SETTLEMENT AGREEMENT AND RELEASE
This Agreement is dated as of January 28, 2003 and is made by and
between ALPHA CAPITAL AKTIENGESELLSCHAFT ("Alpha Capital") and CYBERTEL
COMMUNICATIONS CORP. ("Cybertel").
BACKGROUND
WHEREAS, on or about March 26, 2002, Alpha Capital purchased a convertible
note in the sum of Two Hundred Thousand Dollars ($200,000.00) from Cybertel
(the "Note"), which was purchased pursuant to the terms of a Subscription
Agreement entered into between Alpha Capital and Cybertel dated March 26, 2002
(the "Subscription Agreement");
WHEREAS, in accord with the Subscription Agreement, Alpha Capital tendered
$200,000.00 to Cybertel, and in exchange, Alpha Capital received the Note;
WHEREAS, under Section 10.1(iv) of the Subscription Agreement, Cybertel was
required to file a Form S-3 registration statement with the U.S. Securities
Exchange Commission ("SEC") in order to register the common stock issued or
issuable upon conversion of the Note or issuable by virtue of ownership of the
Note, and one share of common stock for each share issuable upon exercise of
the Warrants (collectively the "Registerable Securities") within forty-five
(45) days after the March 26, 2002 (the "Closing Date");
WHEREAS, Cybertel acknowledged its obligation under the Subscription
Agreement, and on or about May 15, 2002, Cybertel filed a Form S-3 with the
SEC, which provided for the registration of the Registerable Securities;
WHEREAS, Section 10.1(iv) of the Subscription Agreement provided that the Form
S-3 must be declared effective by the SEC within one hundred and twenty days
(120) days after the Closing Date - to wit, by July 25, 2002 (the "Effective
Date");
WHEREAS, Cybertel acknowledges and admits that the aforementioned Form S-3 was
never deemed effective;
WHEREAS, pursuant to Section 10.4 of the Subscription Agreement, in the event
that the registration statement on Form S-3 was not declared effective on or
before the Effective Date, Alpha Capital would be entitled to liquidated
damages in an amount equal to two (2%) percent per month or part thereof
during the pendency of such non-registration, of the principal amount of the
Note, whether or not converted (the "Liquidated Damages");
WHEREAS, pursuant to Section 10.4 of the Subscription Agreement, Alpha Capital
is entitled to liquidated damages in the amount of $4,000 per month ($200,000
x 2% = $4,000), for the partial month of July, and each subsequent month
thereafter. As of the January 2003, the amount of Liquidate Damages due and
owing totals: $28,000;
WHEREAS, pursuant to Section 3.11 of the Note, Cybertel's failure to have the
registration statement declared effective by the Effective Date constitutes an
event of default under the Note and makes all sums of principal ($200,000) and
interest immediately due and payable;
WHEREAS, pursuant to the terms of the Note, the Note accrued interest thereon
at the agreed upon annual rate of eight (8%) thereon, and in the event of a
default under the Note, the parties agreed that a default interest rate of
fifteen (15%) percent per annum shall apply to the amounts owned under the
Note;
WHEREAS, during the time period between March 26, 2002 and July 25, 2002, the
amount of interest accrued at the rate of eight (8%) percent per annum
totaled: $5,260.27, and between the period July 26, 2002 through February 3,
2003, the amount of interest accrued at the default rate of fifteen (15%)
percent per annum totaled: $15,780.75 and continues to accrue at the daily
rate of $82.19 per day;
WHEREAS, in addition to the principal amount of the Note ($200,000) due and
owning because of Cybertel's breach of the Subscription Agreement, Alpha
Capital is also entitled to additional damages as a result of Cybertel's
breach; therefore, pursuant to Section 9.2 of the Registration Agreement, in
the event of default, Cybertel's must pay a mandatory redemption payment to
Alpha Capital in an amount equal to one hundred thirty (130%) percent of the
principal of the Note in the amount of $260,000 ($200,000 x 130% = $260,000)
less the principal amount of $200,000, for a total additional payment of
$60,000;
WHEREAS, a key component of the Note is the unqualified right of Alpha Capital
to convert the debt owed thereunder into common stock of Cybertel;
WHEREAS, pursuant to Section 9.1(b) of the Subscription Agreement and Section
2.1(a) of the Note, Cybertel had the absolute and unconditional obligation to
honor all Notices of Conversion delivered by Alpha Capital to Cybertel within
three (3) business days after receipt by Cybertel of the Notice of Conversion
(the "Delivery Date");
WHEREAS, on September 24, 2002, Alpha Capital duly delivered a properly
executed Notice of Conversion to convert $15,000 of the principal of the Note
and $598.22 of the interest due under the Note into 1,172,799 shares of
Cybtertel's common stock at the conversion price of .0153 per share, and three
business days later, Cybertel had not responded to the Notice of Conversion,
and Cybertel had not issued and delivered the converted shares to Alpha
Capital;
WHEREAS, Cybertel admits that it has not honored the Notice of Conversion;
WHEREAS, pursuant to Section 9.1(c) of the Subscription Agreement, Alpha
Capital is entitled to a late payment from Cybertel for its failure to deliver
the shares under the Conversion Notice to Alpha Capital by the Delivery Date
in the amount of $100 per business day after the Deliver Date for each $10,000
of Note principal amount being converted (the "Late Payment"), and between the
time period of September 30, 2002 and February 3, 2003, the Late Payment due
and owing totals $12,300 ($150 per business day ($100 per business day x
$15,000 of Note Principal) x 82 business days);
WHEREAS, pursuant to Section 3.10 of the Note, Cybertel's failure to deliver
the shares called for by the Notice of Conversion by the Delivery Date
constitutes an event of default under the Note and makes all sums of principal
($200,000) and interest immediately due and payable;
WHEREAS, pursuant to Section 12(e) of the Subscription Agreement, Alpha
Capital is entitled to recover, as the prevailing party, its reasonable
attorneys' fees and costs incurred in this action, which the parties hereto
have agreed shall total $12,500.00;
WHEREAS, on December 31, 2002, Alpha Capital filed an action against Cybertel
entitled Alpha Capital Aktiengesellschaft v. Cybertel Communications Corp.,
Civil Action No. 02 CV 10335, (the "Action") in the United States District
Court, Southern District of New York (the "Court"), whereby Alpha Capital
asserted claims against Cybertel under the Note and Subscription Agreement;
WHEREAS, Cybertel admits that it is liable for the amount sought in the
Action, Cybertel acknowledges that it does not have sufficient cash to satisfy
the claims made in the action or to defend the action, and Cybertel seeks to
resolve this action prior to the filing of an Answer to avoid incurring legal
fees, including the expense of retaining local counsel and filing an Answer to
the Complaint;
WHEREAS, Cybertel admits that it is liable to Alpha Capital as a result of the
aforementioned and admits that Alpha Capital has been damaged and it is
entitled to monetary damages from CCC as follows: the return of its principal
due and owning under the Note in the amount of $200,000; the mandatory
redemption payment pursuant to the Subscription Agreement in the amount of
$60,000; Liquidated Damages in the amount of $28,000; accrued and unpaid
interest under the Note in the amount of $5,260.27; and default interest at
the rate of fifteen (15%) percent per annum through February 3, 2003 in the
amount of $15,780.75, late penalties in the amount of $12,300.00, for total
damages in the amount of $321,341.02, together with its reasonable attorneys'
fees in the amount of $12,500.00;
WHEREAS, Cybertel currently only has the means to satisfy the settlement of
the bona fide claim by Alpha Capital through the issuance of authorized shares
to Alpha Capital, pursuant to Section 3(a)(10) of the Securities Act of 1933
(hereinafter the "Act");
WHEREAS, Alpha Capital and Cybertel desire to resolve, settle, and compromise
Alpha Capital's bona fide claims that it has asserted against Cybertel, which
arise out of or relate to the Note and Subscription Agreement, to wit, the
principal due and owning under the Note in the amount of $200,000; the
mandatory redemption payment pursuant to the Subscription Agreement in the
amount of $60,000; Liquidated Damages in the amount of $28,000; accrued and
unpaid interest under the Note in the amount of $5,260.27; and default
interest at the rate of fifteen (15%) percent per annum through February 3,
2003 in the amount of $15,780.75, late penalties in the amount of $12,300.00,
for total damages in the amount of $321,341.02, together with its reasonable
attorneys fees in the amount of $12,500.00 (hereinafter the "Claims");
With this background incorporated herein, the parties hereby agree to the
following settlement:
TERMS OF SETTLEMENT
1. COMPROMISED AMOUNT. Alpha Capital agrees to resolve its bona fide Claims
with Cybertel for the agreed upon sum of Two Hundred Thousand Dollars and No
Cents ($200,000.00). Further, Cybertel agrees to compensate Alpha Capital for
its reasonable attorneys' fees in the amount of Twelve Thousand Five Hundred
Dollars and No Cents ($12,500.00). As a result, Cybertel and Alpha Capital
agree to resolve Alpha Capital's Claims for a sum total of Two Hundred Twelve
Thousand Five Hundred Dollars and No Cents ($212,500.00) (the "Compromised
Amount").
2. SETTLEMENT SHARES. Within ten days following entry of an order by the
Court in accordance with Paragraph 4 herein, Cybertel shall issue and deliver
to the Escrow Agent (as defined below) shares of Cybertel's common stock, par
value $.01 per share, ("Common Stock") sufficient to satisfy the Compromised
Amount through the issuance of freely trading securities issued pursuant to
Section 3(a)(10) of the Act. The parties agree that the value of the Common
Stock utilized to satisfy the Compromised Amount shall be discounted at Forty
(40%) percent of the closing bid price on January 28, 2003, which was .015 per
share. Thus, the value of the Common Stock to be utilized to satisfy the
Compromised amount shall be .009 per share, and the total amount of Common
Stock to be delivered by Cybertel to satisfy the Compromised Amount shall be
Twenty Three Million Six Hundred Eleven Thousand One Hundred and Eleven
(23,611,111) shares of Common Stock (the "Settlement Shares"). Within ten
days following entry of an order by the Court in accordance with Paragraph 4
herein, Alpha Capital shall execute and deliver to the Escrow Agent a proxy in
favor of Cybertel in the form of Exhibit C hereto (the "Proxy").
3. ESCROW AGENT. Pursuant to the terms of an Escrow Agreement by and between
Alpha Capital, Cybertel, and the Escrow Agent (as defined in the Escrow
Agreement), which Alpha Capital and Cybertel shall execute and enter into,
Cybertel shall deliver the Settlement Shares to the Escrow Agent in accordance
with paragraph 2 above, which are to be held on behalf of Cybertel for the
future benefit of Alpha Capital until such time, and from time to time, that
Alpha Capital requests deliver of any portion of the Settlement Shares from
the Escrow Agent to Alpha Capital, pursuant to a written notification, the
"Redemption", and the date thereof, the "Redemption Date". Pursuant to the
terms of the Escrow Agreement by and between Alpha Capital, Cybertel, and the
Escrow Agent, which Alpha Capital and Cybertel shall execute and enter into,
Alpha Capital shall deliver the Proxy to the Escrow Agent in accordance with
paragraph 2 above.
3.1 REDEMPTION. Alpha Capital shall not be entitled to redeem
Settlement Shares which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Subscriber and its affiliates
on the Redemption Date, and (ii) the number of shares of Common Stock issuable
upon the Redemption with respect to which the determination of this provision
is being made on a Redemption Date, which would result in beneficial ownership
by Alpha Capital and its affiliates of more than 9.99% of the outstanding
shares of Common Stock of the Company. For the purposes of the provision to
the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, Alpha
Capital shall not be limited to aggregate conversions of only 9.99% and
aggregate conversion by Alpha Capital may exceed 9.99%. Alpha Capital may
void the Redemption limit described in the Section upon 75 days prior written
notice to the Escrow Agent. Notwithstanding anything to the contrary
contained herein, it is the express intention of the parties that the
Settlement Shares, together with all other shares of Cybertel then owned by
Alpha Capital, whether of record or beneficially, should not result in Alpha
Capital owning more than 9.9% of all such Common Stock as would be outstanding
on the date of the aforementioned Redemption.
4. ALTERNATIVE SETTLEMENT. Notwithstanding the foregoing, at any time prior
to the first Redemption Date, Cybertel, in it's sole discretion, may pay Alpha
Capital the full amount of all Claims in the amount of $333,841.02, together
with interest thereon at the rate of fifteen (15%) percent per annum from
February 3, 2003, to the date of such payment to Alpha Capital (the
"Alternative Payment"). In the event the Alternative Payment is made, the
Settlement Shares shall be returned to Cybertel for cancellation, the Proxy
shall be returned to Alpha Capital and Alpha Capital shall accept the
Alternative Payment in full satisfaction of all Claims.
5. FAIRNESS HEARING. Upon execution hereof, Alpha Capital and Cybertel agree,
pursuant to 15 U.S.C. Section 77(a)(10), to immediately submit the terms and
conditions of this Agreement to the Court for a hearing on the fairness of
such terms and conditions, for the issuance of an exemption from registration
of the Settlement Shares. Cybertel avers it is a "reporting issuer" that
files reports with the SEC under Section 13 of the Securities and Exchange Act
of 0000 (xxx "Xxxxxxxx Xxx"); Cybertel avers it is current in all its filing
required under the Exchange Act; and Alpha Capital avers it has access to, and
has accessed all such filings. In connection with such a fairness hearing,
Cybertel, the issuer of the securities, and Alpha Capital, the proposed person
to whom the securities are to be issued, agree that the value of the
Settlement Shares utilized to satisfy the Compromised Amount is fair and
reasonable. This Agreement shall become binding upon the parties only upon
entry of an order by the Court substantially in the form annexed hereto as
Exhibit A (the "Order").
6. NECESSARY ACTION. At all times after the execution of this Agreement and
entry of the Order by the Court, each party hereto agrees to take or cause to
be taken all such necessary action including, without limitation, the
execution and delivery of such further instruments and documents, as may be
reasonably requested by any party for such purposes or otherwise necessary to
complete or perfect the transaction contemplated hereby.
7. RETURN OF THE NOTE. Pursuant to the Escrow Agreement, Alpha Capital shall
deliver the Note to the Escrow Agent. Upon delivery by the Escrow Agent to
Alpha Capital of all the Settlement Shares or the delivery of the Alternative
Payment to Alpha Capital, the Escrow Agent shall deliver the Note to Cybertel.
8. RELEASES. Upon deliver of the Settlement Shares to the Escrow Agent and in
consideration of the terms and conditions of this Agreement, and except for
the obligations and representations arising or made hereunder or a breach
hereof, the parties hereby release, acquit and forever discharge the other and
each, every and all of their current and past officers, directors,
shareholders, affiliated corporations, subsidiaries, agents, employees,
representatives, attorneys, predecessors, successors and assigns (the
"Released Parties"), of and from any and all claims, damages, causes of
action, suits and costs, of whatever nature, character or description, whether
known or unknown, anticipated or unanticipated, which the parties may now have
or may hereafter have or claim to have against each other with respect to the
Claims, the Note, or the Subscription Agreement. Nothing herein shall be
deemed to negate or affect Alpha Capital's right and title to any securities
heretofore issued to it by Cybertel.
9. CONTINUING JURISDICTION. Simultaneously with the execution of this
Agreement, the attorneys representing the parties hereto will execute a
stipulation of dismissal substantially in the form annexed hereto as Exhibit B
(the "Stipulation of Dismissal"), which shall be held by Alpha Capital's
counsel and filed with the Court after Cybertel's delivery of the Settlement
Shares in accordance with paragraph 2 herein.. In order to enable the Court
to grant specific enforcement and other equitable relief in connection with
this Agreement, (a) the parties consent to the jurisdiction of the Court for
purposes of enforcing this Agreement and (b) each party to this Agreement
expressly waives any contention that there is an adequate remedy at law or any
like doctrine that might otherwise preclude injunctive relief to enforce this
Agreement.
10. CONTINUING OBLIGATION. Both parties agree to use their best efforts to
cooperate with the Court to cause the Order to be timely entered and agree
that delays caused due to Court calendars shall not constitute a valid reason
to void this Agreement.
11. INFORMATION. Alpha Capital and Cybertel each represent that prior to the
execution of this Agreement, they have had the advise of counsel, namely, Xxxx
X. Xxxx of Sichenzia Xxxx Xxxxxxxx Xxxxxxx for Alpha Capital and Xxxxxxx X.
Xxxxxxxxxx of the Law Offices of Xxxxxxx X. Xxxxxxxxxx, they fully informed
themselves of its terms, contents, conditions and effects, and that no promise
or representation of any kind has been made to them except as expressly stated
in this Agreement.
12. OWNERSHIP AND AUTHORITY. Alpha Capital and Cybertel represent and warrant
that they have not sold, assigned, transferred, conveyed or otherwise disposed
of any or all of any claim, demand, right or cause of action, relating to any
matter which is covered by this Agreement, that each is the sole owner of such
claim, demand, right or cause of action, and each has the power and authority
and has been duly authorized to enter into and perform this Agreement and that
this Agreement is a binding obligation of each, enforceable in accordance with
its terms.
13. BINDING NATURE. This Agreement shall be binding on all parties executing
this Agreement and their respective successors, assigns and heirs.
14. AUTHORITY TO BIND. Each party to this Agreement represents and warrants
that the execution, delivery and performance of this Agreement and the
consummation of the transaction provided in this Agreement have been duly
authorized by all necessary action of the respective entity and that the
person executing this Agreement on its behalf has the full capacity to bind
that entity. Each party further represents and warrants that it has been
represented by independent counsel of its choice with the negotiation and
execution of this Agreement and that counsel has reviewed this Agreement.
15. SIGNATURES. This Agreement may be signed in counterparts and the
Agreement, together with its counterpart signature pages, shall be deemed
valid and binding on each party when duly executed by all parties.
16. CHOICE OF LAW, ETC. Notwithstanding the place where this Agreement may be
executed by either of the parties, or any other factor, all terms and
provisions hereof shall be governed by and construed in accordance with the
laws of the State of New York, applicable to agreements made and to be fully
performed in that State and without regard to principles of conflicts of law
thereof. Any action brought to enforce, or otherwise arising out of this
Agreement shall be brought only in the Federal Court sitting in the State of
New York, County of New York.
17. INCONSISTENCY. In the event of any inconsistency between the terms of
this Agreement and any other document executed in connection herewith, the
terms of this Agreement shall control to the extent necessary to resolve such
inconsistency.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first indicated above.
ALPHA CAPITAL AKTIENGESELLSCHAFT
By: /s/
CYBERTEL COMMUNICATIONS CORP.
By:/s/ Xxxxxxx X. Xxxxxxxxxxx
Its CEO, President and Director
EXHIBIT A
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
ALPHA CAPITAL AKTIENGESELLSCHAFT,:
:
Plaintiff, : 02 Civ. 10335
:
-against- :
:
CYBERTEL COMMUNICATIONS CORP., :
:
Defendant. :
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[PROPOSED] ORDER GRANTING APPROVAL OF SETTLEMENT AGREEMENT
This matter having come on a hearing on the _____day of ___________,
2003, to approve the Settlement Agreement and Release entered into as of
____________________, 2003 (the "Settlement Agreement") between Plaintiff
Alpha Capital Aktiengesellschaft ("Alpha Capital") and Defendant Cybertel
Communications Corp. ("Cybertel" and, collectively with Alpha Capital, the
"Parties"), and the Court having held a hearing as to the fairness of the
terms and conditions of the Settlement Agreement and being otherwise fully
advised in the premises, the Court hereby finds as follows:
1. The Court has been advised that the parties intended that the sale of the
Settlement Shares (as defined by the Settlement Agreement, and hereinafter,
the "Settlement Shares") to, and the resale of the Settlement Shares by, Alpha
Capital within the United States of America, assuming satisfaction of all
other applicable securities laws and regulations, will be exempt from
registration under the Securities Act of 1933 (the "Securities Act") in
reliance upon Section 3(a)(10) of the Securities Act based upon this Court's
finding herein that the terms and conditions of the issuance of the Settlement
Shares by Cybertel to Alpha Capital are fair to Alpha Capital;
2. The hearing having been scheduled upon the consent of Alpha Capital and
Cybertel. Alpha Capital has had adequate notice of the hearing and Alpha
Capital is the only party to whom Settlement Shares will be issued pursuant to
the Settlement Agreement;
3. The terms and conditions of the issuance of the Settlement Shares in
exchange for the release of certain claims as set forth in the Settlement
Agreement are fair to Alpha Capital, the only party to whom the Settlement
Shares will be issued;
4. The fairness hearing was open to Alpha Capital. Alpha Capital was
represented by counsel at the hearing who acknowledged that adequate notice of
the hearing was given and consented to the entry of this order.
It is therefore ORDERED AND ADJUDGED that the Settlement Agreement is hereby
approved as fair to the party to whom the Settlement shares will be issued,
within the meaning of Section 3(a)(10) of the Securities Act and that the sale
of the Settlement Shares to, and the resale of the Settlement Shares in the
United States of America by, Alpha Capital, assuming satisfaction of all other
applicable securities laws and regulations, will be exempt from registration
under the Securities Act.
SO ORDERED, this ______day of _____________________, 2003.
____________________________________
The Honorable
EXHIBIT B
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
ALPHA CAPITAL AKTIENGESELLSCHAFT,:
:
Plaintiff, : 02 Civ. 10335
:
-against- :
:
CYBERTEL COMMUNICATIONS CORP., :
:
Defendant. :
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STIPULATION OF DISMISSAL
IT IS HEREBY STIPULATED AND AGREED, by and between the undersigned, the
attorneys of record for all parties to the above-entitled action, pursuant to
the Federal Rules of Civil Procedure, that whereas no party hereto is an
infant of incompetent person for whom a committee has been appointed or
conservatee and no person not a party has an interest in the subject matter of
the action, the above-entitled action be, and the same hereby is, discontinued
with prejudice, each party to bear its own costs.
This Stipulation may be filed without further notice with the Clerk of
the Court.
Dated: __________________, 0000
XXXXXXXXX XXXX XXXXXXXX LAW OFFICES OF XXXXXXX
XXXXXXX LLP X. XXXXXXXXXX
By: /s/ Xxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxxxxxx
Xxxx X. Xxxx, Esq. (MR-2977) Xxxxxxx X. Xxxxxxxxxx
1065 Avenue of the Americas, 21st Floor 455 East 000 Xxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000 Xxxx Xxxx Xxxx, Xxxx 00000
(000) 000-0000 (000) 000-0000
Attorneys for Plaintiff Attorneys for Defendant
Alpha Capital Aktiengesellschaft Cybertel Communications Corp.
EXHIBIT C
PROXY
Alpha Capital Aktiengesellschaft ("Alpha") hereby appoints Cybertel
Communications Corp. (the "Company"), as proxy, with the power to appoint its
substitute, to represent and to vote all the shares of common stock of
Cybertel Communications Corp., held by Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, as
escrow agent for the benefit of Alpha (the "Escrow Agent"), which the
undersigned would be entitled to vote, at any meeting of, or written consent
by, the stockholders of the Company, and at any adjournments thereof, subject
to the directions included herein. In exercising such proxy, the Company is
hereby directed to vote the Shares for all matters in the same proportion as
other votes cast or consented to by all stockholders of the Company other than
the Company on any matter so voted upon.
This proxy shall only be effective with respect to the Shares for such
time as the Shares are held in escrow by the Escrow Agent. Upon the delivery
of any Shares by the Escrow Agent to Alpha, this proxy shall only be effective
with respect to any Shares which continue to be held by the Escrow Agent.
ALPHA CAPITAL AKTIENGESELLSCHAFT
By:_____________________________________
Name:
Title:
Dated: February ____, 2003
