DEBENTURE AGREEMENT
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY
NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED
OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED
THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
| FACE AMOUNT | $822,500 | |
| PRICE | $822,500 | |
| DEBENTURE NUMBER | February - ▇▇▇▇-▇▇▇ | |
| ▇▇▇▇▇▇▇▇ DATE | February 10, 2006 | |
| MATURITY DATE | February 10, 2011 |
FOR
VALUE
RECEIVED, Eagle Broadband, Inc. a Texas corporation (the “Company”), hereby
promises to pay DUTCHESS PRIVATE EQUITIES FUND, LP (the “Holder”) by February
10, 2011 (the “Maturity Date”), the principal amount of Eight Hundred and
Twenty-two Thousand Five Hundred Dollars ($822,500) U.S., and to pay interest
and redemption on the principal amount hereof, and any accrued penalties, in
such amounts, at such times and on such terms and conditions as are specified
herein.
The
Debenture set forth in this Agreement is subject to automatic conversion at
the
end of five (5) years from the date of issuance at which time the Debenture
outstanding will be automatically converted based upon the formula set forth
in
Section 3.2(c).
Article
1 Interest
The
Company shall pay twelve percent (12%) annual coupon on the unpaid Face Amount
of this Debenture (this “Debenture”) at such times and in such amounts as
outlined in this section. The Company will make mandatory payments on the
interest (“Interest Payment”), with the minimum Interest Payments outlined in
Exhibit B for the first two (2) months, and herein incorporated by reference
in
the amount of eight thousand one hundred and fifty-one dollars and twelve cents
($8,151.12) per month for the first two (2) months following the Issuance Date.
The first Interest Payment is due as outlined below in Article 2.
Any
monies paid to the Holder in excess of the interest due when paid shall be
credited toward the Redemption of the Face Amount of the Debenture.
Article
2 Method
of Payment
Section
2.1 Prior
to
an Effective Registration Statement with the SEC.
Prior
to
the U.S. Securities and Exchange Commission ("SEC") declaring the registration
statement for the shares underlying the Debenture ("Registration Statement")
effective ("Effective Date"), the Company will make amortizing payments to
the
Holder (a "Payment," or collectively, the "Payments") on a monthly basis on
the
first day of each business day of each month while there is an outstanding
balance on the Debenture, in the following amounts ("Payment Amount" or
collectively, the "Payment Amounts"):
Payment
for Month 1 (due March 1, 2006) $8,151.12
Payment
for Month 2 (due April 1, 2006)
$8,151.12
Payment
for Month 3 and each month thereafter $90,156.19
Notwithstanding
any provision to the contrary in this Debenture, the Company may pay in full
to
the Holder the Face Amount, or any balance remaining thereon, in readily
available funds, at any time and from time to time without penalty.
The
minimum Payments are outlined on Exhibit B, attached hereto and incorporated
herein by reference.
Section
2.2 Subsequent
to the Effective Date
The
Holder, at its sole option, shall be entitled to either i) request a Payment
from the Company in the amounts set forth in the table in Section 2.1, above;
or, ii) the Holder may elect to convert a portion of the Debenture pursuant
to
Article 3, below, in an amount equal to or greater than the Payment Amount.
In
the event the Holder elects not to convert that portion of the Debenture equal
to the Payment Amount during a calendar month, the Company shall make a Payment
in cash in an amount equal to the difference between the amount converted by
the
Holder and the Payment Amount due for that month.
Nothing
contained in this Article 2, shall limit the amount the Holder can elect to
convert during a calendar month except as defined in Section 3.2(i),
below.
All
Payments made in under Article 2, shall be applied toward the Redemption Amount
as outlined in Article 14, herein.
Section
2.3 No Penalty for Prepayment.
The
Company may make additional payments toward Redemption (“Prepayment”) without
any penalties.
Section
2.4 Accelerated Repayment in the Event of a Subsequent Financing by a Third
Party.
If,
at
any time after the Issuance Date, the Company receives financing from a third
party (excluding the Holder), the Company is required to pay to the Holder
100%
of the proceeds raised from the third party in excess of an aggregate amount
of
$750,000 (the “Threshold Amount”). The Threshold Amount shall also pertain to
any assets sold, transferred or disposed of by the Company not in the ordinary
course of business, with the exception of the Exclusions (as defined in the
Security Agreement between the Company and the Holder of this date). The Company
agrees to pay one hundred percent (100%) of any proceeds raised by the Company
over the Threshold Amount toward the accelerated repayment of the Debenture
with
Interest until such time as the Face Amount of the Debenture has been paid
in
full. The accelerated Repayment shall be made to the Holder upon the Company’s
receipt of the financing. Failure to do so will result in an Event of Default
as
set forth herein.
Article
3 Conversion
Section
3.1 Conversion
Privilege
(a) The
Holder of this Debenture shall have the right to convert any and all amounts
owing under this Debenture into shares of Common Stock at any time following
the
Issuance Date and which is before the close of business on the Maturity Date,
except as set forth in Section 3.2
below.
The number of shares of Common Stock issuable upon the conversion of this
Debenture is
determined pursuant to Section 3.2
and
rounding the result to the nearest whole share.
(b) This
Debenture may not be converted, whether in whole or in part, except in
accordance with this Article 3.
(c) In
the
event all or any portion of this Debenture remains outstanding on the Maturity
Date, the unconverted
portion
of such Debenture will automatically be converted into shares of Common Stock
on
such date in the manner set forth in Section 3.2.
Section
3.2 Conversion
Procedure
(a) Conversion
Procedures. The
Holder may elect to convert the Face Amount of and accrued interest on this
Debenture, in whole or in part, at
any
time
following the Issuance Date. Such conversion shall be effectuated by the Holder
sending to the Company a facsimile or electronic mail version of the signed
Notice of Conversion which evidences the Holder’s intention to convert the
Debenture indicated. The date on which the Notice of Conversion is delivered
(“Conversion Date”) shall be deemed to be the date on which the Holder has
delivered to the Company a facsimile or electronic mail of the signed Notice
of
Conversion. Notwithstanding the above, any Notice of Conversion received by
5:00
P.M. EST, shall be deemed to have been received the previous business
day,
with
receipt being via a confirmation of time of facsimile of the Holder.
(b) Common
Stock to be Issued.Upon
the
Holder's conversion of any Debenture, the Company shall issue the number of
shares of Common Stock equal to the Conversion. If, at the time of conversion,
the Registration Statement has been declared effective, the Company shall
instruct its transfer agent to issue stock certificates without restrictive
legend (other than a legend referring to the registration statement and
prospectus delivery requirements) or stop transfer instructions. If at the
time
of Holder's conversion, the Registration Statement has not been declared
effective, the Company shall instruct the transfer agent to issue the
certificates with an appropriate legend. The
Company shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture. The
Company warrants that no instructions, other than these instructions, have
been
given or will be given to the transfer agent and that the Common Stock shall
otherwise be freely resold, except as may be otherwise set forth
herein.
(c) Fixed
Conversion Price. Holder
is
entitled to convert the
unpaid Face Amount of this Debenture, plus accrued interest, any time following
a Issuance Date, at the lesser of the following prices: (i) the lowest closing
Best Bid (as defined in the Investment Agreement of this date between the
Company and the Holder) price of the Common Stock between February 1, 2006
and
the date of filing the registration statement covering resale of the shares
underlying this Debenture; or (ii) at nine cents ($.09). The lesser of (i)
and
(ii) shall become the "Fixed Conversion Price", as defined herein. No fractional
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded up, as the case may be,
to
the nearest whole share. The Holder shall retain all rights of conversions
during any partial trading days.
(d) Maximum
Interest.
Nothing
contained in this Debenture shall be deemed to establish or require the Company
to pay interest to the Holder at a rate in excess of the maximum rate permitted
by governing law. In the event that the rate of interest required to be paid
exceeds the maximum rate permitted by governing law, the rate of interest
required to be paid thereunder shall be automatically reduced to the maximum
rate permitted under the governing law and such excess, if so ordered, shall
be
credited on any remaining balances due to the Holder with reasonable promptness
by the Holder to the Company. In
the
event this Section 3.2(d) applies, the Parties agree that the terms of this
Debenture remain in full force and effect except as is necessary to make the
interest rate comply with applicable law.
(e) Opinion
Letter.
It shall
be the Company’s
responsibility to take all necessary actions and to bear all such costs to
issue
the Common Stock as provided herein, including the responsibility and cost
for
delivery of an opinion letter to the transfer agent, if so required. The person
or entity in whose name the certificate of Common Stock is to be registered
shall be treated as a shareholder of record on and after the conversion date.
Upon surrender of any Debentures that are to be converted in part, the Company
shall issue to the Holder a new Debenture equal to the unconverted amount,
if so
requested in writing by Holder.
(f) Delivery
of Shares.
Within
three (3) business days after receipt of the documentation referred to above
in
Section 3.2(a),
the
Company shall deliver a certificate, in accordance with Section 3.2(c)
for
the number of shares of Common Stock issuable upon the conversion. In the event
the Company does not make delivery of the Common Stock, as instructed by Holder,
within three (3) business days after the Conversion Date, the Company shall
pay
to Holder as liquidated damages three
percent (3%) per day in cash, of the dollar value of the Debentures being
converted, compounded daily.
If
the
failure of the Company to issue the Common Stock pursuant to this Section 3.2(f)
is due to the unavailability of authorized shares of Common Stock, the
provisions of this Section 3.2(f) shall not apply, but instead the provisions
of
Section 3.2(k) shall apply.
The
Company shall make any payments required under this Section 3.2(f)
in
immediately available funds within three (3) business days from the date the
Common Stock is fully delivered. Nothing herein shall limit the Holder’s right
to pursue actual damages or cancel the conversion for the Company’s failure to
issue and deliver Common Stock to the Holder within three (3) business days
after the Conversion Date.
The
Company shall at all times reserve (or make alternative written arrangements
for
reservation or contribution of shares) and
have
available all Common Stock necessary to meet conversion of the Debentures by
Holder of the entire amount of Debentures then outstanding. If, at any time,
the
Holder
submits
a Notice of Conversion and the Company does not have sufficient authorized
but
unissued shares of Common Stock (or alternative shares of Common Stock as may
be
contributed by Stockholders) available to effect, in full, a conversion of
the
Debentures (a “Conversion Default”, the date of such default being referred to
herein as the “Conversion Default Date”), the Company shall issue to the Holder
all of the shares of Common Stock which are available. Any Convertible
Debentures or any portion thereof, which cannot be converted due to the
Company's lack of sufficient authorized common stock (the “Unconverted
Debentures”), may be deemed null and void upon written notice sent by the Holder
to the Company. The Company shall provide notice of such Conversion Default
(“Notice of Conversion Default”) to the Holder, by facsimile, within one (1)
business days of such default.
In
the
event of Conversion Default, the Company will pay to the Holder the amount
of
(N/365) x (.24) x the initial issuance price of the outstanding and/or tendered
but not converted Debentures held by each Holder where N = the number of days
from the Conversion Default Date to the date that the Company authorizes a
sufficient number of shares of Common Stock to effect conversion of all
remaining Debentures (the "Authorization Date"). The Company shall send notice
to Holder of outstanding Debenture that additional shares of Common Stock have
been authorized; stating the Authorization Date and the amount of Holder’s
accrued Conversion Default Payments (“Authorization Notice”). The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, upon written notice sent by the Holder to the
Company, as follows: (i)
in
the event the Holder elects to take such payment in cash, cash payment shall
be
made to the Holder within five (5) business days, or (ii) in the event Holder
elects to take such payment in stock, the Holder may convert at the conversion
rate set forth in Section 3.2(c) within five (5) business days until the
expiration of the conversion period.
The
Company acknowledges that its failure to maintain a sufficient number of
authorized but unissued shares of Common Stock to effect in full a conversion
of
the Debenture will cause the Holder to suffer irreparable harm, and that damages
will be difficult to ascertain. Accordingly, the parties agree that it is
appropriate to include in this Agreement a provision for liquidated damages.
The
parties acknowledge and agree that the liquidated damages provision set forth
in
this section represents the parties’ good faith effort to quantify such damages
and, as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to deliver the Common Stock
pursuant to the terms of this Debenture. Nothing herein shall limit the Holder’s
right to pursue actual damages for the Company’s failure to maintain a
sufficient number of authorized shares of Common Stock.
If,
by
the third (3rd) business day after the Conversion Date, any portion of the
shares of the Convertible Debentures have not been delivered to the Holder
and
the Holder purchases, in an open market transaction or otherwise, shares of
Common Stock (the "Covering Shares") necessary to make delivery of shares which
would have been delivered if the full amount of the shares to be converted
and
delivered to the Holder, then the Company shall pay to the Holder, in addition
to any other amounts due to Holder pursuant to this Convertible Debenture,
and
not in lieu thereof, the Buy-In Adjustment Amount (as defined below). The "Buy
In Adjustment Amount" is the amount equal to the excess, if any, of (x) the
Holder's total purchase price (including brokerage commissions, if any) for
the
Covering Shares over (y) the net proceeds (after brokerage commissions, if
any)
received by the Holder from the sale of the Sold Shares. The Company shall
pay
the Buy-In Adjustment Amount to the Holder in immediately available funds within
five (5) business days of written demand by the Holder. By way of illustration
and not in limitation of the foregoing, if the Holder purchases shares of Common
Stock having a total purchase price (including brokerage commissions) of $11,000
to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which the Company will be
required to pay to the Holder will be $1,000.
(g) Prospectus
and Other Documents. The
Company shall furnish to Holder such number of prospectuses and other documents
incidental to the registration of the shares of Common Stock underlying the
Debentures, including any amendment of or supplements thereto. Any filings
submitted via ▇▇▇▇▇ will constitute fulfillment of the Company's obligation
under this Section.
(h) Limitation
on Issuance of Shares.
If the
Company’s Common Stock becomes listed on the Nasdaq SmallCap Market after the
issuance of the Debenture, the Company may be limited in the number of shares
of
Common Stock it may issue by virtue of (A) the number of authorized shares
or
(B) the applicable rules and regulations of the principal securities market
on
which the Common Stock is listed or traded, including, but not necessarily
limited to, NASDAQ Rule 4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be
applicable (collectively, the “Cap Regulations”). Without limiting the other
provisions thereof;
(i) the
Company will take all steps reasonably necessary to be in a position to issue
shares of Common Stock on conversion of the Debentures without violating the
Cap
Regulations and (ii) if, despite taking such steps, the Company still cannot
issue such shares of Common Stock without violating the Cap Regulations, the
Holder cannot convert as result of the Cap Regulations (each such Debenture,
an
“Unconverted Debenture”) shall have the right to elect either of the following
remedies:
(x)
if
permitted by the Cap Regulations, require the Company to issue shares of Common
Stock in accordance with the Holder's Notice of Conversion at a conversion
purchase price equal to the average of the closing bid price per share of Common
Stock for any five (5) consecutive Trading Days (subject to certain equitable
adjustments for certain events occurring during such period) during the sixty
(60) Trading Days immediately preceding the Conversion Date; or
(y)
require the Company to redeem each Unconverted Debenture for an amount (the
“Redemption Amount”), payable in cash, equal to the sum of (i) one hundred
thirty-three percent (133%) of the principal of an Unconverted Debenture, plus
(ii) any accrued but unpaid interest thereon through and including the date
on
which the Redemption Amount is paid to the holder (the “Redemption
Date”).
The
Holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture. The Debenture shall
contain provisions substantially consistent with the above terms, with such
additional provisions as may be consented to by the Holder. The provisions
of
this section are not intended to limit the scope of the provisions otherwise
included in the Debenture.
(i) Limitation
on Amount of Conversion and Ownership.
Notwithstanding anything to the contrary in this Debenture, in no event shall
the Holder be entitled to convert that amount of Debenture, and in no event
shall the Company permit that amount of conversion, into that number of shares,
which when added to the sum of the number of shares of Common Stock beneficially
owned, (as such term is defined under Section 13(d) and Rule 13d-3 of the
Securities Exchange Act of 1934, as may be amended, (the “1934 Act”)), by the
Holder, would exceed 4.99% of the number of shares of Common Stock outstanding
on the Conversion Date, as determined in accordance with Rule 13d-1(j) of the
1934 Act. In the event that the number of shares of Common Stock outstanding
as
determined in accordance with Section 13(d) of the 1934 Act is different on
any
Conversion Date than it was on the Issuance Date, then the number of shares
of
Common Stock outstanding on such Conversion Date shall govern for purposes
of
determining whether the Holder would be acquiring beneficial ownership of more
than 4.99% of the number of shares of Common Stock outstanding on such
Conversion Date.
(j) Legend.
The
Holder acknowledges that each certificate representing the Debentures, and
the
Common Stock unless registered pursuant to the Registration Rights Agreement,
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT
(OR
ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR
(iii) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH
ACT.
(k)
Prior
to conversion of the Debenture, if at any
time
the
conversion of all the Debentures and exercise of all the Warrants outstanding
would result in an insufficient number of authorized shares of Common Stock
being available to cover all the conversions, then in such event, the Company
will move to call and hold a shareholder’s meeting or have shareholder action
with written consent of the proper number of shareholders within thirty (30)
days of such event, or such greater period of time if statutorily required
or
reasonably necessary as regards standard brokerage house and/or SEC requirements
and/or procedures, for the purpose of authorizing additional shares of Common
Stock to facilitate the conversions. In such an event management of the Company
shall recommend to all shareholders to vote their shares in favor of increasing
the authorized number of shares of Common Stock. Management of the Company
shall
vote all of its shares of Common Stock in favor of increasing the number of
shares of authorized Common Stock to an amount equal to three hundred percent
(300%) of the balance on the Debenture. The Company represents and warrants
that
under no circumstances will it deny or prevent the Holder’s right to convert the
Debentures as permitted under the terms of this Subscription Agreement or the
Registration Rights Agreement. Nothing in this Section shall limit the
obligation of the Company to make the
payments set forth in this Section 3.
The
Holder, at his option, may request the company to authorize and issue additional
shares if the Holder feels it is necessary for conversions in the future.
In
the
event the Company’s shareholder’s meeting does not result in the necessary
authorization, the Company shall redeem the outstanding Debentures for an amount
equal to the sum of the principal of the outstanding Debentures plus accrued
interest thereon multiplied by 133%.
Section
3.3 Fractional
Shares.
The
Company shall not issue fractional shares of Common Stock, or scrip representing
fractions of such shares, upon the conversion of this Debenture. Instead, the
Company shall round up or down, as the case may be, to the nearest whole
share.
Section
3.4 Taxes
on Conversion. The
Company shall pay any documentary, stamp or similar issue or transfer tax due
on
the issue of shares of Common Stock upon the conversion of this Debenture.
However, the Holder shall pay any such tax which is due because the shares
are
issued in a name other than its name.
Section
3.5 Company
to Reserve Stock. The
Company shall reserve the number of shares of Common Stock required pursuant
to
and upon the terms set forth in the Subscription Agreement to permit the
conversion of this Debenture.
All
shares of Common Stock which may be issued upon the conversion hereof shall
upon
issuance by the Company be validly issued, fully paid and nonassessable and
free
from all taxes, liens and charges with respect to the issuance
thereof.
Section
3.6 Restrictions
on Sale. This
Debenture has not been registered under the Securities Act of 1933, as amended
(the “Act”) and is being issued under Section 4(2) of the Act and Rule 506 of
Regulation D promulgated under the Act. This Debenture and the Common Stock
issuable upon the conversion thereof may
only be
sold
pursuant to registration under or an exemption from the Act.
Section
3.7 Stock
Splits, Combinations and Dividends.
If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Fixed Conversion Price shall be proportionately
reduced in case of subdivision of shares or stock dividend or proportionately
increased in the case of combination of shares, in each such case, by the ratio
of the total number of shares of Common Stock outstanding immediately after
such
event bears to the total number of shares of Common Stock outstanding
immediately prior to such event.
Article
4 Mergers
The
Company shall not consolidate or merge into, or transfer any or all of its
assets to, any person, unless such person assumes in writing the obligations
of
the Company under this Debenture and immediately after such transaction no
Event
of Default exists. Any reference herein to the Company shall refer to such
surviving or transferee corporation and the obligations of the Company shall
terminate only upon such written assumption of the Company's
obligation.
The
Company shall make notice to the Holder simultaneously with the dissemination
of
a Merger to the public markets.
Article
5 Security
This
Debenture is secured by a Security Agreement (the "Security Agreement") of
this
date herewith between the Company and the Holder.
Article
6 Defaults
and Remedies
Section
6.1 Events
of
Default. An
“Event
of Default” occurs if any one of the following occur:
(a)
the
Company does not make the Payment of the principal, interest or other sum due
under this Debenture or the other Transactions Documents by the Holder's
conversion into Common Stock, within five (5) business days of the Maturity
Date, upon redemption, Conversion Date or otherwise described herein;
or,
(b)
the
Company does not make a Payment in cash for a period of three (3) business
days
when due as described in this Agreement; or,
(c)
any
of the Company’s representations or warranties contained in the Transaction
Documents or this Debenture were false when made or the Company fails to comply
with any of its other agreements in the Transaction Documents (as defined in
Article 16 below) and such failure continues for a period of five (5) business
days; or,
(d)
the
Company pursuant to or within the meaning of any Bankruptcy Law: (i) commences
a
voluntary case; (ii) consents to the entry of an order for relief against it
in
an involuntary case; (iii) consents to the appointment of a Custodian (as
hereinafter defined) of it or for all or substantially all of its property
or
(iv) makes a general assignment for the benefit of its creditors or (v) a court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that: (A) is for relief against the Company in an involuntary case; (B) appoints
a Custodian of the Company or for all or substantially all of its property
or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for sixty (60) calendar days; or,
(e)
the
Company’s Common Stock is suspended or no longer listed on any recognized
exchange including electronic over-the-counter bulletin board ("Principal
Market") for in excess of three (3) consecutive Trading Days.
Failure
to comply with the requirements for continued listing on a Principal Market
for
a period of five (5) trading days; or notification from a Principal Market
that
the Company is not in compliance with the conditions for such continued listing
on such Principal Market; or,
(f)
the
Company breaches any covenant or condition of the Transaction Documents, and
such breach, if subject to cure, continues for a period of five (5) business
days; or,
(g)
the
Registration Statement underlying the Debenture is not declared effective by
the
SEC within twelve (12) months of the Issuance Date.
Section
6.2 Remedies.
In the
Event of Default, the Holder may elect to secure a portion of the Company's
assets in Collateral (as defined in the Security Agreement of this date). The
Holder may also elect to garnish Revenue from the Company in an amount that
will
repay the Holder on the schedules outlined in this Agreement.
In
the
Event of Default, as outlined in this Agreement, the
Holder
can exercise its right to increase the Face
Amount of the Debenture by ten percent (10%) as an initial penalty, and for
each
subsequent Event of Default under this Agreement. In addition, the Holder may
elect to increase the
Face
Amount by two and one-half percent (2.5%) per month (pro-rata for partial
periods) paid as a penalty for liquated damages ("Liquidated Damages"). The
Liquated Damages will be compounded daily. It is the intention and
acknowledgement of both parties that the Liquidated Damages not be deemed as
interest under this Agreement.
In
the
event of Default under Section 6.1(g), the Holder may elect to switch the Fixed
Conversion Price of the Debenture as outlined in Section 3.2(c) above ("Default
Conversion Price"). The Default Conversion Price shall be equal to the lesser
of
a) the Fixed Conversion Price or b) seventy percent (70%) of the lowest closing
Best Bid price of the Common Stock during the fifteen (15) trading days prior
to
conversion. Upon written notice being sent to the Company by the Holder of
Default under Section 6.1(g), and the Holder's election to exercise the remedy
to switch the Fixed Conversion Price to the Default Conversion Price, the
Company shall immediately withdraw the Registration Statement. Further, the
Company agrees that the date of consideration for the Debenture shall remain
the
Issuance Date stated herein. The Company shall provide an opinion letter from
counsel within two (2) business days of written request by the Holder stating
that the date of consideration for the Debenture is the Issuance Date and
submission of proper Rule 144 (as defined under the Securities Act of 1933)
support documentation consisting of Form 144, a broker's representation letter
and a seller's representation letter. In the event the Company does not deliver
the opinion letter within two business days, the Default Conversion Price shall
immediately decrease by two percent (2%) for each business day an opinion letter
fails to be delivered. In the event that counsel to the Company fails or refuses
to render an opinion as required to issue the Shares in accordance with this
paragraph (either with or without restrictive legends, as applicable), then
the
Company irrevocably and expressly authorizes counsel to the Holder to render
such opinion and shall authorize the Transfer Agent to accept and to rely on
such opinion for the purposes of issuing the Shares. Any costs incurred by
Holder for such opinion letter shall be added to the Face Amount of the
Debenture.
Section
6.3 Acceleration.
If
an
Event of Default occurs, the Holder hereof by notice to
the
Company may declare the remaining principal amount of this Debenture, together
with all accrued interest and any liquidated damages, to be due and payable.
Section
6.4 Seniority. As
of the
Issuance Date, no indebtedness of the Company is senior to this Debenture in
right of payment, whether with respect to interest, damages or upon liquidation
or dissolution or otherwise. And, the Company warrants that it has taken all
necessary steps to subordinate its other obligations to the rights of the Holder
hereunder.
Section
6.5 Cost
of Collections. If
an
Event of Default occurs, the Company shall pay the Holder hereof reasonable
costs of collection, including reasonable attorney's fees.
Article
7 Registered
Debentures
Section
7.1 Record
Ownership. The
Company, or its attorney, shall maintain a register of the Holder of the
Debentures (the “Register”) showing their names and addresses and the serial
numbers and principal amounts of Debentures issued to them. The Register may
be
maintained in electronic, magnetic or other computerized form. The Company
may
treat the person named as the Holder of this Debenture in the Register as the
sole owner of this Debenture. The Holder of this Debenture is the person
exclusively entitled to receive payments of interest on this Debenture, receive
notifications with respect to this Debenture, convert it into Common Stock
and
otherwise exercise all of the rights and powers as the absolute owner
hereof.
Worn
or Lost Debentures. If
this
Debenture becomes worn, defaced or mutilated but is still substantially intact
and recognizable, the Company or its agent may issue a new Debenture in lieu
hereof upon its surrender. Where
the
Holder of this Debenture claims that the Debenture has been lost, destroyed
or
wrongfully taken, the Company shall issue a new Debenture in place of the
Debenture if the Holder so requests by written notice to the Company.
Article
8 Notice.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Debenture 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 a confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) 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:
▇▇▇▇▇
▇▇▇▇▇
Eagle
Broadband, Inc.
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to the
Investor:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Dutchess
Capital Management
▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
Each
party shall provide five (5) business days prior notice to the other party
of
any change in address, phone number or facsimile number.
Article
9 Time
Where
this Debenture authorizes or requires the payment of money or the performance
of
a condition or obligation on a Saturday or Sunday or a holiday on which the
United States Stock Markets (“US Markets”) are closed (“Holiday”), such payment
shall be made or condition or obligation performed on the first business day
following such Saturday, Sunday or Holiday. A “business day” shall mean a day on
which the US Markets are open for a full day or half day of
trading.
Article
10 No
Assignment
This
Debenture and the obligation hereunder shall not be assignable
by the Company or the Holder.
Article
11 Rules
of
Construction.
In
this
Debenture, unless the context otherwise requires, words in the singular number
include the plural, and in the plural include the singular, and words of the
masculine gender include the feminine and the neuter, and when the sense so
indicates, words of the neuter gender may refer to any gender. The numbers
and
titles of sections contained in the Debenture are inserted for convenience
of
reference only, and they neither form a part of this Debenture nor are they
to
be used in the construction or interpretation hereof. Wherever, in this
Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding
upon
the Company and the Holder of this Debenture.
Article
12 Governing
Law
The
validity, terms, performance and enforcement of this Debenture shall be governed
and construed by the provisions hereof and in accordance with the laws of the
Commonwealth of Massachusetts applicable to agreements that are negotiated,
executed, delivered and performed solely in the Commonwealth of Massachusetts.
Article
13 Disputes
Under Agreement
All
disputes arising under this agreement shall be governed by and interpreted
in
accordance with the laws of the Commonwealth of Massachusetts, without regard
to
principles of conflict of laws. The parties to this agreement will submit all
disputes arising under this agreement to arbitration in Boston, Massachusetts
before a single arbitrator of the American Arbitration Association (“AAA”). The
arbitrator shall be selected by application of the rules of the AAA, or by
mutual agreement of the parties, except that such arbitrator shall be an
attorney admitted to practice law in the Commonwealth of Massachusetts. No
party
to this agreement will challenge the jurisdiction or venue provisions as
provided in this section.
Article
14 Redemption
The
Holder shall have the right to be redeemed from the Debenture, in whole or
in
part, at a price equal to one hundred and twenty-five percent (125%) of the
outstanding principal amount of the Debenture, including accrued interest (and
penalties if applicable). Any Payments, as defined in Article 2 above, shall
apply to the Redemption Amount.
Article
15 Holder
Warrants
As
an
additional inducement to Holder, the Company shall issue to the Holder a warrant
to purchase two hundred and forty-six thousand seven hundred and fifty dollars
($246,750) worth of shares of its common stock exercisable at the Fixed
Conversion Price as outlined in the Warrant Agreement of this date.
Article
16 Transaction
Documents
The
Company agrees that contemporaneously with the execution and delivery of this
Debenture, the parties hereto are executing and delivering a Debenture
Registration Rights Agreement, Subscription Agreement, Warrant Agreement and
the
Security Agreement between the Company and the Holder (collectively, the
"Transaction Documents") pursuant to which the Company has agreed to provide
certain rights and obligations as defined in the Transaction
Documents.
Article
17 Waiver
The
Holder's delay or failure at any time or times hereafter to require strict
performance by the Company of any undertakings, agreements or covenants shall
not waive, affect, or diminish any right of the Holder under this Agreement
to
demand strict compliance and performance herewith. Any waiver by the Holder
of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of
the
same or a different type. None of the undertakings, agreements and covenants
of
the Company contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by the Holder, nor may this Agreement be amended,
changed or modified, unless such waiver, amendment, change or modification
is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Holder.
Article
18 Integration
This
Debenture is the FINAL AGREEMENT between the Company and the Holder with respect
to the terms and conditions set forth herein, and, the terms of this Debenture
may not be contradicted by evidence of prior, contemporaneous, or subsequent
oral agreements of the Parties. The execution and delivery of this Debenture
shall not alter the prior written agreement between the Company and the Holder,
consisting of the Transaction Documents, as defined in Article 16.
Article
19 Failure
by the Company to Act in a Timely Manner
The
Company acknowledges that its failure to timely meet any of its obligations
hereunder, including, but without limitations, its obligations to make Payments,
deliver shares and, as necessary, to register and maintain sufficient number
of
Shares, will cause the Holder to suffer irreparable harm and, that the actual
damage to the Holder will be difficult to ascertain. Accordingly, the parties
agree that it is appropriate to include in this Debenture a provision for
liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties’ good faith
effort to quantify such damages and, as such, agree that the form and amount
of
such liquidated damages are reasonable and do not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this
Debenture.
Article
20 No
Limitations on Conversions
Nothing
contained herein, or in the Transaction Documents, shall limit the Holder’s
right to convert any portion of the Debenture into the Company’s Common stock,
except as stated in Section 3.2 (i).
*.*.*
IN
WITNESS WHEREOF, the Company has duly executed this Debenture as of the date
first written above and duly authorized to sign on behalf of:
EAGLE
BROADBAND, INC.
By:
/s/▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇
▇▇▇▇▇
Title:
President
and Chief Executive Officer
By:
/s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇.
Title:
Vice
President of Administration
DUTCHESS
PRIVATE EQUITIES FUND, LP
BY
ITS
GENERAL PARTNER DUTCHESS
CAPITAL
MANAGEMENT, LLC
By:
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Title: A
Managing Member
Exhibit
A
NOTICE
OF CONVERSION
(To
be
Executed by the Registered Owner in order to Convert Debenture)
TO
EAGLE
BROADBAND, INC.
The
undersigned hereby irrevocably elects, as of ________________, to convert
$________________ of its convertible debenture (the “Debenture”) into Common
Stock of Eagle
Broadband, Inc. (the
“Company”) according to the conditions set forth in the Debenture issued by the
Company.
Date
of
Conversion________________________________________________
Applicable
Conversion Price________________________________________
Number
of
Debentures Issuable upon this Conversion_______________________
Name(Print)___________Dutchess
Private Equities Fund, LP
_________________
▇▇▇▇▇▇▇______________▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ 02116_____________
Phone_____▇▇▇-▇▇▇-▇▇▇▇_____________
Fax________▇▇▇-▇▇▇-▇▇▇▇___________
By:_______________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
EXHIBIT
B
PAYMENT SCHEDULE
|
Convertible
Amount
|
Interest
Rate
|
Redemption
|
|
|
|
|
|
$
822,500.00
|
12%
|
125%
|
|
|
|
|
|
Applied
to
|
Applied
to
|
Total
Principle and
|
||||
|
Amount
|
Balance
|
Payment
Due
|
Principle
|
Interest
|
Redemption
|
|
|
3/1/2006
|
$
822,500.00
|
$830,651.12
|
$8,151.12
|
$0.00
|
$8,151.12
|
$0.00
|
|
4/1/2006
|
$822,500.00
|
$830,651.12
|
$8,151.12
|
$0.00
|
$8,151.12
|
$0.00
|
|
5/1/2006
|
$822,500.00
|
$830,651.12
|
$
90,156.19
|
$65,604.05
|
$8,151.12
|
$82,005.07
|
|
6/1/2006
|
$756,895.95
|
$764,396.92
|
$
90,156.19
|
$66,124.17
|
$7,500.97
|
$82,655.21
|
|
7/1/2006
|
$690,771.78
|
$697,617.45
|
$
90,156.19
|
$66,648.41
|
$6,845.67
|
$83,310.51
|
|
8/1/2006
|
$624,123.37
|
$630,308.54
|
$
90,156.19
|
$67,176.81
|
$6,185.17
|
$83,971.01
|
|
9/1/2006
|
$556,946.56
|
$562,465.99
|
$
90,156.19
|
$67,709.40
|
$5,519.44
|
$84,636.75
|
|
10/1/2006
|
$489,237.16
|
$494,085.59
|
$
90,156.19
|
$68,246.21
|
$4,848.43
|
$85,307.76
|
|
11/1/2006
|
$420,990.95
|
$425,163.05
|
$
90,156.19
|
$68,787.27
|
$4,172.09
|
$85,984.09
|
|
12/1/2006
|
$352,203.68
|
$355,694.08
|
$
90,156.19
|
$69,332.63
|
$3,490.40
|
$86,665.78
|
|
1/1/2007
|
$282,871.05
|
$285,674.35
|
$
90,156.19
|
$69,882.31
|
$2,803.30
|
$87,352.88
|
|
2/1/2007
|
$212,988.75
|
$215,099.50
|
$
90,156.19
|
$70,436.34
|
$2,110.76
|
$88,045.43
|
|
3/1/2007
|
$142,552.40
|
$143,965.12
|
$
90,156.19
|
$70,994.77
|
$1,412.72
|
$88,743.47
|
|
4/1/2007
|
$71,557.63
|
$72,266.78
|
$
90,156.19
|
$71,557.63
|
$709.15
|
$89,447.04
|