EXHIBIT 10.15 - $390,000 CONVERTIBLE DEBENTURE
THIS SECURED DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE
(COLLECTIVELY, THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR
SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION
D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND THE COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH
INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE
AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE MADE
EXCEPT IN COMPLIANCE WITH THE ACT.
CONVERTIBLE DEBENTURE
WWAP, INC.
5% CONVERTIBLE DEBENTURE
DUE AUGUST 26, 2006
No. CCP-1 $390,000
This Debenture is issued by WWAP, INC., a Delaware corporation (the
"COMPANY"), to Cornell Capital Partners L.P. (together with its permitted
successors and assigns, the "HOLDER") pursuant to exemptions from registration
under the Securities Act of 1933, as amended.
ARTICLE I.
SECTION 1.01 PRINCIPAL AND INTEREST. For value received, on August 26,
2006 the Company hereby promises to pay to the order of the Holder in lawful
money of the United States of America and in immediately available funds the
principal sum of Three Hundred Ninety Thousand Dollars ($390,000), together with
interest on the unpaid principal of this Debenture at the rate of five percent
(5%) per year (computed on the basis of a 365-day year and the actual days
elapsed) from the date of this Debenture until paid. At the Company's option,
the entire principal amount and all accrued interest shall be either (a) paid to
the Holder on August 26, 2006 or (b) converted in accordance with Section 1.02
herein provided, however, that in no event shall the Holder be entitled to
convert this Debenture for a number of shares of Common Stock in excess of that
number of shares of Common Stock which, upon giving effect to such conversion,
would cause the aggregate number of shares of Common Stock beneficially owned by
the Holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such conversion (which provision may be waived by the
Investor by written notice from the Investor to the Company, which notice shall
be effective 61 days after the date of such notice). This limitation shall not
apply to an automatic conversion pursuant to Section 4.03 hereof.
SECTION 1.02 OPTIONAL CONVERSION. The Holder is entitled, at its
option, to convert, and sell on the same day, at any time and from time to time
subject to restrictions set forth below, until payment in full of this
Debenture, all or any part of the principal amount of the Debenture, plus
accrued interest, into shares (the "CONVERSION SHARES") of the Company's common
stock, par value $0.01 per share ("COMMON STOCK"), at the price per share (the
"CONVERSION PRICE") equal to the lowest volume weighted average price ("VWAP")
of the Company's Common Stock (as reported Bloomberg, LP) for the five (5)
Trading Days immediately preceding the Conversion Date (as defined herein).
Subparagraphs (a) and (b) above are individually referred to as a "CONVERSION
PRICE". As used herein, "PRINCIPAL MARKET" shall mean The National Association
of Securities Dealers Inc.'s Over-The-Counter Bulletin Board, Nasdaq SmallCap
Market, or American Stock Exchange. If the Common Stock is not traded on a
Principal Market, the Closing Bid Price shall mean the reported Closing Bid
Price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the applicable periods. No fraction of shares or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. To
convert this Debenture, the Holder hereof shall deliver written notice thereof,
substantially in the form of Exhibit "A" to this Debenture, with appropriate
insertions (the "CONVERSION NOTICE"), to the Company at its address as set forth
herein. The date upon which the conversion shall be effective (the "CONVERSION
DATE") shall be deemed to be the date set forth in the Conversion Notice.
So long as there is no Event of Default (as defined herein), the Holder
may not convert this Debenture prior to 120 calendar days after the Company's
Common Stock is quoted on the Principal Market. After the end of such period,
the Holder may convert up to twenty five percent (25%) of the principal and
interest due hereunder. The Holder shall not have any restrictions on conversion
after the Company's Common Stock has been quoted on the Principal Market for 180
calendar days.
SECTION 1.03 RESERVATION OF COMMON STOCK. The Company shall reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Debenture, such number of
shares of Common Stock as shall from time to time be sufficient to effect such
conversion, based upon the Conversion Price. If at any time the Company does not
have a sufficient number of Conversion Shares authorized and available, then the
Company shall call and hold a special meeting of its stockholders within
forty-five (45) days of that time for the sole purpose of increasing the number
of authorized shares of Common Stock.
SECTION 1.04 RIGHT OF REDEMPTION. The Company shall have the right to
redeem all or part of this Debenture by providing five (5) days prior written
notice (a "REDEMPTION NOTICE"). If the Company provides a Redemption Notice to
the Holder prior to the Company's Common Stock having been quoted on the
Principal Market for 90 days, then the redemption price shall be equal to the
principal amount, plus accrued interest. Thereafter, the redemption price shall
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be equal to 120% of the principal amount, plus accrued interest. If the Company
delivers a Redemption Notice, then the Company shall consummate such redemption
and pay the redemption price to the Holder within five (5) days of the date
thereof. If the Company fails to consummate such redemption and to pay the
redemption price, then the Company shall pay the Holder liquidate damages (and
not as a penalty) equal to 2% of the principal amount to be redeemed as
specified in the applicable Redemption Notice.
SECTION 1.05 REGISTRATION RIGHTS. The Company is obligated to register
the resale of the Conversion Shares under the Securities Act of 1933, as
amended, pursuant to the terms of a Registration Rights Agreement of even date
herewith between the Company and the Holder (the "INVESTOR REGISTRATION RIGHTS
AGREEMENT").
SECTION 1.06 INTEREST PAYMENTS. Accrued interest shall be paid at the
time of maturity or conversion to the person in whose name this Debenture is
registered. At the time such interest is payable, the Holder, in its sole
discretion, may elect to receive the interest in cash (via wire transfer or
certified funds) or in the form of Common Stock. In the event of default, as
described in Article III Section 3.01 hereunder, the Holder may elect that the
interest be paid in cash (via wire transfer or certified funds) or in the form
of Common Stock. If paid in the form of Common Stock, the amount of stock to be
issued will be calculated as follows: the value of the stock shall be the
Conversion Price on: (i) the date the interest payment is due; or (ii) if the
interest payment is not made when due, the date the interest payment is made. A
number of shares of Common Stock with a value equal to the amount of interest
due shall be issued. No fractional shares will be issued; therefore, in the
event that the value of the Common Stock per share does not equal the total
interest due, the Company will pay the balance in cash.
SECTION 1.07 PAYING AGENT AND REGISTRAR. Initially, the Company will
act as paying agent and registrar. The Company may change any paying agent,
registrar, or Company-registrar by giving the Holder not less than ten (10)
business days' written notice of its election to do so, specifying the name,
address, telephone number and facsimile number of the paying agent or registrar.
The Company may act in any such capacity.
ARTICLE II.
SECTION 2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may not be
amended without the consent of the Holder. Notwithstanding the above, without
the consent of the Holder, the Debenture may be amended to cure any ambiguity,
defect or inconsistency, to provide for assumption of the Company obligations to
the Holder or to make any change that does not adversely affect the rights of
the Holder.
ARTICLE III.
SECTION 3.01 EVENTS OF DEFAULT. An Event of Default is defined as
follows: (a) failure by the Company to pay amounts hereunder when due,
including, without limitation, principal, interest and liquidated damages; (b)
failure by the Company to comply with the terms of the Irrevocable Transfer
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Agent Instructions; (c) failure by the Company's transfer agent to issue freely
tradeable Common Stock to the Holder within five (5) days of the Company's
receipt of the attached Notice of Conversion from Holder; (d) failure by the
Company to comply with any of its other agreements in the Debenture; (e) events
of bankruptcy or insolvency; (f) a breach by the Company of its obligations
under the Securities Purchase Agreement, the Escrow Agreement, the Security
Agreement, the Investor Registration Rights Agreement or any other agreement
entered into on the date hereof between the Company and the Holder which is not
cured within any applicable cure period set forth in such agreements. Upon the
occurrence of an Event of Default, the Holder may, in its sole discretion,
accelerate all amounts due hereunder and may, notwithstanding any restrictions
or limitations contained herein, the Holder may convert all or any portion of
this Debenture into Common Stock at the price set forth in Section 1.02 hereof
and sell or transfer any shares of Common Stock received upon such conversion.
SECTION 3.02 FAILURE TO ISSUE UNRESTRICTED COMMON STOCK. As indicated
in Article III Section 3.01, a breach by the Company of its obligations under
the Investor Registration Rights Agreement shall be deemed an Event of Default,
which if not cured within ten (10) days, shall entitle the Holder to accelerate
full repayment of all debentures outstanding and accrued interest thereon or,
notwithstanding any limitations contained in this Debenture and/or the
Securities Purchase Agreement, to convert all debentures outstanding and accrued
interest thereon into shares of Common Stock pursuant to Section 1.02 herein.
The Company acknowledges that failure to honor a Notice of Conversion shall
cause irreparable harm to the Holder.
ARTICLE IV.
SECTION 4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole
or in part, may be converted at any time following the date of closing into
shares of Common Stock at a price equal to the Conversion Price as described in
Section 1.02 above.
SECTION 4.02 RE-ISSUANCE OF DEBENTURE. When the Holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
SECTION 4.03 TERMINATION OF CONVERSION RIGHTS. The Holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on the date that is the second (2nd) year anniversary from the
date hereof and this Debenture shall be automatically converted on that date in
accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of Common Stock and amount of interest shall be issued to the
Holder.
ARTICLE V.
SECTION 5.01 ANTI-DILUTION. In the event that the Company shall at any
time subdivide the outstanding shares of Common Stock, or shall issue a stock
dividend on the outstanding Common Stock, the Conversion Price in effect
immediately prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Common Stock, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination as the case may be.
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SECTION 5.02 CONSENT OF HOLDER TO SELL CAPITAL STOCK OR GRANT SECURITY
INTERESTS. Except for the Standby Equity Distribution Agreement dated the date
hereof between the Company and Cornell Capital Partners, LP. so long as any of
the principal of or interest on this Note remains unpaid and unconverted, the
Company shall not, without the prior consent of the Holder, issue or sell (i)
any Common Stock or Preferred Stock without consideration or for a consideration
per share less than its fair market value determined immediately prior to its
issuance, (ii) issue or sell any Preferred Stock, 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 such Common Stock's fair market value determined immediately
prior to its issuance, or (iii (iv) file any registration statement on Form S-8.
ARTICLE VI.
SECTION 6.01 NOTICE. Notices regarding this Debenture shall be sent to
the parties at the following addresses, unless a party notifies the other
parties, in writing, of a change of address:
If to the Company, to: WWAP, Inc.
C/o ActivePoint Ltd.
20 Giborel Israel St. Poleg Industrial Zone
Netanya Israel - 42504
Attention: Moshe Ofer
Telephone: 972-9-8857484
Facsimile: 972-9-8853233
With a copy to: McLaughlin & Stern, LLP
260 Madison Avenue
New York, NY 10016
Attention: Steven W. Schuster, Esq.
Telephone: (212) 448-1100
Facsimile: (212) 448-0066
If to the Holder: Cornell Capital Partners, LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07303
Attention: Mark A. Angelo
Portfolio Manager
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
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With a copy to: Cornell Capital Partners, LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07303
Attention: Troy J. Rillo, Esq.
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
SECTION 6.02 GOVERNING LAW. This Debenture shall be deemed to be made
under and shall be construed in accordance with the laws of the State of New
Jersey without giving effect to the principals of conflict of laws thereof. Each
of the parties consents to the exclusive jurisdiction of the U.S. District Court
sitting in the District of the State of New Jersey or the state courts of the
State of New Jersey sitting in Hudson County, New Jersey in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
SECTION 6.03 SEVERABILITY. The invalidity of any of the provisions of
this Debenture shall not invalidate or otherwise affect any of the other
provisions of this Debenture, which shall remain in full force and effect.
SECTION 6.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents
the entire agreement between the parties hereto with respect to the subject
matter hereof and there are no representations, warranties or commitments,
except as set forth herein. This Debenture may be amended only by an instrument
in writing executed by the parties hereto.
SECTION 6.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
Company has executed this Debenture as of the 20th day of October 2004.
WWAP, INC.
By:/S/ MOSHE OFER
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Name: Moshe Ofer
Title: CEO
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EXHIBIT "A"
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE DEBENTURE)
TO:
The undersigned hereby irrevocably elects to convert $ of the principal
amount of the above Debenture into Shares of Common Stock of WWAP, Inc.,
according to the conditions stated therein, as of the Conversion Date written
below.
CONVERSION DATE:
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APPLICABLE CONVERSION PRICE:
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SIGNATURE:
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NAME:
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ADDRESS:
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AMOUNT TO BE CONVERTED: $
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AMOUNT OF DEBENTURE UNCONVERTED: $
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CONVERSION PRICE PER SHARE: $
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NUMBER OF SHARES OF COMMON STOCK TO BE
ISSUED:
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PLEASE ISSUE THE SHARES OF COMMON STOCK
IN THE FOLLOWING NAME AND TO THE
FOLLOWING ADDRESS:
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ISSUE TO:
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AUTHORIZED SIGNATURE:
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NAME:
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TITLE:
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PHONE NUMBER:
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BROKER DTC PARTICIPANT CODE:
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ACCOUNT NUMBER:
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A-1