EXHIBIT 4.38
Receivable Factoring Agreement
FACE AMOUNT $100,000
DEBENTURE PURCHASE PRICE $100,000
ISSUANCE DATE June 8, 2005
MATURITY DATE June 22, 2005
FOR VALUE RECEIVED, NeWave, Inc., a Utah corporation (the "Company"), (OTC
BB: NWWV) hereby promises to pay DUTCHESS PRIVATE EQUITIES FUND, II, L.P. (the
"Holder") by June 22, 2005 (the "Maturity Date"), or earlier, the face amount of
One Hundred Thousand dollars ($100,000) U.S., in such amounts, at such times and
on such terms and conditions as are specified herein. All capitalized terms
used, but not otherwise defined, herein shall have the respective definitions
assigned thereto in this Agreement, dated June 8, 2005 (the "Agreement"),
between the Company and the Holder.
Article 1 Method of Payment
Final payment shall be made in the amount of $100,000 upon receipt of
payment from Interactive Communications.
Section 1.2 Prepayment
The Company shall make mandatory payments to the Holder as the funds become
available from the Interactive Communications payment ("Collateral
Receivables"). If the Company receives a check or wire from the Collateral
Receivables, it must be immediately be sent to the Holder
Article 2 Unpaid Amounts
In the event that on the Maturity Date, any amounts on the Note remain, the
Holder can exercise it's right to increase the Face Amount by two and one-half
percent (2.5%) per month for each month that the Note remains unpaid, compounded
daily, pro rate for partial periods. If the aforementioned occurs, the Company
will be in Default and remedies as described in Article 6 may be taken at the
Holder's discretion.
Article 3 Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 4 Reports
The Company will mail to the Holder hereof at its address as shown on the
Register a copy of any annual, quarterly or current report that it files with
the Securities and Exchange Commission promptly after the filing thereof and a
copy of any annual, quarterly or other report or proxy statement that it gives
to its shareholders generally at the time such report or statement is sent to
shareholders.
Article 5 Defaults and Remedies
Section 5.1 Events of Default. An "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Note within two (2)
business days of the applicable Payment Date or Maturity Date, as applicable, in
violation of the Threshold Amount upon redemption or otherwise, (b) the
Company pursuant to or within the meaning of any Bankruptcy Law (as hereinafter
defined): (i) commences a voluntary case; (ii) consents to the entry of an
order for relief against it in an involuntary case; (iii) consents to the
appointment of a Custodian (as hereinafter defined) of it or for all or
substantially all of its property or (iv) makes a general assignment for the
benefit of its creditors or (v) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that: (A) is for relief against the
Company in an involuntary case; (B) appoints a Custodian of the Company or for
all or substantially all of its property or (C) orders the liquidation of the
Company, and the order or decree remains unstayed and in effect for sixty (60)
calendar days; (e) the Company's Common Stock is suspended or no longer listed
on any recognized exchange including electronic over-the-counter bulletin board
for in excess of five (5) consecutive trading days, As used in this Section
6.1, the term "Bankruptcy Law" means Title 11 of the United States Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law. A default under clause (b) above is not an Event of Default
until the holder of at least 25% of the aggregate principal amount of the
Debentures outstanding notify the Company of such default and the Company does
not cure it within three (3) business days after the receipt of such notice,
unless the Company commences to cure such default within such period, which must
specify the default, demand that it be remedied and state that it is a "Notice
of Default". Prior to the expiration of the time for curing a default as set
forth in the preceding sentence, the holders of a majority in aggregate
principal amount of the Debentures at the time outstanding (exclusive of
Debentures then owned by the Company or any subsidiary or affiliate) may, on
behalf of the holders of all of the Debentures, waive any past Event of Default
hereunder (or any past event which, with the lapse of time or notice and lapse
of time designated in subsection (a), would constitute an Event of Default
hereunder) and its consequences, except a default in the payment of the
principal of or interest on any of the Debentures (which may only be waived by
consent of the holders all of the aggregate principal amount of the Debentures).
In the case of any such waiver, such default or Event of Default shall be deemed
to have been cured for every purpose of this Debenture and the Company and the
holders of the Debentures shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
In the event of Default the Holder shall have the right to either a) switch any
remaining amount left on the Debenture to the same terms and conditions as Note
June- 2005-101 dated June 2, 2005 or ,b) attach any other Receivables listed as
current by the Company and attach them as Collateral Receivable as defined in
Section 1.2 above or c) switch any remaining amount left on the Debenture
("Residual Amount") to a 3 Year ("Convertible Maturity Date"), 10% interest
bearing Convertible Debenture at the terms described in Section option for
accelerated effectiveness of the registration
Section 6.2 Conversion Privilege
(a) The Holder shall have the right to convert the Convertible Debenture
into shares of Common Stock at any time following the Convertible Closing Date
and which is before the close of business on the Convertible Maturity Date.
The number of shares of Common Stock issuable upon the conversion of this
Convertible Debenture shall be determined pursuant to Section 6.3 and rounding
the result to the nearest whole share.
(b) This Convertible Debenture may be converted, whether in whole or in part
at any time and from time to time.
(c) In the event all or any portion of this Convertible Debenture remains
outstanding on the Convertible Maturity Date, the unconverted portion of such
Convertible Debenture will automatically be converted into shares of Common
Stock on such date in the manner set forth in Section 6.3.
Section 6.3 Conversion Procedure.
The face amount of this Convertible Debenture may be converted, in whole or
in part, any time and from time to time following the Convertible Closing Date.
Such conversion shall be effectuated by surrendering to the Company, or its
attorney, this Convertible Debenture to be converted together with a facsimile
or original of the signed Notice of Conversion which evidences Holder's
intention to convert the Convertible Debenture indicated. The date on which the
Notice of Conversion is effective ("Conversion Date") shall be deemed to be the
date on which the Holder has delivered to the Company a facsimile or original of
the signed Notice of Conversion, as long as the original Convertible
Debenture(s) to be converted are received by the Company within five (5)
business days thereafter. At such time that the original Convertible Debenture
has been received by the Company, the Holder can elect to whether a reissuance
of the Convertible Debenture is warranted, or whether the Company can retain the
Convertible Debenture as to a continual conversion by Xxxxxx. Notwithstanding
the above, any Notice of Conversion received by 4:00 P.M. EST, shall be deemed
to have been received the previous business day. Receipt being via a
confirmation of time of facsimile of the Holder.
(a) Common Stock to be Issued. Upon the conversion of any Convertible
Debentures and upon receipt by the Company or its attorney of a facsimile or
original of Xxxxxx's signed Notice of Conversion the Company shall instruct its
transfer agent to issue stock certificates without restrictive legend or stop
transfer instructions, if at that time the aforementioned registration statement
has been declared effective (or with proper restrictive legend if the
registration statement has not as yet been declared effective), in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable. The Company shall
act as registrar and shall maintain an appropriate ledger containing the
necessary information with respect to each Convertible Debenture. The Company
warrants that no instructions, other than these instructions, have been given or
will be given to the transfer agent and that the Common Stock shall otherwise be
freely resold, except as may be set forth herein and subject to applicable law.
(b) Conversion Rate. Holder is entitled to convert the residual amount of
this Convertible Debenture, plus accrued interest, anytime following the Closing
Date, at the lesser of (i) 75% of the average of the lowest closing bid
price during the fifteen (15) trading days prior to the Conversion Date or (ii)
100% of the average of the closing bid prices for the twenty (20) trading days
immediately preceding the Convertible Closing Date ("Fixed Conversion Price"),
each being referred to as the "Conversion Price". No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share.
(c) Nothing contained in the Convertible Debenture shall be deemed to
establish or require the payment of interest to the Holder at a rate in excess
of the maximum rate permitted by governing law. In the event that the rate of
interest required to be paid exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the Company.
(d) It shall be the Company's responsibility to take all necessary actions
and to bear all such costs to issue the Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. Holder shall be treated as a shareholder of
record on and after the conversion date. If the Holder shall designate another
person as the entity in the name of which the stock certificates issuable upon
conversion of the Convertible Debenture are to be issued, prior to the issuance
of such certificates the Holder shall provide to the Company evidence that
either no tax shall be due and payable as a result of such transfer or that the
applicable tax has been paid by the Holder or such person. Upon surrender of any
Convertible Debentures that are to be converted in part, the Company shall
issue to the Holder a new Convertible Debenture equal to the unconverted amount,
if so requested in writing by Xxxxxx.
(e) Within five (5) business days after receipt of the documentation
referred to above in Section 6.2, the Company shall deliver a certificate, for
the number of shares of Common Stock issuable upon the conversion. In the event
the Company does not make delivery of the Common Stock, as instructed by
Xxxxxx, within five (5) business days after the Conversion Date, then in such
event the Company shall pay to Holder one percent (1%) in cash, of the dollar
value of the Convertible Debentures being converted, compounded daily, per each
day after the fifth (5th)business day following the Conversion Date that the
Common Stock is not delivered to the Purchaser.
The Company acknowledges that its failure to deliver the Common Stock
within five (5) business days after the Conversion Date will cause the Holder to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Convertible
Debenture a provision for liquidated damages. The parties acknowledge and agree
that the liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to deliver the Common Stock pursuant to the terms
of this Convertible Debenture.
The Company shall make any payments incurred under this Section in
immediately available funds within five (5) business days from the date the
Common Stock is fully delivered.
(f) The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Convertible Debentures by all
Holders of the entire amount of Convertible Debentures then outstanding. If, at
any time Holder submits a Notice of Conversion and the Company does not have
sufficient authorized but unissued shares of Common Stock (or alternative shares
of Common Stock as may be contributed by Stockholders) available to effect,
in full, a conversion of the Convertible Debentures (a "Conversion Default", the
date of such default being referred to herein as the "Conversion Default Date"),
the Company shall issue to the Holder all of the shares of Common Stock which
are available, and the Notice of Conversion as to any Convertible Debentures
requested to be converted but not converted (the "Unconverted Convertible
Debentures"), may be deemed null and void upon written notice sent by the Holder
to the Company. The Company shall provide notice of such Conversion Default
("Notice of Conversion Default") to all existing Holders of outstanding
Convertible Debentures, by facsimile, within three (3) business day of such
default (with the original delivered by overnight or two day courier), and the
Holder shall give notice to the Company by facsimile within five business days
of receipt of the original Notice of Conversion Default (with the original
delivered by overnight or two day courier) of its election to either nullify or
confirm the Notice of Conversion.
The Company agrees to pay to all Holders of outstanding Convertible
Debentures payments for a Conversion Default ("Conversion Default Payments") in
the amount of (N/365) x (.24) x the initial issuance price of the outstanding
and/or tendered but not converted Convertible Debentures held by each Holder
where N = the number of days from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient number of shares
of Common Stock to effect conversion of all remaining Convertible Debentures.
The Company shall send notice ("Authorization Notice") to each Holder of
outstanding Convertible Debentures that additional shares of Common Stock have
been authorized, the Authorization Date and the amount of Xxxxxx's accrued
Conversion Default Payments. The accrued Conversion Default shall be paid in
cash or shall be convertible into Common Stock at the Conversion Rate, upon
written notice sent by the Holder to the Company, which Conversion Default shall
be payable as follows: (i) in the event Holder elects to take such payment in
cash, cash payments shall be made to such Holder of outstanding Convertible
Debentures by the fifth day of the following calendar month, or (ii) in the
event Holder elects to take such payment in stock, the Holder may convert such
payment amount into Common Stock at the conversion rate set forth in Section
6.3(c) at any time after the 5th day of the calendar month following the month
in which the Authorization Notice was received, until the expiration of the
mandatory three (3) year conversion period.
The Company acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of the Convertible Debentures will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages
provision set forth in this section represents the parties' good faith effort to
quantify such damages and, as such, agree that the form and amount of such
liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Convertible Debenture.
Nothing herein shall limit the Holder's right to pursue actual damages for the
Company's failure to maintain a sufficient number of authorized shares of
Common Stock.
(g) If, by the fifth (5th) business day after the Conversion Date of any
portion of the Convertible Debentures to be converted (the "Delivery Date"), the
transfer agent fails for any reason to deliver the Common Stock upon
conversion by the Holder and after such Delivery Date, the Holder purchases, in
an open market transaction or otherwise, shares of Common Stock (the "Covering
Shares") solely in order to make delivery in satisfaction of a sale of Common
Stock by the Holder (the "Sold Shares"), which delivery such Holder anticipated
to make using the Common Stock issuable upon conversion (a "Buy-In"), the
Company shall pay to the Holder, in addition to any other amounts due to Holder
pursuant to this Convertible Debenture, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Covering Shares over (y) the
net proceeds (after brokerage commissions, if any) received by the Holder from
the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount
to the Holder in immediately available funds within five (5) business days of
written demand by the Holder. By way of illustration and not in limitation of
the foregoing, if the Holder purchases shares of Common Stock having a total
purchase price (including brokerage commissions) of $11,000 to cover a Buy-In
with respect to shares of Common Stock it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount which the Company will be required to pay to the Holder
will be $1,000.
Article 7 Additional Financing:
The Company shall not, directly or indirectly, without the prior written
consent of Dutchess Private Equities Fund, L.P., offer, sell, grant any option
to purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of its Common Stock or securities
convertible into Common Stock, or issue or increase the debt (other than trade
debt or debt pursuant to existing credit facilities) (a "Subsequent Financing")
for a period of 135 days after the Closing Date or Convertible Closing Date,
unless the Debenture has been paid in full. Notwithstanding the foregoing, the
Company shall be entitled to issue shares of Common Stock in connection with any
Exempted Transaction (as hereinafter defined). Any additional increase in debt
by the Company shall be used as a Prepayment to the Holder as described in
Section 1.2. Any breach of this section shall be considered an event of
Default. For purposes hereof, "Exempted Transaction" shall mean the issuance of
any securities pursuant to outstanding options, warrants and convertible or
exchangeable securities, the issuance of securities to consultants and
professionals in satisfaction in whole or in part of obligations for services
rendered or to be rendered, the incurrence of trade indebtedness (other than
trade debt or debt pursuant to existing credit facilities), and securites issued
during that time frame shall not have piggyback or demand registration rights
and will have a one year hold.
Article 8 Notice.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Debenture must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Xxxxxxx Xxxx, Chief Executive Officer
NeWave, Inc.
000 XXXX 0XX XXXXXX, #0000
XXXX XXXXX, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Investor:
Dutchess Private Equities II
Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxx, XX 00000
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
Article 9 Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day"
shall mean a day on which the banks in New York are not required or allowed to
be closed.
Article 10 No Assignment
This Debenture shall not be assignable.
Article 11 Rules of Construction.
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12 Governing Law
The validity, terms, performance and enforcement of this Debenture shall be
governed and construed by the provisions hereof and in accordance with the laws
of the Commonwealth of Massachusetts applicable to agreements that are
negotiated, executed, delivered and performed solely in the State of
Massachusetts.
Article 13 Litigation
The parties to this agreement will submit all disputes arising under this
agreement to arbitration in Boston, Massachusetts before a single arbitrator of
the American Arbitration Association ("AAA"). The arbitrator shall be selected
by application of the rules of the AAA, or by mutual agreement of the parties,
except that such arbitrator shall be an attorney admitted to practice law in the
Commonwealth of Massachusetts. No party to this agreement will challenge the
jurisdiction or venue provisions as provided in this section.
Article 14 Conditions to Closing
The Company shall have delivered the proper Collateral to the Holder before
Closing. The Securities and Exchange will have declared the registration
statement effective for the Investment Agreement with Dutchess Private Equities
Fund, II, LP.
Article 15 Reserved
Article 16 Indemnification
In consideration of the Holder's execution and delivery of this Agreement
and the acquisition and funding by the Holder of the Debenture hereunder and in
addition to all of the Company's other obligations under the documents
contemplated hereby, the Company shall defend, protect, indemnify and hold
harmless the Holder and all of their shareholders, officers, directors,
employees, counsel, and direct or indirect investors and any of the foregoing
person's agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES'), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Debenture, or any other
certificate, instrument or document contemplated hereby or thereby (ii) any
breach of any covenant, agreement or obligation of the Company contained in the
Debenture or any other certificate, instrument or document contemplated hereby
or thereby, except insofar as any such misrepresentation, breach or any untrue
statement, alleged untrue statement, omission or alleged omission is made in
reliance upon and in conformity with written information furnished to the
Company by, or on behalf of, the Holder or based on illegal or alleged illegal
trading of the Shares by the Holder. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. The
indemnity provisions contained herein shall be in addition to any cause of
action or similar rights the Holder may have, and any liabilities the Holder may
be subject to.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.
NeWave, Inc
By: /s/ Xxxxxxx Xxxx
------------------
Name: Xxxxxxx Xxxx
Title: President
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: A Managing Member
