10.2 Debt Conversion and Funding Agreement dated September 30, 2004
ERF Wireless, Inc. Eagle R.F. International, Inc., and Investor.
DEBT CONVERSION AND FUNDING AGREEMENT
This Debt Conversion and Funding Agreement ("Agreement") dated
September 30, 2004 is between ERF Wireless, Inc., a Nevada corporation,
("ERFW"), Eagle R. F. International, Inc., a Texas corporation ("Company"), and
the persons listed on the signature page of this Agreement ("Investor").
WHEREAS, the Company needs to restructure and raise additional capital;
WHEREAS, the Company's stockholders have entered a Stock Purchase
Agreement with ERFW; and
WHEREAS, the Investor is aware of the terms and conditions of the Stock
Purchase Agreement mentioned above and, subject to the terms and conditions of
this Agreement, is willing (1) to consent to a restructuring of the Company, (2)
to convert all of Investor's claims against the Company's for shares of ERFW's
Series A Convertible Preferred Stock, and (3) to make an additional cash
investment for shares of ERFW's Series A Convertible Preferred Stock;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Simultaneous with the closing of the Stock Purchase Agreement between
ERFW and the Company's stockholders:
1. Investor shall convert all of Investor's claims against the Company for
shares of ERFW's Series A Convertible Preferred Stock (the "Securities"). As of
the date hereof, the Investor holds notes and other claims against the Company
in the total amount of $487,142.33, including all principal, interest, fees,
expenses, and costs of every nature.
2. ERFW's capital structure is comprised of Five Hundred Million shares
(500,000,000) of capital stock, of which Four Hundred Seventy Five Million
(475,000,000) shares of the par value of $.001 each are common stock and of
which Twenty Five Million (25,000,000) shares of the par value of $.001 each are
preferred stock. As of the date hereof, ERFW has not more that Four Hundred
Thousand (400,000) shares of common stock issued and outstanding, Two Million
Eight Hundred Eighty Thousand (2,880,000) shares of common stock reserved for
issuance underlying warrants and stock options, and Eighteen Million Six Hundred
Seventy Six Thousand Three Hundred Forty Seven (18,676,347) shares reserved for
issuance upon conversion of the Purchaser's 1,000,000 shares of issued and
outstanding Series A Convertible Preferred Stock. As of the date hereof, the
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Purchaser has designated Two Million Five Hundred Thousand (2,500,000 shares of
its preferred stock as Series A Convertible Preferred Stock of which One Million
(1,000,000) shares are issued and outstanding. All issued and outstanding shares
are legally issued, fully paid, and non-assessable, and are not issued in
violation of the preemptive or other right of any person.
3. ERFW shall issue the Investor one (1) share of its Series A Convertible
Preferred Stock for every Fifty Cents ($.50) in claims converted and one (1)
share of its Series A Convertible Preferred Stock for every Fifty Cents ($.50)
invested during the next 90 days. For example, the Investor shall receive
1,500,000 shares of ERFW's Series A for an investment of $750,000.
4. The Investor understands and agrees that all securities will be issued with a
restrictive legend to the effect that: "THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER
THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO
BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY."
5. Private Transaction
A. PRIVATE TRANSACTION. Investor and ERFW understand each that the sale and
exchange of securities contemplated herein constitutes a private, arms-length
transaction between a willing seller and a willing buyer without the use or
reliance upon a broker, distribution or securities underwriter.
B. PURCHASE FOR INVESTMENT. Investor is not an underwriters of, or dealer in the
securities to be exchanged hereunder. Further, Investor is acquiring the
securities for investment purposes and not with a view to resell the securities.
C. INVESTMENT RISK. Because of Investor's financial position and other factors,
the transaction contemplated by this Agreement may involve a high degree of
financial risk, including the risk that Investor may lose its entire investment
in the securities.
D. ACCESS TO INFORMATION. Investor and Investor's advisors have been afforded
the opportunity to discuss the transaction with legal and accounting
professionals and to examine and evaluate the financial impact of the exchange
contemplated herein.
6. Representations and Warranties of Investor
Investor hereby covenants with, represents, and warrants that:
A. ABILITY. This Agreement has been duly executed and delivered by Investor and
constitutes a binding, and enforceable obligation of Investor;
B. THIRD PARTY CONSENT. No authorization, consent, or approval of, or
registration or filing with, any governmental authority or any other person is
required to be obtained or made by Investor in connection with the execution,
delivery, or performance of this Agreement;
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C. LITIGATION. Investor is not a defendant against whom a claim has been made or
a judgment rendered in any litigation or proceedings before any local, state or
federal government, including but not limited to the United States, or any
department, board, body or agency thereof;
7. Miscellaneous
A. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding between
the parties hereto and no other prior written or oral statement or agreement
shall be recognized or enforced.
B. SEVERABILITY. If a court of competent jurisdiction determines that any clause
or provision of this Agreement is invalid, illegal or unenforceable, the other
clauses and provisions of the Agreement shall remain in full force and effect
and the clauses and provision which are determined to be void, illegal or
unenforceable shall be limited so that they shall remain in effect to the extent
permissible by law.
C. ASSIGNMENT. None of the parties hereto may assign this Agreement without the
express written consent of the other parties and any approved assignment shall
be binding on and inure to the benefit of such successor or, in the event of
death or incapacity, on assignor's heirs, executors, administrators and
successors.
D. APPLICABLE LAW. This Agreement has been negotiated and is being contracted
for in the United States, State of Texas, it shall be governed by the laws of
the United States, State of Texas, notwithstanding any conflict-of-law provision
to the contrary.
E. ATTORNEY'S FEES. If any legal action or other proceeding (non-exclusively
including arbitration) is brought for the enforcement of or to declare any right
or obligation under this Agreement or as a result of a breach, default or
misrepresentation in connection with any of the provisions of this Agreement, or
otherwise because of a dispute among the parties hereto, the prevailing party
will be entitled to recover actual attorney's fees (including for appeals and
collection) and other expenses incurred in such action or proceeding, in
addition to any other relief to which such party may be entitled.
F. NO THIRD PARTY BENEFICIARY. Nothing in this Agreement, expressed or implied,
is intended to confer upon any person, other than the parties hereto and their
successors, any rights or remedies under or because of this Agreement, unless
this Agreement specifically states such intent.
G. COUNTERPARTS. It is understood and agreed that this Agreement may be executed
in any number of identical counterparts, each of which may be deemed an original
for all purposes.
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H. FURTHER ASSURANCES. At any time, and from time to time after the debt for
equity swap, each party hereto will execute such additional instruments and take
such action as may be reasonably requested by the other party to carry out the
intent and purposes of this Agreement.
I. AMENDMENT OR WAIVER. Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred herein, at law,
or in equity, and may be enforced concurrently herewith, and no waiver by any
party of the performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or thereafter
occurring or existing. A writing signed by all parties hereto may amend this
Agreement.
J. HEADINGS. The section and subsection headings in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
K. FACSIMILE. A facsimile, telecopy or other reproduction of this Agreement may
be executed by one or more parties hereto and such executed copy may be
delivered by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties agree to execute
an original of this Agreement as well as any facsimile, telecopy or other
reproduction hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
"ERFW"
ERF WIRELESS, INC., A NEVADA CORPORATION
By: /s/ R. Xxxx Xxxxx
-----------------
Name: R. Xxxx Xxxxx
Title: Chief Executive Officer
The "Company"
EAGLE R. F. INTERNATIONAL, INC., A TEXAS
CORPORATION
By: /s/ Xxxxx Xxxxxx
----------------
Name: Xxxxx Xxxxxx
Title: President
[Continued on following page]
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Persons referred to herein above as
"Investor"
XXXXXXX TRUST
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Name: Xxxxx Xxxxxxxxx
Title: Trustee
XXXXXX FAMILY TRUST
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Name: Xxxxx Xxxxxxxxx
Title: Trustee
HC1 TRUST
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Name: Xxxxx Xxxxxxxxx
Title: Trustee
LEOPARD FAMILY TRUST
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Name: Xxxxx Xxxxxxxxx
Title: Trustee
JAUQUINE TRUST
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Name: Xxxxx Xxxxxxxxx
Title: Trustee
XXXXXX TRUST
By: /s/ H. Xxxx Xxxxxx
------------------
Name: H. Xxxx Xxxxxx
Title: Trustee
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