WAIVER AGREEMENT
This
Waiver (this
“Agreement”) is made and
entered into as of the 30th day of June, 2008, by and between Cistera
Networks, Inc., a Nevada corporation (the “Company”), and Roaring
Fork Capital SBIC, LP, a Delaware limited
partnership (“Roaring
Fork”).
Recitals
Whereas,
Roaring Fork purchased a Convertible Promissory Note in the original principal
amount of $1,000,000 (the “Note”) and a warrant to
purchase 1,000,000 shares of the Company’s common stock (the “Warrant”) from the Company in
April 2007;
Whereas,
in connection with the purchase of the Note and the Warrant, the Company and
Roaring Fork entered into a letter agreement dated April 5, 2007;
Whereas,
the Company is providing temporary incentive to its investors by lowering the
conversion price of outstanding notes (including the Note) and by lowering the
exercise price of outstanding warrants (including the Warrant) (the
“Incentive”);
Whereas,
Roaring Fork has accepted the Incentive with respect to that portion of the
principal amount of the Note equal to $800,000, including all accrued but unpaid
interest and penalties with respect to that portion of the principal, and
delivered to the Company an the Allonge to Promissory Note attached as Appendix A;
Whereas,
Roaring Fork has also accepted the Incentive with respect to the entire Warrant
and has determined to purchase an additional 300,000 shares of the Company’s
common stock at $.30 per share resulting from its exercise of the Warrant; as
provided under the Incentive;
Whereas,
in connection with its acceptance of the Incentive, conversion of the Note,
exercise of the Warrant and purchase of additional shares, Roaring Fork has
delivered to the Company payment of $490,000 and the Company will issue to
deliver to Roaring Fork an aggregate of 3,259,424 shares of the Company’s common
stock (the “Shares”), of which 1,959,424 shares result from the conversion of
the Note and 1,300,000 shares result from the exercise of the Warrant and
purchase of additional shares pursuant to the Incentive.
Whereas,
in connection with the aforementioned transaction, the Company has requested
that Roaring Fork waive the Company’s obligation to register the Shares, and
Roaring Fork has agreed to provide such waiver as set forth in this
Agreement.
Agreement
Now,
Therefore, in
consideration of the mutual promises, covenants and agreements set forth herein,
the sufficiency of which the parties acknowledge, the parties hereby agree as
follows:
1. Termination
of Registration Obligation and Damages. The Company’s
obligation to register the shares of common stock underlying the Note and the
Warrant is terminated, and damages related thereto are hereby waived, and the
Company shall deliver to Roaring Fork an irrevocable instruction letter to the
Company’s transfer agent to issue to Roaring Fork 58,777 shares of the Company’s
common stock within five business days of the date of this
Agreement. The other provisions of the letter agreement dated April
5, 2007 between the Company and Roaring Fork remain in full force and
effect.
2. Representations,
Warranties and Covenants of the Company.
The Company hereby represents and warrants to Roaring Fork as follows:
2.1 Corporate Power.
The Company has all requisite corporate power and authority to execute and
deliver this Agreement, and to carry out and perform the provisions of this
Agreement.
2.2 Authorization. All
corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of the Company hereunder has
been taken. This Agreement, when executed and delivered by the
Company, will constitute a valid and binding obligation of the Company,
enforceable 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.
2.3 Note
Conversions. The Company had note payables of $3,598,776 at
May 31, 2008. The Company has made no notes since May 31,
2008. Since May 31, 2008, the Company has received: (i)
note conversions of $1,325,723 into the Company’s common stock at $.53 per
share, (ii) warrant exercises at $.40 per share to purchase 729,395 shares of
the Company’s common stock for proceeds of $291,758 and (iii) warrant exercises
at $.30 per share to purchase 180,375 shares of the Company’s common stock for
proceeds of $54,113.
2.4 Agreements with Xxxx
Xxxxxxx. The Company has entered into a Consulting Agreement
with Xxxx Xxxxxxx. The Company’s Board of Directors (the “Board”)
will, within ten business days of the date hereof, elect Xxxxxxx to serve as a
member of the Board and as Chairman of the Board, it being understood that
Xxxxxxx requires that the Company obtain D&O insurance prior to accepting
these positions. The Company covenants to obtain D&O insurance by
no later than August 31, 2008 and that the Xxxxxxx elections to the Board will
not be revoked. The Company and its principal stockholders have
entered into an agreement with Xxxx Xxxxxxx in the form attached as Appendix C to this
Agreement.
2.5 Most
Favored Nation.
(a) If
and whenever, on or after the date hereof and before June 30, 2009 (the “MFN Period”), the Company (i)
permits the conversion of any note payable outstanding as of the date hereof at
a conversion price below $.53 per share, then immediately after such conversion,
the Company shall issue to Roaring Fork additional shares of the common stock
such that Roaring Fork shall receive benefit of the more favorable terms of the
subsequent conversion or issuance(s). By way of example, if the
Company permits the conversion of a note payable outstanding as of the date
hereof at a conversion price of $.50 per share, then Roaring Fork would receive
an additional 117,494 shares of the common stock (calculated by dividing the
unpaid principal, interest and penalties of the Note, as identified in Section 1
above, in the amount of $1,038,495 by $.50 (2,076,918) and subtracting from that
amount the 1,959,424 shares issued to Roaring Fork pursuant to Section 1 above
(2,076,918 - 1,959,424 = 117,494)).
(b) If
and whenever, during the MFN Period, the Company permits the exercise of any
warrant outstanding as of the date hereof at an exercise price below $.40 per
share, the Company shall issue to Roaring Fork additional shares of the common
stock such that Roaring Fork shall receive benefit of the more favorable terms
of the subsequent exercise. By way of example, if the Company permits
the exercise of a warrant outstanding as of the date hereof at an exercise price
of $.30 per share, then Roaring Fork would receive an additional 333,334 shares
of the common stock (calculated by dividing the aggregate exercise price paid
with respect to Roaring Fork’s exercise of the Warrant pursuant to Section 2
above ($400,000) by $.30 (1,333,334) and subtracting from that amount the
1,000,000 shares issued to Roaring Fork pursuant to Section 2 above (1,333,334 -
1,000,000 = 333,334)).
(c) If,
during the MFN Period, the Company in any manner issues or sells any (i) shares
of its common stock for no consideration or any consideration below $.53 per
share, or (ii) any Convertible Securities (as defined below), other than Options
(as defined below) granted or sold in accordance with any employee equity
incentive plan, and the lowest price per share for which one share of the
Company's common stock is issuable upon such conversion or exchange or exercise
thereof is less than $.53 per share, then such share of common stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price per
share. For the purposes of this agreement, the “lowest
price per share for which one share of the Company's common stock is issuable
upon such conversion or exchange or exercise ” shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by the Company
with respect to any one share of its common stock upon the issuance or sale of
the Convertible Security and upon the conversion or exchange or exercise of such
Convertible Security. Notwithstanding the foregoing, this Section (c)
shall only apply, and the issuances to Roaring Fork described in Sections 2.4(a)
and (b) shall only be made, (x) after the first $200,000 in aggregate gross
proceeds received by the Company with respect to sales of common stock or
Convertible Securities, and thereafter, (y) only if the Company repays, redeems,
repurchases, retires or otherwise terminates the notes payable or warrants
described in Sections 2.4(a) and (b), within 180 days of the issuance of shares
of common stock or Convertible Securities described in this Section
2.4(c).
For
purposes of this Agreement, issuances of any rights, warrants or options to
subscribe for or purchase shares of common stock of the Company (“Options”) and
issuances of any stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of common stock of
the Company (“Convertible Securities”).
(d) Notwithstanding
this Section 2.4, no issuance of common stock pursuant to this Section 2.4 shall
be made to Roaring Fork with respect to any shares of common stock or
Convertible Securities issued by the Company in connection with the settlement
of its current litigation pending in Dallas, Texas, styled XXXXXXX X. XXXXXX VS.
XXXXXXX X. ROYAL, XXXXXXX X. XXXX, XXXXX X. XXXXXX, XX., XXXXXXX XXXXXXX, CNH
HOLDINGS COMPANY D/B/A CISTERA NETWORKS AND XBRIDGE SOFTWARE, INC.; Cause No.
DV05-0600-G; X-000xx Xxxxxxxx Xxxxx, Xxxxxx Xxxxxx, Xxxxx.
2.6 Acknowledgments. The
Company acknowledges that the provisions of this Section 2 are material to
Roaring Fork’s investment decision to convert the Note, exercise the Warrant and
purchase the additional shares of stock as set forth in Sections 2.3 above and
to terminate the registration obligation in Section 1.
3. Fees
and Expenses. The Company agrees to pay Roaring Fork $5,000 at
Closing as reimbursement of Roaring Fork’s legal fees in connection with the
preparation of this Agreement and other expenses. It is understood
that counsel for Roaring Fork has only rendered legal advice to Roaring Fork,
and not to the Company or any other note holder in connection with the
transactions contemplated hereby, and that each of the Company and Roaring Fork
has relied for such matters on the advice of its own respective
counsel. Each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.
4. Miscellaneous.
4.1 Governing Law. This
Agreement shall be governed by and construed under the laws of the State of
Colorado in all respects as such laws are applied to agreements among Colorado
residents entered into and performed entirely within Colorado, except for
matters of corporate law, which shall be governed by the laws of the State of
Nevada. The parties agree that any action brought by either party
under or in relation to this Agreement, including without limitation to
interpret or enforce any provision of this Agreement, shall be brought in, and
each party agrees to and does hereby submit to the jurisdiction and venue of,
any state or federal court located in the County of Denver,
Colorado.
4.2 Survival. The
representations, warranties, covenants and agreements made herein shall survive
the closing of the transactions contemplated hereby for a period of two years
following the Closing.
4.3 Successors and
Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon the parties
hereto and their respective successors, assigns, heirs, executors and
administrators.
4.4 Severability. In
the event one or more of the provisions of this Agreement should, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
4.5 Amendment and Waiver. This Agreement
may be amended or modified only upon the written consent of the Company and
Roaring Fork.
4.6 Titles and
Subtitles. The titles of the sections and subsections of the
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
4.7 Counterparts. This
Agreement may be executed in any number of counterparts and may be delivered by
facsimile or other electronic means, each of which shall be an original, but all
of which together shall constitute one instrument.
4.8 Pronouns. All
pronouns contained herein, and any variations thereof, shall be deemed to refer
to the masculine, feminine or neutral, singular or plural, as to the identity of
the parties hereto may require.
[The
remainder of this page is intentionally left blank.]
In Witness
Whereof, each of the parties hereto has executed this Agreement as of the
date first above written.
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COMPANY:
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ROARING
FORK:
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By:
/s/ Xxxxx X. Xxxxx
Name: Xxxxx
X. Xxxxx
Title: CEO
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ROARING
FORK CAPITAL SBIC, L.P.
Roaring
Fork Capital Management, LLC
Its
General Partner
By:
/s/ G. Xxxxxxx Xxxxxxx
Name:
G. Xxxxxxx Xxxxxxx
Its:
Manager
Address:5350 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx,
XX 00000-0000
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Appendix
A
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Form
of Allonge to Promissory Note
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Appendix
B
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Form
of Warrant Endorsement
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Appendix
C
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Form
of Xxxxxxx Agreement
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