BRIDGE NOTE AND WARRANT PURCHASE AGREEMENT
THIS
AGREEMENT is made effective as of this __ day of __ 2008, by and between Wherify
Wireless, Inc. a Delaware corporation, (the “Company”)
and
the persons named on Schedule
1
hereto
(the “Purchaser”).
W
I T N E S S E T H:
WHEREAS,
the
Purchaser desires to purchase, and the Company desires to sell one or more
senior secured convertible bridge notes (the “Bridge
Note(s)”)
in the
aggregate principal amount of up to $800,000 (the “Principal
Amount”),
upon
the terms and subject to the conditions hereinafter set forth;
NOW,
THEREFORE,
in
consideration of the foregoing premises and the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as
follows:
1. Sale
and Purchase of the Bridge Note.
Subject
to the terms and conditions of this Agreement, on the Closing Date (as defined
below), the Company shall issue, sell and deliver to the Purchaser(s), and
such
Purchaser(s) shall purchase from the Company Bridge Note(s) in that principal
amount set forth on Schedule
1
hereto
(the “Purchase
Price”).
The
form of Bridge Note is attached hereto as Exhibit
I.
2. Purchase
Price.
(a) The
aggregate Purchase Price of the Bridge Note(s) shall be $800,000.
(b) At
the
Closing (as defined below), each Purchaser shall pay the Purchase Price by
wire
transfer of immediately available funds or by such other method as is acceptable
to the Company and the Purchaser, to such account of the Company as shall have
been designated in advance to the Purchaser by the Company.
3. Closing
Date.
The
closing of the sale and purchase of the Bridge Note (the “Closing”)
shall
take place at such time, date or place as the parties hereto may mutually agree.
The date on which the Closing is held is referred to in this Agreement as the
“Closing
Date.”
4.
[Intentionally
left blank]
5. Use
of Proceeds.
Net
proceeds from the sale of the Bridge Note after payment of the fees and expenses
associated with its issuance shall be used by the Company to pay its operating
expenses and those other expenses associated with completion of the Company’s
planned merger with Lightyear Network Solutions, Inc. (the “Planned
Merger”)
on or
before September 30, 2008.
6. Security;
Intercreditor Agreement.
The
Company’s obligations under the Bridge Notes are secured by a first lien on all
the assets owned by the Company and its subsidiaries, all as provided in the
Security Agreement of even date herewith by and among the Company, its
subsidiaries and the Holder, the form of which is attached hereto as
Exhibit
II.
The
Bridge Notes are also subject to the terms and conditions set forth in the
Intercreditor Agreement between the holder(s) of the Bridge Note(s) and YA
Global Investments, L.P. (f/k/a Cornell Capital Partners, LP) (“YA
Global”),
which
is the holder of the Company’s senior secured debt (the “Senior
Debt”).
7. The
Warrant.
On the
Closing Date, in addition to delivery of the Bridge Note, the Company will
also
deliver to the Purchaser a warrant (the “Warrant”)
entitling the Purchaser to purchase, for a period of five (5) years (the
“Exercise
Period”),
four
(4) shares of the Company’s common stock (the “Common
Stock”)
for
each dollar of Principal Amount. The Warrant shall have such terms and
conditions as set forth in the form of the Warrant, attached hereto as
Exhibit
III.
8. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchaser as follows:
(a) Organization
and Good Standing; Capitalization.
The
Company is duly organized and validly existing under the laws of the State
of
Delaware. The Company is not in good standing in the State of Delaware on
account of a tax deficiency of approximately $4,000, which the Company covenants
to pay upon receipt of the Purchase Price. The Company is duly qualified or
authorized to do business as a foreign corporation and is in good standing
under
the laws of each jurisdiction in which the conduct of its business or the
ownership of its properties or assets requires such qualification or
authorization.
(b) Authorization
of Agreement; Enforceability.
The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and each other agreement, document, instrument and certificate,
including, but not limited to, the Forbearance Agreement, the Warrants, the
Security Agreement, the UCC-1s to be filed by the Company and the Bridge Note
(and, together with all Exhibits, Schedules and related documents collectively,
the “Transaction
Documents”),
and
to perform fully its obligations thereunder. The execution, delivery
and performance by the Company of the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Company. The
Transaction Documents have been duly and validly executed and delivered by
the
Company and, assuming the due authorization, execution and delivery thereof
by
the Purchaser, the Transaction Documents constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles
of
equity.
(c) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby,
do
not and will not (i) conflict with or violate any provision of the
Company’s Certificate of Incorporation or Bylaws, (ii) other than the
consent required of Yorkville Advisors, LLC pursuant to those certain
Convertible Debentures entered into on March 10, 2006 and March 14, 2006, and
subsequent amendments thereto between Wherify and YA Global, which consent
has
been or will be obtained prior to the Closing, conflict with, or constitute
a
default (or an event that with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a Company
debt or otherwise), or other understanding to which the Company is a party
or by
which any property or asset of are subject or by which any property or asset
of
the Company are bound or affected, or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject, or
by
which any property or asset of the Company are bound or
affected.
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(d) Solvent.
Immediately following the Closing, the Company expects to be able to pay its
current debts and obligations incurred in the ordinary course of business after
the date of this Agreement as they become due through the Forbearance Period
(as
defined in the Forbearance Agreement). However, there is no guaranty the Company
will be able to pay its debts and obligations after that time if the Company
does not raise additional outside funding.
9. Representations
and Warranties of the Purchaser.
The
Purchaser represents and warrants to the Company as follows
(a) Authority.
The
Purchaser has the power and authority to enter into and to consummate its
obligations set forth in the Transaction Documents. Each Transaction Document
to
which it is a party has been duly executed by Purchaser, and when delivered
by
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of the Purchaser, enforceable against it in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors’ rights generally and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief,
or
other equitable remedies.
(b) Investment
Purposes.
The
Purchaser (a) is acquiring the Bridge Note, the Warrant, and the
shares
Common
Stock to be issued upon exercise
of the
Warrant (collectively the "Securities")
for
investment purposes only, for its own account, and not as nominee or agent
for
any other Person, and not with a view to, or for resale in connection with,
any
distribution thereof within the meaning of the Act, (b) understands and
acknowledges that the Securities have not been registered under the Act or
any
other securities laws, (c) is not an “affiliate” (as defined in Rule 144 under
the Act) of the Company, (d) has such knowledge and experience in financial
and
business matters as to be capable of evaluating the merits and risks of its
investment, (e) is an “accredited investor” within the meaning of Rule 501 of
Regulation D under the Act, (f) has had the opportunity to ask questions and
to
receive answers from the Company, and to obtain information necessary to
evaluate the merits and risks of this investment, and (g) understands,
acknowledges and agrees that Bridge Note has not been, and any Conversion
Securities will not be, registered under (and that the Company has no present
intention to register the Bridge Note nor the Conversion Securities under)
the
Act or applicable state securities laws, and may not be sold or otherwise
transferred by the Purchaser to a United States person unless they have been
registered under the Act and applicable U.S. state securities laws or are sold
or transferred in a transaction exempt therefrom.
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(c)
Understanding
of the Risks and Circumstances Involved in Purchasing the Bridge
Note.
The
Purchaser acknowledges and understands that the acquisition of the Bridge Note
involves a significant degree of risk, including but not limited to the loss
of
Purchaser’s entire investment in the Bridge Note.
10. Indemnification.
(a) The
Company shall indemnify and hold harmless each Purchaser and each of their
respective officers, attorneys, agents, equityholders, directors, agents and
employees, if any, to the fullest extent permitted by applicable law, from
and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys' fees) and expenses including, without
limitation, reasonable attorneys’ fees and expenses relating to an Indemnified
Party’s (as defined below) actions to enforce the provisions of this
Section
10)
(collectively, the “Losses”),
as
incurred, to the extent arising out of or relating to (i) any material
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, or (ii) any material breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents. Each party shall promptly notify the other of the institution, threat
or assertion of any proceeding of which it is aware in connection with the
transactions contemplated by this Agreement.
(b) If
any
proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party shall promptly notify the other party (the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, however, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, except (and only)
to the extent that such failure shall have materially and adversely prejudiced
the Indemnifying Party.
(c) An
Indemnified Party shall have the right to employ separate counsel in any such
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such proceeding and to employ counsel reasonably satisfactory to
such
Indemnified Party in any such proceeding; or (3) the named parties to any such
proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and the reasonable fees and expenses of one separate counsel for all Indemnified
Parties in any matters related on a factual basis shall be at the expense of
the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such proceeding affected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of
any
pending proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from
all liability on claims that are the subject matter of such proceeding. The
indemnification obligations under this Section 6 are in addition to any
indemnification or similar obligations under any other Transaction
Document.
4
(d) The
provisions of this Section shall survive the termination of this Agreement
for a
period of eighteen (18) months.
11. Miscellaneous.
(a) Further
Assurances.
The
Company and the Purchaser agree to execute and deliver such other documents
or
agreements as may be necessary or desirable for the implementation of this
Agreement and the consummation of the transactions contemplated
hereby.
(b) Entire
Agreement; Amendments and Waivers.
This
Agreement (including the schedules and exhibits hereto) represents the entire
understanding and agreement among the parties hereto with respect to the subject
matter hereof and can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making specific reference
to
this Agreement signed by the parties hereto. No action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf
of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision
of
this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
(c) Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
(d) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the express prior
written consent of the Purchaser. Notwithstanding anything to the contrary
provided herein or elsewhere, the Purchaser, however, may assign any or all
of
its Securities and/or rights under any of the Transaction Documents to any
Person, provided such transferee agrees in writing to be bound, with respect
to
the transferred Securities and otherwise, by the provisions hereof that apply
to
the “Purchasers.”
5
(e) No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
12. Governing
Law.
This
Agreement shall be governed by and construed exclusively in accordance with
the
internal laws of the State of New York without regard to the conflicts of laws
principles thereof. The parties hereto hereby irrevocably agree that any suit
or
proceeding arising directly and/or indirectly pursuant to or under this
Agreement, shall be brought solely in a federal or state court located in the
City, County and State of New York. By its execution hereof, the parties hereby
covenant and irrevocably submit to the in personam
jurisdiction of the federal and state courts located in the City, County and
State of New York and agree that any process in any such action may be served
upon any of them personally, or by certified mail or registered mail upon them
or their agent, return receipt requested, with the same full force and effect
as
if personally served upon them in New York City. The parties hereto waive any
claim that any such jurisdiction is not a convenient forum for any such suit
or
proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from
the
other party hereto of all of its reasonable legal fees and
expenses.
13. Headings;
Interpretive Matters.
The
section headings of this Agreement are for reference purposes only and are
to be
given no effect in the construction or interpretation of this Agreement. No
provision of this Agreement will be interpreted in favor of, or against, any
of
the parties hereto by reason of the extent to which any such party or its
counsel participated in the drafting thereof or by reason of the extent to
which
any such provision is inconsistent with any prior draft hereof or
thereof.
14. Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on (a) the next Business Day, if sent by U.S. nationally recognized
overnight courier service, or (b) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices and
communications to the Company shall be as set forth below and for each Purchaser
shall be as set forth on the signature pages attached hereto.
If
to the
Company:
|
Wherify
Wireless, Inc.
|
|
00
Xxxxx Xxxx, #000,
|
Xxx
Xxxxx, Xxxxxxxxxx 00000-0000
|
Attn:
Xxxxx Xxxxxxx, Chief Executive
Officer
|
If
to the
Purchaser:
At
the
address listed on Schedule 1 hereto.
15. Severability.
If any
provision of this Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.
6
16. Binding
Effect; Assignment.
This
Agreement shall be binding upon and insure to the benefit of the parties
and
their respective successors and permitted assigns. Other than as expressly
provided in writing by the parties hereto, no assignment of this Agreement
or of
any rights or obligations hereunder may be made by the Company or the Purchaser
(by operation of law or otherwise) without the prior written consent of the
other parties hereto and any attempted assignment without the required written
consents shall be void.
17. Counterparts.
This
Agreement may be executed simultaneously in any number of counterparts, each
of
which shall be deemed an original but all of which together shall constitute
one
and the same instrument.
7
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed and delivered
as
of the day and year first written above.
|
By:
|
|
|
Name:
|
Xxxxx
Xxxxxxx
|
|
Title:
|
Chief
Executive Officer
|
|
Purchaser
|
|
|
By:
|
|
|
Title:
|
|
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SCHEDULE
1
PURCHASERS
|
Name and Address of Bridge Note
Purchaser
|
Aggregate Principal Amount of
Bridge Notes Purchased
|
Number of Shares of Common
Stock Issuable Upon Exercise
of Granted Warrants
|
||
EXHIBIT
I
FORM
OF BRIDGE NOTE
2
EXHIBIT
II
FORM
OF THE SECURITY AGREEMENT
3
EXHIBIT
III
FORM
OF WARRANT
4
EXHIBIT
IV
FORM
OF INTERCREDITOR AGREEMENT
5
EXHIBIT
V
FORM
OF FORBEARANCE AGREEMENT
6
