UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) April 19, 2006
Netfabric Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-21419 76- 307819
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(State or other jurisdiction (Commission File Number) (IRS Employer
Identification No.) of Incorporation)
Three Stewart Court, Denville, NJ 07834
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code - (973) 887-2785
(Former Name or Former Address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into Material Definitive Agreement
The Company sold on April 19, 2006, Convertible Debentures (the
"Debentures") in the face amount of $500,000 to five individuals including
$150,000 face value to Fahad Syed, an officer and director, and $50,000 face
value to Fred Nazem, a stockholder. The Debentures bear interest at 8% and are
due on June 17, 2006. At the option of the Debenture holder, the Debenture can
be converted into shares of the Company's common stock at a conversion price of
$.50 per share. In connection with the sale, the Company issued two individuals
warrants to acquire an aggregate of 200,000 shares of its common stock with a
nominal exercise price. The warrants expire in three years from the date of
issuance. For the other three individuals, the Company issued an aggregate of
225,000 shares of its common stock as additional consideration. For three
individuals, the Company has agreed to place with an escrow agent 3,000,000
shares of its common stock. There will not be any collateral for the Debentures
issued to Fahad Syed and Fred Nazem.
The Company used the proceeds from the sale of Convertible Debentures to
repay $500,000 due to Macrocom Investors, LLC pursuant to a convertible
debenture issued in July of 2005.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
See Item 1.01
Item 3.02 Unregistered Sales of Equity Securities
See Item 1.01
Item 9.01 Financial Statements And Exhibits
(a) None
(b) None
(c) Exhibits
Exhibit 99.1 Form of Convertible Debenture dated April 19, 2006
issued by the Company.
Exhibit 99.2 Form of Warrant, dated April 19, 2006 issued by the
Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETFABRIC HOLDINGS, INC.
Date: April 24, 2006 By: /s/Jeff Robinson
Name: Jeff Robinson
Title: Chairman and CEO
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Dated: April 19, 2006
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
NO. CD-N3 $100,000
NETFABRIC HOLDINGS, INC.
CONVERTIBLE DEBENTURE
JUNE 17, 2006
This Convertible Debenture (the "Debenture") is issued by NETFABRIC
HOLDINGS, INC., a Delaware corporation (the "Obligor"), to (the "Holder").
FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or
its successors and assigns the principal sum of One Hundred Thousand Dollars
($100,000), together with accrued but unpaid interest on or before June 17, 2006
(the "Maturity Date") in accordance with the following terms:
Interest. Interest shall accrue on the outstanding principal balance
hereof at an annual rate equal to 8%. Interest shall be calculated on the basis
of a 360-day year and the actual number of days elapsed, to the extent permitted
by applicable law. Interest hereunder will be paid to the Holder or its assignee
(as defined in Section 4) in whose name this Debenture is registered on the
records of the Obligor regarding registration and transfers of Debentures (the
"Debenture Register"). Interest shall be payable at Maturity.
This Debenture is subject to the following additional provisions:
Section 1. Events of Default.
(a) An "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) Any default in the payment of the principal of, interest on or
other charges in respect of this Debenture, free of any claim of subordination,
as and when the same shall become due and payable;
(ii) The Obligor or any subsidiary of the Obligor shall commence, or
there shall be commenced against the Obligor or any subsidiary of the Obligor
under any applicable bankruptcy or insolvency laws as now or hereafter in effect
or any successor thereto, or the Obligor or any subsidiary of the Obligor
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Obligor or any subsidiary of the Obligor or there is commenced against the
Obligor or any subsidiary of the Obligor any such bankruptcy, insolvency or
other proceeding which remains undismissed for a period of 90 days; or the
Obligor or any subsidiary of the Obligor is adjudicated insolvent or bankrupt;
or any order of relief or other order approving any such case or proceeding is
entered; or the Obligor or any subsidiary of the Obligor suffers any appointment
of any custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of 90 days; or the Obligor or any subsidiary of the Obligor makes a
general assignment for the benefit of creditors; or the Obligor or any
subsidiary of the Obligor shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Obligor or any subsidiary of the Obligor shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Obligor
or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;
(b) During the time that any portion of this Debenture is outstanding, if
any Event of Default has occurred, the full principal amount of this Debenture,
together with interest and other amounts owing in respect thereof, to the date
of acceleration shall become at the Holder's election, immediately due and
payable in cash, provided however, the Holder may request (but shall have no
obligation to request) payment of such amounts in Common Stock of the Obligor.
In addition to any other remedies, the Holder shall have the right (but not the
obligation) to convert this Debenture at any time after (x) an Event of Default
or (y) the Maturity Date at the Conversion Price then in-effect. The Holder need
not provide and the Obligor hereby waives any presentment, demand, protest or
other notice of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon. Upon an Event of Default, notwithstanding any
other provision of this Debenture or any Transaction Document, the Holder shall
have no obligation to comply with or adhere to any limitations, if any, on the
conversion of this Debenture or the sale of the Underlying Shares.
Section 2. Conversion and Adjustment.
(a) This Debenture shall be convertible into shares of Common Stock at the
option of the Holder, in whole or in part at any time and from time to time,
after the Original Issue Date. The number of shares of Common Stock issuable
upon a conversion hereunder equals the quotient obtained by dividing (x) the
outstanding amount of this Debenture to be converted by (y) the Conversion
Price. The Obligor shall deliver Common Stock certificates to the Holder prior
to the Fifth (5th) Trading Day after a Conversion Date. The conversion price
(the "Conversion Price") in effect on any Conversion Date shall be equal to
$.50, which may be adjusted pursuant to the other terms of this Debenture.
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(b) The Holder shall effect conversions by delivering to the Obligor a
completed notice in the form attached hereto as Exhibit A (a "Conversion
Notice"). The date on which a Conversion Notice is delivered is the "Conversion
Date." Unless the Holder is converting the entire principal amount outstanding
under this Debenture, the Holder is not required to physically surrender this
Debenture to the Obligor in order to effect conversions. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this
Debenture plus all accrued and unpaid interest thereon in an amount equal to the
applicable conversion. The Holder and the Obligor shall maintain records showing
the principal amount converted and the date of such conversions. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.
(c) If the Obligor, at any time while this Debenture is outstanding, shall
(i) pay a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock, (ii) subdivide outstanding shares of Common
Stock into a larger number of shares, (iii) combine (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (iv) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Obligor, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(d) In case of any (1) merger or consolidation of the Obligor or any
subsidiary of the Obligor with or into another Person, or (2) sale by the
Obligor or any subsidiary of the Obligor of more than one-half of the assets of
the Obligor in one or a series of relat1d transactions, a Holder shall have the
right to (A) convert the aggregate amount of this Debenture then outstanding
into the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such merger,
consolidation or sale, and such Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and property
as the shares of Common Stock into which such aggregate principal amount of this
Debenture could have been converted immediately prior to such merger,
consolidation or sales would have been entitled, or (B) in the case of a merger
or consolidation, require the surviving entity to issue to the Holder a
convertible Debenture with a principal amount equal to the aggregate principal
amount of this Debenture then held by such Holder, plus all accrued and unpaid
interest and other amounts owing thereon, which such newly issued convertible
Debenture shall have terms identical (including with respect to conversion) to
the terms of this Debenture, and shall be entitled to all of the rights and
privileges of the Holder of this Debenture set forth herein and the agreements
pursuant to which this Debentures were issued. In the case of clause (B), the
conversion price applicable for the newly issued shares of convertible preferred
stock or convertible Debentures shall be based upon the amount of securities,
cash and property that each share of Common Stock would receive in such
transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
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(e) Upon a conversion hereunder the Obligor shall not be required to issue
stock certificates representing fractions of shares of the Common Stock, but may
if otherwise permitted, make a cash payment in respect of any final fraction of
a share based on the Closing Bid Price at such time. If the Obligor elects not,
or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of this Debenture shall be made without charge to the Holder
thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Obligor shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debenture so converted and the Obligor
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Obligor
the amount of such tax or shall have established to the satisfaction of the
Obligor that such tax has been paid.
Section 3. Notice.
(a) Any notices, consents, waivers or other communications required or
permitted to be given under the terms hereof must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) trading day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
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If to the Company, to: NetFabric Holdings, Inc.
Three Stewart Court
Denville, NJ 07834
Attention: Vasan Thatham
Telephone: (973) 887-2785
Facsimile: (973) 442-0540
If to the Holder, to
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) business days prior to the effectiveness of such
change. Written confirmation of receipt (i) given by the recipient of such
notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
Section 4. Definitions. For the purposes hereof, the following terms shall
have the following meanings:"Business Day" means any day except Saturday, Sunday
and any day which shall be a federal legal holiday in the United States or a day
on which banking institutions are authorized or required by law or other
government action to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $0.001, of the Obligor
and stock of any other class into which such shares may hereafter be changed or
reclassified.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Original Issue Date" shall mean the date of the first issuance of this
Debenture regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.
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"Closing Bid Price" means the price per share in the last reported trade
of the Common Stock on the OTC or on the exchange which the Common Stock is then
listed as quoted by Bloomberg, LP.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trading Day" means a day on which the shares of Common Stock are quoted
on the OTC or quoted or traded on such Subsequent Market on which the shares of
Common Stock are then quoted or listed; provided, that in the event that the
shares of Common Stock are not listed or quoted, then Trading Day shall mean a
Business Day.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of this Debenture or as payment of interest in accordance with the
terms hereof.
Section 5. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Obligor, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Obligor, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 6. If this Debenture is mutilated, lost, stolen or destroyed, the
Obligor shall execute and deliver, in exchange and substitution for and upon
cancellation of the mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed Debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Obligor.
Section 7. This Debenture shall be governed by and construed in accordance
with the laws of the State of New Jersey, without giving effect to conflicts of
laws thereof. Each of the parties consents to the jurisdiction of the Superior
Courts of the State of New Jersey sitting in Hudson County, New Jersey and the
U.S. District Court for the District of New Jersey sitting in Newark, 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 8. If the Obligor fails to strictly comply with the terms of this
Debenture, then the Obligor shall reimburse the Holder promptly for all fees,
costs and expenses, including, without limitation, attorneys' fees and expenses
incurred by the Holder in any action in connection with this Debenture,
including, without limitation, those incurred: (i) during any workout, attempted
workout, and/or in connection with the rendering of legal advice as to the
Holder's rights, remedies and obligations, (ii) collecting any sums which become
due to the Holder, (iii) defending or prosecuting any proceeding or any
counterclaim to any proceeding or appeal; or (iv) the protection, preservation
or enforcement of any rights or remedies of the Holder.
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Section 9. Any waiver by the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Holder to insist upon strict adherence to any term
of this Debenture on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Debenture. Any waiver must be in writing.
Section 10. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Obligor covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Obligor from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Obligor (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
Section 11. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
Section 12. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS
AGREEMENT.
IN WITNESS WHEREOF, the Obligor has caused this Convertible Debenture to
be duly executed by a duly authorized officer as of the date set forth above.
NETFABRIC HOLDINGS, INC.
By:
Name: Jeff Robinson
Title: Chairman and Chief Executive Officer
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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 NetFabric Holdings,
Inc., according to the conditions stated therein, as of the Conversion Date
written below.
CONVERSION DATE: _________________________________________
APPLICABLE CONVERSION PRICE: _________________________________________
SIGNATURE: _________________________________________
NAME: _________________________________________
ADDRESS: _________________________________________
AMOUNT TO BE CONVERTED: $________________________________________
AMOUNT OF DEBENTURE UNCONVERTED: $________________________________________
CONVERSION PRICE PER SHARE: $________________________________________
NUMBER OF SHARES OF COMMON STOCK TO BE _________________________________________
ISSUED: _________________________________________
PLEASE ISSUE THE SHARES OF COMMON STOCK
IN THE FOLLOWING NAME AND TO THE
FOLLOWING ADDRESS: _________________________________________
ISSUE TO: _________________________________________
AUTHORIZED SIGNATURE: _________________________________________
NAME: _________________________________________
TITLE: _________________________________________
PHONE NUMBER: _________________________________________
BROKER DTC PARTICIPANT CODE: _________________________________________
ACCOUNT NUMBER: _________________________________________
WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
NETFABRIC HOLDINGS, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: CD-N1 Number of Shares: 100,000
Date of Issuance: April 19, 2006
NetFabric Holdings, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in connection with the issuance of a
Convertible Debenture by the Company in the amount of $100,000 (the
"Debenture"), (the "Holder"), the registered holder hereof or its permitted
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company upon surrender of this Warrant, at any time or times on or after the
date hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as
defined herein) Hundred Thousand fully paid and nonassessable shares of Common
Stock (as defined herein) of the Company (the "Warrant Shares") at the exercise
price per share provided in Section 1(b) below or as subsequently adjusted.
Section 1.
(a) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
(i) "Business Day" means any day other than Saturday, Sunday
or other day on which commercial banks in the City of New York are authorized or
required by law to remain closed.
(ii) "Common Stock" means (i) the Company's common stock, par
value $0.001 per share, and (ii) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a reclassification
of such Common Stock.
(iii) "Event of Default" means an event of default under the
Note other related agreements hereunder between the Company, its subsidiary and
Holder of even date herewith which is not cured by the Company by any applicable
cure period therein.
(iv) "Expiration Date" means the date three (3) years from the
Issuance Date of this Warrant or, if such date falls on a Saturday, Sunday or
other day on which banks are required or authorized to be closed in the City of
New York or the State of New York or on which trading does not take place on the
Principal Exchange or automated quotation system on which the Common Stock is
traded (a "Holiday"), the next date that is not a Holiday.
(v) "Issuance Date" means the date hereof.
(vi) "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(vii) "Principal Market" means the New York Stock Exchange,
the American Stock Exchange, the Nasdaq National Market, the Nasdaq SmallCap
Market, whichever is at the time the principal trading exchange or market for
such security, or the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg or, if no bid or sale information is
reported for such security by Bloomberg, then the average of the bid prices of
each of the market makers for such security as reported in the "pink sheets" by
the National Quotation Bureau, Inc.
(viii) "Securities Act" means the Securities Act of 1933, as
amended.
(ix) "Warrant" means this Warrant and all Warrants issued in
exchange, transfer or replacement thereof.
(x) "Warrant Exercise Price" shall be $.01 or as subsequently
adjusted as provided in Section 8 hereof.
(xi) "Warrant Shares" means the shares of Common Stock
issuable at any time upon exercise of this Warrant.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein", "hereof",
and "hereunder" and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section",
"Schedule", and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
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(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, pro
rata as hereinafter provided, at any time on any Business Day on or after the
opening of business on such Business Day, commencing with the first day after
the date hereof, and prior to 11:59 P.M. Eastern Time on the Expiration Date (i)
by delivery of a written notice, in the form of the subscription notice attached
as Exhibit A hereto (the "Exercise Notice"), of such holder's election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, payment to the Company of an amount equal to the Warrant
Exercise Price(s) applicable to the Warrant Shares being purchased, multiplied
by the number of Warrant Shares (at the applicable Warrant Exercise Price) as to
which this Warrant is being exercised (plus any applicable issue or transfer
taxes) (the "Aggregate Exercise Price") in cash or wire transfer of immediately
available funds and the surrender of this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) to a common carrier for overnight delivery to the Company as soon
as practicable following such date ("Cash Basis") or (ii) if at the time of
exercise, the Warrant Shares are not subject to an effective registration
statement or if an Event of Default has occurred, by delivering an Exercise
Notice and in lieu of making payment of the Aggregate Exercise Price in cash or
wire transfer, elect instead to receive upon such exercise the "Net Number" of
shares of Common Stock determined according to the following formula (the
"Cashless Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number of Warrant Shares with respect to which this
Warrant is then being exercised.
B = the Closing Bid Price of the Common Stock on the date of
exercise of the Warrant.
C = the Warrant Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise.
3
(b) In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2, the Company shall on the fifth (5th)
Business Day following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or an indemnification undertaking with respect
to this Warrant in the case of its loss, theft or destruction) and the receipt
of the representations of the holder specified in Section 6 hereof, if requested
by the Company (the "Exercise Delivery Documents"), and if the Common Stock is
DTC eligible, credit such aggregate number of shares of Common Stock to which
the holder shall be entitled to the holder's or its designee's balance account
with The Depository Trust Company; provided, however, if the holder who
submitted the Exercise Notice requested physical delivery of any or all of the
Warrant Shares, or, if the Common Stock is not DTC eligible then the Company
shall, on or before the fifth (5th) Business Day following receipt of the
Exercise Delivery Documents, issue and surrender to a common carrier for
overnight delivery to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder, for the number of shares of
Common Stock to which the holder shall be entitled pursuant to such request.
Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in
clause (i) or (ii) above the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised.
(c) Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall, as soon as practicable
and in no event later than five (5) Business Days after any exercise and at its
own expense, issue a new Warrant identical in all respects to this Warrant
exercised except it shall represent rights to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under this Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
is exercised.
(d) No fractional Warrant Shares are to be issued upon any pro rata
exercise of this Warrant, but rather the number of Warrant Shares issued upon
such exercise of this Warrant shall be rounded up or down to the nearest whole
number.
Section 3. Covenants as to Common Stock. The Company hereby covenants and
agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least one hundred percent (100%) of the number of shares of Common
Stock needed to provide for the exercise of the rights then represented by this
Warrant.
(d) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes, except any
applicable withholding, which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of
capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. Representations of Holder. The holder of this Warrant and the
Note, by the acceptance hereof, represents that it is acquiring this Warrant and
the Warrant Shares, and the Note and the shares underlying it, (collectively,
the "Securities")for its own account for investment purposes only and not with a
view towards, or for resale in connection with, the public sale or distribution
of the Securities, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act. The holder of the Securities further represents, by
acceptance hereof, that, as of this date, such holder is an "accredited
investor" as such term is defined in Rule 501(a)(1) of Regulation D promulgated
by the Securities and Exchange Commission under the Securities Act (an
"Accredited Investor").
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the holder hereof), a register for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
Section 8. Adjustment of Warrant Exercise Price and Number of Shares. The
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, any Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares issuable upon exercise of this Warrant will be proportionately decreased.
Any adjustment under this section shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Notices.
(i) Immediately upon any adjustment of the Warrant Exercise
Price, the Company will give written notice thereof to the holder of this
Warrant, setting forth in reasonable detail, and certifying, the calculation of
such adjustment.
Secti1on 9. Reorganization, Reclassification, Consolidation, Merger or
Sale.
(a) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction in each case which is effected in such a
way that holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "Acquiring Entity") a written agreement to deliver to each holder
of Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance to
this Warrant and satisfactory to the holders of the Warrants (including an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on exercise, if
the value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision to insure that each of the holders of the Warrants will thereafter
have the right to acquire and receive in lieu of or in addition to (as the case
may be) the Warrant Shares immediately theretofore issuable and receivable upon
the exercise of such holder's Warrants (without regard to any limitations on
exercise), such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for the
number of Warrant Shares which would have been issuable and receivable upon the
exercise of such holder's Warrant as of the date of such Organic Change (without
taking into account any limitations or restrictions on the exercisability of
this Warrant).
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt
of an indemnification undertaking (or, in the case of a mutilated Warrant, the
Warrant), issue a new Warrant of like denomination and tenor as this Warrant so
lost, stolen, mutilated or destroyed.
6
Section 11. Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company, to: NetFabric Holdings, Inc.
Three Stewart Court
Denville, NJ 07834
Telephone: (973) 887-2785
Facsimile: (973) 442-0540
If to a holder of this Warrant, to it at the address and facsimile number set
forth on Exhibit C hereto, with copies to such holder's representatives as set
forth on Exhibit C, or at such other address and facsimile as shall be delivered
to the Company upon the issuance or transfer of this Warrant. Each party shall
provide five days' prior written notice to the other party of any change in
address or facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, facsimile, waiver or other communication, (or
(B) provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
Section 12. Date. The date of this Warrant is set forth on page 1 hereof.
This Warrant, in all events, shall be wholly void and of no effect after the
close of business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8(b) shall continue in full force
and effect after such date as to any Warrant Shares or other securities issued
upon the exercise of this Warrant.
Section 13. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holder of the
Warrants representing a majority of the Warrant Shares issuable upon exercise of
the Warrants then outstanding; provided that, except for Section 8(d), no such
action may increase the Warrant Exercise Price or decrease the number of shares
or class of stock obtainable upon exercise of any Warrant without the written
consent of the holder of such Warrant.
7
Section 14. Descriptive Headings; Governing Law. The descriptive headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of Nevada shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New Jersey, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New Jersey or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New Jersey. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in Morris County and the United States District Court for
the District of New Jersey, for the adjudication of any dispute hereunder or in
connection herewith or therewith, or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Section 15. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR EACH PARTY
HERETO TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR
ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
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8
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as of
the date first set forth above.
NETFABRIC HOLDINGS, INC.
By:
-----------------------------
Name: Jeff Robinson
Title: Chief Executive Officer
9
EXHIBIT A TO WARRANT
EXERCISE NOTICE
TO BE EXECUTED
BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
NETFABRIC HOLDINGS, INC.
The undersigned holder hereby exercises the right to purchase
______________ of the shares of Common Stock ("Warrant Shares") of NetFabric
Holdings, Inc., a Delaware corporation (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
Specify Method of exercise by check mark:
1. ___ Cash Exercise
(a) Payment of Warrant Exercise Price. The holder shall pay the
Aggregate Exercise Price of $______________ to the Company in
accordance with the terms of the Warrant.
(b) Delivery of Warrant Shares. The Company shall deliver to the
holder _________ Warrant Shares in accordance with the terms of the
Warrant.
2. ___ Cashless Exercise
(a) Payment of Warrant Exercise Price. In lieu of making payment of
the Aggregate Exercise Price, the holder elects to receive upon such
exercise the Net Number of shares of Common Stock determined in
accordance with the terms of the Warrant.
(b) Delivery of Warrant Shares. The Company shall deliver to the
holder _________ Warrant Shares in accordance with the terms of the
Warrant.
Date: _______________ __, ______
Name of Registered Holder
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
A-1
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of NetFabric Holdings, Inc., a Delaware
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated:
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By:
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Name:
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Title:
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