WAIVER AND INVESTMENT AGREEMENT
This
Waiver and Investment Agreement (this “Agreement”)
is
dated as
of November 30, 2007, by and among Surfect Holdings, Inc., a Delaware
corporation (the "Company"),
and
each existing bridge investor identified on the signature pages hereto (the
“Bridge
Investors”)
Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed
to
such terms in that certain Securities Purchase Agreement, dated as of June
1,
2007, as amended by the Joinder and First Amendment to Securities Purchase
Agreement, dated as of July 20, 2007, among the Company and the Bridge
Investors (the “Purchase
Agreement”)
entered into in connection with the Company’s 10% senior secured convertible
promissory notes due October 29, 2007 in the original principal amount of $1.8
million (the “Bridge
Loan”)
and
related bridge loan documents, as amended through the date hereof.
WHEREAS,
the Bridge Investors have agreed to accept revisions to the Bridge Loan in
order
to permit the company to accept new financing from new investors (the
“Investors”) and have agreed and do hereby waive any and all existing or prior
breaches or defaults under the Bridge Loan, including pursuant to the terms
of
the Purchase Agreement and the Security Agreement, dated June 1, 2007, as
amended by First Amendment to Security Agreement, dated July 20, 2007 (the
“Security
Agreement”
and
together with the Purchase Agreement, the Notes and other documents ancillary
to
or related to the Bridge Loan, the “Bridge
Loan Documents”);
WHEREAS,
the Company has granted certain rights to the Bridge Investors, including but
not limited to (i) a right to participate in future financings, (ii) a right
to
repayment senior to existing or future indebtedness of the Company, (iii) price
protection in the event of a subsequent financing and certain registration
rights and the Investors desire to waive and modify those
provisions;
WHEREAS,
the Company has secured commitments for certain short-term bridge loan financing
of up to $120,000 (the “Short-Term
Loans”)
and
desires to offer shares of its common stock to the Investors in a private
placement offering of up to $3,000,000 (the “Private
Placement”);
NOW,
THEREFORE, in consideration of the mutual covenants contained herein, and for
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the Company and each Investor agree as
follows:
1.
Bridge
Investors Waiver Agreements.
Each of
the Bridge Investors hereby unconditionally and irrevocably waives:
|
(i)
|
the
Future Financing Participation Right,
as set forth in Section 5.16 of the Purchase Agreement;
|
|
(ii)
|
the
Senior Debt Ranking, as set forth in Section 3 of the
Note;
|
|
(iii)
|
the
Price Protection Right, as set forth in Section 5.16 of the Purchase
Agreement and Section 5 of the
Note;
|
|
(iv)
|
the
Registration Rights, as set forth in Section 7.01 of the Purchase
Agreement;
|
|
(v)
|
any
breach of representation, warranty or covenant, or Event of Default
or
other default under the Bridge Loan Documents;
and
|
|
(vi)
|
any
and all penalties, damages or claims and any other right to which
the
Investor is entitled under the Bridge Loan
Documents.
|
The
foregoing waivers shall continue until the later of the closing of the
Short-Term Loan or the Private Placement, but not later than December 14, 2007
provided if a closing of the Private Placement shall occur prior to such date
such waivers shall become permanent, and shall apply to the Short-Term Loan
and
the Private Placement and this Agreement.
In
addition, the Company shall be permitted, with the proceeds of the Short-Term
Loan or the Private Placement, to redeem $755,000 of original principal amount
of Bridge Loans sold to Acqua Capital (the “Aqua Loan”), including accrued
interest thereon, and issue to Acqua Capital 200,000 shares of common stock
as
consideration for settlement of any and all claims.
2.
Bridge
Investor Additional Agreements
|
(i)
|
Each
Bridge Investor and the Company agree that the outstanding principal
amount of all Bridge Loan debt, plus accrued interest, shall be converted
into common stock of the Company at a purchase price of $0.04 per
share,
with 5 year warrants for 50% of such number of shares sold exercisable
at
$0.06 per share; and 50% of such number of shares sold exercisable
at
$0.12 per share. All of such warrants shall have cashless exercise
features.
|
|
(ii)
|
The
agreements and waivers hereunder of the Bridge Investors shall be
subject
to the following:
|
|
a.
|
The
Waivers set forth in paragraph 1 hereof shall be of no force or effect
unless ITU Ventures agrees that it shall not offer, sell, assign,
hypothecate, pledge, or otherwise transfer any securities of the
Company,
directly or indirectly purchased or held by ITU Ventures of any of
its
affiliates, officers, directors of employees, without the prior written
consent of each of the Investors for a period of 18 months as set
forth in
a separate Lock Up Agreement;
|
|
b.
|
No
securities convertible into any shares of common stock of the Company
held
by any Bridge Investor or Investor may be exercised on less than
61 days
prior written notice to the Company, unless such provision is waived
by
the Investor in writing on at least 61 days prior written notice
to the
Company if such conversion would result in the holder owning in excess
of
4.9% of the outstanding common stock of the
Company.
|
|
c.
|
The
Waivers set forth in paragraph 1 hereof shall be of no force or effect
unless the Company shall offer and sell to New Investors in the Private
Placement up to $3.0 million gross proceeds of common stock of the
Company
at
a purchase price of $0.04 per share, with 5 year warrants for 50%
of such
number of shares sold exercisable at $0.06 per share; and 50% of
such
number of shares sold exercisable at $0.12 per
share.
|
|
d.
|
The
Waivers set forth in paragraph 1 hereof shall be of no force or effect
unless the Board of Directors shall grant to management of the Company
5
year incentive options exercisable at $0.15 per
share.
|
-
2
-
|
(iii)
|
The
Company shall authorize the foregoing not later than November 30,
2007.
|
|
(iv)
|
The
Company shall issue and deliver to the parties all usual and customary
documents in order to memorialize the foregoing agreements of the
parties,
including all stock certificates, warrants, and similar agreements,
within
30 days of the date hereof.
|
|
(v)
|
On
November 30, 2007 the Company shall send by wire transfer the funds
required to redeem the Acqua Loan.
|
|
(vi)
|
On
closing on an amount of $3 million by January 1, 2008 if no such
closing
shall occur under the Private Placement, the Company shall pay $500,000
to
IR/PR firms reasonably acceptable to the Bridge Investors and upon
the
initial closing list its stock for trading on a German exchange acceptable
to Westminster Securities.
|
|
(vii)
|
In
the event the Company does not possess sufficient shares of common
stock
authorized, it shall use its best efforts immediately to seek shareholder
approval and to amend its certificate of incorporation and any other
documents or agreements to permit the lawful issuance and delivery
of all
securities hereunder.
|
|
(viii)
|
All
fees and expenses of the offering to placement agents shall be immediately
paid or set off from the proceeds.
|
3.
Miscellaneous.
(a) No
Continuing Agreement.
No
waiver by the Investors hereunder shall be deemed to be a continuing waiver
in
the future except as noted herein.
(b) No
Other Alterations to Purchase Agreement.
Except
as herein expressly amended, the Purchase Agreement and all other agreements,
documents, instruments and certificates executed in connection therewith, except
to the extent of the Agreement specifically provided herein, are ratified and
confirmed in all respects and shall remain in full force and effect in
accordance with their respective terms. The execution, delivery and
effectiveness of this Agreement shall
not
constitute a consent or waiver
to or
modification of any provision, term or condition of the Purchase Agreement,
other than such terms, provisions, or conditions that are required to consummate
the transactions contemplated by this Agreement.
(c) Counterparts;
Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same instrument and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
(d) Governing
Law.
THIS
WAIVER SHALL
BE
GOVERNED BY, CONSTRUEDAND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF
NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. EACH PARTY HERETO
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL OR STATE COURTS
LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY CLAIM OR CONTROVERSY RELATED
TO THE ENFORCEMENT OR INTERPRETATION OF THIS WAIVER. IN THE EVENT OF ANY ACTION
OR PROCEEDING TO ENFORCE ANY OF THE PROVISIONS OF THIS AGREEMENT, THE PREVAILING
PARTY WILL BE ENTITLED TO RECOVERY OF ITS REASONABLE COSTS AND EXPENSES INCURRED
IN CONNECTION WITH SUCH ACTION.
-
3
-
(e) Severability.
If any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement shall remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree shall remain in full force and effect
to
the extent not held invalid or unenforceable.
(f) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
-
4
-
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
|
By:
|
||
| Name: | Xxxxxx Xxxxxxxx | |
| Title: | President and Chief Executive Officer | |
[SIGNATURE
PAGES FOR INVESTORS FOLLOW]
-
5
-
[INVESTOR
SIGNATURE PAGES TO WAIVER]
IN
WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed
by its authorized signatory as of the date first indicated above:
Name
of
Purchaser:
____________________________________________________________
Signature
of Authorized Signatory of Purchaser:
______________________________________
Name
of
Authorized Signatory:
____________________________________________________
Title
of
Authorized Signatory:
_____________________________________________________
Email
Address of
Purchaser:______________________________________________________
Fax
Number of Purchaser:
________________________________________________________
-
6
-
