STANDBY EQUITY
DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of the
20th day of April 2005 (the “ Agreement ”)
between CORNELL CAPITAL PARTNERS, LP , a Delaware limited
partnership (the “ Investor ”), and AIRBEE
WIRELESS, INC. , a corporation organized and existing under the
laws of the State of Delaware (the “ Company
”).
WHEREAS , the parties desire
that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Investor, from time
to time as provided herein, and the Investor shall purchase from
the Company up to Twenty Million U.S. Dollars ($20,000,000) of the
Company’s common stock, par value $0.00004 per share (the
“ Common Stock ”); and
WHEREAS , such investments
will be made in reliance upon the provisions of Regulation D
(“ Regulation D ”) of the Securities Act of
1933, as amended, and the regulations promulgated thereunder (the
“ Securities Act ”), and or upon such other
exemption from the registration requirements of the Securities Act
as may be available with respect to any or all of the investments
to be made hereunder.
WHEREAS , the Company has
engaged Monitor Capital Inc. (the “ Placement Agent
”), to act as the Company’s exclusive placement agent
in connection with the sale of the Company’s Common Stock to
the Investor hereunder pursuant to the Placement Agent Agreement
dated the date hereof by and among the Company, the Placement Agent
and the Investor (the “ Placement Agent Agreement
”).
NOW , THEREFORE , the
parties hereto agree as follows:
ARTICLE
Certain
Definitions
Section “ Advance
” shall mean the portion of the Commitment Amount requested
by the Company in the Advance Notice.
Section “ Advance Date
” shall mean the date the David Gonzalez Attorney Trust
Account is in receipt of the funds from the Investor and David
Gonzalez, Esq., is in possession of free trading shares from the
Company and therefore an Advance by the Investor to the Company can
be made and David Gonzalez, Esq. can release the free trading
shares to the Investor. The Advance Date shall be the first (1
st ) Trading Day after expiration of the applicable
Pricing Period for each Advance.
Section “ Advance Notice
” shall mean a written notice to the Investor setting forth
the Advance amount that the Company requests from the Investor and
the Advance Date.
Section “ Advance Notice
Date ” shall mean each date the Company delivers to the
Investor an Advance Notice requiring the Investor to advance funds
to the Company, subject to the terms of this Agreement. No Advance
Notice Date shall be less than five (5) Trading Days after the
prior Advance Notice Date.
Section “ Bid Price
” shall mean, on any date, the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market or
if the Common Stock is not traded on a Principal Market, the
highest reported bid price for the Common Stock, as furnished by
the National Association of Securities Dealers, Inc.
Section “ Closing
” shall mean one of the closings of a purchase and sale of
Common Stock pursuant to Section 2.3.
Section “ Commitment
Amount ” shall mean the aggregate amount of up to Twenty
Million U.S. Dollars ($20,000,000) which the Investor has agreed to
provide to the Company in order to purchase the Company’s
Common Stock pursuant to the terms and conditions of this
Agreement.
Section “ Commitment
Period ” shall mean the period commencing on the earlier
to occur of (i) the Effective Date, or (ii) such earlier
date as the Company and the Investor may mutually agree in writing,
and expiring on the earliest to occur of (x) the date on which
the Investor shall have made payment of Advances pursuant to this
Agreement in the aggregate amount of Twenty Million U.S. Dollars
($20,000,000), (y) the date this Agreement is terminated
pursuant to Section 2.4, or (z) the date occurring
twenty-four (24) months after the Effective Date.
Section “ Common Stock
” shall mean the Company’s common stock, par value
$0.00004 per share.
Section “ Condition
Satisfaction Date ” shall have the meaning set forth in
Section 7.2.
Section “ Damages
” shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable
attorney’s fees and disbursements and costs and expenses of
expert witnesses and investigation).
Section “ Effective Date
” shall mean the date on which the SEC first declares
effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section “ Escrow
Agreement ” shall mean the escrow agreement among the
Company, the Investor, and David Gonzalez, Esq., dated the date
hereof.
Section “ Exchange Act
” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
Section “ Material Adverse
Effect ” shall mean any condition, circumstance, or
situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of
its obligations under this Agreement or the Registration Rights
Agreement in any material respect.
Section “ Market Price
” shall mean the lowest VWAP of the Common Stock during the
Pricing Period.
Section “ Maximum Advance
Amount ” shall be Three Hundred Thousand U.S. Dollars
(US$300,000) per Advance Notice.
Section “ NASD ”
shall mean the National Association of Securities Dealers, Inc.
Section “ Person ”
shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
Section “ Placement
Agent ” shall mean Monitor Capital Inc., a registered
broker-dealer.
Section “ Pricing Period
” shall mean the five (5) consecutive Trading Days after
the Advance Notice Date.
Section “ Principal
Market ” shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange, the OTC
Bulletin Board or the New York Stock Exchange, whichever is at the
time the principal trading exchange or market for the Common
Stock.
Section “ Purchase Price
” shall be set at ninety seven percent (97%) of the Market
Price during the Pricing Period.
Section “ Registrable
Securities ” shall mean the shares of Common Stock to be
issued hereunder (i) in respect of which the Registration
Statement has not been declared effective by the SEC,
(ii) which have not been sold under circumstances meeting all
of the applicable conditions of Rule 144 (or any similar
provision then in force) under the Securities Act (“
Rule 144 ”) or (iii) which have not been
otherwise transferred to a holder who may trade such shares without
restriction under the Securities Act, and the Company has delivered
a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend.
Section “ Registration
Rights Agreement ” shall mean the Registration Rights
Agreement dated the date hereof, regarding the filing of the
Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the Investor.
Section “ Registration
Statement ” shall mean a registration statement on Form
S-1 or SB-2 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC for which the Company then qualifies and
which counsel for the Company shall deem appropriate, and which
form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the
provisions of this Agreement and the Registration Rights Agreement,
and in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investor of
the Registrable Securities under the Securities Act.
Section “
Regulation D ” shall have the meaning set forth
in the recitals of this Agreement.
Section “ SEC ”
shall mean the Securities and Exchange Commission.
Section “ Securities Act
” shall have the meaning set forth in the recitals of this
Agreement.
Section “ SEC Documents
” shall mean Annual Reports on Form 10-KSB, Quarterly Reports
on Form 10-QSB, Current Reports on Form 8-K and Proxy Statements of
the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve (12) months
immediately preceding the date hereof or the Advance Date, as the
case may be, until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration
Statement as set forth in the Registration Rights Agreement.
Section “ Trading Day
” shall mean any day during which the New York Stock Exchange
shall be open for business.
Section “ VWAP ”
shall mean the volume weighted average price of the Company’s
Common Stock as quoted by Bloomberg, LP.
ARTICLE
Advances
Section Investments .
Advances . Upon the terms and
conditions set forth herein (including, without limitation, the
provisions of Article VII hereof), on any Advance Notice Date
the Company may request an Advance by the Investor by the delivery
of an Advance Notice. The number of shares of Common Stock that the
Investor shall receive for each Advance shall be determined by
dividing the amount of the Advance by the Purchase Price. No
fractional shares shall be issued. Fractional shares shall be
rounded to the next higher whole number of shares. The aggregate
maximum amount of all Advances that the Investor shall be obligated
to make under this Agreement shall not exceed the Commitment
Amount.
Section Mechanics .
Advance Notice . At any time
during the Commitment Period, the Company may deliver an Advance
Notice to the Investor, subject to the conditions set forth in
Section 7.2; provided, however, the amount for each Advance as
designated by the Company in the applicable Advance Notice, shall
not be more than the Maximum Advance Amount. The aggregate amount
of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount. The Company acknowledges that the Investor may
sell shares of the Company’s Common Stock corresponding with
a particular Advance Notice on the day the Advance Notice is
received by the Investor. There shall be a minimum of five
(5) Trading Days between each Advance Notice Date.
Date of Delivery of Advance
Notice . An Advance Notice shall be deemed delivered on
(i) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received prior to 12:00 noon
Eastern Time, or (ii) the immediately succeeding Trading Day
if it is received by facsimile or otherwise after 12:00 noon
Eastern Time on a Trading Day or at any time on a day which is not
a Trading Day. No Advance Notice may be deemed delivered on a day
that is not a Trading Day.
Section Closings . On each
Advance Date, which shall be the first (1 st ) Trading
Day after expiration of the applicable Pricing Period for each
Advance, (i) the Company shall deliver to David Gonzalez, Esq.
(the “ Escrow Agent ”) shares of the
Company’s Common Stock, representing the amount of the
Advance by the Investor pursuant to Section 2.1 herein,
registered in the name of the Investor which shall be delivered to
the Investor, or otherwise in accordance with the Escrow Agreement
and (ii) the Investor shall deliver to Escrow Agent the amount
of the Advance specified in the Advance Notice by wire transfer of
immediately available funds which shall be delivered to the
Company, or otherwise in accordance with the Escrow Agreement. In
addition, on or prior to the Advance Date, each of the Company and
the Investor shall deliver to the other through the
Investor’s counsel, all documents, instruments and writings
required to be delivered by either of them pursuant to this
Agreement in order to implement and effect the transactions
contemplated herein. Payment of funds to the Company and delivery
of the Company’s Common Stock to the Investor shall occur in
accordance with the conditions set forth above and those contained
in the Escrow Agreement; provided , however , that to
the extent the Company has not paid the fees, expenses, and
disbursements of the Investor, the Investor’s counsel, or the
Company’s counsel in accordance with Section 12.4, the
amount of such fees, expenses, and disbursements may be deducted by
the Investor (and shall be paid to the relevant party) from the
amount of the Advance with no reduction in the amount of shares of
the Company’s Common Stock to be delivered on such Advance
Date.
Section Termination of
Investment . The obligation of the Investor to make an Advance
to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not
yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration
Statement for an aggregate of fifty (50) Trading Days, other than
due to the acts of the Investor, during the Commitment Period, and
(ii) the Company shall at any time fail materially to comply with
the requirements of Article VI and such failure is not cured
within thirty (30) days after receipt of written notice from
the Investor, provided , however , that this
termination provision shall not apply to any period commencing upon
the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective
amendment is declared effective by the SEC.
Section Agreement to Advance
Funds .The Investor agrees to advance the amount specified in
the Advance Notice to the Company after the completion of each of
the following conditions and the other conditions set forth in this
Agreement:
(a) the execution and delivery
by the Company, and the Investor, of this Agreement and the
Exhibits hereto;
(b) the Escrow Agent shall have
received the shares of Common Stock applicable to the Advance in
accordance with Section 2.3. Such shares shall be free of
restrictive legends.
(c) the Company’s
Registration Statement with respect to the resale of the
Registrable Securities in accordance with the terms of the
Registration Rights Agreement shall have been declared effective by
the SEC;
(d) the Company shall have
obtained all material permits and qualifications required by any
applicable state for the offer and sale of the Registrable
Securities, or shall have the availability of exemptions therefrom.
The sale and issuance of the Registrable Securities shall be
legally permitted by all laws and regulations to which the Company
is subject;
(e) the Company shall have
filed with the Commission in a timely manner all reports, notices
and other documents required of a “reporting company”
under the Exchange Act and applicable Commission regulations;
(f) the fees as set forth in
Section 12.4 below shall have been paid or can be withheld as
provided in Section 2.3; and
(g) the conditions set forth in
Section 7.2 shall have been satisfied.
(h) the Company shall have
provided to the Investor an acknowledgement, from Bagell Josephs
& Co. LLC as to its ability to provide all consents required in
order to file a registration statement in connection with this
transaction;
(i) The Company’s
transfer agent shall be DWAC eligible .[DAVE: Current transfer
agent may not be DWAC eligible]
Section 2.6. Lock Up
Period.
During the Commitment Period, the
Company shall not issue or sell (i) any Common Stock or
Preferred Stock without consideration or for a consideration per
share less than the Bid Price on the date of issuance or
(ii) issue or sell any warrant, option, right, contract, call,
or other security or instrument granting the holder thereof the
right to acquire Common Stock without consideration or for a
consideration per share less than the Bid Price on the date of
issuance.
On the date hereof, the Company shall
obtain from each officer and director a lock-up agreement, as
defined below, in the form annexed hereto as Schedule 2.6
agreeing to only sell in compliance with the volume limitation of
Rule 144.
Section 2.7. Hardship .
In the event the Investor sells shares of the Company’s
Common Stock after receipt of an Advance Notice and the Company
fails to perform its obligations as mandated in Section 2.3,
and specifically the Company fails to deliver to the Escrow Agent
on the Advance Date the shares of Common Stock corresponding to the
applicable Advance, the Company acknowledges that the Investor
shall suffer financial hardship and therefore shall be liable for
any and all losses, commissions, fees, or financial hardship caused
to the Investor.
ARTICLE
Representations and
Warranties of Investor
Investor hereby represents and
warrants to, and agrees with, the Company that the following are
true and as of the date hereof and as of each Advance Date:
Section Organization and
Authorization . The Investor is duly incorporated or organized
and validly existing in the jurisdiction of its incorporation or
organization and has all requisite power and authority to purchase
and hold the securities issuable hereunder. The decision to invest
and the execution and delivery of this Agreement by such Investor,
the performance by such Investor of its obligations hereunder and
the consummation by such Investor of the transactions contemplated
hereby have been duly authorized and requires no other proceedings
on the part of the Investor. The undersigned has the right, power
and authority to execute and deliver this Agreement and all other
instruments (including, without limitations, the Registration
Rights Agreement), on behalf of the Investor. This Agreement has
been duly executed and delivered by the Investor and, assuming the
execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations
of the Investor, enforceable against the Investor in accordance
with its terms.
Section Evaluation of Risks .
The Investor has such knowledge and experience in financial tax and
business matters as to be capable of evaluating the merits and
risks of, and bearing the economic risks entailed by, an investment
in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company
involves a high degree of risk.
Section No Legal Advice From the
Company . The Investor acknowledges that it had the opportunity
to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax
advisors. The Investor is relying solely on such counsel and
advisors and not on any statements or representations of the
Company or any of its representatives or agents for legal, tax or
investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
Section Investment Purpose .
The securities are being purchased by the Investor for its own
account, for investment and without any view to the distribution,
assignment or resale to others or fractionalization in whole or in
part. The Investor agrees not to assign or in any way transfer the
Investor’s rights to the securities or any interest therein
and acknowledges that the Company will not recognize any purported
assignment or transfer except in accordance with applicable Federal
and state securities laws. No other person has or will have a
direct or indirect beneficial interest in the securities. The
Investor agrees not to sell, hypothecate or otherwise transfer the
Investor’s securities unless the securities are registered
under Federal and applicable state securities laws or unless, in
the opinion of counsel satisfactory to the Company, an exemption
from such laws is available.
Section Accredited Investor .
The Investor is an “ Accredited Investor ” as
that term is defined in Rule 501(a)(3) of Regulation D of
the Securities Act.
Section Information . The
Investor and its advisors (and its counsel), if any, have been
furnished with all materials relating to the business, finances and
operations of the Company and information it deemed material to
making an informed investment decision. The Investor and its
advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such inquiries
nor any other due diligence investigations conducted by such
Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor’s right to rely on the
Company’s representations and warranties contained in this
Agreement. The Investor understands that its investment involves a
high degree of risk. The Investor is in a position regarding the
Company, which, based upon employment, family relationship or
economic bargaining power, enabled and enables such Investor to
obtain information from the Company in order to evaluate the merits
and risks of this investment. The Investor has sought such
accounting, legal and tax advice, as it has considered necessary to
make an informed investment decision with respect to this
transaction.
Section Receipt of Documents .
The Investor and its counsel have received and read in their
entirety: (i) this Agreement and the Exhibits annexed hereto;
(ii) all due diligence and other information necessary to
verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company’s Form
10-KSB for the year ended 2004 and Form 10-QSB for the period ended
March 31, 2005 and (iv) answers to all questions the
Investor submitted to the Company regarding an investment in the
Company; and the Investor has relied on the information contained
therein and has not been furnished any other documents, literature,
memorandum or prospectus.
Section Registration Rights
Agreement and Escrow Agreement . The parties have entered into
the Registration Rights Agreement and the Escrow Agreement, each
dated the date hereof.
Section No General
Solicitation . Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the shares of Common Stock
offered hereby.
Section Not an Affiliate . The
Investor is not an officer, director or a person that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with the Company or any
“ Affiliate ” of the Company (as that term is
defined in Rule 405 of the Securities Act).
Section Trading Activities .
The Investor’s trading activities with respect to the
Company’s Common Stock shall be in compliance with all
applicable federal and state securities laws, rules and regulations
and the rules and regulations of the Principal Market on which the
Company’s Common Stock is listed or traded. Neither the
Investor nor its affiliates has an open short position in the
Common Stock of the Company, the Investor agrees that it shall not,
and that it will cause its affiliates not to, engage in any short
sales of or hedging transactions with respect to the Common Stock,
provided that the Company acknowledges and agrees that upon
receipt of an Advance Notice the Investor is permitted to sell the
shares to be issued to the Investor pursuant to the Advance Notice
during the applicable Pricing Period.
ARTICLE
Representations and
Warranties of the Company
Except as stated below, on the
disclosure schedules attached hereto or in the SEC Documents (as
defined herein), the Company hereby represents and warrants to, and
covenants with, the Investor that the following are true and
correct as of the date hereof:
Section Organization and
Qualification . The Company is duly incorporated or organized
and validly existing in the jurisdiction of its incorporation or
organization and has all requisite power and authority corporate
power to own its properties and to carry on its business as now
being conducted. Each of the Company and its subsidiaries is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
Section Authorization,
Enforcement, Compliance with Other Instruments . (i) The
Company has the requisite corporate power and authority to enter
into and perform this Agreement, the Registration Rights Agreement,
the Escrow Agreement, the Placement Agent Agreement and any related
agreements, in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Placement
Agent Agreement and any related agreements by the Company and the
consummation by it of the transactions contemplated hereby and
thereby, have been duly authorized by the Company’s Board of
Directors and no further consent or authorization is required by
the Company, its Board of Directors or its stockholders,
(iii) this Agreement, the Registration Rights Agreement, the
Escrow Agreement, the Placement Agent Agreement and any related
agreements have been duly executed and delivered by the Company,
(iv) this Agreement, the Registration Rights Agreement, the
Escrow Agreement, the Placement Agent Agreement and assuming the
execution and delivery thereof and acceptance by the Investor and
any related agreements constitute the valid and binding obligations
of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’
rights and remedies.
Section Capitalization . As of
the date hereof, the authorized capital stock of the Company
consists of 200,000,000 shares of Common Stock, par value $0.00004
per share and no shares of Preferred Stock of which
43,622,107 million shares of Common Stock and no shares of
Preferred Stock were issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in the SEC Documents, no shares
of Common Stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted
by the Company. Except as disclosed in the SEC Documents, as of the
date hereof, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities
( iii) there are no outstanding registration statements
other than on Form S-8 and (iv) there are no agreements or
arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the
Securities Act (except pursuant to the Registration Rights
Agreement). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by this
Agreement or any related agreement or the consummation of the
transactions described herein or therein. The Company has furnished
to the Investor true and correct copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the
date hereof (the “ Certificate of Incorporation
”), and the Company’s By-laws, as in effect on the date
hereof (the “ By-laws ”), and the terms of all
securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
Section No Conflict . The
execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations of
any outstanding series of preferred stock of the Company or By-laws
or (ii) conflict with or constitute a default (or an event
which 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 of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal
Market on which the Common Stock is quoted) applicable to the
Company or any of its subsidiaries or by which any material
property or asset of the Company or any of its subsidiaries is
bound or affected and which would cause a Material Adverse Effect.
Except as disclosed in the SEC Documents, neither the Company nor
its subsidiaries is in violation of any term of or in default under
its Articles of Incorporation or By-laws or their organizational
charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to
the Company or its subsidiaries. The business of the Company and
its subsidiaries is not being conducted in violation of any
material law, ordinance, regulation of any governmental entity.
Except a
