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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.
(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
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