company with or into
another corporation, or (iii) sale or all or substantially all of the
Company’s operating assets to another corporation followed by a liquidation of
the Company (any such transaction shall be referred to herein as an
“Event”),
is
effected in such a way that holders of Shares are entitled to receive securities
and/or assets as a result of their ownership of the Shares, the Holder, upon
exercise of this Warrant, shall be entitled to receive such shares of stock
securities or assets which the Holder would have received had it fully exercised
this Warrant on or prior the record date for such Event. The Company shall
not
merge into or consolidate with another corporation or sell all of its assets
to
another corporation for a consideration consisting primarily of securities
of
such corporation, unless the successor or acquiring corporation, as the case
may
be, shall expressly assume the due and punctual observance and performance
of
each and every covenant and condition of this Warrant to be performed or
observed by the Company and all of the obligations and liabilities hereunder
unless waived in writing by the Holder.
9. Notice
of Adjustments.
Whenever the Exercise Price or number of Shares purchasable hereunder shall
be
adjusted pursuant to Section 8 hereof, the Company shall execute and
deliver to the Holder a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated and the Exercise Price and number of Shares
purchasable hereunder after giving effect to such adjustment, and shall cause
a
copy of such certificate to be mailed (by first class mail, postage prepaid)
to
the Holder.
10. Rights
as Shareholder.
Prior
to exercise of this Warrant, the Holder shall not be entitled to any rights
as a
Shareholder of the Company with respect to the Shares, including (without
limitation) the right to vote such Shares, receive distributions thereon, or
be
notified of Shareholder meetings, and the Holder shall not be entitled to any
notice or other communication concerning the business or affairs of the
Company.
11. Restricted
Securities.
The
Holder understands that this Warrant and the Shares purchasable hereunder
constitute “restricted
securities”
under
the federal securities laws inasmuch as they are, or will be, acquired from
the
Company in transactions not involving a public offering and accordingly may
not,
under such laws and applicable regulations, be resold or transferred without
registration under the Securities Act of 1933, as amended (the “1933
Act”),
or an
applicable exemption from such registration. In this connection, the Holder
acknowledges that the securities legend on Exhibit
A
to the
Notice of Exercise attached hereto shall be placed on any Shares issued to
the
Holder upon exercise of this Warrant.
12. Certification
of Investment Purpose.
Unless
a current registration statement under the 1933 Act shall be in effect with
respect to the securities to be issued upon exercise of this Warrant, the Holder
covenants and agrees that, at the time of exercise hereof, it will deliver
to
the Company a written certification executed by the Holder that the securities
acquired by such Holder upon exercise hereof are for the account of such Holder
and acquired for investment purposes only and that such securities are not
acquired with a view to, or for sale in connection with, any distribution
thereof.
B-4
13. Transferability.
This
Warrant shall be transferable on the books of the Company maintained at its
principal office wherever then located, upon delivery thereof duly endorsed
by
the Holder or its assign(s), or their duly authorized attorney or
representative, accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver new Warrants to the person entitled thereto. This Warrant
may be transferred, divided or combined, upon request to the Company by the
Holder, into a certificate or certificates representing the right to purchase
the same aggregate number of Shares.
14. No
Impairment.
The
Company shall not, by amendment of its certificate of incorporation or through
a
reorganization, transfer of assets, consolidation, merger, dissolution, issue,
or sale of securities or any other voluntary action, avoid or seek to avoid
the
observance or performance of any of the terms to be observed or performed under
this Warrant by the Company, but shall at all times in good faith assist in
carrying out all of the provisions of this Warrant and in taking all such action
as may be reasonable necessary or appropriate to protect the Holder’s rights
hereunder against impairment. If the Company takes any action affecting its
Shares other than as described in this Warrant that adversely affect the
Holder’s rights under this Warrant, the Exercise Price shall be adjusted
downward and the number of Shares issuable upon exercise of this Warrant shall
be adjusted upward in such a manner that the aggregate Exercise Price of this
Warrant is unchanged.
15. Miscellaneous.
15.1 Construction.
Unless
the context indicates otherwise, the term “Holder”
shall
include any transferee or transferees of this Warrant pursuant to Section 13
and
the term “Warrant”
shall
include any and all warrants outstanding pursuant to this Agreement, including
those evidenced by a certificate or certificates issued upon division, exchange,
substitution or transfer pursuant to Section 13.
15.2 Restrictions.
By
receipt of this Warrant, the Holder makes the same representations with respect
to the acquisition of this Warrant as the Holder is required to make upon the
exercise of this Warrant and acquisition of the Shares purchasable hereunder
as
set forth in the Form of Investment Letter attached as Exhibit
A
to the
Notice of Exercise, the form of which are attached hereto as Exhibit
A.
15.3 Notices.
Unless
otherwise provided, any notice required or permitted under this Warrant shall
be
given in writing and shall be deemed effectively given upon personal delivery
to
the party to be notified or three (3) days following deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified (or one (1) day following timely deposit
with a reputable overnight courier with next day delivery instructions), or
upon
confirmation of receipt by the sender of any notice by facsimile transmission,
at the address indicated below or at such other address as such party may
designate by ten (10) days’ advance written notice to the other
parties.
To
Holder:
|
Xxxx
X. Xxxxxxx and Xxxxxx X. Xxxxxxx
|
00000
Xxx Xxxxxxx Xxxx Xxxxx 000
|
|
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
|
|
Facsimile:
000 000-0000
|
B-5
With
copies to:
|
Xxxxxx
X. Xxxxxx, Esq.
|
00000
Xxxxxxxx Xxxx., Xxxxx 000
|
|
Xxx
Xxxxxxx, XX 00000
|
|
Facsimile:
000-000-0000
|
|
and
|
|
Xxxxx
& Associates LLC
|
|
00000
Xxxxxxxx Xxxx Xxxxx 0000
|
|
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
|
|
Facsimile:
310 371-7272
|
|
To
the Company:
|
AIRBEE
WIRELESS, Inc.
|
0000
Xxx Xxxx Xxxxxx
|
|
Xxxxxxxxx,
XX 00000
|
|
Attention:
E. Xxxxxx Xxxxxx, President
|
|
Facsimile:
(000) 000-0000
|
|
With
copies to:
|
Xxxxxxxxx
Xxxxx Xxxxxxx & Xxxxx
|
000
Xxxxxxx Xxxxxx Xxxxx
|
|
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
|
|
Attention:
Xxxxxxx X. Xxxxxx, Esq.
|
|
Facsimile:
(000) 000-0000
|
|
and
|
|
Xxxxx
& Associates LLC
|
|
00000
Xxxxxxxx Xxxx Xxxxx 0000
|
|
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
|
|
Facsimile:
000 000-0000
|
15.4 Governing
Law. Any
dispute in the meaning, effect or validity of this Warrant shall be resolved
in
accordance with the laws of the State of New York without regard to the conflict
of laws provisions thereof.
15.5 Attorneys’
Fees.
In the
event that any suit or action is instituted under or in relation to this
Warrant, including without limitation to enforce any provision in this Warrant,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Warrant, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
15.6 Entire
Agreement.
This
Warrant, the exhibits and schedules hereto, and the Convertible Debenture and
Warrant Purchase Agreement to which it is attached, constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter set froth below.
B-6
15.7 Binding
Effect.
This
Warrant and the various rights and obligations arising hereunder shall inure
to
the benefit of and be binding upon the Company and its successors and assigns,
and Holder and its successors and assigns.
15.8 Waiver;
Consent.
This
Warrant may not be changed, amended, terminated, augmented, rescinded or
discharged (other than by performance), in whole or in part, except by a writing
executed by the parties hereto, and no waiver of any of the provisions or
conditions of this Warrant or any of the rights of a party hereto shall be
effective or binding unless such waiver shall be in writing and signed by the
party claimed to have given or consented thereto.
15.9 Severability.
If one
or more provisions of this Warrant are held to be unenforceable under applicable
law, such provision shall be excluded from this Warrant and the balance of
the
Warrant shall be interpreted as if such provision were so excluded and the
balance shall be enforceable in accordance with its terms.
15.10 Assignment.
Holder
shall have the right, without the prior written consent of the Company, to
(i)
sell, assign, mortgage, pledge or otherwise transfer any interest or right
created hereby, or (ii) delegate its duties or obligations under this Agreement.
This Agreement is made solely for the benefit of the parties hereto, and no
other person, partnership, association or corporation shall acquire or have
any
right under or by virtue of this Agreement.
[Remainder
of the page is intentionally left blank. Signature page
follows]
B-7
IN
WITNESS WHEREOF, the parties hereto have executed this Warrant effective as
of
the date set forth below.
DATED:
_________________, 2008
|
“Company”
|
|
AIRBEE
WIRELESS, INC.
|
||
By:
|
||
Name:
|
E.
Xxxxxx Xxxxxx
|
|
Title:
|
President
|
|
“Holder”
|
||
[_______________________]
|
||
By:
|
||
Name:
|
||
Title:
|
B-8
EXHIBIT
A
NOTICE
OF EXERCISE
To: AIRBEE
WIRELESS, INC.
The
undersigned hereby elects to purchase _____________ Shares (the “Shares”)
of
AIRBEE WIRELESS, INC., a Delaware corporation (the “Company”)
pursuant to the terms of the attached Warrant, and tenders herewith payment
of
the purchase price pursuant to the terms of the Warrant.
Attached
as Exhibit
A
is an
investment representation letter addressed to the Company and executed by the
undersigned as required by Section 12 of the Warrant.
Please
issue certificates representing the Shares purchased hereunder in the names
and
in the denominations indicated on Exhibit
A
attached
hereto.
Please
issue a new Warrant for the unexercised portion of the attached Warrant, if
any,
in the name of the undersigned.
Dated:
|
||
Name:
|
||
Title:
|
B-9
Exhibit
A
To: AIRBEE
WIRELESS, INC.
In
connection with the purchase by the undersigned of _________ Shares of (the
“Shares”)
of
AIRBEE WIRELESS, INC., a Delaware corporation (the “Company”),
upon
exercise of that certain Warrant dated as of January 30, 2008, the undersigned
hereby represents and warrants as follows:
The
Shares to be received by the undersigned upon exercise of the Warrant are being
acquired for its own account, not as a nominee or agent, and not with a view
to
resale or distribution of any part thereof, and the undersigned has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The undersigned believes it has received all the information it
considers necessary or appropriate for deciding whether to purchase the
Shares.
The
undersigned understands that the Shares are characterized as “restricted
securities” under the federal securities laws inasmuch as they are being
acquired from the Company in transactions not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of 1933, as amended (the
“Act”),
only
in certain limited circumstances. In this connection, the undersigned represents
that it is familiar with Rule 144 of the Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
The
undersigned understands the instruments evidencing the Shares may bear the
following legend:
THE
OFFER
AND SALE OF THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE “ACT”)
OR
QUALIFIED UNDER STATE SECURITIES LAWS AND SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR, THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND THE QUALIFICATION REQUIREMENTS OF THE RELEVANT
STATE.
B-10
EXHIBIT
C
WIRE
INSTRUCTIONS
Not
Supplied
C-1
EXHIBIT
D
SECURITY
AGREEMENT
See
attached.
D-1